The Chinese Wobble : Part 3

If you have not read the first two parts please read them before proceeding further. It will enable you to understand the context of this article from the larger perspective. .

 1 – Preamble to the Wobble

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Part 2 – The Cobbles in the Wobble

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Part 3 – An Analysis of The Hobbles of the  Wobble

In China,  politics is supreme,  above all other considerations. CCP has to remain in absolute power without any semblance of competition. Xi Jinping will do anything to stay in power for life. His USP has been back to Maoist ideas and he is taking China there. The period of capitalism with or without Chinese principles is definitely over. The cobbles of capitalism were only a stepping stone to common prosperity prior to entering a state of  total socialism. The cornerstones of the new China will be  ideology, nationalism, populism, self-sufficiency, and security. The indication that CCP will be in total control of all walks of Chinese life  comes from Facebook and Twitter which banned President Trump from their platforms. No private entity in China will ever be allowed to grow to a level where such a thing can even be dreamt of. Resultant?  Flow of capital, data and information will be brought fully under state control. The Party will control all levers of the economy. We are staring at a command economy. China will not collapse. It will not grow like before. 

The revisionist pointers are also very clear. Xi Jinping and the CCP have started leveraging dual circulation, self-reliance,  nationalism and national security as part of the larger ‘common prosperity’ drive to drive populism. A EU business group has stated that China is ‘Turning Inwards’ through tighter political control. China’s inward looking trend has already made EU businesses rethink of their  operations in China. They see  troubling times ahead. 

The  joint study of 2012 by the World Bank and Development Research Center of the State Council of PRC had identified Chinese  strengths to be  high savings, plentiful skilled labour, and potential for further urbanization. The identified opportunities were continued globalization, and promising new technologies. Peoples  savings have been locked into debt ridden bubbles of unfinished real estate projects or unoccupied housing in ghost cities. Labour availability is declining and costly. Jobs are scarce. Globalisation has virtually ended. Tech companies are being hammered. Most of China’s strengths and opportunities  have all gone into the risk category. The systemic risks identified in 2012 – high inequality, inefficiencies in social service delivery , rapid ageing of the population and  growing economic, social, and cultural diversity have actually worsened.  The entire issue has been fast forwarded by the pressure cooker situation created by the Chinese virus effect. In such a situation social churn and chaos is in air.  The populism generated by common prosperity seeks to negate  social unrest without addressing the basic causes.   

China’s inequality has not changed significantly ever since Xi Jinping has come to power. CCP’s inability and  unwillingness to tackle its real problems or undertake meaningful reforms is leading to the  great stall of China.  No politician will admit to this. He will only obfuscate issues to stay in power. Xi Jinping is doing that. As China’s domestic economic problems have compounded,  their  external environment has deteriorated. Its  opacity and the great information firewall has enhanced distrust. This is now being reinforced publicly by reports of compromising / coercing/  bribing / influencing  WHO, World Bank, UN and other international institutions to soft pedal Chinese deficiencies. Simultaneously, internal trust deficit is also bubbling.  Health  care providers, public hospitals,  and medical industry are rarely trusted . The educational system is not trusted. Chinese  vaccines are not trusted by chinese. The pension system or lack of it is also a major concern for an ageing population.  Failure of mega banks (Huarong) and huge real estate developers(Evergrande) only enhances public and international distrust. For a rapidly ageing country,  simultaneous erosion of internal and external trust is a serious  matter beyond its  economy. It the danger of chaos.  The CCP has seen the writing on the wall which has been missed out by outsiders. ‘Boluan Fanzheng’ (returning to order from chaos) of the Deng era and talk of revolution is being spoken of.  When viewed in this perspective, common prosperity makes a lot of sense. It is an anticipatory bandage on a wound about to open up. 

China’s leaders have always tackled their problems differently. Their solutions to a problem have always been great in the short term and detrimental  in the long term. Mao’s long march freed them from dynastic rule and made  them  captive to restrictive CCP politics. His great leap forward ended with common poverty and a widespread famine in which millions died of starvation. Deng’s one child policy has consigned them to an ageing and declining population irreversibly. Chinese leaders pride themselves on being dam builders. Many dams including some great ones like the Three Gorges Dam have been built to tame flooding. However, during monsoons and floods, China bursts many smaller dams every year to save their iconic  dams. In doing so they create floods which they sought to avoid in the first place. The  weight of the water bodies created have resulted in devastating earthquakes. The latest and current snafu is their mindless industrialisation and severe pollution problems. Attempts to rectify environmental issues by cutting down on coal plants is resulting in severe power shortages and it might  eventually result in an economic slowdown! China is in a ‘damned if it will and damned if doesn’t’ situation. Every cure is turning out to be worse than the disease. If history is anything to go by – it is repeating itself. 

China is an overstretched hegemon. So far it has been able to maintain its balance. In the past few months there is a definite change. The internal imbalance and its dangers are well  known to the CCP. Moreover in the past year and a half many Chinese myths have been burst, and the invincibility halo has been shattered. Super Power status is slowly and steadily receding. In this mix,  one must add the persona of Xi Jinping and his ilk. China has this habit of producing strongmen who have  larger than life ambitions and push the Chinese to become what they are not. Chiang Kai Shek, Mao Zedong, Deng Xiaoping and now Xi Jinping are illustrious examples of such leaders of modern day China who did that. No country in the world with such a line-up of strongmen has risen to be a deciding global power. I have been stating that the  the CCP is prepared to be in power of a China which is not a superpower rather than being out of power in attempting to make China a superpower. So what if? The more important question is how does the world deal with emerging China  and what does India do about it? That to me is the real deal.  

Recently many articles have appeared which discuss ‘Decline’ of China and the end of its economic miracle as against the ’Decline’ of USA which has been in every alternate headline. Both our super powers are declining. That is not good news for the world economy or well-being. A Chinese economic meltdown either due to a collapse of a mega firm like Evergrande  or an economic stall due to common prosperity drive will have its contagious effect on the global economy. If the pace of change is fast it will mean lot of international grief. A slow decline will allow some time for alternate systems to evolve. The reality will be somewhere in between. From a different perspective China is entering an  economic downturn and a troublesome period internally while its global ambitions remain  untrimmed. History suggests that China has  been aggressive and expansionist in such times. For example, in 1962, when China attacked India, it was at the throes of its great famine. Military and diplomatic  aggression and assertion will increase as its economy declines in this period. This will be reinforced by Xi Jinping’s efforts to stay in power for life. He has already painted a vision of rejuvenation of the Chinese dream and revenge on a century of humiliation to whip up populism , nationalism, ideology and security to derive personal benefit. We must prepare for the worst and hope for the best.   

There is a need to drastically reassess our geopolitical environment which includes the emerging China and the declining West. A Chinese downturn is an Indian global opportunity. However it is also a great danger. Mindless growth will result in greater chaos and adverse environmental effects. It is better to be poor and clean than rich and dirty. We should make wise choices. Decades hence , we should not be what China is today. Our political leaders should display statesmanship and sagacity in this time. We need to grow our military accordingly. Our watch words should be dissuasive capability and collective security.  Most importantly, this is a time when we need great diplomacy to navigate the country through the opportunity and chaos at the same time. We have to expand our diplomatic strength without doubt. That is the long term. In the short term, reassess China and its intent. Manage the change which is ahead.  Grasp the opportunity.   

To conclude my analysis, China is as real a global power as is the imaginary and non-existent dragon. Last year many articles came out which suggested that the Virus will have the same effect on China as Chernobyl disaster had on USSR. I wrote two articles @ https://www.gunnersshot.com/2021/04/china-chernobyl-and-virus-gradually.html and https://www.gunnersshot.com/2020/04/corona-chinese-chernoybyl-by-lt-gen-p-r.html trying to corelate the Virus, events in China and globally with the Chernobyl effect. In retrospect these articles were probably gauche but definitely not out of context. Something is happening for sure. In my own opinion, the chances of a complete Chinese collapse and breakdown are remote. However it takes an idea to spark a revolution. These days I keep getting reminded of Ernest Hemingway’s classic quote “How do you go bankrupt?”….. “Two ways”…..“Gradually, then suddenly”…Is ’gradually’  happening too fast in China… who knows?

Views on the Wobbles from others…….