HONG KONG, June 30 (Reuters Breakingviews) – The Chinese Communist Party celebrates its 100th anniversary this week. A century after its creation in the French concession of Shanghai, the institution has never been so popular in its country or felt abroad. Its leaders are experts in the nuances of control, and long on ambition. But they are dangerously short of new ideas.
Under President Xi Jinping, the CCP has marched boldly on the world stage. He founded multilateral lending institutions, pushed the yuan into the International Monetary Fund’s currency basket, and invested money in overseas infrastructure projects under the Belt and Road Initiative. “. Back home, he has eliminated absolute poverty to his measure and promises to be carbon neutral by 2060.
Beijing has also fought the White House to a virtual standstill on several fronts. Despite President Donald Trump’s tariffs, Chinese manufacturers held about 16% of the global export market in March, according to data from Refinitiv: a share last reached by the United States in the 1970s. diplomatic relations with the United States were deteriorating, mainland companies raised $ 70 billion on U.S. stock exchanges and borrowed $ 163 billion from U.S. banks under Xi’s tenure, according to Dealogic.
Finally, the CCP succeeded in rallying its citizens to suppress Covid-19 after a failed start, and brought the economy back into growth mode after a single quarter of contraction. Yet the list of stalled reform projects has grown even as the volume of bilious nationalist diatribes increases.
SLOWLY BUT SURELY
It should be remembered that China’s economic miracle, which began under Deng Xiaoping in the 1980s, was the result of considerable political ingenuity. In post-Soviet Russia, the government hastily wrested controls and established free markets in an approach called “shock therapy.” Because Mao Zedong’s radical socialism had made the Chinese economy even more rigid and fragile than the Soviet model, this was not an option for Beijing.
Instead, reformers under Deng’s umbrella allowed local cadres to carefully experiment with liberalization, slowly reintroducing private property and allowing farmers and entrepreneurs to keep their profits. The Communists revived the stock and bond markets and exploited the US financial markets to help convert clumsy ministries into listed companies.
They made bold calls. Premier Zhu Rongji laid off about 40 million employees of inefficient state-owned enterprises in the 1990s. The CCP also executed one of the largest transfers of real estate assets from public to private control in history. Most of the credit for China’s economic recovery belongs to its hard-working people. But its political leaders deserve a share for wisely leading the way – even if they created the mess in the first place.
Today, the CCP’s creativity is showing signs of exhaustion. Officials seem increasingly nostalgic for old solutions, such as free trade zones, which cannot solve current problems. Xi can be a great bud cracker; his brutal anti-corruption campaign has done a lot to restore public confidence in the CCP. But in economic terms, his government did not stop reform so much as it failed.
RETURN TO THE WELL
Take the long-drawn-out campaign to reduce overinvestment in real estate, which cannibalizes capital from more productive asset classes and indebted Chinese households. Despite a concerted effort during the pandemic to keep stimulus funds out of real estate, house prices in central cities are once again rising too rapidly. This is largely because the CCP’s response to Covid-19 used an old playbook: spending on infrastructure while easing credit. The two inevitably poured into housing, as they did after the 2008 global financial crisis. But officials were unable to stop it, and the government was also unable to withdraw from the drawing board a property tax, which could have a chilling effect.
Elsewhere, bureaucrats tend to view blowing heads in struggling industries as synonymous with reforming them. This is not always true, and it could be a costly misunderstanding. The CCP-led public scare of tech giants like Alibaba (9988.HK), for example, is unlikely to spur investment or innovation. Meanwhile, Beijing is redoubling its efforts to become self-sufficient in the semiconductor business, but has been spending money on the problem for years without much success. With the national bad debt pile rising to $ 2 trillion, China can hardly afford to stick to its model of unnecessary innovation.
The list goes on. The demographic crisis caused by the shrinking workforce is accelerating as the wealth gap widens. Yet the CCP, increasingly dominated by male “wolf warriors”, still insists on micro-managing women’s birth decisions, arresting feminists and restricting labor mobility.
Sitting atop a $ 15 trillion economy, the CCP has vast resources and popular support. But the problems he faces are even more complex than those overcome by Deng’s reformers. If the party is to celebrate another century in power, it will have to stop relying on past successes.
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– The Chinese Communist Party will celebrate the 100th anniversary of its founding on July 1. He established the People’s Republic of China on October 1, 1949 after defeating the Kuomintang Party in a civil war and has ruled alone since then.
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Editing by Peter Thal Larsen and Katrina Hamlin
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