The emperor has new clothes. Arriving at a meeting to celebrate the 100th Anniversary of the Chinese Communist party, China’s supreme leader Xi Jinping came dressed as Chairman Mao. His light gray tunic suit, four front pockets and five buttons to the neck cut an imposing contrast to the Politburo’s Standing Committee in their familiar dark suits and sober ties. This was no subtle message; ludicrous it might seem, but it was fancy dress hiding an iron fist.

You can’t imagine Boris Johnson addressing the Conservative party wearing the frock coat, winged collar and white tie stock of Sir Robert Peel. It would be equally laughable if President Macron addressed the French people wearing a Napoleon-style bicorne hat and the uniform of a colonel of the imperial guard’s light cavalry. But nobody in China will dare find Emperor Xi’s new clothes funny.

Remarkably, Xi’s speech listed Liu Shaoqi, Mao’s long-term deputy, as one of the cherished comrades who ‘contributed greatly to China’s revolution.’ Liu was arrested during Mao’s Cultural Revolution and died on the squalid floor of a remote provincial prison after being deprived of food and medicine.

Both the Cultural Revolution and the Great Leap Forward were catastrophes the Chinese Communist party inflicted on its own people; both, of course, were expunged from the story that Chairman Xi wove into his speech to the Chinese nation this week. Instead, he focused on the ‘humiliations’ suffered by China over the last 100 years at the hands of foreigners, starting with the ‘unequal treaties’ forced on the Qing dynasty in the 19th century.

Unsurprisingly, no mention was made of the ‘unequal’ arrangements that China is currently forcing on its Asian neighbors. In its illegal appropriation of fishing and oil rights in the South China Sea, Xi has trampled over UNCLOS, the United Nations Conventions on the Law of the Sea.

It was not only Xi’s dress sense that was amusing. You can take your pick of the laughably delusional statements in his address to the nation.

Xi’s claim that ‘the party has no special interests of its own’ or that ‘Marxism works’ makes a mockery of both the massive accumulation of personal wealth on the part of China’s leaders and the catastrophic failure of China’s economy before the free-market reforms of Deng Xiaoping. Further assertions that China’s government ‘does not carry aggressive or hegemonic traits in its genes’ or that the party continues ‘to govern based on the rule of law’ would come as a shock to the inhabitants of Tibet and Xinjiang, and to Jimmy Lai, the founder of Hong Kong’s Apple Daily newspaper who was incarcerated last week.

Even more interestingly, in spite of several listings of Deng Xiaoping as a cherished comrade, Xi Jinping’s speech glossed over this pre-eminently important figure in modern Chinese history. While Xi has elevated Mao, Deng, the architect of China’s free-market revolution, has been downgraded. Deng was famously pragmatic. When he realized that capitalism worked, he encouraged it. As he reportedly said to the Central Committee Secretariat in June 1962, ‘It doesn’t matter if a cat is black or white, as long as it catches the mouse it is a good cat‘.

It was the modest-living Deng Xiaoping who dismantled the Maoist cult leader system that Xi is busily resurrecting. Deng deregulated China’s economy, allowed private ownership of land and capital, and unleashed the animal spirits of China’s capitalists. It was these entrepreneurs, figures such as Jack Ma (Alibaba) and Ren Zhengfei (Huawei) who are the real heroes of China’s astonishing economic renaissance.

It is of concern for China’s future that in October last year Jack Ma, the standout Chinese entrepreneur who achieved worldwide fame for his development of the e-commerce giant Alibaba, was put under house arrest. This was supposedly at Xi Jinping’s personal command.

Ma’s crime was to denounce the monolithic nature of China’s banking system and the regulations that protect it in an excoriating speech at the BUND financial summit in Shanghai. His critique was spot on. China’s state banks lend massive financial support to the still highly inefficient State-Owned Enterprises (SOEs) that Xi has failed to reform. By comparison, the entrepreneurial sectors of the economy are starved of capital. Not only are the top ten biggest companies in China state controlled but so are the majority of the top 100 Chinese corporations. For China’s future growth this has to change.

After a 6.8 percent COVID collapse in GDP in the first quarter of 2020, China has recovered rapidly. In the first quarter of 2021 the economy grew by a staggering 18.3 percent. However, there are signs that China’s economic performance has peaked. Economic growth of 9 to 10 percent per annum pre-2010 has declined to 6 percent per annum over the last decade. Export-led growth driven by low labor costs and a previously endless supply of agrarian labor, the classic Asian growth model, had reached its limits — just like Japan at the end of the 1980s. China has picked clean the low-hanging fruit of economic growth.

What’s more, China’s aging population will slow growth as its workforce becomes less productive. The impending ‘aging’ crisis has already dawned on the Chinese government. In 2015 the 30-year-long ‘one-child’ policy became the ‘two-child’ policy and this year became the ‘three-child’ policy.

Notwithstanding these changes, the undoubted advances made in China’s technology sectors, and the shift to domestic demand led growth, it seems inevitable that China’s economic growth will fall to 1 to 3 percent annually over the next 20 years. In the future, China’s economic growth will depend on increasing labor productivity. There is considerable scope for this. But productivity is highly dependent on efficient capital allocation. Xi’s government has failed to address the sclerotic structure of China’s banking system, which will restrict China’s growth potential.

Far from the Communist party being ‘the crux upon which the interests and wellbeing of all Chinese people depend’ as Xi described it last week, China’s economy has achieved its exceptional performance since Deng Xiaoping’s reforms in spite of the Communist party and not because of it.

Apart from the absurdity of his Chairman Mao costume and his conceited promotion of the cult of Xi, China’s supreme leader last week displayed his limited grasp of economics. It is business, not the Communist party, that has led China’s renaissance over the last 30 years. Xi Jinping has clearly demonstrated that he has lost the plot.

This article was originally published on The Spectator’s UK website.