What China’s ‘Market Maoists’ Tell Us About Trade Tensions Today

The Chinese flag in Hong Kong, China. (Photographer: Paul Yeung/Bloomberg)

What China’s ‘Market Maoists’ Tell Us About Trade Tensions Today

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China’s Communist Party celebrates its 100th anniversary next month, a chance for it to reinforce to a domestic audience how the party transformed the country into the world’s second-largest economy and major world power since taking control in 1949.

In conventional narratives of China’s economic rise, the action starts in 1978, when Deng Xiaoping launched sweeping reforms to open up trade and investment with Western capitalist countries following the death of Mao Zedong.

But in his new book, called Market Maoists, historian Jason M. Kelly argues that China’s Communists emphasized the importance of economic ties with market-economies long before the 1970s. He tracks the history of the CCP’s trade strategy, from selling soybeans to fund its civil war battle with the rival Nationalist Party, to deals made by Communist bureaucrats to import technology from Europe in the face of a U.S. embargo.

In an interview with Bloomberg News, Kelly discussed his views on how those events shape the party’s thinking on trade to this day.

Your book overturns a common view that under Mao, Beijing didn’t often seek out trade and investment relations with capitalist countries or U.S. allies. What are the most important things that have been forgotten?

The CCP has been trading with capitalists abroad for decades longer than many people realize. We also often forget that many of the concepts and ideas that shape Chinese trade policy today have roots in the Mao era. For example, the concept of “equality and mutual benefit,” a phrase Chinese trade officials still invoke today, emerged as part of the CCP’s fervently anti-imperialist position on foreign trade during the early Cold War. It’s tied to the whole notion of China “standing up” under Communist Party rule.

Vice Premier Liu He, China’s top negotiator, used the expression just recently in talks with U.S. Treasury Secretary Janet Yellen. Knowing the historical origins of phrases and concepts like this can help us to appreciate legacies that we would otherwise overlook.

One of those key Mao-era concepts is “zili gengsheng,” which was revived by Xi Jinping amid the trade war with the U.S. and is often translated as “self-reliance.” How do you think the CCP first understood the concept, and does that shed light on what Xi might mean today?

It’s important to remember that the party has a long history of invoking the term to mean something far short of autarky or comprehensive decoupling. During the Mao era, it served as a framework for thinking about the vulnerabilities that might emerge from excessive reliance on foreign markets. It was not a call for the blanket reduction of imports.

In fact, for much of the Mao era, the Ministry of Foreign Trade pushed to increase imports while also championing “zili gengsheng,” provided these increases didn’t lead to unacceptable vulnerabilities. The real question is where Xi and others see China’s current vulnerabilities and how the party might modulate trade policy to address these specific concerns.

You also describe Beijing struggling against a trade embargo from the U.S. following the Korean War, which seem to have some clear parallels with recent U.S. sanctions on Chinese companies. How did the CCP try to cope with the embargo, and to what extent was it successful?

Beijing attempted to use the prospect of lucrative trade with China to create tension between the U.S. and its allies and used the embargo to cast China as a champion of global free trade and the U.S. as bent on interfering with it, a message that rhymes with some recent pronouncements in Beijing. Beijing did generate significant tension between the U.S. and its allies over the embargo. So much so, in fact, that by the mid-1950s certain trade restrictions had already begun to unravel.

Finally, inside China, the party used the embargo to mobilize trade officials and the general population. The embargo became a useful foil, one more cause to rally against.

Another issue in your book that resonates with recent China-Australia and China-South Korea trade tensions, are the Japanese trade tensions after World War II. How have patriotic emotion and nationalist ideas impacted China’s trade policy?

In the spring of 1958, leaders in Beijing shut down all trade with Japan after a string of disagreements over political issues, including a famous incident in which a Chinese flag was torn down during an exhibition at a department store in Nagasaki. Party leaders were hypersensitive to challenges to CCP rule in China, real or imagined, and to any hints of disrespect or inequality. These sensitivities still exist today.

You identify a shift in the CCP’s view of trade that was started under Mao in the early 1970s: firstly, using imports to cultivate exports; and secondly, prioritizing trade for economic growth and focusing on Western markets. Do you think that, broadly speaking, we are still in this era of Chinese trade policy, or do you think the CCP has changed its outlook on trade again under Xi?

The last few years have rekindled concerns for some Chinese leaders about the potential vulnerabilities that have accompanied China’s deeper integration into global markets. At the same time, leaders in Beijing also seem to believe that China’s outsize trade clout has created new opportunities to exert commercial leverage over trade partners in pursuit of other foreign policy goals. Both developments have roots in the Mao era.

China’s commercial ties to global markets are far more complex and widespread than at any time during the Mao era. It’s also clear that CCP leaders today believe that foreign trade remains a vital component of China’s economic development, a point stressed repeatedly by Xi Jinping and other top party officials. These considerations suggest that, despite recent shifts in CCP thinking on trade policy, there are incentives for continuity.

Something that is clear if we look at the whole period covered by the book is the CCP’s flexibility on trade policy. Do you think there’s a lesson there when we look at the CCP today and underestimate its potential for further economic shifts?

I do. The CCP has proven far more resilient and adaptable than many would have guessed years ago, when Mao was still alive. Partly this reflects the flexibility of certain underlying trade principles, such as “zili gengsheng.” It matters, too, that no organized opposition exists inside China to point out when new policies contradict old ones. Still, the CCP does strive to cultivate its own legitimacy by presenting a coherent narrative of its rise to power and its role in restoring national greatness, a perpetual project that requires party officials to seek continuity and coherence across shifts in trade policy over time.

©2021 Bloomberg L.P.

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