How the Chinese Communist Party Outwitted American Capitalists

July 1 marks the 100th anniversary of the founding of the Chinese Communist Party, an occasion the government is commemorating with banquets, fireworks displays, parades and festivals around the country—all in celebration of itself. And why not? A Party that was started in 1921 by a dozen men meeting in secret at a time of mounting instability in the world's most populous country, now presides over the second-most-powerful nation on the planet.

Beijing is more confident than ever of its destiny to supplant the United States (a declining power, in the eyes of the Party) as the world's preeminent superpower by 2049—precisely one hundred years after the CCP came to power pledging to follow the dictates of Marx, Lenin and Mao, so-called "communism with 'Chinese characteristics.'" But in practice there's little 20th-century Communism practiced there. "Totalitarianism with 'Chinese characteristics,'" is more like it.

China has the world's largest military, measured by manpower; its second-largest economy; and, according to the Hurun report that tracks global wealth, the largest number of billionaires, 1058 to America's 696. (Other surveys put the number of Chinese billionaires lower, just behind the U.S.) Political power in China brings wealth to senior party officials—part of the reason President and Party leader Xi Jinping has emphasized an anti-corruption campaign during his time in office (though Xi 's family itself is reported to be wealthy). There is a significant private sector of the economy that includes large businesses, though they are not free to go against Beijing's wishes.

Xi Jinping Chinese Communist Party Capitalism
Is "Communist China" still actually communist? President Xi Jinping celebrating the 100th anniversary of the Founding of the Communist Party of China on June 28, 2021 in Beijing, China. Lintao Zhang/Getty Images

Despite allowing market forces to fuel the country's economic rise for the last 40 years, what the Party is celebrating more than anything else is this: it maintains a ruthless—and complete—hold on political power. It controls the commanding heights of the economy (banking, energy, key sectors of technology) and if anything, its control is tightening, thanks to the deployment of Orwellian, surveillance-state technology that makes any dissent difficult and dangerous, and thus rare. The Chinese Communist Party, says Cai Xia, a former professor at Beijing's Central Party School—where Party cadres are trained to rule—presides over "a neo-totalitarian state."

For the United States and the rest of the West, that fact should prompt the kind of self-criticism sessions that Mao Zedong used to enforce. The reality of modern day China is now plain to see: the brutal suppression of ethnic minorities like Uyghurs and Tibetans, the stomping on civil liberties in Hong Kong that it had agreed by treaty not to touch, the military muscle flexing in the South China Sea. All this makes it increasingly clear that a generation of China hands, from government policy makers to academics to business executives, got Beijing and its ruling party badly wrong. Their hope and dream was to help integrate China—an isolated, impoverished nation as the 1970s began—into the existing world order. To help China become, in the now-famous phrase of former Deputy Secretary of State Robert Zoellick, a "responsible stakeholder."

The policy of "engagement" with Beijing began with Richard Nixon and his historic visit to China in 1971, and has been built upon by every president since. A key underlying presumption for many of the architects of American China policy was that through economic opening would come liberalizing winds, which would eventually change China politically. President Bill Clinton, in a speech in 2000, put it this way: "by joining the World Trade Organization, China is not simply agreeing to import more of our products, it is agreeing to import one of democracy's most cherished values, economic freedom. The more China liberalizes its economy, the more fully it will liberate the potential of its people, their initiative, their imagination, their remarkable spirit of enterprise . . . [and] the genie of freedom will not go back into the bottle."

It's almost painful to read those words today, and Cai, in a just-published essay for the Hoover Institution, says the presumption was ''naive.'' The ''buy-in to the engagement theory was so pervasive among U.S. policy elites that it had an intoxicating effect on them. The big fallacy of [engagement] was in assuming that the CCP could be transformed to share power and accept democracy."

To be fair, there were moments when the political winds in China did seem to be shifting. In the 1980s there were senior figures in the Party—former General Secretaries Hu Yaobang and Zhao Ziyang—who did promote political reform, if not outright Western-style democracy. The spirit of liberalization led to the pro-democracy demonstrations in 1989—which ended, of course, in bloodshed. The killing of hundreds of civilians in Tiananmen Square at the hands of Beijing's military revealed to the world just how determined the Party was to maintain its power. The Tiananmen crackdown ended the flirtations with political liberalization. None have come since. ''The CCP," says Cai, ''is determined to reframe the existing international order and norms and lead the world in the opposite direction of liberal democracy."

That realization is finally seeping in, in Washington and around the world. The question is, why did it take nearly a decade of Xi Jinping's iron-fisted rule for that to happen? Because Deng Xiaoping understood—as have all of his successors—that the business of China is business. The country's not-so-secret weapon is its attractiveness to foreign companies: first as a low-cost export platform, then as a market of 1.3 billion people in a steadily growing economy. China was irresistible, and Deng knew it.

After Tiananmen, then-President George H.W. Bush sent his national security adviser, Brent Scowcroft, on two secret visits to Beijing to prepare for a resumption of relations. In the first of those meetings, Deng told Scowcroft, "the Chinese market is not fully developed yet, and the United States can take advantage of it in many ways. We shall be happy to have American merchants continue doing business with China. This could be an important way of putting the past behind us."

American business was more than happy to put "the past" in the rear view mirror. The level of groveling obeisance from the U.S. business community toward Beijing could at times be embarrassing. On one occasion, not long after China had joined the World Trade Organization, MTV hosted a banquet in Beijing. The company's president and CEO got up to offer a toast, and in it he said he was absolutely certain China was going to be MTV's "best market."

''Why am I so sure," he asked rhetorically? ''Because," he bellowed, ''IT'S CHINA!!!!"

At a nearby table, MTV China's president, Li Yifei, rolled her eyes in embarrassment—or maybe contempt.

china economy business communism capitalism
The business of China is business: It's the world's second-largest economy and competes with the U.S. in number of billionaires. An investor watches the electric board in a stock market in Huaibei, Anhui province, east China. Jie Zhao/Corbis via Getty Images

Some of corporate America has fallen out of love with Beijing, tired of intellectual property theft, the subsidies handed out to domestic competitors and unfulfilled promises of market access. But Wall Street is still in love and so is much of Big Tech, many of whose companies either have big supply chains located there, or make big money selling to Chinese customers—or both. (Think Apple.) These companies are hoping President Biden will ease Trump-era tariffs and in general adopt a softer tone toward Beijing. At the moment the tariffs remain, but the tone has indeed been modified. While flatly calling Vladimir Putin's Russia an "adversary," the Biden administration does not use that word in talking about Beijing, This, despite the fact that officials in China are increasingly open about their intention to supplant the U.S. as Number One.

Is that a realistic goal for the CCP? Cai and others note that there are still vulnerabilities for the regime. As China has gotten richer, the Chinese want to get richer still. The economy has to keep growing; it's the only thing, for many Chinese citizens, that makes the oppressive surveillance state remotely tolerable. Some economists believe China's economic model has run its course, and that trouble looms. An economic crisis will beget a political crisis—or so the argument goes. The problem is, that's been the forecast for a long, long time.

Still, Cai, in her recent essay, writes: ''In my more than thirty years of contact with middle- and high-level CCP officials, I can say that at least 60 to 70 percent of the CCP's high-level officials understand the trend of progress of the modern world. They understand that only a democratic constitutional government can ensure long-term stability in China and protect human rights, personal dignity, and personal safety for oneself."

The issue for those 60 to 70 percent: in a suffocating surveillance state, in which the Party reads your every utterance online or listens to your phone calls, how do you get from here to there? And is there anything the United States and the rest of the outside world can do to help? That may be the challenge for a new generation of China hands.