Soon after Chinese President Xi Jinping has succeeded in getting a “CPC leadership system” proposed and approved by the recent National People’s Congress, concerns started to arise in the rest of the world about the impact of that plan on the model of Chinese economic governance, and ultimately on the scenarios for China’s economic stability and growth. Political stability in democratic countries has long and strongly been associated with economic growth, but no similar link can be applied to other countries.
Changes included in that plan will give the Communist Party greater control over the economy, as well as over economic decision-making processes in the country, encompassing all sectors from finance to real estate, from industry to entertainment. Reorganisation of ministries, merging more than a dozen state agencies, greater control or even absorption of state agencies by party structures, all mark a big shift in the philosophy of economic governance. According to Dali Yang, a political scientist from the University of Chicago, “The move will fuse the party with state institutions and ensure the party is in the lead.”
On the one hand, this shift does not come as a total surprise, as it is not abrupt. Xi has gradually taken over policy-making duties traditionally left to Premier Li Keqiang and his State Council since taking power in 2012. However, the recent moves, including the end of the two-term presidential limit, show that China is heading towards a serious shift from a centralised to a unified, party-led system of government, similar to what Mao Zedong had introduced back in the 1950s. That system was replaced by a more decentralised model in Deng Xiaoping’s 1980s’ reforms, which introduced a separation between the party and the government. The ultimate aim of those reforms was to foster economic development and growth through the positive effects of meritocracy in party organisations and professionalism in state institutions. Four decades of stability and free trade followed, which allowed China to industrialise by integrating its labour-abundant and technology-scarce economy into global value chains and markets.
Xi is now going back again in the old direction. There is clearly a strong parallel between Mao and Xi, in many respects, but more specifically in the strong link between the party-led government and an inwardly oriented strategy of development and growth, in contrast with Deng’s approach. Some of the planned mergers of state agencies and ministries aim at reducing the number of potentially conflicting objectives, which have often worked against the overall effectiveness of national policies in the past, and sometimes have proven to be an obstacle on the path to reforms.
At the same time as the economic goal and policy priority in China becomes stability instead of high growth, the management of the economy requires more central power to prevent possible internal frictions. The legitimacy and credibility of the government have always relied on its ability to deliver prosperity, which was once based on increasing living standards for millions of Chinese. As China is now becoming a moderately prosperous society, prosperity means that the rich will likely not get as rich as or richer than before. For the Chinese middle class to be still supportive of the single-party system, now and in the future, despite being less satisfied with such a shift in the paradigm of economic growth, it is necessary that political legitimacy derives more from loyalty than from well-being and material payoffs. This is why Xi needs more power on the road to reforms than ever.