China's Central Party Leadership is walking on a Tight Rope: Dissecting the 17th CCP Party Congress from economic analytical perspective

Chinese Communist Party (CCP)’s 17th Party Congress concluded on October 21, 2007. In his closing report, party secretary Hu Jintao outlines China’s focus on “scientific outlook of development,” one that “regards economic development as top priority, puts people first, persists in overall considerations and pursues comprehensive, balanced and sustainable development.”

Overall, Hu’s speech indicates CCP’s intention to improve people’s livelihood, promote social equity, overcome energy shortage problems, pay attention to workers and peasant’s conditions, protect environment and minority groups, and reinforce effort in macro-controlling housing market.

If we overlook the contradictory nature of these goals and CCP leadership’s underlying motives behind those words, Hu’s remark is actually a well-crafted statement with pages of achievements, ideas and plans. Although the achievements, ideas and plans listed are merely window dressings—party slogans without any real value, this statement and the 17th Party Congress in general are significant, because they provide us a glance over China’s leadership succession. It is true that these words, especially the policy goals that are mentioned, represent a break from Jiang Zemin’s emphasis on economic growth. This shows current leadership’s concern of rising social and economic problems. Hu’s insistence on “scientific outlook of development” indicates that this outlook is viewed as the solution to those problems.

However, “scientific outlook of development,” synonym for “sustainable economic development,” is mission impossible for CCP. Sustainable economic development and CCP simply do not coexist. If sustainable economic development occurs in China, then the regime that is in power will not be the CCP but one that is non-Communist and, more importantly, non-authoritarian.

China’s economic reforms resulted in market liberalization. Its rapid economic transformation, rising tax revenue and foreign reserves led many to conclude that China is next economic power. What these observers often neglect, however, is that tax revenue (which generated the problem of official corruption) and foreign reserves were the results of foreign investment inflow and of sacrifices made by peasants and workers. China’s reliance on these “problematic means” of development is thus costly. Official corruption, economic inequality, deteriorating environment, rising social instability, implicit financial trouble, growing bubble economy, as well as other social problems are prevalent. Since these problems arose out of the present system, which is economically liberal but non-democratic, it is impossible for the CCP to solve these problems. Corruption, a major economic and social issue, is the outcome of officials who enjoy authority over economic policy-making without being accountable to the Chinese people. In other words, the devolution of economic decision authority gave Chinese officials greater opportunities to engage in corrupt behaviors, while political authoritarianism protected them from popular sanctions, the ones that elected officials have to face in a democratic system. Therefore, the best solution for the CCP is “democratization.” In this manner, how should we expect the CCP to engage in the suicidal act of political liberalization?

During his visit to Moscow, Premier Wen Jiabao not only dismissed criticisms on his inability to successfully macro-control Chinese economy but also vowed to continue the task. Like the internal contradictions found within the Chinese society, there is every reason to question the compatibility between macro-management, and CCP’s goal of long-term economic development. After it witnessed the domino effect of Communist downfall, the Chinese leadership is fully aware of the dilemma it currently faces—the goal and process towards long-term growth will inevitably lead to political/regime transformation. This awareness explains CCP’s frenzied moves to address “social harmony” and related socio-economic issues, to a point that its reaction is almost paranoid—every little move triggers deep concern often followed by large-scale repression.

What happened during the 17th Party Congress are perfect examples of this CCP paranoia. During that week, the Chinese government banned news that they considered sensitive, including coal mine explosions, car accidents, pollutions, labor dissatisfactions, public petitions, corruption, illegal construction removal, illegal arrests and even ordinary family quarrels! News suppressions were accompanied by bans on internet information flows, arrests and even abductions of activists. These behaviors led some to joke that “China is news free during the week of the 17th Party Congress.”

The real accomplishment of the 17th Party Congress, as I have indicated above, is settlement of leadership issue—the finalization of nine Politburo members. Other than that, the CCP cannot implement any political, economic and social transformation. It cannot even reduce the number of the Politburo members from nine to seven.

CCP’s actions during the 17th party congress perfectly illustrate its paranoia as it faces domestic challenges. If it has such a hard time dealing with these problems, why bother showcasing fancy slogans, and most importantly, admitting the severity of these problems? The 1989 Tiananmen incident has taught leadership the danger of popular anger. CCP’s reliance on these corrupt officials, however, reduced its incentives to punish and remove the latter. That is why we witness the issue of corruption and rising concerns among the top leadership but little concrete actions.

While some observers believe that China will shift from personal to “oligarchic,” collective rule, others argue that Hu has already consolidated his control and is thus powerful enough to lead the CCP alone. In my view, it does not matter which direction China goes—China is still a country with centralized authoritarian rule. China’s top leadership, however, is not reassured. The existence of socio-economic problems exposes the fragility of its control. In the other words, China’s leadership is walking on a tight slippery rope, and it is fully aware of that.