An Upgraded State-Planned Economy May Be Accelerated in China After the 20th Congress: Experts

Commentary

With the 20th congress of the Chinese Communist Party (CCP) starting on Oct.16, Xi Jinping’s re-election seems to be a given. In the face of a deteriorating economy, Xi’s government may go ahead with “one state-owned enterprise for one industry” and “national unified market,” an upgraded model of the planned economy, experts say.

This could be traced back to the “People’s Economy” theory proposed by professor Wen Tiejun at the Renmin University of China, an academic institution with a Communist background, in late September.

‘People’s Economy’

In his theory, Wen claimed that the only way to implement universal ownership is to make state-owned enterprises bigger and stronger, and that “the people’s economy replacing the market economy is the world’s trend.”

Wen defined “people’s economy” as autonomy, that is: the economy is related to state sovereignty and cannot be monopolized by foreign capital; locality, revenue from resource exploring fosters local sustainable development; integration, the purpose of enterprises is not to make profits, but to achieve autonomy and locality; and universal ownership that eliminates privatization.

The “people’s economy theory immediately aroused doubts and criticism from the financial sector and public opinion. For now, all opposition to the “people’s economy” within China has been censored by internet censors.

Xiang Songzuo, a famous economist, denounced Wen’s theory as “absurd” on his Weibo account, questioning “isn’t the so-called autonomy a closure of the country? Does it deny foreign-invested enterprises and joint ventures alike? Isn’t the so-called locality just confining [China] to a prison?”

Xiang’s words stirred up the general resonance and were widely forwarded even though it was censored repeatedly, and circulated by many media outside China like Radio Free Asia.

“Wen’s intention is that a state should come to take a tighter grip on the private economy and then the state implements a rationing system.” Wu Zuolei, an independent Chinese political scientist, told VOA on Oct. 6.

“This is version 2.0-like of China’s planned economy, an enhanced, upgraded version of the planned economy.” Xie Tian, a professor of marketing at the Aiken School of Business at the University of South Carolina, told The Epoch Times.

Terms like seclusion, self-sufficiency, large social enterprises, and people’s communes, characterized the planned economy introduced by the first generation of CCP leaders during the 1950s to 1970s. The extremely centralized system produced The Great Leap Forward, an economic and social campaign that pursued “national steel-making surpassing the UK and the U.S.” It eventually resulted in the Great Famine of 1958 to 1962, with an estimated 15 to 55 million starvation deaths.

Unifying a State-Level Large Market

On April 10, the State Council released a notice on speeding up the construction of a national unified market and elevating it to a strategic level. It stressed that building a unified market is to break down local protection and market segmentation, especially to “regulate improper market competition and market intervention.”

The day after the move (April 11), the Shanghai Stock Exchange Index fell by 2.61 percent, the Shenzhen Index dropped by 3.67 percent, and the Second-board Market Index slid by 4.2 percent, and the stock traded for the day decreased to a new low since July 2020, according to a Shanghai Security News report.

The stock market plunge shows the market is expecting worse things to come and has less confidence in the economy, said Rong Jian, an independent Chinese scholar, in a tweet, believing “more and more people are choosing to vote with their feet.”

Public fears that the regime could return to the old path of planned economy, are shown in online comments, such as, “unifying market means that everything could be decided by the central government” and “market prices, commodity supply, and distribution channels could be unified, that would be a national supply and marketing agency and unified purchase and distribution.”

According to Ji Da, a China expert in the United States, the Communist Party’s goal of “unifying the market” is to control resources, manipulate prices, and rule the country through the establishment of mega-central enterprises in various industries.

“The CCP is also trying to use the power of these enterprises to compete for bargaining power in the international arena and to influence and threaten the international community,” Ji said.

‘State-Owned Enterprise Reform Paves the Way for Power Resumption’

Ji believes that up to the 1980s a planned economy dominated the whole of China, with state-owned enterprises holding the lifeline of the national economy. Thus, when the CCP proposed “a national unified market,” it seems to have started preparing for the central government to take over power.

In June 2020, the CCP released the “Three-Year Action Plan for the Reform of State-Owned Enterprises.” The program claims to promote the layout and restructuring of the “state-owned economy.” The program requires central enterprises in all industries to complete their main tasks before the 20th Party congress.

Central enterprises are state-owned and funded by the State Council or the State-owned Assets Supervision and Administration Commission, wholly owned or controlled by state-owned capital, and managed directly by the central government or entrusted to central ministries.

The real estate industry is a prominent case in the reforms. On Aug. 20, 2020, the Ministry of Housing and Construction and the Central Bank held a seminar on key real estate enterprises, and limited financing for property developers. In the pilot program, 12 key real estate enterprises were included. The program was pushed to the whole industry on Jan. 1, 2021.

Lacking funding to build houses, the real estate sector encountered a setback, with property developers as influential as Evergrande, Sunac, and Central China Real Estate Limited struggling to survive.

However, after those serious problems occurred, the central government shifted responsibility to the local level. On July 28, the Political Bureau of the Central Committee held a meeting and admitted that the current economic operation faces outstanding contradictions and problems, hence there’s a need to stabilize the real estate market, which local government should consider protecting the delivery of buildings.

In the steel industry, China Baowu Steel Group has merged and reorganized seven or eight iron and steel companies that are spread in Wuhan, Hubei Province; Maanshan, Anhui Province; Shaoguan, Guangdong Province; Taiyuan, Shanxi Province; and Chongqing and Xinjiang forming a “steel carrier fleet.” After the integration, the tax revenue went directly to the central government, while settlement of the many layoffs was left to the local government.

In the energy sector, the CCP wanted to build the largest power system in the world. However, for the third year in a row, the central power company, which claims to have the world’s largest power generation capacity, experienced a power crisis in August. The local automotive, battery, chemical, and integrated circuit semiconductor industries were heavily hit by the shortage.

In addition, the public budgets of 31 provinces and autonomous regions showed a deficit in the first half of this year due to the stringent dynamic Zero-COVID policy. Many local governments have been experiencing financial difficulties and debts that exceed the risk alert line.

Shi Shan, a qualified current affairs expert, told The Epoch Times that the moves are efforts of the CCP to break local protection, cut power to local governments, and transfer economic management and tax revenue directly to the central government in a bid to realize its so-called “centralized power to do big things.”

Shi pointed out that, contrary to the second CCP leader, Deng Xiaoping, transferring power to local governments and opening up the market economy in an economic reform, Xi is eager to take back power through centralization and cutting local power.

Shi said this means that China’s economic policy will completely change direction and that a “planned economy 2.0” is on the horizon.

Big Data Technology Cannot Remedy Defects of a Planned Economy

The Party looks to using technology, such as, the internet, big data, and artificial intelligence, to make it the “all-powerful hand” in the planned economy 2.0 version, Ji said.

From 2017 to 2020, the CCP authorities launched the so-called “National Big Data Strategy” and “Next Generation Artificial Intelligence Development” in an attempt to use big data and artificial intelligence technology to strengthen government management and decision-making.

In December 2021, the State Council issued a notice about the “14th Five-Year Plan” for the development of the digital economy that called for an accelerated penetration of digital technology into all areas of economic, social, and industrial development.

Zhou Weimin, a scholar within the Communist Party system and former director of the Marxist Theory Department of the Central Party School, dismissed the theory of planned economy at the second China Economic Forum, saying that big data technology, no matter how “big” it is, cannot make up for the fundamental flaws of a planned economy, and therefore it cannot be an effective tool for a planned economy.

The planned economy, according to Zhou, is a restriction that deprives individuals and businesses of independence and autonomy, and big data technology cannot help overcome its inherent shortcomings.

The Planned Economy Will Intensify Conflicts

Official media reported that at a special meeting on the “three-year action of state-owned enterprise reform” held on Sept. 1, Weng Jiming, deputy director of the State-owned Assets Supervision and Administration Commission, claimed that it was necessary to vigorously promote the concentration of resources to enterprises with advantages and that more enterprises and regions should form a pattern of “one enterprise for one industry, one industry has only one enterprise.”

In this regard, Ji said that the CCP is trying to monopolize the Chinese market through “one enterprise for one industry” to influence the world, and this will be the main tone of the CCP’s political and economic strategy after the 20th congress.

However, as the authorities move forward with “planned economy 2.0,” the conflicts between the central government and the local communities will be intensified, plunging Chinese society into havoc, “This is also the inevitable demise of the Communist Party,” Ji said.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.