For clues on Beijing’s plans for Taiwan, look to Russia

China has learned from Russia’s post-1991 experience, pursuing its economic liberalisation with more care, but still failed to avoid some pitfalls of pro-market policies
While the strongman playbook might dictate taking Taiwan by force to distract from economic woes, Beijing is likely to move cautiously with an eye on Russia’s experience

Nancy Qian

Published: 3:30am, 17 Sep 2022

Why you can trust SCMP

As China prepares for its 20th Party Congress in October, when President Xi Jinping is expected to accept a third term, observers worry about uncertain days ahead, especially regarding Taiwan. But one doesn’t need a crystal ball to glimpse its future. China’s leaders, for their part, are looking at Russia.

China has mirrored Russia’s historical trajectory for most of the past 100 years. At the beginning of the 20th century, both were large empires with outdated institutions that could not protect their people from foreign wars, corruption, inequality and poverty. While Russia’s per capita income in 1900 was around one third that of the United States, Chinese incomes were half those of Russia.

In 1949, the new People’s Republic was modelled on the Soviet system. In both, a command economy replaced markets and the central government influenced every aspect of people’s lives – what they produced and ate, where they worked and lived and what they could say, read and write.

But Beijing and Moscow struggled to maintain production because workers enjoyed little reward for their labour. Among other strategies to get people to work harder, the Soviet and Chinese governments set up systems that threatened farmers with starvation if their production did not meet state quotas. This led to more than 7 million famine deaths in the Soviet Union in 1932-33 and between 16.5 million and 45 million famine deaths in China in 1959-61.

People labour on a communal farm during the Great Leap Forward (1959-1961). Photo: Getty Images

These economic calamities posed a serious political threat to the regimes. After all, the Soviet and Chinese communists were supposed to be modernisers who empowered the people and delivered economic prosperity.

To survive, each regime touted its role as a defender of the people against foreign invaders. The Soviet Union and China suffered more losses than any other country in World War II. In the decades thereafter, the Cold War kept alive fears of foreign invasion and the legitimacy of authoritarian regimes.

When burnt rice, sent or carried to China by relatives, was a lifesaver

Following the collapse of the Soviet Union in 1991, Russia became a model of what not to do. Its per capita income fell by 50 per cent between 1989 and 1996 and did not recover to 1989 levels for another decade. Corruption and crime were rampant. Unemployment rose from 5 per cent in 1991 to 13 per cent in 1998, and social problems such as alcoholism rose in tandem.

The Communist Party of China learned from the Russian experience and pursued its liberalisation more carefully. Recognising that rapid political liberalisation in Russia ended up ousting the Communist Party and auctioning off state assets gave rise to billionaire oligarchs, China’s communists took pains to avoid the same fate. By carefully controlling privatisation and political reforms, they reformed the economy gradually, making progress through trial and error.

Liberalisation transformed China and Russia from relatively equal economies to ones where the top 1 per cent own most of the wealth. In 2015, the bottom 25 per cent of Chinese households owned only 1 per cent of the country’s wealth, while the bottom half of Russian households owned 15 per cent.

07:50

The Chinese villagers who fear they can never escape the poverty trap

Like the Russian oligarchs, the new Chinese elites are seen as egotistical, corrupt threats to state authority. In Russia, President Vladimir Putin gained popularity for “defeating” the oligarchs. In China, Xi’s aggressive campaigns to reduce corruption and curb the power of new billionaires have been similarly popular.

While times have changed, the playbook for popularity has not. Strongmen still appeal to the people by presenting themselves as defenders against poverty, corruption and foreign invaders. The more controversial their hold on power, the more they need success in these fights. The less success they have in economic battles, the greater their need for an external enemy.

It is no coincidence Russia’s invasions of Crimea in 2014 and Ukraine this year followed Putin’s controversial third term in 2012 and coincided with falling incomes since 2014 and rising corruption. Xi is unlikely to face explicit resistance when he starts his third term, but he still faces demands for economic improvement. Inequality and perceptions of corruption have grown since Xi came to power, while prolonged “zero-Covid” lockdowns have shrunk economic growth forecasts for 2022 to 3.3 per cent, which would be the lowest since 1976, save for 2020.

The strongman’s playbook for boosting popularity dictates distracting attention from China’s economic woes and attempting to take Taiwan by force. However, history suggests China will move cautiously and base its actions on Russia’s experience. The more successful Ukraine’s resistance is, the more costly war is for Russia and the more likely peace across the Taiwan Strait will be.

Nancy Qian, professor of managerial economics and decision sciences at Northwestern University’s Kellogg School of Management, is a co-director of Northwestern University’s Global Poverty Research Lab and the founding director of China Econ Lab. Copyright: Project Syndicate