When President Joe Biden took office in 2021, his first message to the rest of the world was: “America is back.” Having assumed his third term as General Secretary of the Communist Party of China (CCP) in October, President Xi Jinping appears to be issuing a similar proclamation.
Over the past two months, China’s leadership has announced or signaled a series of major policy changes, abruptly ending nearly three years of severe zero-covid restrictions; ease the crackdown on tech companies and the real estate sector; reaffirming its commitment to economic growth and extending an olive branch to the United States in the G20. With the world’s second-largest economy apparently reopening for business, investors are reacting enthusiastically.
But while China’s business-friendly restart certainly bodes well for international trade and global peace and stability, getting the Chinese economy on the right track will require more than just a change in recent policies.
What is really needed is to bring pragmatism and honest feedback back to the political system. As I showed in my book How China escaped the poverty trapthese attributes defined China’s famous adaptive governance during the Deng Xiaoping era.
There is a common misperception that the “China model” means top-down control by a strong, authoritarian government, flanked by powerful state-owned companies. In fact, 30 years of poverty and suffering under Mao Zedong demonstrated that the combination of top-down planning, state ownership, and political repression was a recipe for failure.
That’s why Deng quietly introduced a hybrid system that I call “directed improv.” The CCP remained firmly in power, but the central government delegated authority to many local authorities in China while freeing private entrepreneurs from state controls.
Playing the role of a director rather than a dictator, the Beijing government defined national objectives and established appropriate incentives and rules, while lower-level authorities and private sector actors improvised local solutions to local problems.
In practice, a wide variety of local “China models” emerged, generating transformative innovations from the bottom up, often in ways that surprised central authorities. The rise of the digital economy is one example.
Since ideas must come before action, Deng made sure to change the CCP’s mindset and rules first. In his landmark December 1978 speech that launched China’s “reform and opening up” era, he made “emancipation of the mind” one of the party’s top priorities. Under Mao, people dared not speak the truth for fear of harsh punishment, creating a chilling political climate that led to disastrous policies like the Great Leap Forward.
But under Deng, the new imperative was to “seek the truth in the facts.” Policies should be chosen because they improve people’s well-being, not because they are politically correct.
Deng’s hybrid system—top-down leadership combined with bottom-up autonomy—has been overlooked by both Western China hawks and Xi’s own leadership. When Xi came to power, he favored a different story of China’s success, celebrating the “institutional advantage” a top-down system of command supposedly has over Western democratic capitalism.
To be sure, a top-down approach yielded impressive results during the initial outbreak of Covid-19. Through massive testing, strict containment, and other measures that could only be sustained under a strong, authoritarian government, China achieved nearly zero infections and deaths between 2020 and 2022. Xi has embraced zero-Covid as one of his signature achievements, recently declaring as the National Congress in October that China will adhere to the policy “without wavering.”
But then events took a quick and unexpected turn. Exasperated by the endless blockades, Chinese citizens from various walks of life took to the streets to protest, forcing Xi to change his position. But the sudden change of the zero covid policy has led to a massive increase in cases and hospitalizations that China will continue to struggle with for some time.
Xi and his team are eager to put the pandemic behind them and restore business confidence. The loosening of economic regulations and the end of pandemic controls have certainly boosted capital markets.
In addition, after the spike in Covid-19 infections, domestic consumption is likely to return strongly (flight bookings multiplied several times immediately after quarantine requirements for travelers were lifted) and manufacturing and logistics they will return to normal. The central government has also promised additional infrastructure spending to boost growth.
But for the new economic terrain to bear fruit in the long term, Xi needs to reopen the feedback channels of the political system. That means setting a personal example and making it clear to party-state officials that you really want them to report on the realities on the ground. That will not happen if, in practice, truth-tellers are silenced and propagandists exalted.
The government also needs to give more space to civil society and the media. It is short-sighted and ultimately self-defeating to think that taking away free speech will strengthen the CCP’s power. Without a regularized system of policy feedback, governance suffers, leading to the kind of mass protests that broke out in November and eroding the CCP’s performance-based legitimacy.
Yet another problem with Xi’s top-down approach is that it will leave investors wondering when China might turn around again. Over the past decade, Xi has repeatedly proclaimed his devotion to various “reforms,” only to do the opposite. Empowering officials with a record of pragmatism and candor would go a long way to reassure markets. Changing the recruitment and promotion criteria of the political system would speak more than slogans.
Finally, China’s leadership must acknowledge that the overall goal of addressing the country’s “Golden Age” problems, such as curbing speculative investment in real estate and protecting the rights of e-commerce drivers, was not bad. Previous policies failed because they were implemented arbitrarily, leaving companies nervous that the party could change them at any time.
Xi and his circle should practice transparency and consultation in their policy making, instead of simply abandoning the pursuit of inclusive development.
China accumulated extensive experience in adaptive governance between the late 1970s and early 2010s. But by the time Xi came to power in 2012, Deng’s economic model had reached its limits and had begun to produce unsustainable levels of corruption. , inequality, debt risks and environmental pollution.
Still, the solution can never be a return to Maoism. Rather, China needs to bring “directed improvisation” into the 21st century. —© Union Project
Yuen Yuen Ang, a professor of political economy at Johns Hopkins University, is the author of How China escaped the poverty trap (Cornell University Press, 2016) and China’s golden age (Cambridge University Press, 2020).
