Gordon G. Chang
World Affairs, March/April 2010
Edited by Andy Ross
On October 1, 2009, China's Communist Party celebrated the country's
National Day, marking the sixtieth anniversary of the founding of the
People's Republic. As they did ten years before, senior leaders put on a
military parade of immense proportions in Beijing.
China has just
about reached high tide, and will soon begin a long painful process of
falling back. The most recent period of China's fast growth began in early
1992. This was the beginning of an era of globalization and tremendous
wealth generation. The Chinese central government accumulated foreign
currency reserves of $2.4 trillion. No country has a bigger stash. Analysts
believe that China has now acquired unstoppable momentum.
analysts are wrong. China's economic model is ill suited to current global
conditions. About 38 percent of the country's economy is attributable to
exports but China's exports fell 16 percent in 2009. China's economy fell to
negative growth at the end of 2008. Beijing stopped the precipitous decline
with a $586 billion stimulus program that favors large state enterprises
over small and midsize private firms.
pushed unneeded funds into the Chinese stock markets. Beijing's plan might
trigger the biggest wave of corruption in Chinese history. Forced lending
will create a mountain of bad loans. The stimulus plan targets
infrastructure and aims to boost industrial capacity even further.
Consumption has been sliding from its historical average of about 60 percent
to about 30 percent today. That's the lowest rate in the world.
the Chinese economy is now headed on a downward trajectory. China faces a
number of problems, including banks with bad loans on their books, trade
friction arising from mercantilist policies, a pandemic of defective
products and poisonous foods, a grossly underfunded and inadequate social
security system, a society that is rapidly aging as a result of the brutally
enforced one-child policy, a rising tide of violent crime, a monumental
environmental crisis, ever-worsening corruption, and failing social
The Communist Party faces the dilemma of all reform-minded
authoritarians: the economic progress that legitimates their leadership
endangers their continued control. The political system is having increasing
difficulty channeling discontent as the Chinese people wrestle for control
of their future. The Communist Party made the continual delivery of
prosperity its primary basis of legitimacy.
Middle-class Chinese now
behave like activists whenever they think their rights are threatened. The
party can censor and imprison, but it does so at the risk of creating even
more enemies, both internal and external, and further delegitimizing itself.
No other country has more cell phone subscribers (703 million) or Internet
users (384 million, at last count). Political dissent is sizzling on the
Web. Beijing has created a Big Brother style Internet but it will never be
able to claim final victory.
The strength of the Communist Party has
been eroded. It's doubtful the party even commands the loyalty of its own
members. Many cadres are opportunistic careerists. The change in attitude
has even affected the People's Liberation Army. The country's prosperity has
changed its people.
AR I think this may be too
pessimistic, but I guess the collapse of the CPC could be as fast as the fall of
the CP in the Soviet Union. In that case, I guess we'll have to wait at least
ten years for the economic situation to deteriorate. I don't see China
collapsing faster than that.