We all know that China has, in the memorable words of Mao Zedong, ‘stood up’. But the Communist Party of China (CPC) now tells two conflicting stories of its stewardship of the Chinese economy. The first story, inherited from Mao (and indeed from the Kuomintang and the Xinhai Revolution) is that of China’s recovery from the ‘century of humiliation’ that started with the First Opium War. In the most celebrated engagement of that war, the British warship Nemesis sank more than a dozen Chinese warships in one hour on January 7, 1841. From that moment, the days of the Qing Dynasty were numbered; China went on to suffer repeated foreign incursions, two terrible civil wars, and eight years of Japanese war crimes. The CPC arrived on the scene in 1949 to pick up the pieces and start the process of building a unified, modern China.
In this telling of Chinese history, the Qing were a feudal aristocracy presiding over a moribund peasant economy. The CPC liberated the Han people from virtual enslavement and educated the national minorities out of the darkness of barbarism. Any mistakes the CPC made in its early years (most notoriously, the Great Leap Forward and ensuing famine) can be blamed on foreign imperialists and capitalist roaders. After Mao’s death, the CPC found the secret to economic success in ‘socialism with Chinese characteristics’. Under the leadership of Deng Xiaoping and his successors, the CPC lifted ‘more than 850 million people’ out of poverty through its farsighted economic planning and sound economic management. In the beginning there was nothing, but the CPC brought light, and under Xi Jinping it is striving to ‘achieve the Chinese dream of the great rejuvenation of the Chinese nation’.
But there is also a more patriotic second version of the CPC’s official story. In this second telling of Chinese history, China was always at the center of the world. Politically, it was the Central State of a continental tianxia; economically, it was the world’s richest, most productive, and most dynamic region right up until the ‘century of humiliation’. Now that China’s economy has grown to rival that of the United States, it is once again a strong country to which its smaller neighbors must defer. Under the wise leadership of the CPC, China has resumed its ‘rightful’ place in the world.
The Marxist theorists in the CPC’s propaganda department seem not to have grasped the fact that this new, second story contradicts the CPC’s own foundation myth. Yet it is arguably the second story that is true. In the 1200s, Marco Polo really did marvel at the stupendous wealth of the Yuen Dynasty. The early Ming fleets of Zheng He really were unrivalled anywhere in the world. And even in that 1841 battle between the Nemesis and the Qing fleet, the British victory owed more to superior seamanship than to superior technology. The richest 20 million people of 1841 China were almost certainly a match for their 20 million British contemporaries, and they ruled a much larger empire. The industrial revolution did open up a gap between Britain and China, but only for a few decades. By the early twentieth century, China was already starting to catch up, and arguably was only held back by civil war and Japanese militarism.
Mao’s catastrophically destructive economic management during the first three decades of CPC rule gave China levels of GDP per capita lower than those of India, North Korea, and most of the countries of sub-Saharan Africa, but those levels represented an artificial repression of China’s true economic potential. Throughout the civil wars and revolutions of the ‘century of humiliation’ China always had the underlying economic structure of a middle-income country: not world-leading, but generally productive and able to fend for itself. In the short periods of peace, China’s economy boomed, over and over again. But the periods of peace were always too short, and the disruptions always too frequent. When the CPC took power in 1949, it replaced these boom and bust cycles with a seemingly permanent, 30-year bust. It was China’s tragedy that during its first sustained period of peace in 100 years, it was governed by a party that was ideologically committed to ensuring that prosperity would never return.
All that changed after Mao’s death and Deng’s rehabilitation. Deng didn’t revive China’s economy; he merely stopped destroying it. The economy duly bounced back, and over the next four decades enjoyed some of the highest rates of economic growth ever recorded. International observers joined the CPC itself in lauding China’s efficient, technocratic policy-making. A few political scientists (and many poor country dictators) expressed their admiration for the ‘China model’ of repressive politics combined with (some degree of) market economics, what the Hong Kong sociologist Alvin So calls ‘state neoliberalism’. Yet all the PRC has done in the reform era is return China’s economy, in relative terms, to where it was in 1840. According to the widely-used GDP per capita estimates of the late British economist Angus Maddison, China had roughly one-third of the GDP per capita of the United Kingdom on the eve of the First Opium War. Today the ratio is between one-quarter (based on exchange rates) and one-half (based on purchasing power parities).
When you focus just on the rate of economic growth, China’s 8% average compound annual GDP per capita growth since 1980 seems nothing short of ‘miraculous’. Surely it must be the sign of extraordinarily competent economic management? But when you focus on the level of productivity achieved, China’s GDP per capita has only just caught up with that of Mexico, and still lags that of Poland, to say nothing of South Korea or Japan. The proposition that the CPC offers a successful model of economic management rests entirely on a continuation of rapid economic growth for another decade or two. Even the CPC’s own projections of 6% annual growth won’t cut it. At that rate, China won’t even catch up to Poland until 2040.
And that’s if you believe China’s current GDP per capita figures (independent economists have estimated that China is actually about 20% poorer than it claims to be, due to years of over-reporting growth rates) and you believe its GDP growth rates (independent economists estimate growth rates that are three percentage points less than the official figures). Model a 20% poorer China growing at only 3% per year, and you get a pretty typical middle-income country. Account for the fact that much of that 3% growth represents wasted investments in things like unoccupied housing and unused steel stockpiles, and CPC economic management looks less impressive still.
The coronavirus epidemic will certainly put a big dent in China’s economic growth for 2020. If China was ever looking for an opportunity to stop falsifying its statistics and come clean, this is it: the CPC can always claim that it was the coronavirus, not its own mismanagement, that was responsible for the end of China’s growth miracle. No one, not even the gullible international press, will believe that the Chinese economy hit its 6% growth target in the first quarter. If China’s leaders must admit to an economic failure — and in this case, there seems to be no choice — they may as well admit failure at a time when no one will blame them. They could then use 2020 to conduct a benchmarking survey and create a new, honest base year for their economic statistics going forward. In fact, if they revised GDP down by 20% all at once, they could more easily claim to return to growth in 2021, the CPC’s centenary year.
Don’t count on it. Coming clean is not in the CPC playbook. By this time next year, China’s economic statistics will probably be looking even more ridiculously unlikely. Maybe even the Western media will stop believing them. But don’t count on that, either.