China risks turning into 'giant North Korea' says panda pundit

China experts Minxin Pei and Jonathan Fenby left a group of grizzled policy veterans open-mouthed with astonishment at a Westminster lunch by Centre for European Reform.

Minxin fears that China may be reverting to police-state Maoism, with self-criticism sessions making a comeback. The reforms are skin deep so far, and the Communist Party is rapidly shutting off hopes of averting a violent denouement.

The country risks ending in a cul de sac, and ultimately turning into a "giant North Korea" held down by repression alone, if it continues on the current course.

Jonathan Fenby has been in touch to say that it is not his view that China is heading towards a giant North Korea, or at risk of doing so. On the contrary, he stresses that the Party-State apparatus is likely to be weakened by social challenges over time.

He shares worries about the hardline reflexes of the Party and is sceptical over the reforms, but differs from Minxin Pei over the risk that this may end in a slide towards repression

As usual in such matters, I pass on their thoughts to readers. I reserve my own judgment. Bill Bishop from Sinocism (a China site I read every morning, and highly recommend) reminds me that Minxin Pei has been banging this drum for a long time.

Readers may recall that I quoted a member of China's upper house last month asserting that Edmund Burke's evolutionary conservatism is the new Maoism, his books sweeping the country. Obviously, what I report below is incompatible with such claims. In both cases I am wearing my reporter's hat.

Minxin said that the Communist Party is in a state of advanced ideological decay, nearing the end of the typical 70-year lifespan cycles of party dictatorships (USSR, Mexico (PRI), and Taiwan). Core values are eroding. Corruption is endemic. The party is becoming an hereditary caste. It is becoming harder and harder to "perpetuate the regime".

Interestingly, 60 of the world's 89 "high-income" countries are full democracies, and most of the rest are semi-free. The others are oil dictatorships, and China does not have much oil. There comes a point when per capita income reaches a trigger level. Middle-class fury goes "non-linear". China is past that point already, and since you can't drink the water, or the milk, and can't breathe the air either, that fury is becoming combustible.

On reforms:

The July cut in the lower bank lending rate is "meaningless" because most firms cannot borrow from banks. The state entities gobble up bank credit. Hence the shadow banking system. If the interest rate was actually liberalised, "half the state-owned enterprises would go bust".

Premier Li Keqiang did not turn up in person to the opening of the Shanghai free trade zone earlier this month. "That sends a huge message. He is not invested in it." The contrast with Deng planting the first banyan tree in Shenzhen in 1978 is striking. The control documents for the zone contain 25 pages of limits and constraints, the 1000 'no's. The paperwork says it all.

Minxin said China cannot open up its capital accounts because capital would flee. "It would be Indonesia 1998 all over again." Rich Chinese are already smuggling out money through Macau but have to pay 20pc fees.

The headline $3.7 trillion are inflated. Real reserves are $500bn to $800bn, once liabilities to foreign banks and companies forced to park funds are netted out (I don't agree with this). This will not be enough to prevent capital flight becoming serious in a crisis. The Party will be forced to keep the capital gates shut.

On Maoism:

Minxin said President Xi Jinping has "taken over the Bo Xilai vision", contrary to the general belief (and mine) that Bo was chopped down because he was reviving Maoist Red Guards and stirring up horrible memories of the Cultural Revolution.

Xi has revived self-criticism sessions to tighten his grip on party cadres, carrying out four days of flagellation in Hebei. Even the Politburo had to go through a session in June. The cadres are ordered to follow the "mass line". Not again.

"He is stepping back into the past, quoting Mao and talking of class enemies. He keeps reacting in a Leninist way," said Minxin. The anti-corruption drive in Sichuan and Nanjing are in reality internal party "gang warfare".

Assumptions that China is following the path of Taiwan are wrong. Taiwan was never a totalitarian party system. China is Leninist to the core, with a predatory ruling elite, and has gone to great lengths to prevent any pluralist alternatives from emerging. Minxin says there is no precedent in history of such a regime extricating itself smoothly by sharing power. It will go down fighting, if it can.

The security forces are for now under full control but cannot be counted on to crush dissent in the future. The state is being bled by the costs of keeping one million paramilitary in reserve and by an army of paid informers. It is a Sysyphean task to fight sedition in the internet age (though the web cuts both ways).

On the military:

The rise and fall of Chinese dynasties is the story of the army, the failure to control generals in far places, much like the Roman and Byzantine Empires, actually. The Ming fell after pushing military reform, an opportunity seized by Manchu adventurers pushed South by the mini Ice Age freeze on the 1640s.

Beijing troops refused to fire on Tiananmen protesters in 1989. The commanding officer was court-martialed. It took divisions from Mongolia and such places to do the job, and they had to be kept in the dark without access to television.

Xi Jinping has gone to great lengths to put his own party loyalists in top military posts, with ties dating back to his days as Fujian governor during the missile showdown with Taiwan in 1996 (when Clinton sent in the 6th Fleet).

But it is unclear what the troops would do if push ever came to shove. "They will fire on Tibetans and Mongolians and we fear enormous violence in ethnic regions. It is a train wreck in the making. But it is very difficult seeing them killing Han Chinese in daylight," said Minxin.

So there we are, shocking knockabout stuff. By and large, I still cling to a romantic view that China will break historical determinism and find some sort of civilised way through this. Should Xi Jinping persist with his clamp down on the internet, and his Maoist revivalism, I will change my view. Many readers probably feel the same way. Let us watch. Let us judge.

Minxin Pei – from Shanghai – is the author of "From Reform to Revolution: The Demise of Communism in China and the Soviet Union" and "China’s Trapped Transition: The Limits of Developmental Autocracy". He is now a professor at Claremont McKenna in California.

Jonathan Fenby – ex South China Morning Post – is author of "Tiger Head, Snake Tails: China today" and "The History of Modern China: The Fall and Rise of a Great Power", amongst other books. He is in charge of China at Trusted Sources.

I have worked through three copies of his history: the first left on a plane somewhere in China, the second soaked in Yunnan rains, and the third – well-thumbed – still on my shelf. Great source for laymen.