Part V: The Future of the East Model

• his simultaneous crackdowns on real estate, gaming, private educational services, and fintech wiped out trillions of dollars in wealth and hundreds of thousands of jobs in the real economy.
• Economically, China is trending in the direction of a South Korea, but politically it is embracing the North Korean model, minus one advantage that North Korea still has: hereditary rule.
• This is the era of Xi Jinping, defined in this book as commencing in 2018, the year the term limit was abolished. It will be a consequential era, an era of drama, surprises, and convulsions.
• Scholars have long suspected that Xi’s anti-corruption campaign is political, targeting his rivals who are incidentally corrupt.
• political instrumentalization of corruption creates a self-perpetuating dynamic. Targeting political rivals itself sparks political rivalries, and so can have a rebound effect.
• A hallmark of an unaccountable leader is his ability to be wildly inconsistent. When the values are subjective, amorphous, and contradictory, we need a final arbiter to settle any resultant disputes.
• Compounding the problem is that Xi, unlike Mao, is a micro-manager and insists on making all the decisions himself. This is a prescription for policy mishaps and paralysis.
• The CCP of Xi Jinping runs a massive bureaucracy but increasingly with an instrument better suited for a boutique operation. A likely scenario is that the system will produce results that are inconsistent over time and will make many mistakes in policy and personnel.
• Throughout the era of Xi Jinping, GDP targeting has slipped in importance, a shift in priorities that is evident not only in the CCP’s pronouncement on merit evaluation of officials but also in policy actions.
• An unfortunate aspect of statism is that growth is corruption-dependent, so targeting corruption is anti-growth.
• A top-down political system needs to target something. The more top-down an organization is, the more necessary it is to specify a clear, objective function.
• An optimistic—but slim—scenario in the future is ascension of a strong premier who is willing and able to check and balance Xi Jinping on economic policy.
• Targeting GDP rewards an official’s ability to coordinate activities as well as people, including with private and foreign businesses. It is a scope-opening move that rewards a broad set of capabilities and skills.
• GDP targeting has another upside. It orients the CCP away from its well-worn path of endless class struggles, destructive power rivalries, ideological brainwashing, aggressive foreign policies, and red terror.
• Deng stated, “Had it not been for the achievements of the reform and the open policy, we could not have weathered June 4th. And if we had failed that test, there would have been chaos and civil war.”
• By the end of 2020, 92 percent of the top five hundred private companies had a CCP branch, putting them under the direct tentacles of CCP control.
• Xi has also nationalized private enterprises, through outright nationalization but also through an indirect mechanism known as “pressured liquidations.”
• The fusion of the CCP and the state has reverted to a level that prevailed during the Cultural Revolution, at the expense of professionalism and expertise.
• Mao is famous for his hands-off approach to daily affairs. He often spent time reading and writing classical poems in his residence and routinely skipped Politburo meetings. Xi is much more hands-on.