China's Changing of the Guard: Contradictory Trends and Confusing Signals

Assessing China's adoption of capitalism and predicting its future have become enormously daunting. On one hand, rapid economic growth, massive social transformations, and relative political stability in the past two decades provide grounds for optimism. On the other, the growing gap between the country's increasingly open and market-oriented economy and its closed political system, along with the increasing strains generated by an unprecedented pace of socioeconomic change, raise concerns about the sustainability of Chinese policy. The country's transition from communism poses an especially tough intellectual challenge because this transition has at once closely followed and starkly defied world economic and political trends.

Economically, the ruling Chinese Communist Party (CCP) was the first major communist regime to embrace radical reform despite a lack of experience, knowledge, or internal ideological consensus. Its learning-by-doing approach yielded quick economic rewards, while avoiding the short-term disruptions that more drastic reform measures would have caused (as they did in the former Soviet bloc in the early 1990s). Over time, economic reforms have allowed for China's integration into the world's trade and financial systems. Rapid economic growth generated by liberalization not only propelled Chinese development at an unprecedented pace; it also catapulted China to the top ranks of trading nations. China's 2001 entry into the World Trade Organization (WTO) is the most convincing illustration of the Chinese leadership's commitment to economic globalization. But unlike the majority of developing countries that appear to have reaped only meager benefits from globalization while paying a steep price (Argentina being the best example), China (along with India) seems to have avoided globalization's main pitfalls: For one, China has taken advantage of trends in free trade and capital flow to develop competitive manufacturing capabilities aimed at world markets, and has leveraged its pro-investor policies and market size to attract heavy foreign direct investment (FDI). Moreover, the Chinese leadership has retained its ability to intervene in the marketplace and, consequently, avoided the catastrophic mistakes made by developing countries that have fully embraced neoliberalism. ¹

Politically, China's experience over the last two decades also stands out. Its transition from orthodox (Chinese) communism began roughly at the same time as the early phase of the "third wave" of democratization in the developing world. The leadership's commitment to one-party rule and its antipathy toward democracy has meanwhile been notable for its explicitness, but also for its ferocity. Unlike most third-wave countries that pursued economic reform in order to consolidate democratic rule, the CCP did not attempt to conceal its intention of using economic reform in order to strengthen and perpetuate its own political monopoly. To be sure, the Party has embraced several leading global political trends, such as legal reform and the decentralization of power. But these institutional reforms have not substantively altered the defining characteristics of the CCP or led to any real democratic changes.

The resilience of the regime was demonstrated repeatedly as the Party weathered a series of internal and external challenges to its survival. Its near-death experience at Tiananmen Square in the spring of 1989 and its shock at the fall of communist regimes in the former Soviet block shortly afterward appear to have spurred the regime to undertake bold new economic reforms in the 1990s—enabling it quickly to regain its footing and reassert political control. The Party's new survival strategy, maintaining one-party rule through accelerated market reforms, appears to have worked. China has sustained high rates of economic growth and political stability. Nothing, meanwhile, has forced the CCP to loosen its grip on political power and adopt democratic reforms—whether the deterioration of its external strategic environment following the end of the Cold War, the third wave of democratization, or increasing uncertainties in Sino-U.S. relations. Instead, Chinese leaders seem only to have grown more sophisticated in coping with an international community dominated by Western democracies, leveraging its new economic power and strategic influence to...