1989 with Chinese Characteristics

Editor's Note: This piece is part of a full report, "Reassessing 1989," which looks at the major events of that year, including the fall of the Berlin Wall, the Tiananmen Square protests, and the breakup of Yugoslavia. 

While the 30th anniversary of the peaceful revolution that led to reunification of Germany and the end of the Soviet Union is celebrated in the West, China’s leadership had hoped their 1989 would go unremembered. It did not happen that way. The world has changed enormously since the Chinese Communist Party (CCP) clamped down on protests in Tiananmen Square on June 4, 1989. China has become almost unrecognizable after decades of record growth and development of singular scale. But as the anniversary and the recent events in Hong Kong demonstrate all too well, the CCP has remained remarkably unaltered. Despite decades of change and growing prosperity, it holds fast its grip on control – now more enabled by deep pockets, unparalleled propoganda prowess, and global clout.

It is well worth reexamining the lessons of 1989 vis-à-vis China. First, because the Tiananmen shock reverberates until today within the CCP. But also because the West did not pay close enough attention at the time, and for too long afterward allowed false assumptions to shade its perception. The West believed CCP control could not survive economic revolution, but it did. And the party has gained new tools, ushering in a twenty-first century version of technologically enhanced authoritarianism. And yet, there are also fissures in the picture of total control. People are again taking to the streets in massive numbers to challenge the party’s power and to demand civil rights and democracy. However closely 2019 ends up mirroring 1989, this time the West needs to pay closer attention.

In 1989, just a decade into the reform and opening-up process initiated by Deng Xiaoping, China was still a negligible economic power. The CCP leadership had begun to experiment with price liberalization and attempted to slowly move away from the state-planned economy of the Mao era to a greater market orientation. In the 1980s, this resulted in economic growth, but also in inflation. Paired with discontent with the CCP leadership, due in large part to rampant corruption, unrest sprouted throughout the country. This culminated in mass protests in Beijing, led by students and supported by many workers and ordinary citizens of China’s capital.

After the brutal crackdown in Tiananmen Square, a political cleanse followed. Progressive elements within the CCP leadership who had been driving liberalization were marginalized. For the party, the lessons of 1989 dictated firm control. Until today, continuous economic growth and increasing prosperity are seen as crucial to prevent public disquiet, and political liberalization is viewed as a threat to one-party rule.

Capitalism with Chinese Characteristics

The events at Tiananmen Square only temporarily derailed China’s economic transformation. Market-opening reforms resumed shortly afterwards and China eventually became a member of the World Trade Organization in 2001, not because it had suddenly transformed into a full-fledged market economy, but because it had great potential. An overconfident West, inebriated by its own dominance, firmly believed in the power of capitalism to bring about change – and economic gains.

Western economic elites, caught in the gold rush of the China business, were happy to buy into and reinforce the “change through trade” notion.

Within the restraints of the CCP’s written and unwritten rules, the Chinese people managed to engage in unprecedented economic activity, which led to a stunning output and made China the prodigy of global growth. In 1989 China’s GDP was around $350 billion, roughly the size of South Africa’s today. In 2018, its GDP was $13.6 trillion (PPP), making China the second-largest economy in the world. Even as China took an ever larger position in the global economy, policymakers in the United States and Europe, convinced of their own 1989 narrative, remained certain that Chinese communism would soon be a thing of the past.

Western economic elites, caught in the gold rush of the China business, were happy to buy into and reinforce the “change through trade” notion. Western companies benefited enormously from trading with and producing in China, as did Western consumers who soon became accustomed to low prices for their most wanted consumer goods. CCP leaders in China, however, held tight to the political lessons of their own 1989 experience, pushing firmly against the political change that the West anticipated.

The China Challenge

The international system that emerged after 1989 was favorable to China’s stability and development. To this day, the country’s leadership, now under Xi Jinping, has every reason to defend existing multilateral mechanisms. Over time, the CCP learned how to work within these structures while subtly altering them, hollowing out liberal principles to favor its own form of governance.

But the existing order is reaching its limits, as is the patience of European and U.S. officials, who have been lobbying for greater market access and reciprocity for decades. China is reinventing the rules of the game and challenging traditional economic and political assumptions. The state continues to play a dominant role in the Chinese economy, and the party calls the shots.

The United States has decided that the Chinese system is irreconcilable with the principles of free and fair trade and that it will no longer tolerate China’s aggressive state capitalism. A broad consensus across party lines has emerged that views China’s rise as the greatest challenge to U.S. prosperity and security. The incumbent and the emerging superpower are in strategic competition for power and influence in the world. President Donald Trump targeted China and its “unfair trading practices” during his election campaign, and conflict in the form of tariffs and counter tariffs has become the new normal of Chinese-U.S. relations. Talk of “decoupling” the two economies and a new Cold War has emerged, a great-power confrontation reminiscent of the 1980s. It does not seem reasonable, but it also seems nearly unavoidable.

In Europe, some still harbor hopes that China will come around and move further into a market-economy direction. Perhaps nowhere is this wish more pronounced than in Germany. German businesses and politicians have put even more of their eggs in the Chinese basket than those of other countries. Having always boasted a close relationship with Beijing, Berlin now finds itself in a key role. China’s leadership recognizes this and is keenly campaigning for German favor. Turning away from the China business is not an option for many of the major German companies, as some of them generate almost half of their turnover there. Yet developments may be beyond their control. The economic disruptions that result from the confrontation between China and the United States could have a grave effect on Germany’s prosperity.

What makes things harder for Europe is that the rivalry between the United States and China is not limited to economics. For Europe’s most important ally, Beijing has become not just an economic but a military challenge. China does not constitute a direct military threat to Europe currently, but that could change faster than Europeans think. And this at the same time as the U.S. security guarantee no longer seems immutable.

The concurrence of transatlantic tensions and the confrontation between China and the United States has put Europe yet again on the frontlines of a systemic competition. Neutrality is not an option, but neither is unconditional transatlantic allegiance in today’s world. Thirty years after the end of the Cold War, the China challenge is forcing Europe to figure out where it stands.

Do Not Underestimate the Moment

It is worth reflecting on the events of 1989 to inform decision-making in the present. As Gideon Rachman has noted, the events on Tiananmen Square had greater significance for the future of global order than initially recognized. Civic protest led to revolutionary change in Europe, but was crushed to assure continued CCP rule in China. That the party could resist the pull of political liberalization for three decades seemed impossible to too many in the West for too long.

Thirty years later, a new and surprisingly strong uprising against the CCP is unfolding. The citizens of Hong Kong have taken to the streets at this historic moment, protesting Beijing’s increasing grip on power on one of the last bastions of independence – the judicial system – demonstrating that there is limited tolerance for China’s subversion of the rights guaranteed by Hong Kong’s Basic Law, especially among the young. They are also demonstrating that tech savvy demonstrators armed with laser pointers and cell phones can challenge even sophisticated surveillance networks.

The next domestic battle for power will likely not be won or lost by tanks and machine guns, but in the digital space.

The economic super power cannot afford another Tiananmen. But the next domestic battle for power will likely not be won or lost by tanks and machine guns, but in the digital space, for better or for worse. The scale of protest in Hong Kong is drawing attention to the existing cracks in the Communist Party’s carefully crafted narrative of economic power without the nuisance of independent courts and democratic control.

At the moment (September 10) it seems unlikely that the protests will have a lasting effect beyond Hong Kong’s borders, but it is indicative of Beijing’s policy priorities. Europe will have to step up its game quickly and wake up from its strategic slumber of the post Cold War era, redefining its relations with both Beijing and Washington. What happens in China now will shape Europe’s options for the years to come. Underestimating another historic moment in East Asia could have devastating consequences.

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