China’s 'Political-Economy Trilemma': (How) Can It Be Solved?

Abstract

Trilemma situations, which have long been the subject of lively discussion in economics in many fields, indicate risks of instability and unsustainability. This paper shows that China has also been facing a political-economy trilemma (and thus the ongoing danger of unsustainability of its development strategies) for 70 years now and has reacted differently to it in different eras. The paper distinguishes three epochs: the Mao era (1949-1978), the Deng era (1979-2011), and the Xi era (2012-). It argues that in all three epochs basically the same main objectives were pursued (economic growth/convergence; stability; and the maintenance of a one-party communist rule system), but with different priorities and with different instruments. It is shown that the Mao- as well as the Deng-development strategies related to these goals ultimately failed due to increasing systemic imbalances. Now the question arises whether the Xi strategy, which relies on partly new instruments, namely the nationalism map, the BRI program and digital surveillance, will be better able to control the unsustainability threat hidden in the trilemma. In addition, the paper discusses possible strategy alternatives to overcome the trilemma problem.

Keywords: China, political economy trilemma, development strategy, sustainability