Brief
The China-Russia summit just ended. On the surface, the summit was a disappointment to Russia who received no concrete promises and would have liked any number of them. The meeting was not a full loss for Russia, because symbols matter. Both parties agreed to support disinformation narratives, and most importantly at the end of the meeting Xi referred to ‘changes not seen in 100 years:
The 100 years refers to a 100 year strategy for China to become the reigning world power, ruled in a way that can only be described as fascist: aiming for Chinese supremacy of “values order over freedom, ethics over law, and elite governance over democracy and human rights.” Xi bringing Russia into this narrative is a deep sign of allegiance.
Mafia States
Despite the bewilderment of many Western observers, the Chinese government is not a complex, nigh-inscrutable meritocracy.1 Both China and Russia are Mafia states, and mafias are simple, thuggish groups running on clearly defined incentives.
Kremlinology itself is a good sign of the mafia nature of Russia. Lots of analysis of the top brass of the Russian leadership (the Czar’s court if you will), without much analysis of the oppressive and deeply centralized system of government. Chinese analysis share this same problem. Here is the Wall Street Journal analyzing how one specific senior official will temper Xi without much on their systems and changes: https://www.wsj.com/articles/china-li-qiang-xi-jinping-11667399077.
Both states are best understood as criminal enterprises–thugs who run bureaucracies for their benefit with high levels of top down control. In both regimes corruption and theft flourish, security services are the most powerful government organization, and private industry exists at the whim of the state. These guys are the business model of the state:2
Despite still having some great STEM universities (but not many pupils per capita), Russia has had limited innovation and heavy brain drain every year since the fall of the Soviet Union. Salaries for Russian engineers and scientists are often less than half of the easily acquired global rate.
China has retained its scientists better than Russia by offering a better pay structure. However, Chinese industry is far better at stealing scientific innovations than coming up with new ones on their own. This is not due to any deficiencies in Chinese people or culture: the Taiwanese are very innovative, as are ethnic Chinese in other nations. The lack of broad innovation is entirely due to the stifling nature of the state security apparatus and how heavily its instilled power and control over all business. Broad innovation requires empowering scientists with the right to speak freely, work collaboratively, and develop new ideas on their own. China has had some innovative success in the tech marketplace, but even their massive success stories such as TikTok are tied to the security bureaucracy and the overall macroeconomics of China are falling straight into the middle income trap.
Political Conundrums
China and Russia share similar political conundrums:
Both are run by ambitious, yet increasingly isolated dictators obsessed with a colonial worldview from the 1800s.
Both are determined to undermine Western democracy. If possible, they will end it.
Fundamental misunderstandings of China, its history, strength, and weaknesses all result in misguided policies.
Western elites learn the Chinese (and Russian) propaganda. Both nations purposefully feed Western elites what they want to hear and allow them to project their own worldviews and desires mistakenly onto the Mafia dictators. This creates huge perceived complexity as our analysis regularly comes up short and people revert to analyzing the Court over analyzing the dictatorial decision making systems and incentives.
From a US perspective we have analysts who think China will eventually attack Russia, and analysts who mostly think that China will always extract the most from Russia. The political goals of Chinese leadership are their own and not those projected onto them by us.3
Modern Chinese State
Xi came into power in 2012. He has visited Russia 9 times and met Putin more than 40 times. Why does Xi appear to like Putin? Where is China going? Will China be a force to counter Russia?
First, China just wants to be a bigger player in the global market with a bigger share of both political and economic leverage across the globe.
Per Xi, China also seeks to attain “Rejuvenation of the Chinese Nation.” As Peter Mattis laid out in his May 16, 2019 Presentation to the House Intelligence Committee, Rejuvenation of of Chinese Nation has well defined underlying meanings:
The first is building “a great, modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful.”
The second is national reunification of all areas claimed by Beijing, regardless of whether they were traditionally Chinese.
The third is China’s emergence as a global leader in terms of comprehensive national power and international influence.
The history and relationship of Deng and Xi is often mischaracterized in Western media and sources. China owes its economic development to Deng. Xi Jinping did not change the course Deng started in the 1970s–rather Deng was developing China’s economy only for explicit nationalistic purposes and Xi shares his nationalistic aims.
Let’s hear what Deng said himself. On Dec 23, 1989, Deng Xiaoping addressed to the CCP Central Committee:
“The West is fighting a third world war …the peaceful evolution of socialist countries. What happened in Eastern Europe does not come as a surprise to us, sooner or later it had to happen...The West does the same with China, they don't like China's adherence to the socialist path… Western countries say that we have violated human rights, but in fact they are the real violators of human rights...they are not qualified to talk about human rights.”
On Jan 18, 1992, when urging CCP to speed up its opening to the West, Deng Xiaoping stated the following (this speech was held as the ultimate edict guiding CCP until Xi came into power):
“Seize the opportunity to develop ourselves, the key is to develop the economy… if we do not develop or develop too slowly, Chinese people have a problem when they saw the comparison. Therefore, we should not stand in the way of anything that could grow our economy…
As I said, intellectuals are part of the working class. Older scientists and middle-aged scientists are important, and young scientists are important. I hope all those who went abroad to study will come back… This policy cannot change. Tell them that to make contributions, it is better to return home... to accelerate the development of science and technology and education in China….
In the whole process of reform and opening up, we must always pay attention … The consequences of the proliferation of bourgeois liberalization are extremely serious…. The dictatorship of the proletariat to defend the socialist system is a fundamental point of Marxism.
The imperialists are engaged in peaceful evolution and are pinning their hopes on our future generations …We need to select people … ‘revolutionary, youthful, knowledgeable and professional.’ We say the party's basic line to manage a hundred years, to long-term peace and stability, depends on this one. …I also said at the end of May '89 that now is the time to elect people who are recognized by the people as adhering to the line of reform and opening up and have a track record, and boldly put them into the new leadership, so that the people will feel that we are sincerely engaged in reform and opening up.”
CCP has been consistent with its goal of gaining traction from the West economically, while gaining market share and global power. Along with the goal of economic development, the CCP has pushed its primary goals further:
Keep CCP in power;
Reshape the world to the CCP’s vision.
If the global economic and geopolitical reality no longer permits the current path, the Chinese will change course; what the CCP will not willingly change is their power structure.
By 2022, Mexican labor cost is significantly below China’s level. The world is waking up to China’s predatory trade practices. China’s aggression against Taiwan is countered by a firmer and firmer global alliance. China is no longer viewed as a country that will be slowly adopting Democratic reforms, and China is now viewed as the top long-term geopolitical threat to a growing list of countries. At the same time, China’s demographics are collapsing due to the One Child Policy introduced in Deng’s time. Social issues such as pollution, poor public construction policy, and imbalance of regional development are runaway disasters.
CCP is compelled to adopt a different strategy. Xi has done so. This is not a reversal of Deng’s path. Like Deng, Xi is a continuation of the so-called 100-year rise to the “rejuvenation of the Chinese Nation.”
Russian Chinese Summit
At the recent summit, no formal promises were made. It is clear Russia would have liked commitments for a number of things: arms shipments, financing for multi billion dollar gas pipelines, or even support to end the grain deal. However, the symbolism from China towards Russia was very supportive. A dangerous dictator, Xi demonstrated his desires for his old historic rival to help overthrow the Democratic west, in the strongest terms possible. Neither China nor Russia is a state built on treaties, and such an important symbolic statement carries more weight than any agreement possibly could.
Ukraine continues to slowly punish Russia on the battlefield and head towards victory of Democracy over Dictatorship and Colonialism. And the two main colonial empires of the world are not happy about it; their goal is to overthrow the West and right now Ukraine is redefining the lines of Democracy and Russian corrupt influence is retreating at record pace. The support China gives Russia is key. China made no concrete promises, but the symbols mattered. What Russia does and does not get out of China is based on Xi achieving his goals.
Article by @PerceptionMoney, Cohost and finance analyst on @MriyaReport
Coauthored by Hark Herald Researchers. Find more of their work at harkherald.com
Much better analysis on Russia is often available from former Soviet minorities. For example Kamil Galeev discussing the Russian PR, failed import substitution, and incentives of high level state actors: https://en.rattibha.com/thread/1501360272442896388
Or here we have a Kazakh economist discussing Russian linguistics and the symbols of empire and war:
Russia is not difficult to explain. A majority of our journalists and academics have sadly done everything in their power not to explain what is going on and have instead bought into state disinformation.
Sopranos photo with James Gandolphini, Steve Van Sandt, and Tony Sirico. Photograph by HBO/Sportsphoto/Allstar
As one example, Chinese are currently purchasing Russian oil well above the price they could extract from the desperate Russians as a way to assist the disastrous Russian budget.