If the leadup to 2020 was the period of an ascendant China, today should be dubbed the period of an embattled China. It has seen breakneck economic growth, massive infrastructure expansion, a modernizing military, pervasive integration with the global supply chain, and the masterful consolidation of power by the current president Xi Jinping.

China seemed like the inevitable replacement for the allegedly declining global superpower, the United States of America. Although Washington certainly has its hands full with problems at home, Beijing has also stumbled upon considerable roadblocks of its own. Many of these problems are not only existential but inherent to the CCP’s own decisions and system of government.

The crushing weight of a “zero Covid policy” grips entire cities filled with millions of people. Youth unemployment is through the roof, giant companies like Alibaba are cutting double-digit percentages of their workforces, and investors are pulling their money out of the country at an unprecedented pace. 

The economy is slowing much faster than anticipated, the population is predicted to shrink by half before the end of the century, and the country may grow old before it gets rich. On the world stage, Beijing faces fierce competitors like the U.S. and a cooling reception in countries where Chinese investments used to make many friends. 

The reason for this is simple: actions have consequences, and the CCP’s policies may have scored early victories but are not sustainable.

China’s political economic contradiction

Marxist theory heavily emphasizes the role contradictory political-economic conditions play in moving society through history and toward communism. Yet, ironically, today’s China is facing a set of severe political and economic predicaments threatening the Party’s long-term power.  

The story of China’s transformation from a poor rural nation to the second most significant economic heavyweight in human history within a single lifetime is nothing short of a miracle. 

In 1978, two years after the death of Chairman Mao Zedong, the reformer Deng Xiaoping and his supporters convinced the rest of the CCP that the country should embrace more market policies and decentralize political power. At the time, the horrors of Mao’s rule convinced many that something had to be done to prevent a repeat.

The pragmatic use of markets to alleviate the failings of socialist policies is a common feature in communist regimes. For example, Vladimir Lenin restored price mechanisms in the early Soviet Union to curtail a famine with “The New Economic Policy”. Likewise, Deng’s reforms represented a rational calculation that economic growth would not only boost the nation’s power but prevent a revolution. 

Moreover, historians have documented that low-level market activity increased gradually leading up to 1978 as citizens were simply fed up with the communist model, and the state lacked any capacity to enforce the law effectively. As a result, the CCP’s embrace of markets was not an ideological epiphany more than a move to stay in power. 

Today, Chinese mega corporations challenge the party’s authority, geopolitical tensions make interdependence a liability rather than a strength, and Chinese citizens now have the resources to protest inequities they see in society.

The CCP is reasserting its power and clamping down on decentralization

So by 2012, the CCP had to make a choice, and they chose a man like Xi to reassert the party’s power. Indeed, the buildup to the Xi dynasty was clear if you looked close enough. The previous president, Hu Jintao, initially represented the more liberal Deng faction. Then, he acquiesced to the hardline communist faction that called for the need to reassert central authority. 

The reasons for this backstep in liberty and the empowerment of men like Xi are clear. Markets and decentralization of power created prosperity, but they also made the CCP less important and, therefore, less stable. Private businesses are incredibly productive and necessary for national rejuvenation, but they also breed men like Alibaba CEO Jack Ma, who not only wield tremendous social weight but openly criticize things like the state banking system. Therefore, just like the CCP recognized that the political-economic conditions of 1978 required liberalization to stay in power, the CCP of today corrects in the opposite direction.

In an attempt to discipline markets and redistribute wealth, Xi unleashed the Common Prosperity Campaign in 2021, levying huge antitrust fines and tightening regulations. The result: mention of the campaign faded from use after about a year because investors had lost trust in the Chinese market. Furthermore, the Evergrande crisis back in 2021 almost popped a property sector bubble, and the government has since deleveraged the market. Decades of poor oversight, reckless lending, and corruption are to blame, and regardless if the CCP can fix the problem, the result is stunted economic growth.

China is being forced to face up to its problems

As the world becomes increasingly polarized along the lines of great power competition, especially after China’s tacit support for the Russian invasion of Ukraine, Beijing can no longer play the shut up and do business card. 

Once a continent that largely wanted to stay out of former President Trump’s lone crusade against Beijing, Europe is increasingly posturing to contain Chinese influence. The British and French militaries are returning to Asia. 

A Chinese diplomatic envoy touring Europe attempting to assuage concerns over the war in Ukraine couldn’t get a meeting in some countries. Germany, a country with deep economic ties to China, is considering distancing itself from Beijing over human rights concerns. 

The reasons for this expanding checklist of problems all stem back to China’s authoritarian system of government. The CCP cannot tolerate the uncertainty and rowdiness of a dynamic private sector but also needs growth to survive. 

Beijing cannot advance its interests on the world stage without antagonizing other nations, so they resort to coercion. When faced with a problem, the CCP always chooses the option that maximizes political power, which often results in an overcorrection, sacrifices progress, or both. 

The past couple of decades may have suggested that China’s competent, authoritarian style of governance may be an alternative model for the world. However, today one can only help but see a regime faced with the consequences of its actions with a slim off ramp to preserve progress and power at the same time.

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