Understanding the Chinese Political Economic System

I’ve been interested in learning about China’s government and economic policy for a while. Its development over the past 40 years has been historic, but there doesn’t seem to be a consensus as to why. China can be a somewhat difficult subject to learn about. Online discourse is a healthy combination of shallow and toxic. There is an abundance of contradictory information from sources that are motivated to the point of disqualification. Since this is a topic I have limited information on I need a neutral foundation of the basics.

In the year 2020, China is threatening to overtake the United States as the foremost global hegemon. (If it hasn’t happened already.) The anxiety fueled by this potential disruption to the status quo is not limited to the United States.

So for that somewhat neutral foundation I’m reading a book that was published 20 years ago by three Australians. China Since 1978: Reform, Modernisation and Socialism with Chinese Characteristics. I almost read Mao’s China & After by Maurice Meisner, but I preferred the nominal emphasis on Deng rather than Mao. In practice there may not be much difference, as understanding Deng’s tenure seems contingent on understanding Mao’s.

The authors of China Since 1978 are Colin MacKerras, Graham Young, Pradeep Taneja, and since they go out of their way to describe their separation of chapters, I will be splitting my notes up by who wrote what. MacKerras discusses history, Young discusses Political Science, and Taneja discusses Political Economy.

“There is no special message in this book. All three authors recognise both the immense problems which the Chinese leaders have faced in the era of reform and their achievements — both their successes and failures; both their good and bad actions. All authors were and remain appalled at the Beijing massacre of June 1989, and see it as a very black mark on the period of reform. On the other hand, none sees it as a reason for negating everything China, or indeed Deng Xiaoping, has accomplished since 1978. All authors know the Chinese language and have lived in and traveled widely in China during the period with which this book is concerned.”

Before I post those notes though, I’m going to list a few of my notes from other sources to show my existing impressions going in. Mostly just two sources: Thomas Piketty & Eric Olander.

If uninterested you can skip to the Part One of the book summary which I will link here.

Thomas Piketty in Capital & Ideology

Piketty’s writings on China in Capital & Ideology were genuinely informative. I might even call them interesting… Maybe. In fact it was the only part of the book I thought was too short.

The only lingering critique I had was that Piketty seemed to compare existing Chinese Socialism to his own vision of Participatory Socialism. Unsurprisingly the existing system comes up short.

(The following is just copied from my notes in Part Three of my Capital & Ideology Summary.)

“In 1978 the country began experimenting with a novel type of political and economic regime, which rests on two pillars: a leading role for the Chinese Communist Party (CCP), which has been maintained and even reinforced in recent years, and the development of a mixed economy based on a novel balance between private and public property, which has proved to be durable.”

China as a mixed economy is not unlike the temporary economies of postwar western countries.

“70 percent of all property is now private, but it is not completely capitalist either because public property still accounts for a little more than 30 percent of the total — a minority share but still substantial. Because the Chinese government, led by the CCP, owns a third of all there is to own in the country, its scope for economic intervention is large: it can decide where to invest, create jobs, and launch regional development programs.”

“If we compare China to the other Asian giant, India, it is clear that since the early 1980s China has been both more efficient in terms of growth and more egalitarian in terms of income distribution.”

Higher Chinese tax revenues have financed superior infrastructure education and healthcare. That being said Modern Chinese inequality is not a far cry from modern American levels, and data on inequality is as opaque as it is in Russia.

“There is no Chinese inheritance tax and therefore no data of any kind concerning inheritances, which greatly complicates the study of wealth concentration. It is truly paradoxical that a country led by a communist party, which proclaims its adherence to ‘socialism with Chinese characteristics,’ could make such a choice.”

Xi Jinping’s writings on socialism ignores progressive taxation, and power sharing within firms in favor of a ‘visible hand’ of the government to counterbalance the abuses of the ‘invisible hand’ of the market. He also emphasizes the new silk road which ‘would at last put an end to Europe’s mad colonial ambitions and the damaging unequal treaties’ imposed on China and other countries.”

Geopolitically, a Eurasian power bloc with China at its center would ultimately relegate America to its proper place on the world periphery.

“The Chinese regime survives by capitalizing on the weaknesses of other models. Having learned from the failures of the Soviet and Maoist regimes, the Chinese have no intention of repeating the errors of the Western parliamentary democracies.”

Chinese media is quick to justify itself on moral grounds not unlike the Soviet Union.

“The paper also emphasizes the respect with which Chinese leaders treat other world leaders, especially those of the African nations that the president of the United States, the supposed ‘leader of the free world,’ has called shithole countries.”

“Among the criticisms traditionally leveled at Western institutions by communist regimes such as the Russian and Chinese, two warrant particular attention. First, equal political rights are illusory when the news media are captured by the power of money, which gives the wealthy control over minds and political ideology and thus tends to perpetuate inequality. The second criticism is closely related to the first: political equality remains purely theoretical if the way political parties are financed allows the wealthy to influence political platforms and policies.”

“Instead of relying on a few minutes of the voters’ superficial attention every four or five years, as in the West, China’s party-managed democracy is supposed to be guided by a significant minority of the population, made up of party members (about 10 percent of the adult population) who are fully involved and informed and who deliberate collectively and in depth for the good of the country as a whole.”

The CPC has a higher active participation rate among the working class than the equivalent in other countries but Piketty asserts that this indicates nothing about who actually holds power within the party.

“China’s party-managed democracy has yet to demonstrate its superiority over Western electoral democracy, owing in part to its flagrant lack of transparency. The very sharp increase of inequality in China and the extreme opacity of Chinese data also raise serious doubts about the degree to which the lower classes are actually involved in the supposedly representative deliberative process that the CCP claims to embody. Nevertheless, China’s many criticisms of Western political systems should be taken seriously. The power of money over the media and parties and the structural difficulty of dealing with the problems of borders and property rights are important issues, as is the fact that parliamentary institutions are increasingly dominated by closed circles of insiders in both the European Union and the United States. What is more, traditional representative mechanisms need to be complemented by arrangements allowing for true deliberation and participation rather than just casting a ballot every four or five years.”

Eric Olander & the China in Africa Podcast

I binged this for a while especially at the start of the coronavirus lockdown. Eric Olander who is worth a follow seems to be an exceptionally rare breed in trying to think seriously about the China Africa relationship.

One of the more memorable episodes was on the day to day experiences of African Students in Wuhan during the outbreak. Since I took a few notes at the time I’ll post them unedited first. (Although I recommend getting it straight from the source.)

African Students in Wuhan: African governments were very anxious about bringing them back, sometimes changing their minds on short notice. Complex feelings abound. Students felt abandoned by their countries, while people at home felt a mixture of the desire to bring them back, the fear of bringing back the virus, and some resentment that they are being well taken care of and have a bright future getting their PhD in Wuhan.

Anecdotally students interviewed said the experience raised their opinion of the Chinese government since all their unique concerns were quickly and adequately addressed. They wished their home governments were as competent.

The Belt and Road is criticized as a political tool rather than an economic tool. This criticism is bizarre to China since they do not see politics and economics as so distinct from one another in the first place.

The debt trap narrative is mostly a bothsideism talking point. Loans are low rate, and the investments they fund are generally worth it. Unlike Western loans they don’t come with structural adjustment.

Chinese Imperialism as akin to Western Imperialism or even as a meaningful term is ahistorical. Chinese loans come with less political strings attached, not more.

China’s aid and investments are blurred in Africa as Japan’s aid to China was. We’ll build you a road if you use a Chinese company. Both countries’ method of delivering aid is political and always has been. Another line of reasoning (fair or not) is that if we are the ones building it it will actually get built. It won’t just be embezzled to the same extent.

The notion that Chinese infrastructure is inferior to OECD funded infrastructure is not reflected by the data, especially when adjusted for price.

The assertion that China is importing Chinese laborers including convicts instead of just hiring local Africans is also not born out by data, nor does it even make sense from a costs standpoint. When locals are not well trained enough to do a job they do of course bring in people who are, but those people are hard to lure away from their families, & friends in China. Therefore it is cheaper to hire locally if at all possible.

A valid criticism is that their lack of transparency will inevitably lead us to assume the worst. Since this is still a Systems Thinking Blog I’ll make it plain.

Chinese finance can be a bit opaque especially to western media which is faced with a language barrier as well as a mind your own business barrier. As a result they assume the worst, which leads to negative coverage, which leads to a worse rapport with Chinese institutions, which leads to more opacity.

Chinese business can be chaotic and competitive too. It’s not all one coordinated arm of the government.

Within China local governments are essentially a sandbox. The Central government outlines goals and values, local governments write specifics. Success is replicated, failure is scrapped. Obviously material conditions vary so not every success is replicable. This system is another reason broad sweeping characterizations of certain policies are generally unreliable as their implementation changes over time and geography. A benefit is that it also gives the central government deniability as they can evade responsibility for failures or mistakes.

Political Economic Commentary & Analysis.