China’s Return to Maoism: Commentary

by EditorT

A view shows cranes in front of the skyline of the Central Business District in Beijing on Oct. 18, 2021. (Thomas Peter/Reuters)

As the economy falters, the CCP knows it must control everything in order to retain power

By James Gorrie

Commentary

China’s economy is in a serious and prolonged downward spiral.

What better time for China to return to its Maoist roots?

After all, China was the paragon of economic growth, technological innovation, and stability under former leader Mao Zedong, right?

Nonetheless, the Chinese Communist Party’s (CCP) “new” economic and political policies are turning the country’s economy away from its blend of state and private capitalism and into the dark, Maoist model of the past.

Even more staggering is that the CCP is doing so intentionally. Major policy changes are being institutionalized by CCP leadership, which will further damage China’s already declining economy.

Resurrecting Mao’s National Self-Reliance Policy

The purported reason behind reverting to Mao-era policies is to make China self-reliant. The CCP wants to decouple its economy from the West to minimize its dependence on Western partnerships and insulate China against future U.S. sanctions.

It’s an attractive notion, but it doesn’t work in practice. The necessary factors for self-reliance—such as efficient markets and transparent courts—require freedom of information, private property, technological innovation, robust consumer demand, and confidence in the future. None of these things are present enough in China.

On the other hand, the economy is cratering under the current system created by the CCP. So, indeed, why not revert to Maoism?

In reality, preemptively gaining control of as much of the economy as possible may be the only way for the Party to survive the coming onslaught of economic woes.

A few developments make it clear how comprehensively the CCP is failing China.

Manufacturing Implosion Continues

First, a dose of reality regarding “reported” growth rates is in order. China’s growth projection for 2022 is 5.5 percent. The CCP’s official growth assessment for the first quarter of this year was a bit lower at 4.8 percent. Some private economists say that China’s growth for 2022 will be roughly 2 or 3 percent.

If even those lower estimates were accurate, that would represent the greatest fall in economic growth that China has seen since the year following the Tiananmen Square mass murder of students by the CCP in 1989.

But even the lowest estimates aren’t reasonable.

On the Caixin index, which indicates manufacturing activity, China is currently at 48, but was at 46 in April. Any level below 50 on the index means negative growth or a contraction in manufacturing activity. As the manufacturing and export leader of the world, that negative level spells more difficulty for China’s economy.

Property Development Sector Collapsing

There’s more bad news in China’s property development sector. The industry that makes up about 29 percent of its gross domestic product (GDP) continues to melt down. With fewer buyers, heavy discounts are in play. In April, home prices fell in two-thirds of China’s largest 70 cities.

The debt-driven collapse of the industry is resulting in rampant insolvency among even the largest development firms and banks. In fact, trillions in bad debt saturate both private and public economic sectors.

Epoch Times Photo

A man works at a construction site of a residential skyscraper in Shanghai on Nov. 29, 2016. Chinese household debt has risen at an “alarming” pace as property values have soared, analysts say, raising the risk that a real estate downturn could send shockwaves through the world’s second-largest economy. (Johannes Eisele/AFP via Getty Images)

Given that the CCP created the distortions in the property development sector through graft, corruption, and circular lending, the idea that the Party is equipped to solve these problems is absurd.

Again, from the Party’s perspective, it’s not about economic efficiency, but maintaining political control.

Attacking Big Tech

Of course, the CCP’s drive to control the private sector is also behind its oppression of powerful big tech firms such as Alibaba, Tencent, and many others. The CCP blames tech firms’ excessive abuse of monopoly power, but the real issue is power itself.

The big tech firms wield tremendous financial and social influence in China, as well as in many other countries. Their technology, including social media, drives the culture, not the Party. These large societal influencers weren’t only competing with the CCP, but they were posing a threat to its legitimacy.

Naturally, the CCP responds to threats by destroying them. That’s what’s really behind its take on the tech moguls. Massive layoffs have followed the takeovers.

Mixing Economic Models

A big part of the CCP’s transition to Maoism—and undoubtedly related to the tech takeovers—is its plan to blend private firms with state-owned enterprises (SOE) extensively. That’s another formula for economic decline. It didn’t work for Mao, and it won’t work now.

Private companies are typically run much more efficiently than SOEs because they usually have to make a profit to survive. On the other hand, SOEs are run by political appointees, not businesspeople. In most cases, SOEs were successful private firms that the CCP took over for the personal gain of Party members, who then drained the wealth from the companies and refinanced them with loans from the central bank, the People’s Bank of China (PBOC).

The “blending” of both, as it were, is just a euphemism for more takeovers of private businesses by the Party.

Chinese People’s Fear of the Future

Not surprisingly, pessimism best defines people’s outlook for the future in 2022. The CCP’s “zero-COVID” policy kills economic activity wherever it’s applied. The seemingly never-ending lockdowns of entire cities have resulted in dramatic falls in output, consumer income, and spending, as well as considerable jumps in consumers’ savings rates. Of course, unemployment is rising, too.

According to the PBOC, private savings from January to May rose by 7.86 trillion yuan ($1.7 trillion), which is more than 50 percent higher than the same period last year. At the same time, household consumption fell, meaning that people are buying even less in 2022 than they were during the intense lockdowns of 2020.

Epoch Times Photo

A Chinese migrant worker passes by the People’s Bank of China in Beijing on May 1, 2013. The People’s Bank released the “Financial Stability Law (Draft for Comments)” on April 6, 2022, saying that resolving financial risks is a “constant theme.” (Mark Ralston/AFP/Getty Images)

That’s an additional $1.7 trillion that wasn’t spent in the economy in the first quarter, with a GDP of about $14.7 trillion or less. Moreover, in 2020, savings were invested in the stock market or property. In 2022, however, consumers are paying off debt, prepaying mortgages, and other defensive actions.

Finally, the extended lockdowns across China have resulted in declining orders in manufacturing and other major industries, leading to widespread layoffs.

The CCP’s Survival Trumps Economic Viability

The language coming out of Beijing has the unmistakable ring of desperation as the CCP seeks to stabilize employment and the economy. It’s worth noting that amid economic and social chaos, Mao sought and found stability and remained in power until the end.

The resurrection of Maoism is simply the adoption of proven methods for expanding power and control over the country as it descends into economic and social instability.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of NTD Canada.

 

James Gorrie
WRITER

You may also like