Don't criticize China's treatment of Hong Kong, Beijing warns Canada

A Chinese flag is illuminated by sunshine in the Hall of Honour on Parliament Hill in Ottawa, Thursday, September 22, 2016. China is threatening retaliation against Canada after Prime Minister Justin Trudeau condemned a new security law giving Beijing more control over Hong Kong.. THE CANADIAN PRESS/Adrian Wyld

The Chinese government and its ruling Communist Peoples Party are like any large group; that is, they are not monolithic institutions in which every member thinks alike.

There are differences of opinion and the leader, Xi Jinping, is increasingly using repression to muzzle dissent within the nation and particularly within the party.

Xi’s one-man rule marks a distinct change from that of his predecessors. While it may appear to be more efficient and effective in making policy changes and implementing them, it comes with a price tag. Previous administrations used a more inclusive approach which allowed for discussion and consensus-building in policy formation. This allowed the party to consistently display a high degree of flexibility and pragmatism.

And rulers avoided conflicts abroad by staying out of contentious disputes such as those in the Middle East. They also refrained from clashes with the U.S. on activities that were considered vital to American interests.

The Chinese economy was growing at an impressive rate that generated sufficient funds to allow the regime to placate those who voiced concern about changes. The result was by no means perfect. Corruption was almost endemic and the systems was often painfully slow to reach decisions. It had, however, one key success factor: a built-in propensity for pragmatism and caution.

Xi replaced this system with a regime marked by a high degree of ideological rigidity, punitive treatment of ethnic minorities and political dissidents at home, and — most importantly — an impulsive foreign policy best illustrated by the Belt and Road Initiative (BRI) that has aroused significant suspicion in North America and the European Community.

While the centralization of power in one man, Xi, has resulted in accelerated decision-making, it has also raised the risks of making costly blunders. Correcting policy mistakes is proving to be difficult, since reversing decisions made personally by the dictator will undercut his desired public image of infallibility. Under the old system, the group — not an individual — shouldered blame for errors made. China, therefore, now lacks the flexibility it needs to deal productively with the U.S. and the European community.

As mistakes happen and are not corrected, stresses will increase within the ruling elite putting pressure upon Xi. Faced with this problem, Chairman Mao Zedong resorted to purges. In the years ahead, Xi may well do the same thing.

One of the central components of American policy regarding China is “economic decoupling” that is significantly reducing the commercial ties between the two countries. China today is less dependent on trade — exports in 2018 were 19.5% of GDP, down from 32.6 in 2008 — so decoupling may not be as effective as some are hoping. But there is no doubt that economic growth is slowing in China. 

Chinese born after 1980 have experienced only a rising standard of living. Now, with growth reduced to a level advanced economies expect, things will not be as rosy, and that will cause some unrest.

If that wasn’t enough of a challenge, the one-child-per-family policy of the 20th century has now led to a rapidly aging population. That will mean increased demands for some sort of social safety net for those no longer able to work and those in need of long-term care. In short, budgetary pressures will be increasing over the next two decades. An economic slowdown will also constrain the Communist Party’s patronage structure.

China needs to build relations with the U.S. and other western nations, including Canada, to prevent the creation of a broad international anti-China coalition.

This should include opening its domestic markets, offering effective protection of intellectual property, abandoning questionable territorial claims and easing up on harsh human rights programs against minority groups. 

Perhaps it should also focus on the privatization of state owned enterprises. These large companies consume about 80% of the nation’s credit, but contribute less than 30% of the GDP.

Dealing with this problem could yield substantial economic benefits to the economy.

All this means that Xi’s China is facing a host of problems and will have to grapple with them over the next two decades.

David Bond is a retired economist living in Kelowna. His column appears weekly.