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China: Xi Jinping preparing for stormy weather

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First published in Fifth International 22.
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The headline news from China is that the plenary meeting of the Central Committee of the Chinese Communist party, which met last week, adopted a resolution on the history of the party in which Xi Jinping is accorded the same status as Mao Zedong and Deng Xiaoping. Together with the previous change of the constitution that removed the limit of two terms as president, this accolade underlines Xi's consolidation of his own power within the party. Or so it would seem.

The important news from China is that the fallout from the anticipated bankruptcy of Evergrande has highlighted the insolvency of many other huge property development corporations and is accentuating the impact of a downturn in the economy. (see: )

Other major corporations including Sinic, Fantasia and China Modern Land have all defaulted on bond payments, Kaisa, a property management company is also at risk. Evergrande's position has been made worse by the revelation that it had borrowed large sums from a bank it partly owned, that could constitute a breach of banking regulations.

Internationally, Evergrande's difficulties have had a devastating impact on the dollar denominated bonds used by other Chinese property developers to raise funds - in June these offered 10 percent interest, now they have to offer 29 perccent, well into "junk bond" territory. Effectively, that means that Chinese property developers cannot borrow internationally.

On Friday, the Financial Times also reported that, whereas Chinese bonds were generally offered at a higher price but lower interest rate than others, because they were considered very low risk, the "China premium", now commentators talk of a "China discount" - meaning the bonds have to be priced lower but with a higher interest rate because of the perception of increased risk.


Does any of this have any bearing on Xi Jinping's new and exalted status? In all probability, yes. The Communist Party is so central to the entire Chinese system of government that any changes in its structure, leadership or propaganda priorities are sure to express wider developments in society.

The centrality of the party is rooted in its history. In the prolonged period of territorial dual power that existed between the defeat of 1927 and the victory of 1949, the party was the crucial factor in holding together areas of the country that in total were twice the size of France and had some 100 million inhabitants.

In addition to administering the territory under its control, the party, of course, also controlled the development of the People's Liberation Army. In short, the party provided the personnel for a developing state apparatus, and it was held together by the combination of its Popular Front strategy for gaining power and its bureaucratic centralist discipline, both pioneered by the Communist International under Stalin.

What was built was a bourgeois state apparatus with a civilian administration, a legal system and an army. With the defeat of the Guomindang in 1949, the corresponding elements of the existing Chinese state, purged of politically unreliable personnel, were relatively easy to absorb into the communist controlled apparatus.

Despite wild swings of policy in the 70 years since then, the "leading role" of the Party has remained the defining feature of the Chinese state. The Party does not only provide all the key figures in all departments of the state, its 92 million members constitute a network of supervision and control throughout society. Every large workplace must have a party committee, every district of every town and city has its party organisation.

Such a system obviously gives huge power to its leadership but there is another side to this coin; the sheer size of the organisation and its integration so deeply into the fabric of society inevitably means that different, potentially conflicting, ideas and social forces find their way into the party.

Under the system of bureaucratic planning, never as centralised as the Soviet model on which it was originally based, this led to widespread petty corruption, family advancement, preferential promotions, extra rations and, higher up the scale, regional preferences in allocation of development funds and the like. The restoration of capitalism, however, opened the floodgates. Approval of ever closer ties between party and capital was signalled by allowing "businessmen", and they generally were men, to become party members.

At the same time, many party members were themselves becoming either capitalists in their own right or managers of capital on behalf of the state or a corporation. As long as the economy as a whole was expanding, the growing influence of capitalist priorities within the party posed no great problem. In effect, the party-state apparatus played the role described by Marx as that of "total capital", guiding the overall economy in the interests of capital accumulation, presented, as in other countries, as the "national interest".


Capitalism, however, does not grow either steadily or uniformly. Even in a highly statified capitalism, different sectors will grow, or not, at different rates and the economy as a whole will be affected by the dynamics of the global economy. These inevitable variations must now find expression in the form of different groupings within the party.

The reality of capitalism, in China as much as anywhere else, is that greater accumulation of capital also means greater social inequality. In a country ruled by an organisation that calls itself a communist party, this contrast is potentially very destabilising. The legitimacy of the regime, reinforced by traditional Chinese political culture, relies on its ability to maintain social order, social cohesion. The widely reported emphasis that Xi is now giving to building "common prosperity" and his moves against a number of billionaires are clearly attempts to shore up that legitimacy.

When the party adopted a resolution equating Mao Zedong's political and theoretical achievements with those of Marx and Lenin, in 1945, this marked his victory over other factions within the party. Similarly, Deng Xiaoping's resolution on the history of the party, assessing Mao as 70 percent correct, 30 percent wrong, in 1978, registered his victory against the remnants of Mao's regime, the "Gang of Four". How then should we understand the central committee's elevation of Xi Jinping to the party's pantheon?


The increasingly authoritarian and repressive regime instituted by Xi points to a different scenario; rather than victory over rival factions, this is a pre-emptive strike in preparation for coming battles. Xi's claim to pre-eminence is based on the assertion that he is the continuation of both Mao and Deng, leading China towards the completion of the party's programme, Socialism in One Country, with Chinese characteristics.

Further progress, according to Xi, requires a change of economic strategy whose goal will be to achieve "dual circulation". Exactly what that will mean may be spelt out when the National People's Congress discusses implementation of the 14th 5 year plan, adopted in February this year, but the term has been circulating for some time and implies less reliance on international supply chains and greater emphasis on increasing consumer demand within China itself. The model of a more self-sufficient national economy may echo Socialism in One Country, but its timing shows it is a response to the trade barriers imposed by Washington, especially on high-tech goods designed in the US.

The shift from the "Great International Circulation", the strategy pursued by Deng Xiaoping, which meant using China's huge supply of labour to integrate the economy into the world market, will surely mean big changes in priorities within China. The decision to crackdown on the property development sector has to be seen in this context. Its consequences, potential major bankruptcies and changes in supplier industries, are the first signs of how far Xi's leadership is prepared to go.

It is impossible to believe that there will not be important sections of capital and, for that matter, workforces, who will question the wisdom of the new policy and, perhaps, try to oppose it. That is precisely why the regime has become increasingly repressive in recent years - and why it was necessary to elevate Xi to justify the suppression of any dissent.

For socialists, the prospect of internal dissent within such an autocratic regime offers the possibility of promoting not only a Marxist critique of immediate policy decisions but of the character of the entire regime and its history. The strategic aim, as in all countries, is the formation of a workers' party on a programme for the revolutionary overthrow of capitalism by the workers' own organisations based on workers' councils.

Those who are committed to that goal need to build an organisational framework within which to develop the key elements of such a programme and the tactics necessary to take it into the struggles that are sure to shake China in the coming years.

This article can be read in Chinese at:中国:习近平在为一场暴风雨做准备

First published in Fifth International 22.
Buy online