President Xi Jinping leads Communist Party officials during a visit to an exhibition at the Yan’an Revolutionary Memorial Hall in Yan’an, northwest Shaanxi province, on October 27, 2022. Photo: Xinhua
Opinion
Macroscope
by Yuen Yuen Ang
Macroscope
by Yuen Yuen Ang
Is China back? That will require more than just a reversal of recent policies
China’s leadership has announced major policy U-turns that have left global investors and other observers bullish about its economic future
But correcting policy errors is no substitute for the reforms needed to deliver robust growth, including a return to political pragmatism and honest feedback
When US President Joe Biden took office in 2021, his first message to the rest of the world was: “America is back.” Having assumed his third term as general secretary of the Communist Party in October, President Xi Jinping appears to be issuing a similar proclamation.
In the past two months, China’s leadership has announced or signalled a series of major policy reversals, abruptly ending nearly three years of severe “zero-Covid” restrictions, easing the crackdown on tech companies and the real-estate sector, reaffirming its commitment to economic growth and extending an olive branch to the United States at the Group of 20 summit. With the world’s second-largest economy apparently reopening its doors for business, investors are reacting with enthusiasm.
But while China’s pro-business reset bodes well for international trade and global peace and stability, putting the Chinese economy on the right track will require more than just a reversal of recent policies. What is really needed is bringing pragmatism and honest feedback back into the political system. As I showed in my book, How China Escaped the Poverty Trap, these attributes defined China’s adaptive governance during the Deng Xiaoping era.
There is a common misperception that the “China model” means top-down control by a strong, authoritarian government, flanked by muscular state enterprises. In fact, 30 years of poverty and suffering under Mao Zedong proved that the combination of top-down planning, state ownership and political repression was a recipe for failure.
That is why Deng introduced a hybrid system that I call “directed improvisation”. The Communist Party remained firmly in power, but the central government delegated authority to numerous local authorities across China and liberated private entrepreneurs from state controls.
Playing the part of a director rather than a dictator, the government in Beijing defined national goals and established appropriate incentives and rules. Meanwhile, lower-level authorities and private-sector players improvised local solutions to local problems.
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China records second-lowest economic growth figure in almost 50 years after Covid-ravaged 2022
China records second-lowest economic growth figure in almost 50 years after Covid-ravaged 2022
In practice, a wide variety of local “China models” emerged, delivering transformative innovations from the bottom up, often in ways that surprised central authorities. The rise of the digital economy is one example.
Since ideas must come before action, Deng made sure he first changed the party’s mindset and norms. In his December 1978 speech launching China’s era of “reform and opening up”, he made “emancipating the mind” a top priority for the party.
Under Mao, people dared not speak the truth for fear of severe punishment, creating a chilling political climate that gave rise to disastrous policies such as the Great Leap Forward. But under Deng, the new imperative was to “seek truth from facts”. Policies should be chosen because they improved people’s welfare, not because they were politically correct.
Deng’s hybrid system has been overlooked by both Western China hawks and by Xi’s own leadership. When Xi came to power, he favoured a different story about China’s success, celebrating the institutional advantage a top-down command system supposedly has over Western democratic capitalism.
This top-down approach yielded results during the initial Covid-19 outbreak. Through mass testing, strict containment and other measures that could be maintained only under a strong, authoritarian government, China kept infections and deaths at low levels from 2020 through to 2022. Xi embraced “zero Covid” as one of his signature achievements, declaring as recently as October, at the 20th party congress, that China would stick to the policy “without wavering”.
But then events took a rapid, unexpected turn. Exasperated with endless lockdowns, Chinese citizens from various walks of life poured onto the streets in protest, forcing Xi to change his position. The sudden reversal of the “zero-Covid” policy has led to a massive surge of cases and hospitalisations with which China will continue to struggle.
Xi and his team are eager to put the pandemic behind them and restore business confidence. Relaxing economic regulations and ending pandemic controls have buoyed capital markets.
Moreover, after Covid-19 infections peak, domestic consumption is likely to come back with a vengeance and manufacturing will return to normal. The central government has also pledged additional infrastructure spending to boost growth.
But for the new economic terrain to bear fruit over the longer term, Xi needs to reopen the political system’s feedback channels. That means setting a personal example and making clear to party-state officials that he genuinely wants them to report the realities on the ground. That will not happen if truth-tellers are silenced and propagandists are elevated.
The government also needs to give civil society and the media more space. It is short-sighted and ultimately self-defeating to think that quashing free speech will strengthen the party’s hold on power. Governance suffers without a regularised system of policy feedback, leading to the kinds of mass protests that exploded in November and eroding the party’s performance-based legitimacy.
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China reports nearly 60,000 Covid-related deaths since shift from zero-Covid policy
Yet another problem with Xi’s top-down approach is that it will leave investors wondering when China might pivot again. In the past decade, Xi has repeatedly proclaimed a devotion to various reforms, only to do the opposite.
Empowering officials with track records of pragmatism and candour would go a long way towards reassuring markets. Changing the political system’s criteria for recruitment and promotion would speak louder than mere slogans.
China accumulated ample experience in adaptive governance between the late 1970s and the early 2010s. But, by the time Xi came to power in 2012, Deng’s economic model had reached its limits and begun to produce unsustainable levels of corruption, inequality, debt risks and environmental pollution.
Still, the solution can never be a return to Maoism. Rather, China needs to bring “directed improvisation” into the 21st century.
Yuen Yuen Ang, professor of political economy at Johns Hopkins University, is the author of How China Escaped the Poverty Trap and China’s Gilded Age. Copyright:Project Syndicate
