The Chinese Communist Party’s power has long rested on four pillars: economic growth, nationalism, repression and communist ideology. The last of these withered away almost entirely as China liberalized its economy, with slogans such as “Long live the invincible Marxism-Leninism theory” replaced by “To get rich is glorious.” Now the first pillar is unstable too.
All eyes are on the gyrating Chinese stock market. Its precipitous decline and the surprise devaluation of the renminbi have been roiling world markets and stoking fears of currency wars and beggar-thy-neighbor trade policies. Given that only about 1% of our gross domestic product comes from trade with China, the U.S. economy is hardly at risk. Yet this summer’s upheaval may accelerate developments that threaten the peace of Asia and pose a strategic challenge to the West.
China’s economy has been slowing for a while. In this century’s first decade, 10%-plus returns were the norm; lately the growth rate has hovered around 7% — if official figures are to be trusted, which they are not. The Chinese people have begun to feel the effects, and so has the government, with its reputation for sound economic stewardship declining in parallel with the downward-sloping GDP growth charts.