Chinese Communist Party (CCP) General Secretary Xi Jinping has given top priority to a policy of domestic consumption and innovation to ensure “safe economic growth” and to counter U.S. President Trump’s apparent efforts to boycott high-end Chinese firms and products. According to a CCP Politburo meeting late last month, the ruling CCP Central Committee will hold its Fifth Plenum—that is, the fifth meeting of the full Central Committee selected at the 19th Party Congress in 2017—in October to lay down basic strategies for the 14th Five Year Plan (2021-2025) and to draw up long-term economic blueprints through the year 2035. According to the Politburo communique, “The 14th Five-Year Plan period [will cover] the first five years after China has completed building a moderately prosperous society in all respects… The period will also mark the time for the country to build on this achievement to embark on a new journey toward the second centenary goal of fully building a modern socialist country” (Xinhua, July 31).
“The Great Domestic Circulation” As the New Focus of Economic Policy
The leitmotif of the big plans on the drawing board will be safety—and the ability of the Xi-led CCP top leadership to control the nation’s economic and political resources. “We must seek development that has higher quality, higher efficiency, a higher [degree of] fairness, higher sustainability and higher safety,” the Politburo added. “We must seek a synthesis of scale, speed, quality, efficiency and safety.” This was the first time that “safe” growth was given such pride of place in the national agenda. To achieve this supreme new goal, the CCP leadership has put forward the strategy of the “dual domestic and international circulations” (国内国际双循环, guonei guoji shuangxunhuan). Circulation is a code word for ensuring the smooth operation of supply chains, production, logistics, sales, and consumption. Citing Chairman Mao’s famous theory of “protracted warfare,” the Politburo said the country would ceaselessly speed up the establishment of “a new developmental mode whereby the main emphasis is on the great domestic circulation, with mutually beneficial implementation of dual domestic and international circulations” (People’s Daily, July 31; Ming Pao [Hong Kong], July 31; South China Morning Post, July 30).
While the Politburo communique did not mention the United States, there is some truth to the view of former U.S. National Security Adviser John Bolton that “U.S.-China decoupling is already happening” (FCCHK, July 16). Apart from geopolitical contention, there are further indications that the Trump administration is moving away from the symbiotic relationship between the American and Chinese economies that began in 2001 with China’s entry into the World Trade Organization and the establishment of U.S.-China “permanent normal trading relations” (White House, December 27, 2001).
Not long after taking office in 2017, Trump sought to limit the global sales of such top Chinese high-tech firms as Huawei and ZTE, owing to the alleged threats that these companies posed to American national security. Early this month, the White House banned high-flying Chinese apps such as TikTok and WeChat from the American market; it is possible that Tiktok will be forced into a purchase by Microsoft. Moreover, Chinese firms might be delisted from the New York Stock Exchange if they are found to be out of compliance with U.S. accounting standards (Finance.sina.com.cn, August 7; Caixin Global, June 9).
The Prospects for a Return to Chinese Economic Autarky
From one perspective, the Chinese market seems big enough to generate growth, including development in the high-tech sectors. Despite widespread allegations of intellectual rights property theft, Chinese authorities have claimed that robust consumption and government help have pushed Chinese technology in areas such as AI and 5G to the world’s front line. As an acknowledged student of Mao, Xi has countered the challenge from the Trump administration by emphasizing the Maoist value of ziligengsheng (自力更生), or “autarkist self-sufficiency.” “Core technologies cannot be bought [overseas],” Xi likes to say. “The ‘life’ of enterprises lies in their own intellectual property rights. Enterprises must ceaselessly attain breakthroughs in core technologies” (China.com.cn, December 29, 2018).
The Xi leadership has hoped to take advantage of large-scale reconstruction and investment in the wake of the COVID-19 pandemic to raise Chinese technology to the next level (China Brief, May 1). According to the First Financial Daily’s tally of large-scale regional projects, eight major provinces have announced investments close to 3.6 trillion dollars (25 trillion renminbi) (Reportrc.com, March 9; Apple Daily, March 2). For example, China’s three biggest IT companies are set to invest more than 25.9 billion (180 billion renminbi) in 5G-related operations (Economic Observation Net, March 24). However, according to U.S. based-Sinologist and sociologist Ho-Fung Hung, although Beijing has boasted about top-drawer high-tech inventions, Chinese industry still depends on imports of core equipment and components from the West. Now that the United States has blocked Chinese access to American know-how, “the bursting of the bubble of Xi Jinping’s technological dream has taken place earlier” (Radio Free Asia, July 29).
Another prominent goal of “self-reliant economic development” is ensuring food safety. The official media on August 11 cited Xi Jinping as saying that, although China had experienced bumper harvests the past several years, China must “adopt a crisis mentality toward food safety.” Xi stated that “We must resolutely stop wastage of food and earnestly nurture the habit of frugality” in eating and drinking (Gov.cn, August 11). While on a trip last month to the predominantly agricultural province of Jilin, the party leader said: “We must put grain safety in a prominent position and never relax [the goal of] grasping grain production. We must speed up the change of agriculture production methods.” As an example, Xi’s advisers have urged more experimentations with collectivized farming in the three northeastern provinces (People’s Daily, July 25). Given the fact that China has to import up to 30 percent of some produce, agricultural or grain self-sufficiency may never be realized. Despite this, the CCP leadership has warned that China must not become dependent on the imports of potentially hostile countries such as the United States (Apple Daily, August 11).
Another primary goal of autarkist “safe development” is finding employment for workers laid off due to the coronavirus crisis. UBS Securities assessed in late April that perhaps 80 million jobs had been lost in services, industry, and construction; and that more than 10 million other jobs could evaporate in export sectors, as orders cease and businesses avoid large worker gatherings due to lingering pandemic fears (Radio French International, April 30).
The Xi leadership has also resorted to another Maoist solution to unemployment: urging high school and college graduates to go to the countryside “to learn from the masses.” On March 26, party and government authorities published an “opinion on comprehensively boosting labor education among college, high-school and primary-school students in the new era.” During the Cultural Revolution, Mao sought to partially solve China’s unemployment crisis by sending students “up to the mountains and down to the villages.” Throughout this year, an estimated 10 million students will be “sent down” to the countryside to seek work (PRC Government, March 26; Radio French International, April 11, 2019; China Brief, April 29, 2019).
Despite Xi’s apparent penchant for reinstating Maoist norms, the official media has denied that Beijing is re-embracing the Great Chairman’s autarkist economic policies. For example, an official Xinhua commentator indicated in early August that despite the fact that the new development pattern of domestic circulation “puts more emphasis on self-sufficiency, it’s improper to interpret it as a policy shift to less opening up or less active interaction with foreign markets.” A People’s Daily commentary at the same time noted that the great domestic circulation strategy was to “facilitate better connectivity between domestic and foreign markets for more resilient and sustainable growth” (Xinhua, August 5). Apart from purchasing more agricultural products from the United States, however, which is essential to the country’s “grain safety,” Beijing has yet to show the West that it intends to pursue equitable trade or market reforms (Cn.reuters.com, July 31; Finance.sina.com.cn, July 15).
One silver lining in the “new cold war” between the United States and China is that negotiations are still taking place regarding the “second phase” of the trade deal. At least from the American perspective, the “second phase” deals mainly with U.S. requests that the Chinese party-state authorities relax control over the economy—particularly the state-owned enterprise conglomerates. Vice-Premier Liu He (刘鹤), Xi’s main economics adviser, seems sanguine about the symbiosis of the “domestic and foreign circulations.” Liu has said that “We still face the relatively massive pressure of the economy going downwards,” but he has also claimed that the situation is improving: “A new scenario of domestic circulation in the main, coupled with mutually beneficial dual domestic-foreign circulation, is taking shape” (First Financial News, June 19). What Liu and his colleagues have so far failed to offer are market-oriented reforms, coupled with the gradual retreat of the party-state apparatus from the economy.
Indeed, in line with previous plenums, these high-level conclaves are partly called to eulogize General Secretary Xi for his contribution to “Socialism with Chinese Characteristics for the New Era.” In the past few years, Xi’s theories about the economy, foreign and military affairs are said to exemplify “the force of the truth of 21st century Chinese Marxism” (Guangming Daily, February 27, 2018). As Hong Kong-based Sinologist and columnist Sun Jiaye has pointed out, the fact that the Fifth Plenum is intended to set economic policies through to the year 2035 illustrates the determination of Xi—often known as the “21st century Mao”—to remain the nation’s supreme leader until he reaches the ripe old age of eighty (Ming Pao, August 6). At this stage, there don’t seem to be any voices in the party opposing the over-concentration of policy-making at the top that has been the hallmark of Xi since he came to power in 2012. However, whether such Mao-style decision-making will reinstate reforms—particularly in the wake of the pandemic—necessary to render the country competitive with the U.S.-led Western alliance remains a big question.