The Chinese Communist Party (CCP) has plunged into its own civil war.
It’s between the “ultra-Maoists” around CCP leader Xi Jinping and the “liberals.” The outcome will be massively disruptive for the Chinese population and for nations that depend economically on China.
The “ultra-Maoists” are in the ascendant, leading China toward a new era of isolation from the world, possibly worse than the Mao Zedong era from 1949 to 1976.
The battle lines have been drawn over the direction of the country between the “ultra-Maoists” within the CCP leadership and the more market-oriented “liberals.” This growing polarization mirrors the “nationalist-globalist” split seen in many Western societies in recent years, but with “Chinese characteristics,” different causes, and the probability of violence.
The “ultra-Maoists” around Xi recognize that China has already depleted its foreign exchange reserves as well as its control over food and water. Hard currency holdings are believed to be at around Saudi Arabian levels. There are other assets, such as U.S. debt holdings (for which there is a limited market), but the question becomes how best to utilize its resources.
While growing urbanization, the Maoists have discovered, may have been essential for China’s economic and strategic growth, it became the source of great unrest as the fortunes of most Chinese people began to be shaken, their security and happiness evaporating.
The CCP placed mainland China into a new lockdown in early August 2021, ostensibly over the surge in cases of the Delta variant of the COVID-19 virus, but this may not have solely been the case. More likely, the CCP placed the country in lockdown to prevent a growing movement toward protest and challenge from the grassroots level.
This unhappiness—actually widespread anger—has been stimulated by the failure of the CCP to respond adequately to widespread natural disasters such as massive flooding in some areas, and drought in others. The CCP initially claimed, for example, that there were only a handful of deaths in some of the recent flooding in Henan Province, when the actual number of deaths was certainly in the tens of thousands.
Xi has been steadily reining in the private sector of China’s economy, the source of the “Chinese economic miracle.” Instead, he favors dependence only on the sluggish and unproductive state-owned enterprises (SOE) that contributed little or nothing to the “economic miracle.”
What could this mean, other than a preparation for China to return to a closed economy, autarkic and reliant only on what CCP theorists are calling an “internal circulation” economy?
The Bloomberg financial news service, which has supported an appeasing U.S. approach to China under the Biden administration, on Aug. 1 acknowledged that Xi’s “cudgel of state power” had “at its most extreme erased $1.5 trillion from Chinese stocks and dented the portfolios of some of the biggest names in global finance.” Bloomberg cited one Beijing investor as saying: “The Government is going after industries that are creating the most social discontent.” That was an oblique reference to the private sector replacing the CCP as the hope for a prosperous future for the Chinese people.
So how quickly could the “ultra-Maoists” impose a lockdown on protest and eradicate hope that wealth could allow any freedom of action by individuals? Do the “liberals”—the globalists—in the CCP have enough leverage to constrain or overthrow Xi? And, if they could do this, is there enough viability left in China’s economy to spark actual real growth again, given that recent claims of economic growth have clearly been fictitious. What are the ramifications for China’s trading partners?
Massive, rapid curtailment of large resource contracts with the United States, Australia, Brazil, etc., can be expected within the coming few years, among the wider global impact.
Xi is fighting for his life and for continued CCP control over China. There is now little realistic prospect of China competing even with a sluggish and declining United States for “global hegemony.” Is there a middle path in the curve, which might see a “softer landing” or a “gradual decline” for China?
But there is no substance to claim that China has a growing economy or relief from its existential food and water crisis.
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