Xi Jinping: The Resurrection of Mao Zedong

China’s economy is in a serious and prolonged downward spiral. Therefore, the CCP knows it must control everything and everyone in order to retain power. 

What better time for the Party to return to its Maoist roots than while celebrating the 20th the week-long 20th Communist Party National Congress? After all, China was the paragon of economic growth, technological innovation and stability under Mao, right?

Not really. It was from 1980-2012, with a few hiccups along the way, such as the Tiananmen Square Massacre in 1989. What’s a few thousand dead students compared to outsourcing your manufacturing base to the world’s largest slave state?

Nonetheless, the CCP’s very own dictator-for-life Xi Jinping and “new” economic and political policies that are turning the country’s economy away from its blend of state and private capitalism into the dark, Maoist model of the past. Even more staggering is that they’re doing so intentionally. Major policy changes are being institutionalized by the CCP leadership that will further damage China’s already declining economy.

There is a new twist, of course. China’s new surveillance state, with its wall-to-wall social credit system going nationwide by 2023, means total technological control over 1.4 billion people. 

Resurrecting Mao’s National Self-Reliance Policy

The purported reason behind reverting to Mao era policies is to make China self-reliant. The CCP wants to decouple its economy from the West to minimize dependence on Western partnerships and insulate China against future U.S. sanctions.

It’s an attractive notion, but it doesn’t work in practice. The necessary factors for self-reliance such as efficient markets and transparent courts, require freedom of information, private property, technological innovation, robust consumer demand and confidence in the future. None of these are present enough in China. Worse, all but the last are not tolerated by the CCP.

Oh wait, wasn’t that what they had under Mao?  Indeed it was. Fortunately, no young person will have to wonder what it was like back then, with the economy cratering under the current system created by Xi himself, they’ll be living it sooner than later. Besides, preemptively gaining control of as much of the economy as it can may be the only way for the Party to survive the coming onslaught of economic woes and social unrest.

A look at just a few developments makes it clear just how comprehensively the CCP is failing China.

Manufacturing Implosion Continues

First, a dose of reality when it comes to “reported” growth rates is in order. China’s growth projections for 2022 were 5.5 percent. The CCP’s official growth assessment for the first quarter of this year was a bit lower, at 4.8 percent. Some private economists say that China’s growth for 2022 will be around 2 or 3 percent.

But who knows? The Party ain’t publishing the numbers. If even those lower estimates were accurate, that would represent the greatest fall in economic growth in 40 years.

But even the lowest estimates aren’t reasonable. On the Caixin index, which indicates manufacturing activity, China is currently at 48, but was 46 in April. Any level below 50 on the index means negative growth or a contraction in manufacturing activity. As the manufacturing and export leader of the world, that negative level spells more difficulty for China’s economy.

Real Estate Development Sector Collapsing

There’s more bad news in China’s property development sector. The industry that makes up about 29 percent of GDP, continues to meltdown. With fewer buyers, heavy discounts are in play. In April of 2022, home prices fell in two-thirds of China’s largest 70 cities. It’s no better now. The debt-driven collapse of the industry is resulting rampant insolvency among even the largest development firms and banks. In fact, trillions in bad debt saturates both private public economic sectors.

Given that the CCP created the distortions in the property development sector through graft, corruption and circular lending, the idea that the Party is equipped to solve these problems is absurd. That’s why it is passing the yuan back to the local and provincial governments to solve. “Let the blame rest with them” is the obvious strategy.

Again, from the Party’s perspective, it’s not about economic efficiency, but maintaining political control.

Attacking Big Tech

Of course, the CCP’s drive to control the private sector is also behind their oppression against the powerful big tech firms like Alibaba, Tencent and many others. The CCP blames tech firms’ excessive abuse of monopoly power, but the real issue is power itself. The big tech firms wield tremendous financial and social influence in China, as they do in many other countries. Their technology, including social media, are what drive the culture, not the Party. These large societal influencers were not only competing with the CCP, they were posing a threat to its legitimacy.

Naturally, the CCP responds to threats by destroying them. That’s what’s really behind their take of the tech moguls. Massive layoffs have followed the takeovers, followed by massive unemployment and the continued zero-COVID lockdown policy.

Mixing Economic Models

A big part of the CCP’s transition to Maoism–and certainly related to the tech takeovers– is to plan to extensively blend private firms with state-owned enterprises (SOEs). That’s another formula for economic decline. It didn’t work for Mao and it won’t work now.

Private companies are typically run much more efficiently than SOEs, because they usually have to make a profit to survive. SOEs, on the other hand, are run by political appointees, not business people. In most cases, SOEs were successful private firms that were taken over by the CCP for personal gain of party members, who then drained the wealth from the companies and refinance them with loans from the PBOC. The “blending” of both, as it were, is just a euphemism for more takeovers of private businesses by the Party.

 Chinese People Fear the Future

Not surprisingly, pessimism best defines people’s outlook for the future in 2022. The CCP’s Zero-Covid-19 policy is killing economic activity wherever applied. The seemingly never-ending lockdowns of entire cities has resulted in dramatic falls in output, consumer income and spending, as well as huge jumps in consumers’ savings rate. Of course,unemployment is rising, too.

According to the People’s Bank of China, the private savings from January to May of this year rose by 7.86 trillion yuan ($1.7 trillion), which is more than 50 percent higher for the same period last year. At the same time, household consumption fell, meaning people are buying even less in 2022 than they were during the intense lockdowns of 2020.

That’s an additional $1.7 trillion dollars that were not spent in the economy in Q1, with a GDP of about $14.7 trillion or less. What’s more, in 2020, savings were invested in the stock market or property. In 2022, however, consumers are paying off debt, prepaying mortgages and other defensive actions. Finally, due to the extended lockdowns across China, with declining manufacturing orders and in other major industries, again, resulting in widespread layoffs.

 Party Survival Trumps Economic Viability

The language coming out of Beijing has the unmistakable ring of desperation to it, as the CCP seeks to stabilize employment and the economy. It’s worth noting that in the midst of economic and social chaos, Mao sought and found stability as well and remained in power to the end.

The resurrection of Maoism is simply the adoption of proven methods for expanding power and control over the country as it descends into an economic and social instability.

And Xi Jinping owns it all.