Commentary | 27 September 2018

Can China ever reconcile the market economy with a one-party state?

Originally published in Financial Times

Originally published in Financial Times

The late Sinologist Pierre Ryckmans lamented how scholars of modern China had to absorb “industrial quantities of the most indigestible stuff” in grappling with their subject matter. “Reading communist literature,” he said, “is akin to munching rhinoceros sausage, or to swallowing sawdust by the bucketful.”

Such challenges help explain the value, and some of the difficulties, in reading two new China books, one by Kerry Brown, a prominent Sinologist, and George Magnus, an economist with a longtime focus on the country.

Both admirably set out to do something that too few foreigners do in writing about China — to judge the country on its own terms, which means consuming all that sausage and sawdust to grind their way through the walls of official language and institutional opacity.

In Brown’s case, with China’s Dream he sets himself the task of wrestling to the ground reams of top-level pronouncements, from the party’s revolutionary genesis all the way to President Xi Jinping, reconstructing and deconstructing the ruling Communist party’s “grand master narrative” in building a strong, independent China. Getting through the party’s “dense accumulated vocabularies”, he says, with understatement, is “the continuous challenge”. Not only is the party a sinuous, shape-shifting body, veering from violent excesses under Mao Zedong to tortuous, canonical justifications for rampant capitalism from Deng Xiaoping onwards, but it has to juggle competing doctrines as well. One is its austere rules that dictate the selfless creeds that cadres are meant to live by; and the other comprises weighty indigenous traditions of ethical thought and governance.

Brown sees in these centuries-old traditions a “Deep China”, “a place linked to a past before Mao even existed”, made up not just of various belief and behavioural systems such as Confucianism, but also the country’s liquid, age-old family networks. Occasionally, the party has not bothered trying to thread this needle, instead trashing the country’s antecedents in favour of arid Marxist-Leninist tracts and gratuitous diktats conveniently drawn up to win the power struggle du jour.

In adopting the party’s language to explain its survival strategies, Brown struggles with the same problem Chinese citizens face, that of navigating a complex layered system that places “sinified Marxist notions next to the market capitalist realities people live, breathe and work in”. In that respect, Brown sometimes makes for frustrating reading. A tome that is as much faithful to the party’s language as it is captured by it, China’s Dream ends up being a fascinating book, but one with a monumental work buried inside of it. A more captivating approach might have distilled the language into something simpler, and then tied the party’s rolling ideological contortions to the drama of events and the rise and fall of its leaders.

Magnus’s Red Flags is more straightforward, though he is dealing with a similar conundrum, of whether China can continue to keep all its balls in the air as it tries to reconcile the needs of a market economy with the strictures of a one-party state. Like Brown, Magnus is not dogmatic. We should not “rush to judgment that autocratic states are doomed to fail,” though he comes close to suggesting this one will, unless the party changes course.

His book Red Flags looks at the four traps that the party is trying to skirt — debt, currency, demographics, and being caught as a middle-income economy with no foreseeable path to a richer future. Magnus is particularly acute on the renminbi, and Beijing’s pretensions to turn it into a global currency on par with the dollar. By running trade surpluses and restricting capital outflows, in the name of the catch-all credo for Chinese policymakers, maintaining “stability”, Beijing has in truth opted out of a contest with the US altogether. “Far from threatening the role of the US dollar in the global system,” he says, “China is a willing party to the status quo.”

Red Flags lands with exquisite timing. Chinese officials are now debating the need for further stimulus to the economy, to keep up high growth and offset President Donald Trump’s trade tactics. In Magnus’s view, more pump priming is a dead end for China. He advocates the opposite course, of a “growth hiatus” to draw down debt to sustainable levels. Beijing cannot have it both ways, he says, of continuing to pursue speedy growth and simultaneously reducing the risk of financial instability.

Like Brown, Magnus could have looked above the parapet more often, to put the voluminous detail he has assembled on to a grander stage, in his case, of economic history. In the end, Magnus emerges as cautiously pessimistic, comparing Xi’s outward omnipotence with the brittleness displayed throughout the Chinese system. “That places Xi’s China in jeopardy,” he writes.

The reader in me would have liked starker, more dramatic judgments from both books about China’s future. The analyst in me, however, respects the authors’ caution. As both books make clear, the party is charting its own course. Once that is clear, you can see communist China for what it is, a real time, empirical experiment on the end-of-history thesis, testing whether an authoritarian state can surpass liberal democracies.

That so many intelligent observers of China should be cautious about predicting the outcome of the contest of the century tells you, on its own, about how close this competition is.

This article was originally published in the Financial Times.