CHINAwatch

How to read China correctly in the coming Third Plenum

Yao Yang is a Professor and Director of the China Center for Economic Research at Peking University. On June 23, he delivered a speech at an event hosted by Zhenghe Island, a network platform for elites. The following are game-changing highlights gleaned from a translation by "Pekinology", an online platform affiliated with the Beijing-based world-renowned think-tank Center for China and Globalization (CCG): 

(a) China's globalization in the 80's and 90's was characterized by integration and convergence with the then-much-admired American model, not only economically, but socially and to a certain extent, politically. However, after the 2008 financial crisis and increasingly after 2010, China became convinced of its own people-centred socialist path led by the Communist Party of China (CPC). 

(b) This led to America elites' "disappointment" with China. As a self-proclaimed pinnacle nation, America considers its development path the only legitimate one for the world, intolerant of China's alternative model. The United States does not want China to play a leading role in regional or global affairs, seen as inimical to US leadership. This has driven an irrational, emotion-charged bipartisan pushback against China on all fronts.

(c) However, in economics, rationality inevitably prevails. U.S. trade war and attempts at technological decoupling or "de-risking" have not succeeded in isolating China globally.  Although US-China direct trade is declining, America’s dependence on Chinese products is rising. By rules of origin, China’s share of U.S. imports has increased from about 20% in 2018 to 25%. This is because Chinese companies have embraced a global strategy, with many exports shipped from other countries instead of directly from China. (N.B. China's production is globally inter-connected, even for products not qualified as "Made in China", in terms of materials, parts, components or logistics. China remains the largest trading partner for 128 out of 190 nations across the globe.) 

(d) The United States has hiked tariffs on China. Donald Trump said that if elected, he will increase tariffs on China to 60% and impose a 10% tariff on the rest of the world. It is likely that Europe would follow suit. However, China's cost-quality advantage is huge, ranging from 50% to 100% compared to Europe. Even with a 21% tax, most consumers are unlikely to budge. (N.B. If Chinese goods are totally debarred, American consumers and their European counterparts would struggle to cope as virtually all consumer products these days are either Made in China or contain Chinese materials or components). 

(e) Absorbing knowledge and technology from other countries, China's past 40 years of Reform and Opening Up (1978-2018) saw a socio-economic revolution, dismantling class differences and shifting towards enterprise and individualism. However, this has fed wide-spread and deep-seated corruption and unbridled commercialization of compulsory education and excessive financialization of real estate and personal loans. These challenges have shocked social stability and must be rectified. 

(f) The coming Third Plenum will announce the goals for 2035, detailing objectives to be achieved in a  New Era of "High Level Socialism". This is likely to involve comprehensive modernization, tied to China's goal of doubling its income per capita by 2035 through technological competition. Next is Common Prosperity, adjusting the income distribution structure, improving the social security system, and promoting integrated urban and rural development. Third, high-level openness to the outside world (N.B. capitalizing on China's ubiquitous global connectivity, ushering in a new phase of globalization).

Last but not least, against US-led  unprecedented stranglehold on China's access to nano semiconductor chips and other cutting-edge technologies, I should add that China is likely to double down on advancing technological self-reliance, building on its solid foundation as the latest acknowledged "scientific superpower".  

"Caging the Leviathan" - Beijing's tilt from Rule by Law to Rule of Law

Beijing's tilt from Rule by Law to Rule of Law was synthesized by Peking University Law School Professor Jiang Ming'an 姜明安 at the seminar on "The Formation and Prospects of Contemporary Chinese Administrative Law" on 6 October 2023, where he outlined the following shifts "Caging the Leviathan" under various headings:

The Mindset

(a) Government can make mistakes by infringing on citizen rights;
(b) Officials are not people's masters but their servants bound by law; citizens are free to act unless explicitly forbidden by law;
(c) Citizens are entitled to sue the government and to win according to law. 

Methods of Governance

(a) Officials should not just follow orders but also adhere to established principles;
(b) Governance should not be based on coercion but to include participation and interaction;
(c) Law should also be supported by administrative agreements, guidance and soft tactics;
(d) Emphasis should move from speed and efficiency to due process and protection of citizens rights.

The Party

(a) Emphasis is shifting from class struggle, GDP growth, and material development to fairness, justice, social, ecological and political civilization;
(b) Direction is to move from Rule by Policies and Law to Rule of Law. 

What the US-led Democracy Forum doesn't say

Live interview on 11 December, 2021 with Press TV. 

Xi's Plan to build PRC 3.0 - November Party Plenum

Multiple headwinds are emerging across the globe against a rapidly rising and resurgent China. Many of its perceived pitfalls are flagged up by some of the world's renowned China specialists and thinkers in the July/August 2021 edition of Foreign Policy, headlined Can China Keep Rising?  Beijing appears to be rising to the challenge. 

At a YouTube webcast seminar of Washington D.C.-based CSIS (Center for Strategic and International Studies) on 28 October, Freeman Chair Jude Blanchette and Andrew Polk, the co-founder and head of economic research at Trivium China, dissected President Xi's new policy framework for turning China into a "modern socialist nation" by 2035, including the New Development Concept, the Dual Circulation Strategy, Common Prosperity, and the 14th Five Year Plan. 

This is turning out to be a granular, and insightful take on the Chinese Communist Party (CCP)'s 19th Central Committee Plenum from 8-11 November.

On the Plenum's likely focus on the Party's history, The Economist 's 4 November leader rightly intones that "To learn from the past, one must study it dispassionately", although its content busies itself with blackening President Xi as trying to "falsify history".

Fixating on party politics risks missing the big picture on the other side of the coin. According to the South China Morning Post of 7 November, "Xi may avoid altering or questioning past views of the party’s history and instead emphasize its achievements.". The Plenum is as much about the CCP's past as its future under his stewardship.  

The CSIS takeaways are that President Xi is NOT Mao 2.0 but the architect for PRC 3.0.(Mao/Deng/Xi), realizing the China Dream and the two Centenary Goals - (a) to become a moderately well-off (xiaokang) society by 2021, the centenary of the founding of the CCP; and (b) to become a "strong, democratic, civilized, harmonious, and modern socialist country" by 2049, the centenary of the founding of the PRC.

All signs show that Xi is firmly in charge, rumors about local opposition aside. His Third Term seems assured. 

Already game-changing policies are emerging, including real estate deleveraging, a looming property tax , growth targets de-emphasized, and capital being steered away from monopolistic ''platform" behemoths.

On the cards are tax and fiscal reform, new data governance architecture, more aggressive policies to meet environmental challenges, possible opening of more sectors, or even some "nationalization".

Chances are that China would be able to overcome the Middle Income Trap through across-the-board technology and innovation. 

In face of herculean challenges, both domestic and external, China's trajectory is not straightforward and the final outcome not cast in stone. Partial success, or a mixture, cannot be ruled out. 

For example, the intense competition and demands of a "996" work culture (9 a.m. to 9 p.m. 6 days a week) have spawned a 'tang ping" ("lying flat") "passive" attitude amongst China's Generation Z.

However, the term is somewhat misleading. The vast majority of China's youth are positive-minded, wanting to strive for a better future for themselves, their families and their country. Many just want to take better charge of their own lives, to pursue what they are good at, and to chase their personal dreams, including volunteering, as manifest in this video. This augurs well for a more diversified and inclusive society. 

One final take is that to overcome challenges ahead, unless provoked and backed into a corner, China is unlikely to invade Taiwan, as such a drastic move could easily mean all bets are off for China's developmental trajectory.

During his Congress testimony of 3 November, 2021, Chairman of the Joint Chiefs of Staff General Mark Milley repeated his June 2021 testimony that China lacks full capability (or absolute confidence) to prevail over Taiwan by force before 2027. He thinks that the People's Liberation Amy (PLA) harbors no near-term intent to invade the Island, adding a caveat, however, that the unexpected could always happen! 

US-China Relations - The Avoidable War: The Decade of Living Dangerously

An insightful analysis dated February, 2021 by well-seasoned and well-respected China hand, the Hon. Kevin Rudd, ex-Prime Minister of Australia, President and CEO, Asia Society, and President, Asia Society Policy Institute, makes a convincing case for trust-building “managed strategic competition". 

Download Asia Policy Institute US-China Relations The Decade of Living Dangerously 

The New China Scare - Why America Shouldn’t Panic About Its Latest Challenger

At a time of paranoiac anti-China confrontations, it is instructive to re-visit Fareed Zakaria's insightful analysis in Foreign Affairs dated January/February, 2020. In sum, we need to ask whether China is really such an existential threat to the United States and the global liberal order. 

First, is China trying to take over the world as portrayed by Michael Pillsbury's The Hundred-Year Marathon: China's Secret Strategy to Replace America as the Global Superpower (New York, 2015)? 

Yes, China has become the world's second largest economy and is growing to become first within a decade or so. But regardless of anxieties about relative decline, the United States remains dominant in many matrices of world power, including global military presence, leadership in cutting-edge science and technology, alliance systems with leading advanced countries, and the mighty dollar.

While China may be able to challenge some of these matrices, at least regionally, there is no indication that China will be able to take over the world anytime soon.

Moreover, according to the latest survey of 6 October, 2020 of Washington D.C.-based PEW Research Center, Unfavorable Views of China Reach Historic Highs in Many Countries. At the end of the day, few countries want to embrace China's political system. Nor does China want to rival American's military presence in more than 70 countries around the world.

Second, consider China's perceived assertiveness in the South China Sea.

As these waters are vital sea lanes of communication for China's economic and strategic lifeblood (energy and trade), is it surprising that a growing China will want to guard against encirclement by US military assets in the so-called First and Second Island Chains and the Malacca choke point ? 

As China's economy remains heavily dependent on these waters, of necessity they will remain free and open for international shipping. In any case, China is unlikely to be able to impose a "Monroe Doctrine" on the United States as a long-established Pacific Power, unlike the relative power position of the United States in 1823 vis-a-vis its European rivals, both geographically and militarily. This reality seems unlikely to change substantially in the foreseeable future. At least, geography is immutable. 

Third, since accession to the World Trade Organization, China has been the biggest beneficiary of the liberal world order founded by the United States. Despite perceived malpractices, China remains a staunch supporter of free trade and a multilateral system underpinned by global institutions including the United Nations.

Instead of pushing for needed reforms of the existing liberal order, should the United States throw the baby out with the bathwater? Would unilateralism and rule of the jungle serve America's best interests when the whole world's supply and value chains are intricately intertwined, and power becomes more diffused? Even America's allies don't really want to be forced to choose sides sacrificing their own key economic interests. 

Fourth, regarding human rights and democracy, despite perceived transgressions, there is little evidence that the vast majority of the peoples in Xinjiang, Tibet, Hong Kong, let alone the rest of China, are demanding regime change.

As regards ethnic cultural heritage, it is instructive that the PRC has taken care, right from the start, to show the native languages of its four largest minority ethnic groups - Uyghur, Tibetan, Mongolian and Zhuang - on all of China's banknotes - the Renminbi.  

Not forgetting that the United States has its fair share of human rights infringements (systemic racism, and extrajudicial detention camp at Guantanamo Bay come to mind), compared to the West, the Chinese Communist Party has been enjoying increasing support by the people, according to a July 2020 Harvard Kenney School Ash Center survey Understanding CCP Resilience: Surveying Chinese Public Opinion Through Time. All seem to support the nation's trajectory towards the China Dream of historic renaissance as a Great Power, bringing better and more dignified lives for its people.

Fifth, with 56 different ethnic groups, and great divergence of development between provinces, Western democratic models based on multi-party adversarial electoral systems can only lead to fragmentation, if not disintegration. Unlike former Communists, China is not imposing its ideology on other countries, or gunning for regime change.

Sixth, as for alleged belligerence, since the end of World War II, the United States has waged wars 57 times in 75 years. By comparison, China has waged few wars to speak of in recent decades, always pleading for peaceful coexistence, despite differences. 

Last but certainly not least, the world is big enough for diversity of political models, including China's and those of Arabic kingdoms. While substantial corrections are in order and differences or conflicts with Western political values remain, there is no reason to cancel cooperation or partnership in defined areas, such as regional peace, denuclearization, anti-terrorism, and Climate Change.

Indeed, measured cooperation will at least serve to calm down nerves, build trust for negotiations, and avoid a self-fulfilling security dilemma spawning unintended consequences that may spiral out of control.   

To put US-China power competition in a structural context, John Mearsheimer's webinar on 15 October 2020 with the University of Chicago - The Clash of Great Powers: China’s Rise and the Challenge to U.S. Primacy is opportune. The above run-down may help to answer, some, of not all, of the vital issues he raised. 

Click here for an alternative view in Foreign Affairs (November/December, 2020) on how the United States should respond to China's perception of America's "hastening decline". And here to listen to an American YouTuber living in China why an American patriot can love both America and China. 

Beijing passes new whistleblower law

Exclusive TV interview on 28 September 2020 with WION (World is One News), India's leading news-based pay English TV channel. 

China Is Done Biding Its Time? But what is America's end-game?

The End of Beijing’s Foreign Policy Restraint? poses the above question in Foreign Policy on 15 July, 2020. The piece is penned by Kurt Campbell, Chair and CEO of The Asia Group and former Assistant Secretary of State for East Asia and Pacific Affairs, with Mira Rapp-Hooper, Senior Fellow for Asia Studies at the Council on Foreign Relations.

The tour d'horizon summarizes a dramatic about-face of China's foreign policy, in rhetoric and action, from Deng Xiaoping's earlier "hide-and-bide" admonition. China's assertiveness on all fronts is thought to be exploiting the Trump Administration's AWOL on global leadership. The worldwide chaos resulting from the Coronavirus pandemic has created opportunities for a much more powerful China to overreach, thinking that its time has come as a Great Power. 

The authors conclude with the following observation: 

"Fortunately for the next U.S. president, the contours of a better American approach to China have been evident for some time. The United States must reject the punitive unilateralism that has become the norm in recent years and that has produced no trade or national security gains whatsoever. It must rejigger its relationship with allies in Europe and Asia, who provide its only remaining chance at balancing China in the decades ahead. It must reinvest in international institutions, such as the UN, the G-7, and the WHO, which are indispensable for crisis management and which China is all too happy to lead in the United States’ absence. And it must restore its own domestic health and prosperity to remain a viable competitor on the global stage."

Aside from the chances of a second-term Trump presidency, there is a robust bipartisan consensus in the United States that China has become an existential threat (or an "evil empire") with a totally different ideology. This is perceived to be eroding the America-led liberal global order, including American interests in trade, technology, the South China Sea, and ideology. There is widespread support for a robust all-of-government push-back on all fronts, with unilateral sanctions and decoupling where necessary, to exert maximum pressure in the hope of behavioral, if not regime change. It's no wonder that amid the Coronavirus outbreak, American negative views of China have jumped significantly, according to an April 21st PEW survey. 

As for traditional US allies, while wanting to resist China's assertiveness, neither Europe nor Asia wishes to be forced to take sides. This also applies to the rest of the world, with a few exceptions. This is because China has become the largest trading partner of 124 countries, compared to US's 76. China is deeply imbedded in the global complex supply-and-value chains, strategic decoupling notwithstanding. The seven-year period needed for the UK to decouple from Huawei is a case in point. So is the fact that some 90% of India's pharmaceutical industry depends on inputs of China's ingredients.

Another example showing how integrated China remains is the proposed launch in a year or so of the world's largest trading bloc, the Regional Comprehensive Economic Partnership (RCEP), where China, as the world's second largest economy, is set to be a leading partner. This encompasses all ASEAN countries and each member's regional trading partners. With India, it would account for 50% of the world's population and 40% of world GDP. Without India, which has recently withdrawn from engagement, the percentages would be 30% in both cases. 

As for global institutions, the Trump administration has been flouting the UN, lording it over the G-7, and dishing the WHO. It would take time and concrete examples to rebuild America's leadership. 

At the end of the day, there is a growing risk of misreading China's real intentions. China would be foolish to displace the United States as global leader as it remains unable and unwilling to shoulder the responsibilities. Nor would the world be prepared to accept this in view of China's ideology.

However, the Chinese Communist Party has been enjoying increasing support by the people across the board, according to a July 2020 Harvard Kenney School Ash Center survey Understanding CCP Resilience: Surveying Chinese Public Opinion Through Time. It's only rightful for China to realize its China Dream of historic renaissance as a Great Power, bringing better and more dignified lives for its people, provided its trajectory is not seen to be at other countries' expense.

What is more, absent a pragmatic and constructive end-game, a plethora of paranoiac, no-holds-barred, get-tough actions on China could well end up with the very opposite of what these maximum-pressure tactics are meant to achieve, warns Jude Blanchette, Freeman Chair in China Studies at the Center for Strategic and International Studies in Washington, D.C., in his July 17 commentary The United States Has Gotten Tough on China. When Will It Get Strategic? 

A World Politics Review of May 2020, US-China Rivalry in the Trump Era offers a panoply of analyses of multiple responses to the perceived China challenge. As one of the Review's leading authors Howard French wily observes, "Nonetheless, beyond vague calls for the U.S. to get its own house in order and reinvigorate its partnerships, which few sensible people can argue with, it is far from obvious what else Americans should do about the across-the-board challenge that China presents." The absence of a clear-eyed endgame is conspicuous. 

A Rand Corporation 2020 study China’s Grand Strategy: Trends, Trajectories and Long-Term Competition examines how successful China would be in realizing its China Dream of becoming a fully-developed nation by 2049. It outlines four scenarios: "triumphant", "ascendant", "stagnant" and "imploding", concluding that the middle scenarios are much more likely.

While generally balanced, the study quotes statistics no later than 2015. It somewhat under-estimates China's explosive consumption growth (38.8% of GDP in 2019, contributing 60% to economic growth), overplaying the importance of exports (only 17.4% of GDP (5% for net-exports) in 2019). It doesn't seem to do justice to China's rapid advances in e-commerce, 5G, big data, quantum computing, internet-of-things (IoT), its recently-completed global BaiDou Navigation Satellite System, and Tianwen-1, China's first Mars Probe Mission. It also seems oblivious to the above-mentioned Harvard Kennedy School's study on CCP resilience. In any case, its overarching response is America's military.

A Brookings Institution April 2020 study Preparing the United States for the Superpower Marathon with China underscores the imperative of geo-economic competition, defined by 21st century game-changing technologies like 5G and quantum computing. Apparently borrowing the competitive terminology from Michael Pillsbury's much-admired 2016 tome The Hundred-Year Marathon: China's Secret Strategy to Replace America as the Global Superpower , it argues that " If we are to prevail, we must  compete rather than contain China." It concludes that "The outcome of this geo-economic competition is by no means certain. .... If the U.S. fails to prepare for this superpower marathon, we will resign ourselves to becoming a second-rate power while the world looks up to a new global leader with strikingly different values and views." This gives some credence to the possibility of the China "triumphant" scenario in the above-mentioned Rand Corporation study.

With American hawks in the ascendant, a new US-China Cold War seems inevitable. Nevertheless, de-risking  it would be in everyone's interests. What is more, President Trump will never win his New Cold War with China , according to columnist Robin Wright of The New Yorker on 29 July, 2020, suggesting that principled engagement on areas of concern coupled with partnership on global issues like Climate Change is likely to be more productive.

New Cold War: De-risking US-China conflict

A June 2020 Hinrich Foundation report authored by research fellow Dr. Alan Dupont offers seven insightful recommendations (Chapter 4):

(1) Protect democratic values and interests;
(2) Maintain a military edge;
(3) Manage decoupling to minimize disruptions; 
(4) Reform the WTO; 
(5) Strengthen international cooperation, middle-power diplomacy and "back channels"
(6) Develop new cyber and tech rules, protocols and agreements 
(7) Integrate economic and security policy.

These recommendations have a great deal to commend themselves. They may, however, benefit from the following additional perspectives -

(a) Does China really want to dominate the world, with all the obligations, costs and pushback implied? Would achievement of its China Dream be better realized by upholding multilateralism and a global "community of common destiny"? If so, instead of baiting an awoken lion by stroking fears of a global "China Scare", would there be room to encourage greater mutual understanding and learning between the West and China as regards governance and norms, without necessarily negating one or the other? 

(b) As for decoupling, it's true that the idea has gained much further traction thanks to the Coronavirus pandemic. So essentials like certain medical supplies and equipment plus products and components directly affecting national security are likely to see changes in their supply and value chains. But totally "cutting the Gordian knot" seems impossible, as Dr. Dupont quotes from John Lee of the Lowry Institute (page 28). This will become even more apparent with the coming Regional Comprehensive Economic Partnership (RCEP), the world's largest trading bloc, of which China will be a key Member. China has also indicated it may well join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Click here At many more countries already have China as the largest trading partner by far, the vast majority of nations do not want to be forced to choose between the United States and China. 

(c) As the world's Superpower, the United States already possesses overarching global military dominance on multiple fronts. It has 11 nuclear-powered aircraft carrier battle groups compared with China's nascent and miniscule version. It has some 800 military bases in 70 countries and territories, compared with China's only spot in Djibouti. It's nuclear stockpile is some tenfold over China's. Would stroking fears about US global military edge risk a "security spiral" with China and Russia, feeding into the American "military-industrial-complex" vested interests at the expense of much-needed improvements of homeland infrastructure, healthcare and education? 

(d) A looming new Cold War with the United States and the global  Coronavirus backlash have taught China a huge lesson. Its coming Five Year Plan (2021-2025) is likely to focus on improving its own people's livelihood and environment. Click here  Would cooperation with China on global issues of common interests such as Climate Change, denuclearization, anti-terrorism, water scarcity, poverty relief, UN Sustainable Development Goals, and reform of China's Belt and Road Initiative, be more productive in de-risking US-China conflict?         

Worsening Australia-China relations and what to do about it

As highlighted in this live TV interview on 9 June, China has warned citizens not to travel to Australia due to increasing hostility towards its nationals.

As Australia-China relations are plummeting, Gareth Evans, former Australian foreign minister (1988-96), and currently with the Australian National University, offers a nuanced yet realist view of how to engage with a perceived "increasingly-assertive" China to achieve a truly win-win relationship.

Read his article How Not to Respond to China dated18 June, 2020 on an online platform of the Asia Global Institute, a University of Hong Kong think-tank.