Is China Heading for Collapse?

The likely next leader of China, Xi Jinping

The likely next leader of China, Xi Jinping

An implicit social contract underlies the Chinese people’s relationship with its government. The people accept the autocratic Communist Party of China (CPC) regime with its corruption and minimal public participation, and the CPC regime delivers a continuous and rapid improvement in the economic standard of living. But that social contract is now at risk, as China is on an unsustainable path that will result in economic stagnation or decline in the coming decades.

There are several culprits behind China’s impending decline, with ecological limits topping the list. In When a Billion Chinese Jump, for instance, Jonathan Watts catalogues the current and impending ecological disasters: destructive coal mining in dry western provinces, over-utilization of fisheries, water shortages and industrial water pollution, irreversible predation of ancient forests and delicate grasslands – all exacerbated by the crippling effects of global climate change.

Then there’s the absence of good governance – reliable property rights, honest bureaucracy, and evenhanded judicial oversight – which is not just socially undesirable, but arguably a critical barrier to continued economic progress. Reporting on recent studies that correlate economic progress with good governance, Mark Whitehouse declares in The Wall Street Journal that “China is making great progress in lifting its people from the ranks of the world’s poorest. But if the experience of other countries is any indicator, it will need a revolution to achieve rich-nation status.”

A third stress on the Chinese system is the unsustainability of the government’s macroeconomic choices. The imbalances in China’s investment-heavy, mercantilist economic structure have inevitably created, according to Stratfor, “a race [not] between the Chinese and the Americans or even China and the world” but rather “a race to see what will smash China first, its own internal imbalances or the U.S. decision to take a more mercantilist approach to international trade.”

As one or more of these constraints cause extended economic stagnation or decline, the CPC regime will be unable to deliver its promised economic growth. The economic and social catastrophes on the horizon include dramatically increased reliance on expensive imported raw materials, significantly reduced export demand, riots by unemployed export workers and recent college graduates, collapsing real estate prices, rapid inflation, and urban food shortages.

Implicitly or explicitly, many of the “unsustainable path” discussions assume that economic stagnation or decline will destroy the CPC regime once it fails to deliver its half of the social contract. Regime change analogies abound, ranging from the historical collapse of Chinese dynasties and the collapse of the Soviet Union and the communist regimes in its Eastern European allies to the Color Revolutions of the 2000s and the recent Arab Spring uprisings in Tunisia, Egypt Yemen, Bahrain, Libya, and Syria.

Most of the characteristics of contemporary China, however, are crucially different from those of the countries in which these regime changes occurred. China’s distinctive features make it unlikely that the CPC regime will suddenly disintegrate even in the face of continuing economic difficulties. The real question is whether it will respond by evolving into a more open, participatory regime or instead become an increasingly brutal and beleaguered autocracy. Only the Chinese leadership and people can ultimately make the crucial choices. The United States and the West need to walk softly to avoid being tagged as the cause of China’s economic misery.

Countervailing Cultural and Economic Factors

Despite the easy analogies, China’s CPC regime will not inevitably follow the examples of swift collapse of authoritarian regimes that occurred in the Soviet Union or Mubarak’s Egypt. China is in a category by itself because of its demography and culture, its nationally integrated economic and political structure, and the nature of public opposition. The notion that the end of economic growth will cause the CPC regime to evaporate ignores these realities of Chinese society.

China’s distinctive character begins with its cultural homogeneity. Of China’s 1.3 billion people, 92 percent are Han Chinese who share linguistic, cultural, religious, and philosophical perspectives, and a similar physical appearance that minimizes divisive stereotyping. The peoples of the Autonomous Regions of Guangxi, Inner Mongolia, Tibet, and Xinjiang are linguistically, culturally, and physically distinct and do perceive themselves as non-Chinese to varying degrees. But none of the 56 recognized domestic minorities exceeds 1.25 percent of China’s population. Tibetans, who have the most international visibility, number fewer than 6 million people. Moreover, geographic realities strongly tie these Autonomous Regions to China economically, and the CPC regime is strengthening those ties through Han immigration.

The Soviet Union is the only “regime change scenario” country that even approached China in terms of the size of its population. But the Soviet Union was from the start a federation comprising separate republics with very different languages, cultures, religions, and standards of living. Most of the other countries that experienced regime change are much smaller and culturally heterogeneous. Egypt, the largest of the Arab Spring countries, has only 78 million people, about 90 percent of whom are Muslim. Five of China’s 18 provinces are larger. The largest Color Revolution country, Ukraine, has less than 50 million people, of whom over 20 percent are ethnically and linguistically Russian.

China’s culture has maintained substantial continuity, but its economic and social structures have changed dramatically in the last 30 years. Most economic activity is now part of an integrated whole, with state-owned and nominally private corporations governmentally directed and cooperating to expand production. About half the population lives in cities. The export-oriented policies of “socialism with Chinese characteristics” make the wealthy coastal regions deeply dependent on access to overseas markets and to inland labor and raw materials.

Unlike dynastic China, agriculture is no longer the dominant element of China’s economic system. The CPC regime’s finances are no longer dependent on taxation of agricultural production. Instead it subsidizes rural China with funds generated by exports. Its foreign exchange reserves would support food imports through a typical drought and famine cycle. A peasant revolt like those that strangled the imperial dynasties is unlikely to topple the current regime.

The USSR’s planned economy was closed to foreign trade, relatively primitive in its range of goods and services, and skewed to benefit Moscow and St. Petersburg. Its European republics and allies correctly anticipated that they could quickly improve their living standards by breaking from the Soviet Union and opening trade with Western Europe. No similar incentive beckons any Chinese regions, which already benefit from and rely on international trade. A province that attempted to secede would suffer enormous adverse economic consequences.

Although China’s average income roughly matches the Color Revolution and Arab Spring countries, over 200 million Chinese now enjoy an urban “middle-class” life. Their economic status depends on manufacturing, construction, and international trade and finance. China’s 2008 unemployment rate was 4 percent, and almost everyone is put to work, for both economic and cultural reasons. The 2008 reported unemployment rates were about 30 percent in Libya, 14 percent in Tunisia, and 8 percent in Egypt – and that was before the global financial crisis. Not counting their oil exports, these Arab countries are among the least developed, least productive in the world.

Countervailing Political Forces

The CPC regime now follows a well-defined corporate-style leadership succession process with term limits, providing a degree of stability other Communist regimes never achieved. The excesses of Mao and the “Gang of Four” caution against allowing anything approaching one-man rule. China’s desire for international respectability, along with a deep cultural bias favoring consensus, discourages anything more radical than “muddling through.” The regime’s opaque committee system is the antithesis of the “cult of personality” found in almost all of the countries experiencing sudden regime change.

The CPC regime’s goal is a “harmonious society” based on a “scientific development perspective.” Relatively few Chinese doubt the central leadership’s desire to produce economic betterment, whatever they think of its approach to human rights. It is harder for an opposition to coalesce against committees operating by consensus than against a single highly visible, self-aggrandizing leader.

Administratively, the CPC regime is a single unified structure. Officials are rotated among the provinces and typically have little personal connection to the jurisdictions they run. The army similarly operates as a unified national organization. Senior military officers are CPC members and participate actively. These arrangements encourage loyalty to the national institutions and discourage alliances with any potential opposition or secessionists.

China’s deep economic and political involvement with the outside world makes operating without an effective central government impractical. Splintering is also psychologically anathema to most Chinese, who are schooled in the experience of the 19th-century humiliation of “weak China” by imperialist powers. Any foreign attempt at intervention would generate a unifying backlash in the Chinese populace.

Moreover, in our economically interconnected, nuclear-armed world, other nations want to work with a single central regime that has the necessary economic, political, and military authority. Continued recognition of the CPC regime by international organizations and major powers would undermine opposition and secessionist movements. The emergence of another “Warring States” period (or a Taiwanese return to the Mainland) is unimaginable in the 21st century.

Many thousands of anti-government protests, demonstrations, riots, and acts of violence take place in China every year. But almost all spring from local or corporate misconduct: depraved business practices like food adulteration, shoddy school construction, environmental contamination, or arbitrary treatment of citizens who challenge official corruption. Opposition groups often appeal for help from Beijing, which sometimes becomes the hero by taking corrective action.

The CPC regime has aggressively attacked any national groupings that it does not recognize, whether religious (Falun Gong) or political (Charter 2008). Fear of a Chinese “Jasmine revolution” and the few small Twitter-generated demonstrations that did take place in 2011 spawned a pre-emptive response by the Chinese security apparatus that included arrests and disappearances of high-visibility “trouble-makers” like artist Ai Weiwei and 20 leading “rights lawyers.” The regime also initiated highly sophisticated controls on electronic communications. These actions neutralized whatever small immediate threat may have existed.

Few triggering events that could focus widespread anger at the national CPC regime occur in contemporary China. Intra-party multi-candidate elections are only held at the local level. Nothing of unifying significance comparable to the rigged national elections in the Color Revolution countries is on the horizon. Any serious opposition to the national regime faces great practical difficulties in the absence of opportunities to create nationwide organization and leadership.

The widespread outrage about the recent high-speed train collision near Wenzhou, and the subsequent cover-up and suppression of news, suggests the possibility of a different kind of trigger. The National Railway Ministry is directly responsible for the high-speed train program, so public hostility was directed at the national CPC regime. The government has already fired three senior Railway Ministry officials and will certainly compensate the injured parties, but those actions do not address the public’s serious concerns about policy, transparency, and due process. A truly catastrophic event like the Fukushima nuclear plant meltdown could arouse intense and continuing opposition to the CPC regime. Still, even though nationally controlled projects, particularly nuclear energy facilities, will become more common as China advances technologically, the probability of a major disaster that could shake the CPC regime seems quite small.

What Will Happen to the CPC Regime?

The “regime change scenario” examples suggest that people are motivated to bring down authoritarian regimes when those governments pose an existential threat to disenfranchised groups, fail to institute policies designed to address high unemployment and/or rapid inflation, or engage in highly visible malfeasance to preserve themselves in the face of massive public expressions of opposition. None of these conditions currently applies to the Chinese situation.

Economic decline will nevertheless inevitably bring changes. One likely result will be more corrosive political infighting, as factions seek to protect their share of a stagnating economic pie. Another is that China will be increasingly preoccupied with internal challenges and less interested in playing a leadership role, or perhaps even a responsible role, in global affairs.

To allay intense dissatisfaction over continuing poor economic performance, the CPC might not re-elect a president to a second term, or a president could even resign before the end of his term. The conditions that generate the economic decline, however, will not go away. No new president will be able to arrest the decline.

New leadership may not satisfy the public for long, especially since replacements will emerge from the same opaque process and the same cadre of CPC members. Unlike a true election, this process will not generate public confidence in the new leaders or any psychological investment in their success. Ironically, an unscheduled change in CPC leadership is likely to be seen as an admission of failure that inspires demands for more substantial changes in the political system. The net result could be even more leadership paranoia, cosmetic structural changes, and increasing influence or even de facto control by the military and security bureaus.

Faced with insurmountable economic and environmental problems, the CPC regime might try various glasnost-like and perestroika-like reforms that provide broader political participation. The goal would be to calm public frustrations and give people a larger sense of buy-in to the regime’s policies. This strategy would include intensified efforts to reduce local corruption. Allowing greater use of the courts, administrative hearings, the media, and other processes to express and redress grievances could also help redirect public anger from the streets. These steps might be the best strategy to ensure that the CPC regime survives indefinitely through the hard times ahead.

An evolutionary expansion of public participation is not inevitable, however. The current CPC regime apparently believes that any significant diffusion of governing authority will lead to intolerable weakening or demise. The possibility lurks that growing discontent over continuing economic stagnation will prompt it to intensify the crackdown on actual or potential opposition voices and organizations. One acute observer, James Fallows, thinks this process has already begun to some degree in reaction to the Arab Spring. The resulting increase in the influence of the military and security agencies could tilt government policy toward even more oppressive authoritarianism. Creeping militarism seems to be a characteristic of many authoritarian regimes, and in this respect China may not be different.

Over the long term, this approach seems likely to arouse greater public dissatisfaction and more opposition as neither economic nor political conditions improve. If authoritarianism and permanent economic slowdown are accompanied by continued corruption, self-dealing, repression, and unfairness, and if entrenched economic, political, and bureaucratic interests deflect resources from the interests of the whole people, the CPC regime will eventually face massive public opposition. In desperation, the regime might even threaten its neighbors militarily, either as a calculated domestic political ploy or as result of the leadership’s own fear and paranoia. The outcome would likely be destructive both for China and the outside world.

The West and China’s Decline

A great deal of evidence suggests that China’s current growth is unsustainable for a variety of reasons. If so, it faces hard times ahead, regardless of the character of the governing regime. China’s decline, especially if it results in chaotic conditions there, is likely to damage the economic well-being of the United States and the international community, which are depending on China to be the engine of global economic growth and a partner for peaceful cooperation on nuclear proliferation. Long-term economic stagnation or decline carries important implications for the foreign policies of the United States and the international community.

Over the last three decades the United States and Europe have followed a range of policies designed to integrate China into the global economic and political systems. In recent years, however, a growing chorus in Congress has argued that it is time, now that China is so strong, to insist that it change its self-interested policies on currency valuation, intellectual property protection, and human rights.

But changing U.S. and European direction at this time could be just the wrong move.

Although China may look like a rising economic and political competitor today, that situation could quickly reverse. The wildly erroneous predictions of “Japan as #1” three decades ago should warn the outside world not to over-react to the “China threat.” Punitive U.S. measures in response to China’s mercantilist trade and currency policies and disregard for intellectual property rights, however justifiable on the merits, could create the impression in China that the US has created, or at least hastened and deepened its economic stagnation. The United States should avoid providing the CPC regime any excuse to claim the United States is the cause of China’s woes. If the Chinese people as a whole ever adopt that view, U.S.-China relations could be poisoned for decades.

The United States and the international community should also recognize that, as China’s economy deteriorates, any confrontational military maneuvers are likely to be met with escalation rather than compromise. Confrontation would tempt a struggling CPC regime to adopt a jingoistic, rally-’round-the-flag patriotism. The CPC regime already inculcates and makes political use of anti-Japanese feelings among Chinese born long after the end of World War II. “Foreign threats” would serve both to encourage public unity and to justify crushing whatever real or perceived internal opposition exists. It would also favor increased military expenditures and distract people from adverse economic and ecological developments. The United States should make serious efforts to avoid becoming the new enemy. It will need to tread carefully to avoid making China’s economic decline worse both for China and the rest of the world.

Samuel Bleicher is currently principal in his consulting firm, The Strategic Path LLC, an adjunct professor at Georgetown University Law School, and a contributor to Foreign Policy In Focus. From 2001 to 2007, he served as Chief Strategist for New Initiatives in the Overseas Buildings Operations Bureau of the U.S. State Department. From August through December 2007 he taught American law in Beijing to Chinese prosecutors, judges, lawyers, and administrative officials in a joint Tsinghua U./Temple U. LLM program funded primarily by the Chinese and US governments. He can be reached at: SamBleicher@strategicpathllc.com