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  • Writer's pictureThe Pendulum

China, Past and Present: Tying Economic Growth to Political Legitimacy

Owen Eastman

A long-standing aspect of the Chinese Communist Party’s political legitimacy has been their robust economic growth rates over the past thirty years. The country saw annual Gross Domestic Product (GDP) growth rates often in the 8-9% range - for context, the United States and Western Europe typically average rates between 2-3% in non-recession years. This influx of capital has bolstered both the salaries and quality of life of the average citizen, with substantial drops in infant mortality and poverty rate. The money has also been used to grow overseas influence through the financing of infrastructure projects in underdeveloped countries, most notably in China’s Belt and Road Initiative in Africa.

The original catalyst for China’s initial economic growth could be argued as a combination of free-market principles, and the fact that China is simply catching up quickly with the developed world. The uptick began in the early 1990s with a rapid shift away from state-owned industry and the establishment of Special Economic Zones, where foreigners could make transactions on Chinese soil. Initially, these zones were the exception rather than the norm- the first four were established in 1980 and acted as a window into the Western world due to the propagation of uncensored foreign works detailing Chinese politics. Deng Xiaoping’s reforms later in this decade involved creating many more of these zones, and the Chinese market gradually opened to the West even further: China eventually joined the World Trade Organization in 2001, and foreign banks began to operate on Chinese soil just a few years later.

Such growth, however, began to taper off in the early 2010s, bottoming out in 2020 at a meager 2.24% increase in GDP. This downturn was accompanied by an increase in domestic surveillance and state censorship. The cause-effect relationship between the two correlated variables is not immediately clear - one could argue that such authoritarian measures are a direct cause of the downturn, as they are not conducive to free-market growth and private enterprise. One could also make the claim that such measures were a reaction to a slowing market, knowing that they were losing a key aspect of their social contract of governance. Certainly, leaders in China must have surmised that such stratospheric growth rates could not go on forever, as much of it was a byproduct of rapid industrialization and catching up with the rest of the developed world.

Western reporters additionally ascribe much importance to China’s economic health in relation to politics, as one’s relative dissatisfaction with repressive or authoritarian policies might be balanced out by strong yearly growth. Counterintuitively, relative tolerance of corruption by the state may motivate local officials to produce as much net capital as possible in much the same way performance incentives motivate workers to put forth their maximum effort. Likewise, Chinese citizens may be willing to tolerate corruption and graft as long as their bottom line remains relatively unscathed. Through this logic, it could be argued that Xi Jinping’s hold on power was at its weakest in quite some time in the lead up to China’s National Congress, where he was approved for another term as president. Much of this was due to a weak economic policy, especially in the face of COVID complications- in mid-2022, foreign analyst Frederick Kempe described Xi’s recent actions as “high-stakes damage control” for a “dangerously slowing economy”

Such concepts as espoused here would not be historically unprecedented, and may lead to further development of free-market principles in China. For instance, the financial and political stablity of the Pinochet regime in Chile came as a result of tightening economic controls, with policies similar to 20th-century China’s such as the privatization of state-run industry and an emphasis on international trade. Milton Friedman, an economics professor who taught many of the American economists working in the Chilean government, attributed the later fall of the military junta to such economic policies, however. "The Chilean economy did very well, but more importantly, in the end the central government, the military junta, was replaced by a democratic society,” Friedman claimed in an interview with PBS. “So the really important thing about the Chilean business is that free markets did work their way in bringing about a free society."

Though the National Congress ultimately chose to unanimously back Xi’s leadership, issues remain. China’s 2020 rate of 2.24% was still an anomaly due to COVID and was accompanied by similar downturns around the world, and the economy rebounded with an 8.1% rate in 2021. However, China has had an unusually difficult time recovering from this deficit. China’s “Zero COVID Policy” has been characterized as unusually draconian compared to the standards of the Western world, yet difficulties remain in containing the virus. Though the government claims that over 90% of the population is fully vaccinated, they opted to refuse foreign-developed vaccines in favor of a China-developed one, a move which backfired due to lower efficacy rates. Fears have been stoked about the safety of these vaccines, with the most vulnerable groups, the elderly and immunocompromised, disproportionately choosing to remain unvaccinated. This growing unrest culminated in a December 2022 eruption of protests after an apartment fire killed ten people, potentially due to doors locked from the outside for Covid lockdowns. The government pushed back harshly against the movement, with Zhou Lijian, a Foreign Ministry spokesman, blaming “forces with ulterior motives” for propagating the narrative that Covid lockdowns caused the deaths. State-run media did not directly acknowledge the existence of the protests, yet the government eventually conceded that there were “resurgences on a considerable scale” of the virus, with Mi Feng, a spokesman for China’s National Health Commission, claiming that restrictions should be “imposed and lifted as quickly as possible to reduce inconvenience caused by the COVID-19 epidemic.”

All of this paints a dismal economic picture at odds with government rhetoric, with plenty of future issues and growing pains on the horizon over the next decade. With room for industrial growth running out, economists expect China to transition into a more consumer-driven market - already the largest consumer economy in the world, the Brookings Institute forecasted that China may “add more consumption than any other country” over the next decade. The United States and its allies have taken advantage of the recent downturn in Chinese economic power- one of the most notable recent actions in this vein was an October 2022 ban on advanced semiconductors, dubbed the “single most substantial move by the U.S. government to date in its quest to undermine Chinese technology capabilities,” in an article by the Carnegie Endowment. China’s economic and foreign policy issues have been further exacerbated by their antagonistic diplomacy on the world stage, from their building of airstrips within the disputed South China Sea to the incendiary comments of state officials on social media. With these factors, one of two things is likely to happen: China will further withdraw within its isolationist bubble and resist Western influence to a greater degree, or gradually become a more cooperative partner on the world stage out of economic necessity.

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