Most Western thinkers long ago came to see communist ideology as effectively dead—even in China, where, in the late 1970s, the CCP leader Deng Xiaoping set aside the Marxist-Leninist orthodoxy in favour of something more akin to state capitalism.
But Kevin Rudd says Xi has brought that era of pragmatic, non-ideological governance to a crashing halt pushing politics to the Leninist left, economics to the Marxist left, and foreign policy to the nationalist right.
Xi bases his thinking on historical materialism (an approach to history focused on the inevitability of progress through ongoing class struggle) and dialectical materialism (an approach to politics that focuses on how change occurs when contradictory forces collide and are resolved).
Economic management had long been the domain of the technocrats who serve on the State Council, China’s administrative cabinet. But China’s policy debates on the relative roles of the state and the market have now become increasingly ideological.
Xi lost confidence in market economics following the global financial crisis of 2008 and China’s homegrown financial crisis of 2015, which was sparked by the bursting of a stock market bubble and led to a nearly 50 percent collapse in the value of Chinese stocks before the markets finally settled in 2016.
In late 2013, the Central Committee of the CCP had adopted a series of policy measures that would allow the market to play “the decisive role” in the allocation of resources in the economy. But the rollout of these policies slowed to a standstill in 2015. State-owned enterprises now received trillions of dollars in investment from “industry guidance funds” between 2015 and 2021—a massive infusion of government support that brought the Chinese state roaring back to the centre of economic policy.
In 2021, Xi also challenged Deng’s belief that China would need to endure inequality for hundreds of years before achieving prosperity for all. He rejected the notion that China was doomed to an indefinite future of developmental imperfection and class inequality.
Instead party committees would increase their influence on private firms by playing a larger role in selecting senior management and making critical board decisions. And as the Chinese state began securing equity in private firms, the state would also encourage successful entrepreneurs to invest in state-owned enterprises, mixing the market and the state to an ever-greater degree.
Xi has also pursued foreign policy steps that would have been unimaginable under earlier leaders. China has embarked on a series of island reclamations in the South China Sea and turned them into garrisons, ignoring earlier formal guarantees that it would not. The country has also carried out large-scale, live-fire missile strikes around the Taiwanese coast, simulating a maritime and air blockade of the island—something that previous Chinese regimes refrained from doing despite having the ability to do so. Xi has intensified China’s border conflict with India through repeated border clashes and by building new roads, airfields, and other military-related infrastructure near the border. And China has embraced a new policy of economic and trade coercion against states whose policies offend Beijing and that are vulnerable to Chinese pressure.
Xi’s ideological beliefs have committed China to the goal of building what Xi describes as a “fairer and more just” international system. China has built a new set of China-centric international institutions, such as the Belt and Road Initiative, the Asian Infrastructure Investment Bank, and the Shanghai Cooperation Organization, to rival and eventually replace Western-dominated ones.
A Marxist-Leninist quest for a “more just” world also shapes China’s promotion of its own national development model across the global South as an alternative to the “Washington consensus” of free markets and democratic governance. And Beijing has offered a ready supply of surveillance technologies, police training, and intelligence collaboration to countries around the world, such as Ecuador, Uzbekistan, and Zimbabwe, that have eschewed the classical Western liberal-democratic model.
But Xi’s Achilles’ heel is the economy. His vision of greater party control over the private sector, an expanding role for state-owned enterprises and industrial policy, and the quest for “common prosperity” through redistribution is likely to shrink economic growth over time. Declining business confidence will reduce private fixed capital investment in response to growing perceptions of political and regulatory risk; after all, what the state gives, the state can also take away. This applies to the technology, finance, and property sectors, which have been China’s principal domestic growth engines for the last two decades. China’s attractiveness to foreign investors has also declined because of supply chain uncertainty and the impact of the new doctrines of national economic self-sufficiency. At home, China’s business elites have been spooked by the anticorruption campaign, the arbitrary nature of the party-controlled judicial system, and a growing number of high-profile tech titans falling out of political favour.
Adding to these weaknesses are long-term structural trends: a rapidly aging population, a shrinking workforce, low productivity growth, and high levels of debt shared between state and private financial institutions. Whereas the CCP had once expected average annual growth to remain around six percent for the rest of the 2020s before slowing to around four percent for the 2030s, some analysts now worry that in the absence of a radical course correction, the economy will soon begin to stagnate, topping out at around three percent in the 2020s before falling to around two percent in the 2030s.
For China’s leadership, that outcome would have profound consequences. If employment and income growth falter, China’s budget would come under pressure, forcing the CCP to choose between providing health care, elder care, and pension entitlements on the one hand and pursuing national security goals, industrial policy, and the Belt and Road Initiative on the other.
The critical question for China in the 2020s is whether Xi can engineer a course correction to recover from the significant slowing of economic growth. That, however, would involve a considerable loss of face for him. More likely, he will try to muddle through, making as few ideological and rhetorical adjustments as possible and putting in place a new team of economic policymakers, hoping they can find a way to magically restore growth.
The danger is that dialectical methodologies and the binary conclusions that they produce can lead to spectacularly incorrect conclusions when applied to the real world of international security. China might begin to function as if armed conflict is inevitable. This should, therefore, cause Washington and its partners to carefully evaluate their existing China strategies. The United States should realize that China represents the most politically and ideologically disciplined challenger it has ever faced during its century of geopolitical dominance. U.S. strategists should avoid “mirror imaging” and should not assume that Beijing will act in ways that Washington would construe as rational or serving China’s self-interests.
The West won an ideological contest in the twentieth century. But China is not the Soviet Union, not least because China now has the second-largest economy in the world. And although Xi may not be Stalin, he is certainly not Mikhail Gorbachev, either. Xi’s adherence to Marxist-Leninist orthodoxy has helped him consolidate his personal power. But this same ideological stance has also created dilemmas that the CCP will find difficult to resolve, especially as slowing economic growth puts in doubt the party’s long-standing social contract with the people.
Rudd advocates a model of ‘managed strategic competition’ between China and the USA to avoid accidental war. This would involve three elements.
First, recognise both sides’ strategic redlines and create protocols to navigate these redlines. This would involve private, non-declaratory, diplomacy.
Second, allow for non-lethal strategic competition- both sides would be free to grow militarily, compete economically and promote their values or world views.
Third encourage strategic cooperation in the areas where it really matters: combatting climate changes, preventing pandemics and ensuring stability in the international financial system.
Rudd concludes:
“We are dealing with profoundly complex questions. Indeed, it is historically unprecedented to be in the midst of a debate about whether the world’s largest economy and oldest continuing democracy can happily coexist with the world’s second-largest economy and oldest continuing civilization, given that the latter has never exhibited in its history any attraction to liberal democratic norms. But grapple with the debate we must. And resolve it we must as well. One way or the other.”