At the moment, China’s economy is faltering; the Communist Party is splintering; the authority of the central government is eroding; the military is breaking free of civilian control; and the Chinese people, from one end of their country to the other, are taking to the streets, often in violent protest.
The wheels are coming off China. So many things are happening all at once, it’s hard to know where to begin. But to understand where the country is going, it’s necessary to look at two ongoing developments. First, the motor of China’s rise is sputtering. After 35 years of virtually uninterrupted growth, the economy has reached an inflection point and has now started a long downward slide.
Data, and especially the crucial electricity production numbers, contradicts official claims and shows that growth has in fact fallen to about 6%. The downward shift is not temporary because the three principal conditions that created growth in the last three decades either no longer exist or are disappearing fast. The country has abandoned reform, external conditions are not now benign, and the country’s “demographic dividend” is turning into a demographic bust.
It is in this adverse context—not the favorable one of the last three decades—that Chinese leaders will have to act. In other words, they will no longer be propelled by trends; going forward, they will have to succeed in spite of them.
In fact, leaders are doing little to reverse the precipitous fall in the economy. And that is because the greatest challenge to restarting growth has nothing to do with economic fundamentals. It has everything to do with politics.
The second development is the Chinese political system tearing itself apart as Fourth Generation leaders, led by Hu Jintao, are planning to give way to the Fifth, presumably under the command of Xi Jinping. Since the beginning of February, one provincial Party boss invaded another province with an army of hundreds; competing Chinese security forces laid siege to an American consulate; Party leaders used the poisoning of a foreigner to bring down a powerful politician and his wife; and Chinese people circulated rumors of other murders, a coup in Beijing, and a story of a near-successful plot to assassinate a state leader.
These stories of lust, depravity, murder, and intrigue fascinate the Chinese but also repulse and disgust them. The Communist Party is delegitimizing itself, one sordid revelation after another. It will not take long before the system fails.
China has progressed about as far as it can within its existing political framework. The essential problem is that, even before recent events, almost all Chinese people knew that a one-party system was no longer appropriate for their nation’s modernizing society. Yet they essentially had no choice but to accept the Communist Party, which had in the last two decades maintained stability and presided over fast development.
Now, however, the infighting at the top of the political system is eroding the Party’s ability to govern. China is becoming politically unstable at the same time its economy is failing. Day after day, we are witnessing a dynamic increasingly difficult to reverse. And unless it is reversed soon, we will soon be witnessing the final days of the People’s Republic.