In face of multiple crises, China 3.0 needs to stay ahead with the times

There are many tell-tale signs that China has now reached a historic watershed.

First, the economy is changing towards slower, but more balanced, equitable and sustainable growth, to be driven by consumption instead of capital investment and exports.

Second, according to Arvind Subramanian, senior fellow at the Peterson Institute for International Economics, more currencies are moving in sync with the Chinese yuan, the reminbi, as a “reference currency” than with the dollar.  Click here

Third, for the first time, China tops the world in patent applications. Click here

Fourth, a rising citizenry or civil society is succeeding in reversals of government decisions over such matters as social justice, local environment, and press freedom.

Fifth, “labour re-education”, a 60-year-old Communist system since the founding of the People’s Republic of China, has now been announced to be scrapped. Click here

Sixth, China’s new leadership is now fighting corruption as a top threat to the nation’s stability. 

Seventh, externally, China has grown too big and too globalized to continue with Deng Xiaoping’s famous dictum of “biding time and lying low” (“tao guan yang hui”). A nascent blue-water navy is taking shape and more aggressive stands are being taken in asserting the nation’s maritime territorial claims.

The list is by no means exhaustive.

According to a report of the European Council for Foreign Relations (ECFR) (Mark Leonard, ed., November, 2012) click here, China is trapped in its own success and needs to enter into a new era. “After Mao’s political revolution (‘China 1.0’) and Deng Xiaoping’s economic revolution (‘China 2.0’), they are (the country is) expecting a ‘China 3.0’”.

The report, a collection of essays by some of China’s most influential thinkers, identifies three traps or crises in which China finds itself - in the realms of affluence, stability and national power. How to respond to them is subject to intensive academic and political debate:

"In the economic realm, the main divide is between a social Darwinist New Right that wants to unlock entrepreneurial energy by privatizing all the state-owned companies and an egalitarian New Left that believes the next wave of growth will be stimulated by clever state planning”.

“In the political realm, the main divide is between political liberals who wants to place limits on the power of the state, either through elections, the rule of law, or public participation, and neo-authoritarians who fear these measures will lead to a bureaucratic collective government that is unable to take tough decisions or challenge the vested interests of the corrupt, crony capitalist class”.

“In the foreign policy realm, the main divide is between defensive internationalists who want to play a role in the existing institutions of global governance or emphasize prudence and nationalists who want China to assert itself on the global stage."

The intensity of these debates, however, belies the extent of differences between what are portrayed to be diametrically opposing schools of thought. For example, the so-called New Right does not see that China needs to import the kind of Western market fundamentalism that led, for example, to the financial crisis. Moreover, the quoted example of a push by the New Right, the 468-page World Bank Report jointly undertaken with the Development Research Centre of the State Council, is by no means all about “marketization” . It also contains the target of achieving universal access to public goods such as heathcare, education and housing by 2020, reform of the hukou system which marginalizes migrant workers, improved governance and promotion of civil society. These are all agendas said to be part of the ideology of the New Left.

As an example of the latter, the so-called “Chongqing model” also sets great store on the complementary and mutually re-enforcing role between public ownership and private enterprise, as Nobel prize-winning economist James Meade has argued.

In any event, these debates do not fracture the collective leadership, as opposing ideas are, as a rule, discussed and reconciled through various expert groups, a healthy feature of China’s relatively efficient decision-making process. There is no partisan gridlock as what causes administrative dysfunction in American politics.

Indeed, there are valid ideas in various intellectual camps which deserve adoption if China 3.0 is to find a unique path to economic, social and political development and to define the nation’s place in a post uni-polar world. These include such transitional steps as Ma Jun’s  “accountability without elections”, “budgetary” and “social” democracy through wider public consultation,  and monitoring governance through civil society; Zhang Weiying’s safeguard of individual “rights”; Pan Wei and Shang Ying’s “Wuxi experience” of neighbourhood communities; and Wang Yizhou’s diplomacy of “creative involvement” by providing public goods in the global commons commensurate with China’s emerging status as a world power.

Sun Liping, former PhD supervisor of Xi Jinping at Tsinghua University, identifies China’s “correction predicament” or “transition trap” where accumulated problems have grown too difficult to resolve and reform is opposed by powerful vested interests. He opines that a social consensus must be built to tackle this predicament head-on as there is only “a fleeting historical opportunity to face this challenge”.

China also has to grapple with  a “Middle Income Trap”, where countries reaching about $3,000 to $8,000 per capita income tend to stall in productivity and income growth. Nevertheless, according to a research study of China’s Academy of Social Sciences (CASS), this hurdle is likely to be overcome by 2021-25. Click here At the 18th Party Congress, President Hu emphasized the objective of attaining a Middle-Income Society by 2020, doubling per capita income of $5,530 in 2011 to $10,000. This would require only an average growth rate of less than 7% annually, a target not totally beyond reach, given China’s recent innovation records.

A recent OECD report suggests that “China will overtake the eurozone in 2012 and the US within the next four years to become the largest economy in the world”.  More recently, Party leader Xi Jinping talks of China’s dream of a coming renaissance. Click here However, with some seven million university graduates added every year, a rapidly growing, middle -class “Chinanet” generation  is increasingly demanding greater legitimacy, accountability, openness and personal liberty. Absent meaningful democratic reform, any vision of a Chinese renaissance would not only remain elusive, but the very survival of the Communist Party risks being threatened.  

There is a rumour that Alexis de Tocqueville’s tome on the French Revolution has been doing the rounds amongst the top leadership. This may not be without foundation, for amidst the crises and traps China is facing, perhaps democratic reform is the most critical of all.