Beneath the surface of China’s relentless rise

Author: Dong Dong Zhang, ANU

Amid China’s seemingly relentless economic rise, why has its ruling Chinese Communist Party (CCP) centralised power under Xi Jinping? Answering this question requires an understanding of the sense of impending crisis that has plagued the CCP leadership in recent times.

Wang Qishan, head of China's anti-corruption watchdog and member of the Politburo Standing Committee attends the Chinese People's Consultative Conference in Beijing China, 3 March 2017 (Photo: Reuters/Jason Lee).

China’s political system as a party-state has not fundamentally changed since 1949, in which the party maintains control of the state, the military and society. Party organisations permeate China, controlling all personnel and policy of the state machinery. However, it has moved towards greater institutionalisation since the reform era began in the late 1970s.

Rules and conventions have been developed in regulating leadership promotions, retirement and succession. They include term limits, age requirements and performance benchmarks. Members of the Politburo Standing Committee (PBS) — the top CCP decision-making organ — began to be chosen through a behind-the-scenes internal selection process involving consultation among current and retired leaders. This process helped to develop a collective leadership at the top echelon of the party state, which is a system of checks and balances designed to limit the influence of individual leaders.

But prior to the Xi leadership, there was a growing view by China’s political and policy elites that this political structure was losing its ability to address China’s economic, social and political challenges.

One cause for concern was that while rapid growth had lifted the Chinese economy to middle-income status, China’s growth was overly dependent on external demand, investment and credit expansion. There were growing economic imbalances — a low consumption rate, excess production capacity and rising debt levels — all indicating that China’s growth pattern was becoming unsustainable.

Chinese society was also increasingly polarised by widening income gaps between urban and rural areas and the coastal and inland regions, producing a system of haves and have-nots. These gaps indicated that there were institutional barriers preventing the free flow of resources across the economy. Social equality and justice were becoming important political issues.

Deepening market-based reform — accompanied with reform to create a clean, competent and market-serving government — was needed to put the economy back on a more balanced growth path and redress social inequality. But since the mid-2000s, market-based reforms had become difficult to push through due largely to the resistance of powerful interest groups in the state sector. The state sector’s monopolistic control in certain industries — deemed strategically important — was a major source of distortion.

Rampant corruption was the most obvious symptom of malaise in China’s political system. Bribery permeated every corner of the party, the state and the military. By the 2010s, it had become an unavoidable part of daily life. It was commonplace for ordinary people to give bribes for receiving appropriate treatment when giving birth or for getting their children into good kindergartens and schools. There were implicit price tags for virtually every public position. Promotion into any government or military position was no longer possible without paying an expected sum to one’s superiors.

Corruption has economic and political costs. There were observations that the growth of China’s corruption far outstripped GDP growth from 2002–2012. In 2013, some estimated that corruption might account for as much as 10 per cent of China’s GDP. As corruption almost always involves the exchange of power, money and privilege, it has been a focus of public anger and outcry. Rampant corruption was corroding the inside of the party-state as well as sapping its political legitimacy from the outside.

While the outside world was dazzled by China’s relentless rise, its enormous challenges had laid bare the fact that it was impossible to assume a business-as-usual approach to maintaining China’s old growth model and political modus operandi. China’s political and business elites had a growing sense of impending crisis — a coming train wreck that no one could do much about.

Yet intellectuals and policy advisers began to openly discuss the need for fundamental reform of the party-state. While China’s political elites were deeply divided on where China should go, the strong undercurrent in this political debate was the race between reform and revolution. When Xi became general secretary of the CCP in 2012 he put Wang Qishan in charge of the anti-corruption campaign.

Wang recommended party cadres to read Alexis de Tocqueville’s The Old Regime and the Revolution. His unspoken intention was clear: the collapse of the party was as real as that of the grandiose Ancien Régime Louis XIV built more than three centuries ago. Xi worried aloud about the vitality of the party by posing a question to party members: when the Soviet Union was about to collapse, why did nobody stand up and fight hard enough to save it?

For Xi, Wang and their supporters, saving the CCP demanded a drastic revamping of the power structures of the party-state. Xi’s ascendancy signifies that power centralisation has been their chosen path to achieve this.

Dong Dong Zhang is a National Government Fellow at the Crawford School of Public Policy, The Australian National University.

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Lintong Feng
3 April 2017 8:37 pm

While obviously there were many serious problems in China, it is not obvious that the rampant corruption and the unsustanable economic development model that the author describes in the post were equally important contributing factors to the centralisation of power in the recent years. They appear to be very different problems and issues in their nature, with the former directly endangering the very existence of the CCP as it has stood for and the latter a likely a result of development stages.

Lintong Feng
4 April 2017 9:17 pm
Reply to  Lintong Feng

The standard measure of income inequality is the Gini coefficient and China’s was 42.2 at November 2015 according to the World Bank sourced from wikipedia (click it for more information). I have heard and read that some people have argued that inequality in China has reached alarming status. However, while that measure of inequality for China has probably increased over time, that does not necessarily single China out as an particular outlier. For example, that same source also listed the Gini for the USA were 41.1 and 45.0 produced by the World Bank and the CIA respectively in the same table.
Further, rampant corruption was an extremely unlikely positive contributing factor to “the relentless rise of China”. And corruption was unlikely to be an unavoidable part in the China development model, even though it may have seemingly appeared to be a side product of China’s economic reforms and opening up to the outside world as people shifted focus towards money in that process.

Dong Dong Zhang
24 April 2017 4:55 pm
Reply to  Lintong Feng

Lintong – thanks for your comment.

I didn’t suggest that corruption and the old growth model were equally important contributing factors.

While centralisation of power does not have to be the only option, it is the option that the current leadership has chosen in addressing China’s social, economic and political challenges.

Lintong Feng
3 April 2017 8:57 pm

Further, the rampant corruptions were extremely unlikely a positive contributing factor to the relentless rise of China.