“The Coming Chinese Crackup”

The Chinese property boom has bust. Chinese malinvestment is beginning to bite hard. Some say the next to crack up is the Chinese Communist Party itself, arguing “the endgame of communist rule in China has begun, and Xi Jinping’s ruthless measures are only bringing the country closer to a breaking point.”

For decades the Chinese Communist Party has enjoyed the same deal as Chinese political leadership has since the time of Confucius: they get  to live off the backs of others just as long as they deliver the national goals, be they national pride, military success, and/or economic growth and prosperity.

This has been called, since time immemorial, the “Mandate from Heaven.”

Succeed in delivering the goals, with or without bloodshed, and the leadership has a job for generations—the makings of a dynasty. Fail, and the people will be at your throats faster than you can say “peasant uprising.” 

For the last two decades, the national goal has been delivering economic growth and prosperity. Now the boat is rocking however, so too, says China-watcher David Shambaugh in the Wall Street Journal, is the deal.

Despite appearances, China’s political system is badly broken, and nobody knows it better than the Communist Party itself. China’s strongman leader, Xi Jinping , is hoping that a crackdown on dissent and corruption will shore up the party’s rule. He is determined to avoid becoming the Mikhail Gorbachev of China, presiding over the party’s collapse. But instead of being the antithesis of Mr. Gorbachev, Mr. Xi may well wind up having the same effect. His despotism is severely stressing China’s system and society—and bringing it closer to a breaking point…
    China-watchers have been on high alert for telltale signs of regime decay and decline ever since the regime’s near-death experience in Tiananmen Square in 1989. Since then, several seasoned Sinologists have risked their professional reputations by asserting that the collapse of CCP rule was inevitable. Others were more cautious—myself included. But times change in China, and so must our analyses.
    The endgame of Chinese communist rule has now begun, I believe, and it has progressed further than many think.

Shambaugh gives “five telling indications of the regime’s vulnerability and the party’s systemic weaknesses,” two of which have great relevance here in NZ:

• China’s economy—for all the Western views of it as an unstoppable juggernaut—is stuck in a series of systemic traps from which there is no easy exit. And…
• “The country’s elites—many of them party members—[are either fleeing or preparing to flee], and in large numbers,” with at least “one foot out the door, and they are ready to flee en masse if the system really begins to crumble… 64% of the ‘high net worth individuals’ whom it polled—393 millionaires and billionaires—were either emigrating or planning to do so. Rich Chinese are sending their children to study abroad in record numbers... Wealthy Chinese are also buying property abroad at record levels and prices, and they are parking their financial assets overseas, often in well-shielded tax havens and shell companies.”

With no sign of sweeping reforms around the corner, he says, “China-watchers should keep their eyes on the regime’s instruments of control and on those assigned to use those instruments.”

[Hat tip Scott Powell]