Communist China – Part 1

An introduction to the second greatest world superpower.

In the last essay series we explored F.A. Hayek and Milton Friedman’s explanation that a free market system is the best means of promoting personal liberty and individual well-being. In this series of essays, we’ll explore a much different system, the one employed by China, a country with the world’s second largest population and second largest gross domestic product (GDP). It’s a country that uses free markets only strategically and in service of one governing central party, the Communist Party, and its long-term master plans. We’ll use Arthur Kroeber’s China’s Economy: What Everyone Needs to Know, Michael Pillsbury’s The Hundred-Year Marathon: China’s Secret Strategy to Replace America as the Global Superpower, Chris Miller’s Chip War: The Fight for the World’s Most Critical Technology, and Elbridge Colby’s The Strategy of Denial: American Defense in an Age of Great Power Conflict.

Pillsbury makes a general point worth considering when seeking to understand the strategy of China:

One of the first things a student of the Chinese language learns is its essential ambiguity. There is no alphabet, and Chinese words aren’t formed by letters. Rather, words are formed by combining smaller words. The word for size combines the character for large with the character for small. The word for length combines the words for short and long. Chinese use dictionaries to organize thousands of characters, which must be filed under approximately two hundred so- called radicals or families, all sorted according to relatedness. Under each category of relatedness, the dozens of characters are again sorted in order of the total number of strokes required to write a character, from a minimum of one to a maximum of seventeen strokes. Adding to this complexity are the tones and pitches that delineate words. The effect of tones is to give a single word four possible meanings. A classic example is ma. In the first tone, ma means mother. The second tone is a rising tone, so ma then means numb. The third tone for ma means horse, and the fourth tone for ma, which falls sharply, means to scold. The Chinese must talk loudly to make the tonal differences audible. Another ambiguity is how few sounds the Chinese language uses for syllables. The English language uses ten thousand different syllables, but Chinese has only four hundred. Thus, many words sound the same. Puns and misunderstandings abound … [T]he vast majority of so-called China experts in the United States do not speak Chinese beyond a few words— enough to feign competence in the presence of those who do not speak the language fluently. This fact makes it easier for the supposed China “experts” to interpret Chinese messages subjectively in ways that conform to their own beliefs.

That said, given China’s significance as a driver of the world economy and America’s international relations, it’s worth getting to know the basics about that particularly influential nation.

As Keoeber writes:

Consumers have enjoyed the benefits of low prices of China’s many mass-produced goods, ranging from the smartphones that people in wealthy countries use to run their lives to the motor scooters that people in developing countries use to get to work. Companies have found it hard to compete against low-cost Chinese firms and have had to adopt new product lines, move their production to China, or go out of business. China’s hunger for commodities has pushed up the prices of oil, coal, iron ore, and copper … This book is an effort to explain how China’s economy got to where it is today, where it might be headed in the coming years, and what China’s rise means for the rest of the world … Because of its sheer size, the growing tensions with the United States, and the gulf in basic values between China and the international system, it increasingly seeks to expand its influence, understanding modern China’s origins and trajectory is more important than ever … China is also a complicated organism. It is arguably the oldest state in the world, whose geographic core has been governed almost continuously by a rationalist bureaucracy since the late sixth century c.e., [see an earlier essay series on that topic] when the famous examination system was established. The centuries of accumulated knowledge about the craft of running an enormous, nominally centralized but practically quite fragmented polity doubtless continue to play an important role in the country’s political and economic governance. Any outside observer should start with a measure of respect for the durability and resourcefulness of this governing ethos. At the same time, the nation of China as we know it today is quite young, dating from the establishment of Communist Party rule in 1949, and both its political organization and economic development strategy were based on extensive borrowings from abroad … China has the ability to change the global geopolitical order because it is: A durably successful economy large enough to eventually displace the United States as the world’s biggest; An economy with a far higher degree of state ownership and state intervention than any other major country; An independent geopolitical actor with no alliance or security partnership with the United States; and An authoritarian, illiberal, nondemocratic state that is becoming more authoritarian and illiberal rather than less … [F]or the United States and the other countries that built the postwar economic and political order, the emergence of China not just as a large but a very different kind of economy is troubling. They fear a deeply unfair outcome in which heavily subsidized Chinese national champion companies make huge gains in international markets, while international firms are blocked from opportunities in China … On a deeper level, many fear that China will use its newfound economic might to challenge the United States for global political and military supremacy—because, unlike earlier postwar economic rivals like Germany and Japan, China lies outside the American security network. They also worry that an authoritarian China will try to change global rules in ways that strengthen dictatorial regimes and undermine democratic norms. In the words of Elizabeth Economy, a scholar at the Council on Foreign Relations, China is increasingly “an illiberal state seeking leadership in a liberal world order.”

China can also, in virtue of its gigantic consuming population, largely dictate what we all see regarding China in popular media. As Pillsbury explains:

At the beginning of the 2013 film Gravity, the astronauts portrayed by Sandra Bullock and George Clooney receive a troubling message from Mission Control in Houston. The Russians have fired a missile into one of their defunct satellites, and the explosion has created a chain reaction of potentially deadly debris heading toward the Americans on their space walk. A routine mission to repair the Hubbell Space Telescope becomes a fight for survival. In the end, Bullock’s character returns triumphantly to Earth with the assistance of an unoccupied Chinese space station that houses a pod she can pilot home. Amid the glowing reviews, there were a few complaints about the film’s more unrealistic elements. First, Sandra Bullock’s character would never have been allowed to enter—let alone operate—the Chinese space station. When Chinese engineers designed their system, they may have deliberately built it so that it could not interface with its American counterparts. They wanted no cooperation between the United States and China in space. Second, the Russians have never sent a missile into one of their own satellites, as the movie depicts. But the Chinese did exactly that in 2007. Using a ground-based antisatellite weapon (one that they could someday use against American satellites), the Chinese blasted a defunct weather satellite out of orbit. According to a Pentagon report, China’s test “raised concern among many nations, and the resulting debris cloud put at risk the assets of all spacefaring nations, and posed a danger to human space flight.” U.S. intelligence officials were given no warning by the Chinese about their missile launch and in fact had been repeatedly assured that the Chinese government did not have an antisatellite program. The Chinese recklessly created by far the largest, most dangerous space debris field in history, but the Russians get the blame in the movie. The effect of these misrepresentations is that the Chinese look like heroes in Gravity, while the Russians look like villains. The writers of Gravity went out of their way to distort the history of what has happened in space, and the reality of what could happen there. But then it shouldn’t be all that surprising: China’s massive population offers a huge potential audience for American films—and profit for Hollywood studios—provided the Chinese are portrayed in the proper light. Otherwise the movie would be banned from China altogethe … Once again, due to either shortsightedness or self-interest, Western elites and opinion shapers provide the public with rose-colored glasses when it comes to looking at China. That, of course, is just as the Chinese have planned it.

Before we examine these books’ take on China today, let’s review a brief history of modern China leading up to and under communist rule. As Kroeber writes:

During the nineteenth and early twentieth centuries, Europe and North America fully industrialized, but China failed to do so. Once it started to industrialize and adopted an open trading system in the early 1980s, the advantages that led to its pre-nineteenth-century eminence—a large, relatively well-educated population and well-established traditions of manufacturing and commerce—kicked in once more. After four decades of high-speed growth, China is once again punching its weight in the global economy. By 2017, China’s share of global economic output (15 percent), manufacturing value (25 percent), and manufactured exports (18 percent) were all roughly around China’s share of global population (19 percent) … The early years of communist rule under Mao Zedong (1949–1976) had their own elements of political and economic turmoil, including the brutal privatization of industry and collectivization of agriculture in the 1950s, the disastrous forced-march industrialization of the Great Leap Forward (1956–1958), which led straight to a famine in which upwards of 30 million people starved to death, and then the near civil war and constant ideological battling of the Cultural Revolution (1966–1976). But even through these calamities, the new communist state held together and achieved some notable gains: spreading basic literacy to virtually the whole population, imposing basic standards of hygiene and health care that helped life expectancy rise from about 48 years to around 75, and putting in place some of the basic infrastructure for a modern industrial economy. Under Deng Xiaoping (China’s paramount leader from 1979 to 1993) and his successors, communist ideology was shelved in favor of pragmatic, more market-oriented policies that delivered fast economic growth and a steady rise in living standards for most Chinese. A basic premise has been that only the Communist Party is capable of ensuring this sustained growth and, furthermore, that only because of CCP rule was China able to overcome its “century of humiliation” and return to greatness. Dispassionate historians may find much to argue with in this account; but the narrative is powerful and has become an indispensable part of the CCP’s strategy for legitimating its authoritarian rule … China benefited from a cooperative relationship with the United States, even though it was nominally a communist country and the United States had a strong anticommunist stance. This was because, starting with President Nixon’s visit to Beijing in 1972, the two countries decided that they should bury their differences in order to counter a common adversary, the Soviet Union. China continued to benefit from its special relationship with the United States for many years after the end of the Cold War. This relationship has now soured and is turning into an intense strategic rivalry … In 1979, the United States normalized diplomatic relations with the People’s Republic of China, ending a period of nearly three decades during which Washington did not recognize the CCP regime. The initial rationale for the rapprochement, from the U.S. side, was the desire to enlist China as a counterweight to the Soviet Union during the Cold War. China, which had effectively broken with its fellow communist regime by 1960, was also looking for a counterweight to Soviet power. After Deng Xiaoping assumed control of China in 1978, it was also looking for a partner to aid its economic development. The generally constructive relationship between the two countries was tested first by the Tiananmen Square demonstrations and subsequent crackdown of 1989, which led to the imposition of economic sanctions by the United States, and then by the collapse of the Soviet Union in 1991, which eliminated the original basis of this unlikely partnership between two large powers with sharply opposed political and ideological systems.

As Kroeber writes, the fall of the wholly communist system of the Soviet Union gave an opening to China (which, as will be explained later, has allowed for some free market efficiencies in order to provide work for its large population while maintaining its political control over larger state companies) to gain more international influence, with a consequent shift in U.S. policy toward China:

Why should I care about China’s economy? In 1991, the Soviet Union collapsed and the Cold War ended. Until then, the single biggest force affecting global economics and geopolitics had been the rivalry between the United States and the USSR. Since then, a period spanning over three decades, the biggest global forces have been the rise of China and the technological revolution driven by personal computers and the Internet. Today those two forces have converged to create a new strategic rivalry: one between the United States and China, both vying for geopolitical and technological leadership … Several reasons account for the shift from “constructive engagement” to a more adversarial stance. One is simply that China has become a lot bigger and more powerful and seems on its way not only to surpassing the United States as the world’s biggest economy but also acting as a peer competitor in the economic, technological, and military spheres. Another reason was the changes in Chinese policy under Xi Jinping after 2013. The Made in China 2025 industrial policy was seen as an effort to subsidize Chinese firms so that they could displace American competitors in a host of high-value, technology-intensive fields; the military-civil fusion program was seen as an effort to ensure that any technological gains in the commercial sector would translate into a strengthening of China’s military capabilities; the buildup of artificial island bases in the South China Sea was viewed as a signal of China’s intent to displace the United States as the main power in maritime Asia; and the Belt and Road Initiative was regarded as an effort to build up China’s geopolitical influence throughout the world. Moreover, Xi’s centralization of power, increasingly authoritarian tactics, and expansion of the CCP’s role in all aspects of society reduced the hope that China’s political system might converge with the democratic norms of the United States and its allies. These security-related concerns dovetailed with economic discontents [including] an accelerated decline in U.S. manufacturing employment, with job losses concentrated in the traditional Midwest industrial heartland … The U.S. political system did a poor job of protecting workers hurt by competition from low-labor-cost countries (notably but not exclusively China) and from automation … The rising sense that many communities were being left behind—and that China’s growth came not through fair competition but by “cheating” on the rules of the WTO—boosted support for the protectionist and economic nationalist policies that Trump championed. At the elite level, there was rising concern that the transfer of manufacturing capacity from the United States to China would not only slow down the United States’ economic growth, but also harm its national security by reducing the country’s ability to produce the industrial goods needed for national defense.30 An active debate has arisen among the U.S. policy elite about what the appropriate posture toward China should be in the coming decades.

In the next essay in this series, we’ll explore the details regarding the operation of China’s communist political system.