Welcome to the Daily Standard Podcast. I'm Eric Felton. Joined today by Gordon Chang, author of The Coming Collapse of China, among other books on world affairs. Gordon, welcome to the Daily Standard Podcast.
Thank you so much, Eric. Well, this is a big day earlier today. Xi Jinping was at the 19th Communist Party Congress in Beijing, opening the ceremonies, and he delivered an epic three and a half hour speech titled, Secure a Decisive Victory in Building a Moderately Prosper Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a New Era. You almost said that.
You almost laughed. And why would I? I mean, I'd like to say, Eric, that this is unbelievable, but it's not, because unfortunately, what this does is it's reminiscent of the types of things coming out of Beijing in the Maoist period, in the 50s and 1960s, where everything is beautiful, everyone loves the party, party is marching in lockstep to a great Chinese nation. This is just dangerous, in a sense.
And one of the things about this Congress, if Xi Jinping does consolidate his power by breaking Communist Party norms that have been developed over the last two decades, these were norms that were developed in order to constrain party infighting. If Xi Jinping breaks these, then we could see infighting in the future unrestrained by these rules and guidelines, and that is really dangerous. So what's an example of one of these rules or guidelines? Two of them that are people are looking at.
One of them is called Seven Up, Eight Down. In other words, if you're 67 or younger, you are eligible for a term on the Politburo Standing Committee. If you're 68 or older, you're not. There's a guy named Wang Xi-Shan.
He's 69. He is the in charge of the party's Central Commission for Discipline Inspection. In other words, the quote unquote anti-corruption agency. But Xi Jinping has been using the CCDI as it's called really as an element of his purge.
And Wang Xi-Shan has been his favorite lieutenant. A lot of people are saying that Wang is going to get another term on the standing committee. If he does, what this does is Xi Jinping can then say, look, these age limits, they're not absolute, which is what he said in the past. They don't apply anymore, because then he can go for a third, fourth, fifth term as General Secretary when you're only supposed to have two.
And the other thing that is really people are looking at is a General Secretary. The guy who is at the top of the Communist Party is supposed to name his successor by this Congress. If we don't have any hint of a successor to Xi Jinping, it looks like he's going beyond the normal two terms. In other words, a lifetime of Putin-esque sort of rule.
And that's why people are looking at these rules and to get a hint of where China is going, you know, five, 10 years down the road. But if you're Xi Jinping and you're looking at the success that Vladimir Putin has had with staying in power, and you say, wow, my nation is much more successful than Russia has been. Why shouldn't I be awarded a dictator for life powers? And that's why Xi Jinping took three and a half hours, three and a half hours to sort of list his achievements and to say to the world and to the Communist Party, of course, how great am I?
And so I think we really have got to understand the context of this. And although on the surface I can laugh about it, nonetheless, I'm really concerned about the way China is going. If Xi Jinping consolidates power, probably he's going to continue his anti-reform efforts to sort of bolster state enterprises, recreate state monopolies, close out foreign competitors, close out domestic Chinese competitors as entrepreneurs, re-centralized market control of the financial markets and the currency markets, these are really bad things. Plus also, something that really concerns the United States as a whole, not just our businesses.
And that is, of course, Xi Jinping is a nationalist. He talked in this speech about letting nobody divide the Chinese nation. His sense of what China is much larger than what you look at on a map, because he thinks that China includes parts of India, parts of Philippines, parts of South Korea, parts of Japan. And so that brings us into conflict with not only our allies and friends, but also the United States.
Because in addition to all of this stuff, Xi Jinping does not believe in freedom of navigation. And we are the defender of the world's open architecture. We've been that way if we've had any consistent foreign policy over the course of two centuries, it's defending the seas and the airways. And China is absolutely determined to close them off.
So what did Xi have to say about economic policy? How do you take what has been, it's still strong economic growth, but flagging and revitalize it by injecting greater socialism as opposed to market freedoms? Xi Jinping thinks you can do it. I don't think that he can.
I mean, the Chinese rulers have been better than I thought they could have postponed the effect of the laws of economics on China. They did that with massive stimulus program at the 2008 downturn. So for instance, they had a $486 billion stimulus program. That's big.
But what was really big is that in the five years after 2008, they created an amount of credit that was essentially equal to that of the entire US banking system. Even though at the end of 2008, the Chinese economy was less than a third the size of America's. This was unparalleled free money for everybody, forcing state banks just to lend. So they've been able to do this.
We saw another tremendous expansion of credit in 2016. Just sorry about going to the weeds, but this gives you a dimension of where China is. Shadow banking debt, the most risky type of debt in China. It was under 100 trillion UN in 2015.
2016, it shot up to about 250, 260 trillion UN. What year? What is that in dollars? Well, you divide by about 6.7.
But it doesn't really matter. You can see the increase in this. And this is the most unsalable, the most risky type of indebtedness, because this is what the state banks won't touch. So you're starting to see an incredible amount of debt in the system.
And that's why people think, yeah, the Chinese have been able to create growth. But the issue of growth rate, which we all sort of really focused in on for decades, really is not important. What's important right now is the creation of indebtedness, because it is unprecedented. You can see a systemic debt crisis going forward.
Xi Jinping, obviously, depended on having a lot of growth in the run up to the 19th party Congress, because he didn't want a crisis. But they're going to have to pay for this, because at some point, there's going to be a reconciliation. There's going to be an adjustment where we see this in every country that has this big run up in indebtedness. So the Washington Post, Beijing Bureau Chief Simon Danyor talking about the speech today said that she outlined a vision of total control, not only of the nation's economy and the internet, but also of culture, religion, and morals.
How important is it for Xi Jinping's success, survival, et cetera, to maintain total control? Well, he thinks it's absolutely essential. I mean, he does have this Maoist vision. We know that when he became General Secretary at the end of 2012, in the three or four months, there were so many of his rhetorical bows to Mao, visiting Maoist places, spouting Maoist lines.
And indeed, in this work report today, there was a phrase that didn't get much attention, but Xi Jinping said there are great struggles, quote unquote, ahead. Well, struggles is one of Mao's famous phrases. Mao was the idea of permanent and continuous revolution. He talked about struggles.
And so what we're hearing is language from the 1950s and 1960s, except that now is certainly in the 21st century. It's really out of place. But nonetheless, it is a sign of Xi Jinping's mind. And he absolutely believes it's essential, not only for his own position in the party, absolute control, but the absolute control of the party over society.
I think it's absolutely counterproductive to the control of the Communist Party, but that's not the way they see it in Beijing. There was one bit of the president's speech that I found particularly inspiring, personally, inspiring. Oh, here it comes. Xi Jinping called on everyone to resist the vices of pleasure-seeking inaction, sloth, and problem avoidance.
This is the idea of the perfect ability of man, which underlines socialism, which really is very much a throwback, not only to the 1950s, but to the 19th century. This idea that worked harder. Yes, work harder, strive harder. All the rest of it, build a perfect society.
And I can understand this, because I thought this when I arrived in China in 1996, when we moved to Shanghai, I thought, oh, that was gone. And I can remember my wife getting on the phone, as soon as we arrived and saying, Mom, China's not communist anymore, and I agreed with her. But as we lived there, we saw that it indeed was communist, even then, and now, of course, even more so under Xi Jinping. So this really is the throwback to a very dark time in the history of the People's Republic.
And I'm afraid that really China's future is its past. Gordon Chang, thanks for joining us on the Daily Standard Podcast. Oh, thank you so much, Eric. Support for the Daily Standard Podcast comes from Tracker, your phone, your wallet, your keys.
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