Totalitarianism finally hurting China's economic prospects

A violation of that rule would lead to forced disappearance and/or execution. There is no official record on death penalties in China as the single-party regime treats such information as "state secrets". However, unofficial evidence suggests that the country delivers maximum capital punishments of over 1,000 a year, followed by Iran, Egypt, Iraq, Saudi Arabia etc.

Political protests are not allowed in China. The Chinese Communist Party (CCP) that runs the government, court, army and even media; doesn't allow any criticism of its leadership.

A violation of that rule would lead to forced disappearance and/or execution. There is no official record on death penalties in China as the single-party regime treats such information as "state secrets".

Advertisement

However, unofficial evidence suggests that the country delivers maximum capital punishments of over 1,000 a year, followed by Iran, Egypt, Iraq, Saudi Arabia etc.

One can blame the Sharia law for the high rate of capital punishment in the middle-eastern countries.

Advertisement

But China has no such excuse. Regular law and order issues don't result in such a high rate of capital punishment either.

With an identical population, Indian courts delivered 77 death sentences in 2020.

Advertisement

Clearly, the death sentences in China are political. CCP kills its critics. As a rule, therefore, Chinese citizens camouflage their dissent against the regime by protesting against economic issues -- like the recent mortgage strike.

Even that is not easy either, as was evident in the video footage of military tanks rolling on the streets to scare agitators against a series of recent bank fails.

Advertisement

In that China, banners came up accusing President Xi Jinping for his 'zero covid' policy.

Also Read | CCI slaps Rs 935 crore fine on Google, 2nd penalty in 1 week

Advertisement

That too days or weeks before Xi would seek an exceptional third term at the party congress. All Chinese leaders after Mao served a maximum of two terms.

To begin with, two banners popped up at Beijing's university hub of Haidian. One declared Xi a "dictator".

Advertisement

The other read: "We want food, not PCR tests. We want freedom, not lockdowns and controls. We want respect, not lies."

The all-powerful Chinese government did everything to remove the evidence of the dissent from the internet. But, more such banners popped up across China.

Advertisement

"The slogans have since appeared clandestinely in at least eight Chinese cities including Shenzhen, Shanghai, Beijing and Guangzhou, as well as Hong Kong, according to VoiceofCN," a Bloomberg report said.

Apparently, Chinese citizens are getting desperate for political reform -- once proposed by Deng Xiaoping -- and not without reason. CCP continued with totalitarianism by promising economic good. That promise is now failing.

Advertisement

Faltering economy

Growth numbers have been dwindling in China for the last 10 years and have now plummeted to the bare minimum.

Advertisement

Last month, the World Bank projected China to grow by a mere 2.8 per cent in 2022, that's half of the 5.5 per cent growth promised by Beijing.

Moreover, for the first time in three decades, China's growth would lag behind the rest of the Asia-Pacific region.

Advertisement

The latest IMF projection pegs China's growth in 2023 at 4 per cent, lower than the projected 4.9 per cent growth in emerging and developing Asia.

The IMF projections are, however, more optimistic than many contemporary studies which are predicting much slower growth.

Advertisement

"We've been warning for years why we thought the consensus for ongoing, robust Chinese economic growth was wrong, and how the economy would be growing at just 2 per cent by the end of this decade," Neil Shearing, chief economist of Capital Economics said in a September 26 note.

The slowdown is structural with all three major growth engines -- property or construction, exports and domestic consumer demand. Even IMF agrees that the property sector which contributes 29 per cent of China's GDP is collapsing.

Advertisement

A closer look will reveal lack of reforms is the primary reason behind this failure. China created an artificial boom in the property market, which inflated GDP numbers for decades and sucked citizens' savings. Real estate developers made merry on ultra-cheap bank finance.

Local governments, which are essentially local units of the CCP, were happy to make money from land sales. Newly built buildings were pulled down to make way for the new ones.

Advertisement

Citizens were happy to see their money growing.

The federal government, which is the highest leadership of the CCP, made merry of the inflated GDP by pursuing neo-colonial political dreams.

Advertisement

Corrupt governments in Asia and Africa were lured by Belt and Road (BRI) moneybag. Projects were implemented at a highly inflated cost.

Chinese companies went back home with inflated profits. Politicians made money. Poor countries became indebted and lost sovereign rights over ports, rail lines etc.

Advertisement

The entire paradigm is now under threat. Post-pandemic, these countries became bankrupt. China can take over their assets but will not get back the money.

Global demand is plummeting. Excess capacities built at huge state subsidies are closing down.

Advertisement

The collapse in the property sector in China is leading to bank failures and wiping out citizens' savings. They can no longer splurge on costly automobiles, premium branded apparel or pricey jewellery.

According to some sources, auto sales also dropped in September.

Advertisement

A worried China deferred release of monthly data on industrial production, retail sales, fixed asset investment etc for September.

However, India -- which was once referred to as a laggard -- is firing from all cylinders. There is no unrest. The Indian government is stable and so is the economy.

Advertisement

Retail businesses reported a 21 per cent jump in September compared to the pre-Covid levels in 2019.

Electronic permits for inter-state transfer of goods shot up to a record high in September, signalling robust festive buying.

Advertisement

Passenger vehicle sales scaled a record one million units in the September quarter, following the easing of the global semiconductor shortage.

Despite reducing global demand, Indian IT giant Infosys reported better-than-expected profits in September.

Advertisement

IMF has predicted India to grow by 6.8 per cent in 2022 and 6.1 per cent in 2023, way above the average for emerging Asia, and become the third largest economy -- after the US and China -- by the fiscal year 2027-28.

Need political reform

Advertisement

So what's behind this change of fortunes between India and China? The answer lies in their political structure. The market economy essentially runs on democratic principles where information will flow freely and stakeholders will enjoy the freedom to take decisions. The equilibrium is reached through consensus.

China defied this principle. Back in 1978, the Chinese Communist Party or CCP promised to create a "socialist market economy."

Advertisement

In reality, the regime introduced one of the cruelest forms of capitalism, epitomized by the Barbie doll economics, under the protection of single-party rule.

To be fair to China, it worked beautifully in the first three decades when they grew by 10 per cent year-on-year.

Advertisement

Power was centralized. Decisions were taken from the top.

Local CCP machinery implemented them. Roads, airports, and seaports were built in no time. Industrial production grew. China earned global repute as 'the nation that delivers'.

Advertisement

On the contrary, the Indian Constitution demands that the federal government should take States on board in the decision-making and implementation process.

This is easier said than done in a multi-party democracy where the federal and State governments are often run by parties of contradictory ideologies.

Advertisement

Naturally, India's growth performance remained lacklustre. Critical second-generation reforms -- like 'one nation, one tax' (GST), denationalization of the coal sector, bankruptcy code etc -- had to wait for three decades since economic liberalization in 1991.

Also Read | CCI imposes Rs 1,337 cr fine on Google for anti-market practices

Advertisement

Yet, India did reform and is reaping the harvests now. IMF Managing Director Kristalina Georgieva credited India's post-pandemic growth performance to structural reforms.

The difference lies in accountability.

Advertisement

Indian citizens can punish their governments for failure. Congress was routed in the 2014 elections for rampant corruption during the Congress-led UPA rule (2004-14) in Delhi.

Chinese citizens cannot punish CCP for its failures and Xi Jinping can become President for life, with little care for its people.

Advertisement

Advertisement
tags