October 2014 saw an event which scale only future generations will be able to assess in full. The US economy, which had been the world’s largest national economy for 140 years, yielded the palm to China...

Stanislav Tkachenko, Doctor of Economics, Professor

The turnover of Chinese elites after Mao Zedong and changes in this practice under Xi Jinping

October 2014 saw an event which scale only future generations will be able to assess in full. The US economy, which had been the world’s largest national economy for 140 years, yielded the palm to China. So far, this leadership is not absolute because the IMF, which recorded it, calculated China’s GDP on the basis of purchasing-power parity (PPP)1: in 2019, the Chinese economy, calculated by PPP, already forged far ahead of the US – $25.2 trillion against Washington’s $20.5 trillion. Although in nominal terms China’s GDP is nearly 40% lower than the American ($19.4 trillion in the US against $12.1 trillion in China), it’s obvious to experts in economics that the era of Pax Americana, i.e. virtually undisputed global domination of the US, is coming to an end as the result of the growing state power of China.

The process, which Beijing prefers to call “China’s peaceful rise”, has many causes, both political and purely economic. One of the most important ones is the principle of a regular rotation of the top country’s leadership established as a norm of the PRC Constitution in 1982, according to which state leaders cannot occupy senior positions for more than 10 years. By the end of this term, they must resign and new leaders will succeed them. This practice is mainly aimed at preventing the revival of gerontocracy and usurpation of power by one person, initiating communication between the country’s political elite and society, opening up prospects of “vertical mobility” to young, most effective leaders.

The 19th Congress of the Communist Party of China held in October 2017 rejected this principle in a rather disguised manner, thereby enabling President Xi Jinping and a number of his supporters to retain their positions in the supreme governing body of the state, Standing Committee of the Central Political Bureau of the Communist Party of China (PSC), beyond the ten-year term. According to official statements, the country needs to preserve the current political leadership in order to ensure stability during the period of turbulence that awaits China both at the domestic level (economic slowdown, alarming environmental situation) and in the international arena (risk of the world economic crisis, growing confrontation with the US).

Addressing the 19th CPC Congress, Xi Jinping did not promise his party members that their life would be a bed of roses. According to his expectations, “unimaginable, terrible waves” and “threatening storms” are bearing down on the party and the whole of China. To prevent them, it was necessary to “enhance the leadership of the party and the quality of public administration.”

Thus, today China enters a new period of its history, and it is hard to predict its fate in any long-term perspective because so far there are too many unknown variables in the equation called “China in the medium run”.

Modern Chinese agenda: searching for domestic growth drivers

“Socialism with Chinese characteristics for a new era” is being shaped in China today – this is Beijing’s official position. Official Chinese propaganda calls it “the most perfect democratic model in the world.” To implement this ideal model, the country will have to face many years of hard work under the leadership of the CPC. The most important priority of the declared ones is the elimination of the growing divide between the economic situation and people’s expectations. The model of “socialism with Chinese characteristics” is based on the ideology of Xi Jinping’s predecessors, starting with Mao Zedong, and over the next five years it will become a “guide to action” for the whole country. In the longer run, the CPC leaders expect that, with this idea implemented, China will become a prosperous, strong, democratic, culturally advanced, harmonious, and beautiful country.

Behind the vaguely worded statements of the official propaganda lie the intensive efforts of the current generation of Chinese leaders to find domestic growth drivers for the national economy and improve the citizens’ welfare. Theoretically, there may be a number of major sources for such growth: the inflow of domestic and foreign investment, increased public spending, as well as consumption growth within the country. The almost 30-year-long period of rapid Chinese economic growth, with the positive changes in the country mainly driven by manufacturing exports, came to an end in 2012. Just then, Xi Jinping took over as Chinese head of state.

For almost seven years that passed, the Chinese leader has been quite successful in all the three areas (investment, government spending, domestic consumption), nevertheless, the economic growth in China was gradually slowing down. The growth rates are still high and excite unconcealed envy in many countries, including Russia (6.6% in 2018). That said, China’s current economic growth is the lowest in the past 30 years. It is an alarming trend, and so far Beijing hasn’t developed a universal formula to return to the halcyon days of the economic boom. And without it many acute socio-economic issues remaining in the country cannot be addressed successfully. They include thousands of unprofitable industrial enterprises, growing development imbalances between the seaboard provinces and the interior of the country, the demand for democratization of domestic political life. The Chinese authorities fail to eliminate the threat posed by Islamic terrorists, regularly committing bloody terrorist acts in the settlements of the Xinjiang Uighur Autonomous Region in Western China.

Meanwhile, the Chinese leaders believe they can resolve these problems by establishing stricter order and discipline in the country. Clauses stating that “the leadership of the CPC is the defining feature of socialism with Chinese characteristics”, and that the state “advocates the civic virtues of love of the motherland, of the people, of labour, of science and of socialism” has been recently added to the Constitution. The role of the State Council (the country’s government) and a number of large cities has also been enhanced. Lastly, National Supervisory Commission, a new super-agency with extensive powers, has been established, focusing its activities on combating corruption.

A few decades ago, former Chinese leader Deng Xiaoping set an objective to “build a moderately prosperous society” until 2021, and today China is about to announce that it has been achieved. Income level of the country’s population is yet one third lower than the Russian one, but this gap has been rapidly narrowing. Moreover, there is hardly any unemployment in China, health and education are developing fast, and a social support system for the least protected segments of the population is being created almost from scratch. Many Chinese analysts consider the current absolute power of the CPC a necessary condition for the transition stage when the government’s key task is to accumulate resources and achieve an economic breakthrough.  The country is expected to embark on a path of democratic reforms, abandoning censorship, introducing the multiparty system and holding free elections only after the “middle-class society”, a strategic objective of the CPC socio-economic policy, is finally established. So far, none of these issues is included in the agenda of the country’s authorities, and they are unlikely to be added in the medium term.

China in world politics and economy

Against the backdrop of dynamic and not always encouraging processes within the country, the Chinese strategy has demonstrated stability and sustainability in the international arena since 2012. Beijing is committed to “building a community of common destiny” with other world powers, positioning itself as “the largest developing country in the world.” The model of “community of common destiny” has been put into practice in the Belt and Road initiative which was promoted by Xi Jinping in the autumn of 2013 and has become his visiting card in world affairs. Unprecedented in scale, the Chinese initiative involves the construction of highway and railway networks (Silk Road Economic Belt) and a number of major seaports on the shores of the Pacific and Indian ocean, as well as in the Mediterranean (the 21st-century Maritime Silk Road). The strategic objective of this project is to establish strong ties between China and its trade and economic partners in Europe, Central Asia, and the Middle East. This project was made possible due to the multibillion-dollar Chinese investments in the transport and logistics infrastructure of dozens of European and Asian countries which have now reached $70 billion. Another Chinese priority is ensuring that its own technologies and industrial products enter new markets. PRC uses the pressing need of neighbouring countries for investment in order to provide national industrial enterprises, which already flooded the domestic market with their goods, with new orders.

Today, Russian-Chinese relations have reached their peak. Never in the centuries-long history of interaction between the two countries have they been better than today. The two largest Eurasian states are brought closer together due to foreign policy reasons (opposition to the US hegemony and the unipolar world under its leadership), as well as owing to purely economic factors (in 2018, mutual trade turnover exceeded $100 billion). As neighbours, Russia and China can combine their competitive advantages (large markets, raw materials, and developed industry) to foster an interdependence model that will not impinge on the other party’s sovereign rights. Beijing makes it clear that today it considers such relations with Russia the best possible option.

Currently, in the context of unfolding trade war with Washington, Beijing is strongly dismissive of the polemics about the emergence of “Chimerica “, a sort of economic alliance between the two largest global economies (China and the US) which are doomed to cooperate and make mutual concessions due to the level of their interdependence. At the same time, the interdependence is an indisputable fact: the trade turnover between the two countries exceeded $600 billion in 2018! Maintaining access to the US market is vital for the industry and the overall economy of China in the medium run, whereas without cheap and high-quality Chinese goods the long-forgotten inflation will hit the US once again.

Having declared itself “the largest developing country in the world”, China strives to invest in the economies of other developing countries to penetrate into their market, particularly into Africa. On this continent, Beijing builds roads and industrial enterprises, sets up more than 10 thousand companies with Chinese capital, provides employment for nearly one million Chinese engineers and workers meanwhile expanding its military presence: the first overseas military base of the PRC was established in Africa (Djibouti). At the moment, experts anticipate an increased presence of Chinese armed forces in such countries as Tanzania and Namibia. China is already an independent actor in global politics, so Beijing will gradually become less interested in the concept of a multipolar world promoted by Russia.

It is possible to predict that in the medium run Chinese economic growth rates will remain high. That said, the diversification of trade relations to ensure the economic security of this country is inevitable. It can be done primarily through increasing trade exchange with Russia and other EAEU countries, as well as with Europe. Therefore, the Belt and Road initiative will remain important for China and its neighboring countries, fusing transport infrastructure and forging closer economic ties between them.

China-US conflict: the Thucydides’s Trap

2012 was marked not only by Xi Jinping’s taking the reins of government in his country but also by the beginning of the US military infrastructure “turn to the East”. If earlier the Pentagon considered Europe and the Middle East its priority areas, since January 2012 it officially declared the Pacific region its main focus, with China posing the key threat to the global interests of the US. “Turning to the East”, the US aims to create a sort of “сordon sanitaire” along the Western, Southern and Eastern state borders of China, which could isolate this country from the outside world and destroy its economy in a critical situation. In recent years, Washington has done a lot to implement its plans: it has stepped up communication with Central Asian states and Pakistan, attempts to restore military cooperation with India and even with Vietnam, exerts diplomatic pressure on North Korea, and deploys parts of the missile defence system in South Korea. Other areas of the current US-China stand-off include the tech war, with the Chinese technology giant Huawei caught in the thick of it; active promotion of the Belt and Road project, as well as operations of the Asian Infrastructure Investment Bank, set up in China to provide financial backing for the initiative. Today, the American “turn to the East” is in full swing and Beijing is becoming increasingly concerned about its consequences.

Modern scientists link the name of the ancient Greek historian Thucydides (460 – 400 BC) with the phenomenon called the “Thucydides’s trap” which aims to explain why it is virtually impossible to avoid inter-state confrontation between the former super-power in decline and the state succeeding it. Only in the medium run it will become clear whether the US and China will be able to find a peaceful solution to the realignment of their power in global affairs. In other words, whether the US will acknowledge that de facto it is no longer the world’s economic and technological leader, is unable to address world affairs unilaterally, using whatever means to protect their own interests, and often basically ignoring the existing international law. If the “Thucydides’s trap” works and the two largest global powers fail to resolve the emerging contradictions peacefully, that would entail catastrophic consequences for the planet. It is in the interest of humanity to prevent that from happening.

Conclusion

In the medium term, China will fully assert itself as the largest world economy. That said, it is in Beijing’s interest to preserve the liberal pattern of the global trading system. Today, Russia and China are united by the desire to build a fairer model of economic cooperation, abandon sanctions and pressure in international relations.

Judging from the events of the past 40 years, modern China is genuinely committed to the good neighborliness principle in bilateral relations with Russia and views it as the most reliable partner in the global arena. “Washington’s nightmare” in the form of a military alliance between Moscow and Beijing will not come true. Nevertheless, Moscow, both in the medium and longer-term perspective, will seek to foster closer economic ties with China, as well as turn the 4,210-kilometer border between the two countries into a space for peace and cooperation.


1  Purchasing power parity is the ratio of two or more monetary units, currencies of different countries, determined on the basis of their purchasing power applied to a set of identical goods and services.