Agreed. This brings me to another Western myth on China, that the communist government has to keep up the strong economic growth in order to keep their legitimacy.
This is simply wrong. The CCP's legitimacy depends on giving Chinese people good living standards. That is different from economic growth.
Deng's market reforms worked on the principle of letting a portion of the country become rich first. However, this was just a means to an end. This principle allowed rapid economic growth at the price of social upheavals due to the large wealth gap. Now that China's economy has grown strong enough, Xi's government is enacting the second part of the plan: leverage this wealth to improve the lives of the very poor in China.
This might mean a slower GDP growth, but that doesn't mean it's a bad thing. Far from it in fact.
You're right about where the CCP today derives its legitimacy, but I think that if the Chinese government wishes to keep on raising the living standard in China, they're inevitably going to need to find a better basis than investment led growth and focusing on exports. In fact, the recent news about slowing growth in China only proves that weak demand overseas and rising standards in China mean that the investment led growth pioneered by Deng is no longer sustainable.
For 30 years, enough wealth has trickled down from this strategy of investment led growth and "letting some people get rich first" that China has been able to improve its living standard across the board. However now that this is no longer possible, they must shift the economy toward domestic consumption (by freeing up financial capital to small enterprises, making lending easier, etc) and let the rest of society get richer.
These 30 years saw the rise of a political elite that are addicted to Deng's investment led growth simply because it allows them huge profits and graft. These economic/political elites have monopolized power and industry in ways that benefit themselves and their cronies first and foremost while relaying the cost to the average Chinese citizen. (state owned banks give out loans at negative interest rate to sham/unprofitable but connected companies) This means that massive cutbacks are taken directly from funds earmarked for development or investment, and the people end up having to foot the bill as they simply print more money, make lending extremely difficult to small/private enterprises, and suppress wage growth- serving a secondary function of keeping the Yuan low and exports competitive.
Until now, the huge inefficiency arising from this type of corruption could be tolerated because on an aggregate level, there was still enough capital being generated (via export revenues and foreign direct investment) to raise living standards. The credit crunch around the globe means that the political elite can no longer afford this type of corruption at the core of business and still be able to pay out increasing (if diminished) dividends to the average worker. However to reform the market is not so easy, because growing the domestic market entails freeing up lending and reforming property rights and above all, laws to regulate accountable business practices. Those same political elites that have monopolized industry and power are reluctant to make such changes because:
1. They can no longer line their own pockets and the pockets of their cronies as easily.
2. Their relative power becomes diminished when capital flows more freely and the private sector becomes more powerful.
If the Chinese economy can truly make such a transition, we will inevitably see a more just and transparent society (to enable it) and more pluralism in the political landscape (the result of more capital in the hands of small enterprises and the private sector) China's conundrum is that in order to facilitate such a change, the guys who have all the aces now have to give some away, and they (understandably) really don't want to.
PS- Freeing up lending and growing the domestic consumer economy means that they need to make sure that property rights and business standards are enforced at the lower levels, Chinese courts as of now are under the control of the CCP which means that their decisions on many matters (especially business) are inherently politically motivated and thus cannot be impartial.
Say what you will about whether electoral politics are good for China, (maybe not at this stage is my own thought)
I contend to the death that a free and independent judiciary is a MUST for any just society, but sadly this is part of the conundrum of the people in charge not wanting to give up some power and not wanting to be held accountable for their actions.
