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National Observer, Australia, No. 82 (March - May 2010)National Observer, Australia No. 82 (March - May 2010)


How the rise of China as a "successful dictatorship" could affect us all

by Professor Dong Li

National Observer
Australia's independent current affairs online journal
No. 82 (March - May 2010).

As we all know, powerful forces in the world are working hard to overrun or remould the democratic system as we know it. On the one hand, fundamentalist Islam made its intention clear with the 9/11 terrorist attacks on the United States. On the other hand, China has dramatically emerged as a “successful dictatorship” under the Chinese Communist Party (CCP). From time to time the CCP leaders make public declarations that China will never go the way of liberal democracy. Russia under Vladimir Putin, of course, is not going to be a genuine democracy any time soon.

Of all the international forces challenging democracy, I am convinced that the CCP leadership with its one-party dictatorship poses the gravest threat to the future of democracy.

Why? Because the CCP regime is much wealthier, much more powerful politically and militarily, much better organised and much more sophisticated than any of the other potential enemies of democracy. And it enjoys growing influence and prestige worldwide, even from some quarters in liberal democracies.

I’m afraid that the political significance of China in the world is not fully appreciated by many people in the West. For many, China remains remote and mysterious, beyond the pale of their known world. This misunderstanding is unfortunate, and should be rectified.

Some basic facts about China are: —

•    It has a population of 1.3 billion, and is the most populous country in the world.

•    It occupies a land mass as big as the continent of Europe.

•    It has the longest continuing civilisation lasting nearly 5,000 years, which has had a profound influence in Asia.

•    It has a huge diaspora all over the world, numbering about 80 million, many of whose members are wealthy and influential. Some are loyal to their ancestral land, no matter who the rulers are.

•    It is a permanent member of the UN Security Council, enjoying the privilege of veto power on critical world issue.

Apart from the above obvious facts, in the past 30 years China has developed into a modern, and successful economic power:

•    The Chinese economy has been growing at nearly 10 per cent annually for over 30 years. As a result, China either has already surpassed, or will very soon surpass, Japan to become the second-largest economy in the world. It is projected that, by 2025, China will overtake the United States of America as the world’s largest economy.

•    China has outperformed Germany as the world’s number one exporting nation.

•    As a result of its relentless export-driven trade policy, China is now sitting on the largest foreign currency reserves the world has ever seen — US$2.4 trillion and growing by more than one US$1.0 billion every day. It has become the world’s number one creditor nation, and the major financier to Americans.

I have so far reported here a lot of the “good news” about China. Now for the bad news.


One-party dictatorship

China is a one-party dictatorship. All the real power in China is firmly in the hands of nine men — the members of the standing committee of the Politburo of the CCP. The People’s Congress is but a rubber stamp of the Politburo of the CCP; the Government a mere front of the Party. The armed police force, the regular police force and the judicial system, as well as the mammoth mass media, are all under the tight control of the Party, which means the CCP leadership controls both the bodies and minds of the population. Even religions are under government control. Believers can only worship in government-sanctioned and supervised churches, temples and mosques. The Chinese internet police, composed of about 30,000 university graduates with degrees in computing sciences, monitor and intercept internet communication 24 hours, seven days a week.

There is no freedom of thought, no freedom of speech. Dissenters are severely punished. A recent case is the heavy sentencing of Dr Liu Xiaobo, a professor of literature, who last Christmas Day was sentenced to 11 years’ imprisonment for his participation in drafting a document, called “Charter ’08”, an open appeal to the CCP for genuine political reform. The spokesperson of the CCP regime recently said at a news conference that there are no political dissenters in China, only “criminals”. The last bastion of the CCP dictatorship is the mighty armed forces of China — the People’s Liberation Army, which pledges its absolute loyalty to the CCP, and declares its dual function of maintaining domestic stability as well as national defence.


Monopolistic state capitalism

It is not so well known in the world that the Chinese economy, in spite of its capitalist façade, is made up mainly of large state-owned monopolies controlled by the CCP. All the key sectors in the economy are state-owned. These include all banking and finance, telecommunications, energy industries (oil, natural gas and electricity), all national and international transportation (rail, sea and air), large-scale mining, the massive media industries (newspapers, magazines, books, radio, TV and film-making), as well as war industry and defence projects, plus the very lucrative revenue-generating tobacco industry. Of the Fortune 500 Global Companies listed in 2009, 28 are in China, and they are all state-owned monopolies. Chinese currency is not freely convertible, and its value is kept artificially low by government manipulation to boost exports. China’s economy is far from being a free market; it would be more accurately described as state capitalism. Some years ago, the Australian and New Zealand governments, incredibly, designated China as a market economy, while the USA, Europe and Japan have so far resisted doing so.

What has happened in China demonstrates that a dictatorship can only breed monopolistic state capitalism, and it will never, ever, allow genuine privately-owned enterprises to flourish because such enterprises will inevitably challenge its monopoly of state power.

Today, a successful state capitalism and a well-established dictatorship exist side-by-side in China. And the economic miracle that has occurred is because of, not in spite of, this one-party dictatorship. How is this so? Let us get to the roots of the matter.


The “China price”

The root cause of China’s economic success is the relentless expansion of its foreign trade, and the secret weapon in this expansion of foreign trade is the incredibly cheap prices of its manufactured goods — the so-called “China price”.

Professor Peter Navarro of the University of California-Irvine identified eight factors that made the “China price” possible.[1] The major ones are low wages, minimal worker health and safety regulations, lax environmental regulations and enforcement, and subsidies for export. How could all these things — low wages, lack of health and safety regulations and the devil-may-care degradation of environment — be possible? Can we imagine similar government policies in countries like Australia and New Zealand or, for that matter, India? Not at all. However, China is a one-party dictatorship, where there is no representative democracy, no freedom of the press, no independent judicial system, no trade unions, no farmers’ organisations, no vocal religious leaders. Meanwhile, the party-state is backed up by a mighty party-army, ever ready to repeat the Tiananmen massacre of June 1989. So the authorities can do whatsoever they want, no matter how unfair, or how damaging it may be in the long run. And, since the 1980s, what the CCP has been focusing on is the expansion of China’s foreign trade in order to accumulate national wealth, which will be under its control. This is an unashamedly mercantilist economic policy. And it has been phenomenally successful.

The CCP focus on foreign trade expansion has fortuitously coincided exactly with a period of the world history when the doctrine of free trade has become a dogma, and when developed economies, in their unrealistic pursuit of universal free trade, have been engaged in a large-scale but poorly managed globalisation, WTO-style. According to American political economist and best-selling author Pat Choate, “The globalisation policies of Presidents George H.W. Bush, Bill Clinton and George W. Bush collectively constitute the worst economic policy mistakes in American history.”[2] Choate’s accusation has been underlined by the fact that, within a short historical span of three decades, the US has fallen from being the world’s number one creditor to the world’s number one debtor nation.

In the past 20 years, the US has been suffering from an ever-growing trade deficit with China; but the US elites have just watched nonchalantly hundreds of billions of US dollars flowing into Beijing’s coffers. To the ordinary person in the street, this situation is surreal — year in and year out, the wealthiest country in the world is borrowing huge amounts of money from a low-income developing country; or, to look at the situation from another angle, the leading liberal democracy in the world is sinking deeper and deeper in debt to a former communist state which is still a one-party dictatorship and which will probably turn out to be the nemesis of democracy. Something here doesn’t add up.


“Financial balance of terror”

For reasons that defy common sense, the US, when doing business with Beijing, chose to give up the golden rule of reciprocity, and let the trade imbalance between US and China grow and grow and grow until today the world is living under the dark clouds of what President Obama’s economic adviser Larry Summers calls a “financial balance of terror”,[3] not unlike the nuclear balance of terror 40 years ago.

I never really understand why so many among the Western elites persist in taking such a naïve and over-optimistic view of the CCP leadership. If the past may be used as an indicator of the present or the future, it should be recalled that the CCP under Mao Zedong was responsible for well over 70 million Chinese deaths.[4] Moreover, it has fought two bloody wars with the West, first in Korea and then in Vietnam. Nevertheless, many in the West seem to have a sneaking admiration for the rulers in Beijing. They somehow believe that if you make the CCP leaders rich, they will become well disposed towards the West, willingly embracing the universal values of democracy and human rights. Unfortunately, as recent events have shown, wealth only gives the dictators in Beijing more self-confidence, and makes their rule more entrenched and their behaviour more aggressive.


Sitting on a powder keg

What of the future of China? Will the CCP dictatorship be overthrown by a popular uprising? Or will the CCP leadership ever go the way of democracy, as the authoritarian rulers in South Korea and Taiwan did in the 1970s?

My answers to these questions are basically in the negative — a nationwide popular uprising is unlikely to occur.

It is true that the CCP is sitting on a powder keg. The economic reform, which has been carried out under a one-party dictatorship, has made the politically powerful (i.e., the top CCP officials and their families) fabulously rich. The gap between rich and poor is getting wider and wider. Within just 30 years, China has transformed from being one of the most egalitarian societies in the world (i.e., nearly everybody was equal in poverty, as the people of communist Cuba are today) to being a country where the rich-poor gap is even more pronounced than it is in the United States. Among the common people there is a widespread hatred of the rich and powerful. Social tensions are high. Every year there are hundreds of thousands of mass protests, and from time to time we hear of instances of suicide (mostly self-incineration) as marks of protest against official injustice, such as forced eviction to make way for a government building project.

The CCP officialdom is notoriously corrupt in an institutionalised way. The latest Global Corruption Report 2009, published by Transparency International based in Berlin.[5] Of the 130-odd countries surveyed, China has fallen further from the 77th rank in 2008 to 79th in 2009 in public sector transparency and accountability. It’s interesting to note that Singapore is perceived as being the third most transparent and accountable country, only after New Zealand and Denmark, while Hong Kong is the 12th. The high rankings of Singapore and Hong Kong prove that the Chinese are not inherently corrupt and that it is largely the existence of an independent media and judiciary — or lack of them — which determines the quality of government.

In spite of presiding over some terrible social injustices, the CCP leadership still has ample means and a firm determination to control society and the means of communication as it retains a monopoly of coercive power and control of the mass media. CCP rule is also greatly enhanced by its successful mercantilist trade policies and its current status as the principal creditor to the sole superpower in the world. Many Chinese tolerate CCP brutality and corruption as a necessary price to ensure their country’s greatness.


China’s modus operandi

If China is to remain a “successful dictatorship”, as is quite likely, how is it likely to behave in the near future? Here I venture some predictions.

Domestically, the CCP leadership will continue to pursue, as its top priority, rapid economic development. It will expand the “China price” advantages to more technologically advanced sectors, such as automobile manufacturing and green technology products. It will increase investment in research and development. At the same time, the juggernaut of Chinese state capitalism will advance with relentless momentum. No privately-owned enterprises of any significant size will be allowed to thrive.

Politically, it will introduce cosmetic, feel-good measures to appease the people’s desire to have more say in public affairs. For example, it may conduct polls on local officials’ performance, or nominate two candidates for an office and let people “elect” one of them. One of the candidates may not even be a CCP member, but he/she must have been carefully vetted and approved beforehand by the CCP. The bottom line, however, is that the absolute monopoly of power and the privilege of final decision on matters of importance will not be relinquished. Should things really get ugly, the CCP leadership will return to Maoist totalitarian rule, rather than permit the emergence of democracy.

The CCP will foster and groom native sects of Buddhism, to answer the needs of many Chinese for religion and to deflect foreign criticisms of lack of religion freedom. The Chinese Buddhist hierarchy, allowed to survive and thrive under an openly atheist regime, is already corrupt, and the CCP will find it easy to retain it under its control and manipulation.

Internationally, China will not, at least in the foreseeable future, seek to replace the US as the world’s top cop; it is simply not interested. The Chinese worldview and frame of mind are solipsistic rather than universalist, i.e., China is only interested in itself; all its actions put Chinese interests foremost; and it is not much concerned with the affairs of other peoples. When Chinese diplomats say that China is not interested in interfering in the affairs of other countries, they are to a great extent being sincere. However, China is slowly and steadily trying to re-write the rules of international trade, technology, currency and climate. The cautionary tale of the frog allowing itself to be slowly boiled alive without trying to escape has been re-told many times in the past. Today, we can see a similar scenario unfolding before our very eyes.

Some Western scholars have been anticipating the day when “China rules the world”. This is by no means sensationalism or alarmism. What is so dismaying is the response, or lack of response, to the coming tectonic change in the global power structure. A few Marxist intellectuals gloat over the end of the West; most businessmen happily gather profits while they may; commentators generally take a philosophical attitude of “whatever will be will be”; and the majority of people are either unaware or apathetic. Our mainstream politicians pretend to be unaware of, and avoid acknowledging, the conspicuous elephant in the room.


China’s goals

In the near future, Chinese overseas efforts will concentrate on grabbing and controlling as much as possible of the world’s remaining raw materials and fossil fuels. A prime example is rare-technology metals (rare earths), which are indispensable in many electronic products. About 20 years ago, the CCP leadership devised a plan to dominate the world’s rare-earths market. The first step involves limiting the country’s exports; the second step is to force manufacturers that use rare earths to move to China; and the third step is to buy up other rare-earth resources around the world. (Here is a story that has taken place in our part of the world. When two Australian companies, Lynas Corp. and Arafura Resources, which planned to open rare-metals ore mines, met with financial difficulties as the credit markets collapsed last year, this gave China an opportunity to implement the final stage in its three-step plan: Chinese state-owned companies provided the money needed and, in exchange, they have gained 51.7 per cent of Lynas and 25 per cent of Arafura.[6] China now has 97 per cent of the global rare-earths products. Jack Lifton, a rare-earths expert, has warned that the day will come when China isn’t going to sell anybody any rare-technology metals, no matter how much money you offer.[7]

Along with seizing control of these raw materials, the CCP leadership will launch massive cultural and media offensives in the West in order to finally overturn the domination of the universal values of democracy and human rights. The CCP will hire western reporters and editors to staff their English-language newspapers and TV stations, and the western professionals will work under instructions issued by their bosses, i.e., CCP propaganda officials, as to what to say and what not to say or report. Meanwhile, as “a major component of the grand strategy for overseas propaganda work”, the CCP regime is establishing so-called “Confucius Institutes” everywhere as cultural footholds and recruiting grounds for future collaborators.

There are indeed collaborators galore in the Western world. As Eamonn Fingleton, a respected observer on East Asian affairs and best-selling author, writes, “Many of China’s American collaborators operate openly as trade lobbyists. Indeed, the list of good Confucians in the Washington trade lobby would fill a Who’s Who. Starting with George H.W. Bush, Henry Kissinger, Alexander Haig, and Brent Scowcroft, virtually every retired top American official who has helped shape American foreign policy in the last four decades now works openly to further China’s interest — and does so even when these interests quite obviously conflict with those of the United States.”[8] There has been little investigative journalism about how the CCP leadership buy off Australian and New Zealand elites,[9] such as the Australian Rudd Government’s hapless former Defence Minister, Joel Fitzgibbon;[10] but it is safe to say if you are a person of considerable influence and social standing, you will very likely be approached by a Chinese diplomat or an agent and invited to enjoy sumptuous dinner parties, free travel to China with regal treatment, and other goodies. The CCP, it should be recalled, is a past master at exploiting human weaknesses. Very few mortals can resist its charm offensives.

Less than two years ago, I commented: “Is an authoritarian superpower staring us in the face? It sounds horrible, but is not entirely unthinkable.” Since then things have developed with such accelerating speed — much faster than I anticipated — that now an authoritarian superpower — the Chinese one-party dictatorship — is staring us in the face.

I make bold to say that the twenty-first century will witness a titanic struggle between democracy and dictatorship.

Finally, I believe that the fundamental difference between democracy and dictatorship does not lie in ways of governance, but in views of the human condition and of human nature. As Fingleton points out, dictatorship is based upon a bleak view of the human condition, namely, that the human race en masses is incorrigibly stupid and fractious and therefore must be held in check by a ruthless elite with lies and violence. Democracy takes a more flattering view of us human beings. The question is — can we live up to it?

Professor Dong Li is a retired Chinese academic, having taught at universities in China, the UK, the USA and New Zealand. This article is based on a speech Professor Li delivered at the Summer Sounds Symposium at Nelson, New Zealand, on March 20, 2010.


Pat Choate, Dangerous Business: The Risks of Globalization for America (New York: Alfred A. Knopf, 2008).

Pat Choate, Saving Capitalism: Keeping America Strong (New York: Vintage Books, 2009).

Eamonn Fingleton, In the Jaws of the Dragon: America’s Fate in the Coming Era of Chinese Hegemony (New York: Thomas Dunne Books, 2008).

Yasheng Huang, Capitalism with Chinese Characteristics: Entrepreneurship and the State (New York: Cambridge University Press, 2008).

James Mann, The China Fantasy: How Our Leaders Explain Away Chinese Repression (New York: Viking Penguin, 2007).

Peter Navarro, Report of "The China Price Project" (Irvine, California: Merage School of Business, University of California-Irvine, 2006): 30-page monograph.
URL: www.peternavarro.com/sitebuildercontent/sitebuilderfiles/chinapricereport.pdf

Peter Navarro, The Coming China Wars: Where They Will Be Fought and How They Can Be Won [2006] (London: FT Press, revised and expanded edition, 2008).

Philip P. Pan, Out of Mao’s Shadow: The Struggle for the Soul of a New China (New York: Simon and Schuster, 2008).

Gabor Steingart, The War for Wealth: The True Story of Globalization, or Why the Flat World is Broken (New York: McGraw-Hill, 2008).


[1]       Peter Navarro, Report of “The China Price Project” (Irvine, California: Merage School of Business, University of California-Irvine, 2006): 30-page monograph.
URL: www.peternavarro.com/sitebuildercontent/sitebuilderfiles/chinapricereport.pdf

[2]      Pat Choate, Dangerous Business: The Risks of Globalization for America (New York: Alfred A. Knopf, 2008), p.8.

[3]      Rich Miller and Simon Kennedy, “G-20 plans to end ‘financial balance of terror’ after summit”, Bloomberg.com (New York), September 28, 2009.
URL: www.bloomberg.com/apps/news?pid=20601087&sid=aVpPMKLa50rc

[4]      Jung Chang and Jon Halliday, Mao: The Unknown Story (New York: Random House, 2005).

[5]      Global Corruption Report 2009: Corruption and the Private Sector, English edition (Berlin: Transparency International/ Cambridge, UK: Cambridge University Press, 2009), pp.253-57.
URL: www.transparency.org/content/download/46187/739801/

[6]      Myra P. Saefong, “Rare earths are vital, and China owns them all”, MarketWatch (Dow Jones, New York), September 24, 2009.
URL: www.marketwatch.com/story/rare-earths-are-vital-and-china-owns-them-all-2009-09-24

[7]     Quoted in Cahal Milmo, “Concern as China clamps down on rare earth exports”, The Independent (UK), January 2, 2010.
URL: www.independent.co.uk/news/science/concern-as-china-clamps-down-on-rare-earth-exports-1855387.html

[8]    Eamonn Fingleton, In the Jaws of the Dragon: America’s Fate in the Coming Era of Chinese Hegemony (New York: Thomas Dunne Books, 2008), p.263.

[9]      Richard Bullivant, “Chinese defectors reveal Chinese strategy and agents in Australia”, National Observer, No. 66, Spring 2005, pp.43-48.
URL: www.nationalobserver.net/2005_spring_102.htm

        Andrew Campbell, “Guanxi and Australian-China consultants — the risk of dual allegiance”, National Observer, No. 68, Autumn 2006, pp.21-39.
URL: www.nationalobserver.net/2006_campbell_68.htm

[10]      Richard Baker, Philip Dorling and Nick McKenzie, “Minister’s new China link”, The Age (Melbourne), April 9, 2009.
URL: www.theage.com.au/national/ministers-new-china-link-20090408-a0tg.html?page=-1

National Observer, Australia, No. 82 (March - May 2010)