Exploring the Compatibility Between Communism and Free Enterprise
In recent years, the Chinese Communist Party (CCP) has been touting impressive growth numbers, claiming GDP growth rates of over 5 percent in 2023 and aiming for similar growth in 2024. However, many skeptics are questioning the authenticity of these figures, especially considering the crackdown on private enterprise in China. This crackdown has been cited as one of the reasons for the slowing Chinese growth. So, will Beijing finally support free enterprise as promised?
The Chinese economy is facing numerous structural issues that pose significant challenges. One of the most pressing issues is the aging population and demographic collapse that is unprecedented in scale. Projections show that the Chinese population is expected to drop from 1.4 billion to around 550 million by the end of the century. With a rapidly aging and shrinking workforce, it becomes increasingly difficult to maintain overall GDP growth.
To address this issue, analysts and Chinese intellectuals have suggested boosting private enterprise. Research suggests that declining private enterprise has contributed to the slowdown in Chinese economic growth. Even in the late 1970s, when China began opening up its economy, entrepreneurs found success not because of state support but despite it. Even well-established companies like Huawei had to fight for bank credit and self-fund their early growth. State-owned banks provided minimal help even to major export-earning sectors.
Studies conducted by both Chinese and non-Chinese scholars have shown that private enterprise in China is a key source of innovation and disciplined capital use. New and private Chinese firms are significantly more innovative, but their innovation declines over time as they attract more state attention and access to subsidies. On the other hand, state-driven inefficiencies are evident when Beijing announces targeted sectors for preferential financing, leading to a cycle of boom and bust. Companies rush into these industries lacking expertise but receive substantial finance and subsidies, followed by a mass exodus and losses.
However, Chinese entrepreneurs face significant uncertainties in building their businesses. Confiscation of businesses and the imprisonment of key members are constant worries, similar to concerns experienced by Western firms operating in China. Chinese entrepreneurs express concerns about the heavy-handedness of the state, from pandemic-induced lockdowns that devastated numerous businesses to the allocation of state-owned bank finance to state-owned enterprises, depriving private enterprises of essential financial support. The creation of CCP offices to oversee routine corporate affairs adds to these worries.
In an attempt to address these concerns, the CCP announced the creation of the Private Economy Development Bureau under the powerful National Development and Reform Commission in September 2023. However, nearly six months later, there is little evidence of policy influence or new policies aimed at promoting private enterprise. This raises doubts about the CCP’s commitment to supporting private enterprise, given that communism historically hasn’t been known for its support of private enterprise.
Beijing has recently announced that it is working on a draft law to support private enterprise, but details about this law remain scarce. It is unclear whether this will truly improve the situation for private enterprises in China. The fundamental question that remains unanswered is whether China is a communist or a free-market country. As the saying goes, “You cannot be a little pregnant,” and similarly, a state led by an authoritarian party cannot be a little bit communist.
The contradiction between communism and free enterprise seems difficult to resolve. The CCP operates on the premise that it holds absolute control over everything in China under the leadership of Xi Jinping. In such a system, the idea of free enterprise cannot exist. Private enterprise exists solely to serve the needs and whims of the state, rather than operating based on its inherent right to exist. As long as the CCP claims dominion over China, the hopes for private enterprise will remain dim.
In conclusion, the compatibility between communism and free enterprise in China appears to be highly questionable. The Chinese economy faces significant challenges, and boosting private enterprise has been suggested as a potential solution. However, the heavy-handedness of the state, the confiscation of businesses, and the lack of support for private enterprises raise doubts about the CCP’s commitment to free enterprise. As long as the CCP maintains absolute control over China, private enterprise will struggle to thrive.
Disclaimer: The views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
