This article to discuss outcomes of 19th Communist Party Congress by Communist Party of China also will try to predict the future course of actions by Chinese rulers. The article may analyze economic, geopolitical, ideological and party discipline perspective and also highlights shortcomings in Congress.
Economic Dimension
The most important event of 19th Party Congress is that the Principal Contradiction has been changed. In 1981 Congress, the accepted Principal Contradiction was a contradiction between lower forces of production and Chinese people’s desire to have the higher quality of life. In 2018, this is changed into the contradiction between inadequate and unbalanced development with desire for even higher quality of life. In Marxist philosophy, all material objects are determined by different forces of contradictions or dialectics. Among all the contradictions in society, the social dynamics are determined by some principal contradiction. Marxists try to understand this contradiction to determine and curve out the future social outcome. This change clearly points out that 2018 Congress is as much important and as much acceptance of a new era since 1981. CPC has accepted officially that in last 37 years, material conditions have changed and time has come to move beyond Deng Xiaoping’s 1981 Open Market Reforms.
The new era beginning in 2018 is characterized by inadequate and unbalanced development. What does that mean? Firstly, the last 37 years growth is inadequate as only coastal China has developed by such open market reforms while Western interior with few ports available for exports cannot develop. This is because market caters resources where there are returns. Eastern coastal China was ideal for profit-making export-led business. So market led resource allocation went mostly to these areas. So Western China failed to develop as much as coastal China. Rural poverty also remained since the market does not cater to poverty eradication. Secondly, the market led growth was unbalanced as well. The growth was mostly export-led and investment-led and proportion of consumption to GDP ratio was considerably low. Another element of unbalanced growth is ecological and environmental problems growing with rising GDP. Still more visible is the rising economic inequality among Chinese people which again points to unbalanced development.
This is again because profit-making market led resource allocation caters to developed economies thus raising exports of China. This attracted, even more, investments in China’s export sector leading to export and investment-led growth. So CPC clearly indicating that last 37 years growth has brought with it many evils like regional and economic inequality, environmental problems, export-investment led growth with very resources used for consumption. Also, China needs to move to high value-added products in the coming days which will require more quality investment in education, entrepreneurship, health.
Now come next question: why are these now considered problems? Between 1981 and 2007, U.S. financial market was raising debt led income of US people and was a large source of demand for Chinese manufacturing goods, but after 2008 financial crisis, US finance is no longer reliable demand generator for Chinese manufacturing goods. the US finance is no longer generating enough income and demand in US economy. China also found it highly unsustainable, therefore, it has to redirect its entire economy. China has to reduce its dependence on exports and investment. China has now to increase consumption and imports and share more resources for growth with Chinese people. Similarly, with the end in hope in demand from US market, Chinese economy starts facing lack of demand.
To generate demand state has now to undertake non-profit making or long gestation period investments especially in infrastructure. Actually, Chinese policymakers want to use this opportunity by state allocated investment in Western and interior China which has seen little growth in market-led growth since the 1980s. Similarly, the state will also invest in uplifting remaining poor people, making society more equal economically and also by investing in an environment like green technology, recruiting more cleaning workers, etc.
Geopolitical Dimension
Since the Communist revolution in 1949, China was commanding considerable international prestige. The rise of China from hundred years of humiliation by different Western powers as well as Japan was the source of inspiration for many countries across the world. Moreover, Mao’s agrarian revolution made China a showcase for fighting feudalism and colonialism. Peasant revolution and anti-imperialist movement throughout Asia, Africa, and Latin America looked at China a guide to success. Mao’s Cultural Revolution even inspired student movement across the Western world. Many of leading Western figures of post-modernism, feminism and environmentalism began their journey by drawing inspiration from Cultural Revolution. But since the 1970s, enthusiasm about China declined. Capitalism transformed from productive capitalism to financial capitalism by finding profitable demand in asset trading.
The US began to specialize in finance and export its entire manufacturing base to cheap labor based Third World countries. Capitalism began to show growth and also mobilize considerable amount of capital across the Third World. Chinese policymakers understood the coming change and took the opportunity. Since the late 1970s, Chinese leadership became more focused on internal economic growth. Deng’s open market reforms made many people feel that China has abandoned Communism and has taken the path of Western Capitalism.
The soft power of Mao-inspired peasant movement or Cultural Revolution became obsolete but with the financial crisis of 2008, financial capitalism is in crisis and Chinese policymakers are again ready to take the opportunity. They understood that Chinese economy will now face overaccumulation crisis where demand has to be generated continuously by China both at home and abroad. 19th Party Congress clearly approves this position and change in principal contradiction is about officially recognizing the fact that China will now have to tackle over accumulation. To tackle it, China is using not only investing in infrastructure at home but also abroad. It is named as Belt Road Initiative (BRI). BRI is not simply about solving overaccumulation crisis inside China but also about helping to carve out a multipolar world and sharing its resources with rest of the world. Since China is a socialist country its allocation of surplus is determined by Communist Party unlike in capitalist countries where the allocation of surplus is determined by private capitalist-banker class.
In such case, China can invest in infrastructures with long gestation period or even without profit to overcome its overaccumulation crisis and to help geopolitical allies abroad. Western capitalist countries, on the other hand, are chained by profit maximization constraint even while in a demand-constrained economy and so failed to buy allies so easily. The result is China is winning more and more allies from the USA. In last ten years Russia, Pakistan, Turkey, the Philippines, Myanmar, Sri Lanka, Venezuela, Bolivia and many such allies are won by China.
China has also launched yuan-oil gold backed scheme for oil sellers where oil selling countries will get gold backed yuan in exchange for oil. Nigeria, Iran, Russia, Venezuela have already agreed to this deal. Many believe Saudi’s launch of 5% ARAMCO (Saudi state-owned oil producing company) in IPO is a step to move out of petrodollar and accept yuan-oil gold backed scheme. The US media tried to underwrite very low value of$450 billion for ARAMCO while Chinese valuation went as high as $2 trillion. China offered Saudi to buy 5% of ARAMCO for $100 billion instead of IPO listing. So clearly, China has geopolitics in mind while launching BRI or yuan-oil-gold scheme.
Chinese military and navy modernization is also another aspect of geopolitics. With Chinese investments to grow across the world, Chinese policymakers feeling it is ever more necessary to have strong military and navy that can stand the might of any other country. Moreover, the ever-growing demand for raw materials like oil also making China vulnerable to foreign naval presence across different sea trade route choke points. But Chinese defense measures are defensive and only concerned about defending sovereignty.
Ideological Dimension
According to Chinese constitution, China is guided by Marxism-Leninism, Mao Ze Dong’s thoughts, and Deng Xiaoping’s Thesis but 19th Party Congress has added Xi Jinping’s thoughts in the New Era on Socialism with Chinese characteristics. This places Xi in a position equivalent to Mao and more than Deng since the latter’s name was added in the constitution only after his death. This also shows the importance of this new era of overaccumulation and when China has returned to its pre-Opium War position of globe’s leading economy and exporter. Mao has liberated China from colonial powers and destroyed feudalism. Deng has ushered in the industrialization of China.
Mao and Deng had acted more or less following footsteps of other industrialized countries. But since 2007, as Western financial capitalism is in crisis, no Soviet Union is left to lead any other alternative social system, China can no longer remain content to follow others. China now has to pioneer its own way. US-led unipolar world order is falling apart and demand a multipolar world order is growing each day. China being now world’s largest economy by Purchasing Power Parity (PPP) has to shoulder more responsibilities across the globe. All these things make the coming years a New Era indeed.
Xi said Socialism with Chinese characteristics offers a new option for other countries and nations who want to speed up their development while preserving their independence. Xinhua explained Xi’s speech as in the 21st-century capitalist countries will lose its appeal to the developing world and Chinese socialist model will be started to be pursued all over the world. These comments are not much different from Deng Xiaoping in 1981 when he claimed that as Communist China’s per capita income will rise closer to Western capitalist countries, more and more developing countries will start following Chinese socialist model of development and Communism will gain the upper hand.
Xinhua clearly pointed out that “Unlike competitive, confrontational Western politics, the CPC and non-Communist parties cooperate with each other, working together for the advancement of socialism and striving to improve the people’s standard of living. The relationship maintains political stability and social harmony and ensures efficient policy-making and implementation. The Chinese system leads to social unity rather than the divisions which come as an unavoidable consequence of the adversarial nature of Western democracy today. Endless political backbiting, bickering and policy reversals, which make the hallmarks of liberal democracy, have retarded economic and social progress and ignored the interests of most citizens”. Though China will never export its model forcefully on the rest of the world, yet, in the coming days, we may see China more active in claiming its system’s superiority over Western liberal democracy.
Ideologically focus has also shifted from quantity to quality. There is no mention of growth target simply because, after 2008 financial crisis, relatively low growth must be accepted as new normal. This will ensure the country can focus on implementing its new development concepts of innovation, coordination, greening and inclusive. Rather, China has set the long-term objective of 30 years in two steps. Socialist modernization will be basically realized from 2020 to 2035. From 2035 to the middle of the century, China will become a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious and beautiful, according to the report.
Intra Party Discipline
During Hu’s 10-year tenure from 2002-12, the concept of intraparty democracy was promoted. The peaceful transfer of power from Jiang Jemin to Hu Jintao showed that China’s leadership succession could become more institutionalized and standardized through the creation of more rules and norms. The consensus was that development of intraparty democracy could serve as a check and balance to entrench party controls. In September 2009 when the Central Committee held a plenary session to study how to strengthen the party’s legitimacy and declared that intraparty democracy was the lifeblood of the party.
Meanwhile, many liberal thinkers close to the leadership began preaching that intraparty democracy was the best way forward for China’s political reform. Now, in 2018 came Xi’s decision to abandon the vote-based promotion system and effectively revert to the old method of picking new leaders. Many Western and liberal critics began to say that the termination of the straw poll method of selection and the changes Xi introduced not only raised Xi’s power to the level of autocracy but also ended hopes for more incremental experiments of the Chinese-style intraparty democracy.
Contrary to speculation, Li Keqiang, hailing from the Communist Youth League, the power base of former President Hu Jintao will remain as premier for the next five years with his political ranking unchanged at No 2 in the party hierarchy. Wang Yang got the post of executive vice premier who also came from Communist Youth League. Han Zheng the Secretary of Shanghai, the power base of another former President Jiang Jemin also uplifted to the helm of Chinese People’s Political Consultative Conference which is the fourth position from Party’s hierarchy. Wang Qishan, Xi’s trusted ally in charge of the anti-corruption campaign, step down from the committee because he has reached the retirement age. Chen Miner, Xi’s protégé, does not make it into the committee. This signals that Xi has closely followed the rules regarding age limits and seniority when considering candidates for the top posts, again contrary to speculation he would break rules to his advantage.
So, it can be said that different factions of the party have agreed to form the decisions of leadership in 19th Party Congress and no faction is feeling alienated enough which can give rise to future rebellion. Of course, the new line-up without a potential successor insight can lead to another term for Xi. But this new system can also end up as a competitive system where potential candidates will have to prove themselves at the Politburo level before getting an opportunity to rise to the next level. One thing again is clear from party politics, while Jiang Jemin and Hu Jintao just carried out the plans laid by Deng Xiaoping, Xi will chalk out plans completely different from Deng’s. This is not about individual Xi being powerful, rather it is about the collective decision of the party which thinks China is in a New Era and needs as much strong leadership as in times of Mao and Deng.
According to our view, 19th Party Congress is not without flaws. The change in policy under Deng Xiaoping in 1980s is always viewed outside China both among Marxist and non-Marxist people as the road to capitalism. Chinese policymakers now moving to New Era need to explain more clearly how is it different from the capitalist economy. It must be remembered that Mao pioneered New Democratic Revolution in China which is quite different from the then prevailing Leninist model of revolution in the Soviet Union. Since 1949, Mao’s destruction of feudalism and Deng’s industrialization need no pioneering action. But now Xi faces a critical situation when West has reached the dead end and no alternative system is in sight. China now has to pioneer its own way to tackle over accumulation, sharing more of global responsibilities, supporting geopolitical allies and above all projecting itself as an alternative. China still lacks ideological power unlike in times of Mao when its peasant revolution was seen as a source of inspiration by many. Mere development model will never draw in much political support for China from society abroad.
China wants to show its cooperative nature of democracy which is quite opposite to confrontational nature of Western democracy. But often many states are created by an alliance of different elements which finds in confrontational democracy a way to make their voice heard. Though it hampers the development process yet it often proves to be sustainable since all opposing powers uphold the stagnant system simply to make them relevant. In fact, most developing countries are made up of such alliances. So CPC’s cooperative vs confrontation approach may not gain many likes.
Another important factor that has been overlooked in the 19th Party Congress is the demographic crisis that has been creeping into not only the Chinese society but all industrialized societies. Today almost industrialized societies have been plagued by fertility rate below replacement rate. The result is aging society with a few young people to work and to consume. Japan, Germany, Russia already facing a decline in population for decades. China if continue to show such low fertility rates will end up in the similar situation. CPC has canceled a one-child policy in urban areas. But the point is capitalist way of life with too much competition, too much work pressure makes big family almost impossible. The high cost of raising the child in capitalist society forces people to have few children. CPC being the leader of the largest economy in PPP and trying to project its mode of development as a model to be followed should have been hinted about tackling the demographic crisis in the Party Congress.
Consequently,19th Party Congress is the testimony that days of industrialization and capital accumulation are over. Now Chinese leadership is more concerned about overaccumulation crisis and quality of growth. More state directed resource allocation is likely in the coming years in BRI projects, infrastructure in remote underdeveloped areas, green technologies, innovation in  high value-added products, reducing poverty and economic inequality. This is not some individual or factional decision. Instead, all important factions inside the party share this view. It seems that Chinese leadership will also try to project its development model as something that can be followed by other developing countries.
They also try to project socialism with cooperative democracy as an alternative to Western capitalism with confrontational democracy. Chinese socialism with CPC at the helm of surplus allocation decision is likely to win more geopolitical allies than USA or others through BRI infrastructure projects which will give a lot of money to investment recipient country. We also guess that CPC’s political soft power projection to the outside world is still weak and by taking into account demographic crisis and clearing theoretical stand can increase its influence considerably.
DISCLAIMER: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy and position of Regional Rapport.