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China’s Current Problems and Prospects
Remarks to a panel at Brown University’s “China Summit”
Ambassador Chas W. Freeman, Jr. (USFS, Ret.)
Senior Fellow, the Watson Institute for International and
Public Affairs
23 April 2016, Providence, Rhode Island
The dominant
features of Chinese politics in this decade have been the rise of Xi Jinping,
the return of repressive autocracy, and an inconclusive effort to re-engineer
China’s economic model. China’s middle
class has expanded enormously but the Chinese Communist Party has yet to find a
political model that can accommodate this new, educated urban majority’s
aspirations for greater participation in government decision-making. The major trends in China’s national security
situation over this period have been a more ambitious role for China in global
governance, worsening relations with most neighbors, strengthening ties with
Russia, and escalating rivalry with the United States. China now finds itself less confident internally
and in a markedly less peaceful international environment than before.
Foreign views
of China have shifted too, and not in ways favorable to Beijing. The Chinese Communist Party has lost its
previous reputation for superhuman competence in managing economic affairs. China’s political system has become even less
attractive than before, with significant implications for its eventual
integration of outlying parts of the Chinese commonwealth, like Hong Kong and
Taiwan. Some now worry that China may
suffer economic collapse and political turmoil that could destabilize all of
Eurasia. Many more fear that China will
use its growing economic and military power to force its neighbors to defer to
it.
In short, after
a quarter-century in which its domestic and foreign affairs trajectories seemed
relatively predictable and unchallenging to Chinese and foreigners alike, China
is back to a future of multiplying uncertainties and potential crises. The reconciliation of Taiwan with the China
mainland is once again in doubt. The
danger of cross-Strait conflict is no longer receding. Reef-top posturing and naval games of
“chicken” in the East and South China Seas nurture possibilities of armed
conflict between China and Japan and the United States.
Meanwhile, as
the Dalai Lama approaches death and reincarnation, Tibetans are restive. Some members of China’s Uyghur minority have
embraced Islamist terrorism in pursuit of an independent national identity.
And, in the absence of a Sino-Indian border settlement, the PLA and the Indian
Army continue to scuffle along the contested line of control in the
Himalayas.
China has
followed -- not led -- the downturn in
the global economy, but the impact of slower Chinese growth has been worldwide,
reflecting China's new status as a great economic world power. There are few, if any, countries without a
stake in the success of Beijing’s efforts to re-engineer its economy toward a larger
role for services and domestic consumption.
But success in this venture is far from assured. And, without the emergence of some sort of rule
of law, it is hard to see how China can protect its people from abuses of cadre-capitalist
privilege, clean up its now toxically polluted natural environment, or realize
the potential of the enormous investment it is making in its scientific,
technological, engineering, and mathematical workforce.
The
anti-corruption campaign has killed tigers, swatted flies, intimidated Chinese
officials, and unsettled entrepreneurs.
Perceptions of heightened political risk now inhibit deal-making and
exacerbate the slowdown of the Chinese economy.
Many of China’s wealthy are hedging by shifting part of their wealth
abroad.
This is a
formidable list of challenges. Beijing’s
handling of them has been uneven at best.
Some of what it has done has been not just inadequate but
counterproductive. Still, to say that
China has brought many of its problems on itself is too simplistic. The Great Recession was not triggered by
Chinese financial engineers, but by overly clever people on Wall Street and in
the City of London. The United States,
Japan, and other great and lesser powers have played a big part in worsening
the foreign policy dilemmas China now faces. Overcoming these challenges will require
diplomatic imagination. It will also
demand a flexible approach to
rejuvenating the world’s trade, investment, and financial systems. Neither imagination nor flexibility is much
in evidence in Beijing or competing capitals these days.
Other states and
peoples must accommodate China and China must accommodate them if current
tensions are not to shape a future hostile to peace, security, and prosperity
in the Indo-Pacific region and beyond.
China’s policies toward its neighbors need reformulation to emphasize empathy and comity. Without such tempering of xenophobic
nationalism, the Chinese dream of national reinvigoration risks becoming a nightmare
for China as well as for its region.
Good US-China
relations are also a dream that may be going bad. President Xi began his term in office by
proposing “a new type of great power relations” as a model for China’s
interaction with the United States and other powerful states. The Obama administration initially embraced
his slogan. After all, China is a great
and growing power with which Americans must cooperate to advance our
international agendas. But Washington
soon had second thoughts. It feared that
accepting China as an equal might imply ending America’s seven-decade-long
dominance of the Indo-Pacific security architecture. Americans were also influenced by Japanese
and Indian concerns that Sino-American partnership might sideline them in the
management of regional and world affairs.
The failure to
engage with the Chinese in defining the concept of “a new type of great power
relations” to American advantage must now be seen as a major lost
opportunity. Such engagement might have
enabled the United States to stipulate principles for the future development of
a relationship with an ever-more powerful China. Managing China’s rise will require striking a
precarious balance between rivalry, competition, and partnership in
problem-solving. By default, Xi Jinping’s concept of a new
pattern of great power cooperation has found expression only in Sino-Russian
relations. Sino-American and
Sino-Japanese relations are now characterized by rivalry that is increasingly
difficult to distinguish from the sort of hostility that requires active
conflict management.
Things are not
likely to get easier between the United States and China anytime soon. Chinese, Japanese, and Filipino nationalists are none
of them in a conciliatory mood.
Antipathy to China in Washington is everywhere. Both the U.S. academy and military-industrial
complex are crawling with proponents of short-sighted Taiwan-centered China
policies, ideological agendas, and military confrontations. Most American politicians question the
legitimacy of the People’s Republic. Many
openly express the hope that it will follow the USSR into collapse. In short, China and the United States have
both become committed to postures and courses of action that promise to
actualize the menace each posits in the great strength of the other.
The United
States is now committed to deploy its armed forces to counter China's power and
to fend off Chinese intrusion into the sphere of influence in Asia that America
has policed since World War II. Not
content with backing existing “allies,” Americans are inventing new ones – like
Vietnam – whose maritime claims we can defend against China’s. In effect, U.S. forces have been placed on
call to initiate combat with the People’s Liberation Army Navy and Air Force
whenever Tokyo, Manila, and Hanoi decide they should.
And, if a fight
breaks out, no one has a clue how to keep it from escalating. War between the United States and China –
both nuclear powers – was once hard to imagine.
We now appear to be heading in the direction of some sort of eventual
standoff with nuclear characteristics.
If we are lucky, when this occurs, it will end without military or
civilian casualties on either side, as the Cuban missile crisis did. But relying on luck to avert catastrophe is
unwise. It should not be acceptable to
Americans, Chinese, or Asian peoples caught in the middle between China and
America.
Snowballing
U.S. opposition to globalization adds further uncertainty. China has been a key beneficiary of the
liberal economic order that was created under the Pax Americana. Now that China has joined that order, Americans
question it. Trade, investment, and
economic interdependence have been the main drivers of stability in
Sino-American relations. Rising
xenophobia and protectionism in the United States work against this. Some of this trend is rooted in American
economic malaise but much of it originates in reaction to Chinese cyber piracy
and commercial sharp practices. Many
Americans have come to see the US-China trade and investment relationship in
the same zero-sum terms they apply to military interaction between the two
countries.
The Trans-Pacific
Partnership (TPP) was never the transformative counter to Chinese economic
preeminence in Asia that its proponents claimed it would be. But even those opposed to TPP should be
disturbed by its near-universal rejection in American politics. The looming failure by Congress to ratify TPP
would be a defeat for further liberalization of global trade and investment
regimes. It would also be a significant
step toward diminished American influence in Asia. Many there would see congressional
repudiation of TPP as an “own goal” by the United States that is a potential
game changer.
But, while
Americans and Chinese strut, posture, and exchange insults over souped-up
sandbars in the South China Sea, China continues to expand both its economy and
its commercial outreach. The Chinese
have always been better at strategy than tactics. Their concept of “one belt, one road”
exemplifies that tradition.
“One belt, one
road” is a grand vision and broad
strategic framework that advances multiple Chinese objectives. It affirms, rationalizes, and builds upon
pre-existing road, rail, pipeline, telecommunications, port, airport, and other
infrastructure projects. It creates new
markets abroad for China’s bloated steel, aluminum, cement, and construction
industries. It guides and enables the
productive investment of surplus savings accumulated by China in its
three-decade-long export boom. It ties
together the disparate societies of East Africa, Europe, and West, South,
Central, and East Asia, while linking them all to China. It provides a framework for a Chinese role in
the peaceful enrichment of populations that, in the aggregate, constitute
three-fourths of humanity. And it
connects Xi Jinping’s dream of the great domestic renewal of China with the
possibility that, over the course of this century, the Chinese economy can
achieve preeminence on the Eurasian landmass and hence on the planet.
China’s ambitions
are grandiose. "One belt, one
road" is a proposal to use connectivity rather than military power or
political coercion to guide the development of Eurasian infrastructure,
industry, agriculture, and trade over the course of more than three
decades. Chinese institutions have
publicly committed as much as $1.4 trillion to finance “belt and road” projects
through 2049. (By comparison, in current
dollars, the Marshall Plan cost about $120 billion.)
The plan
involves about 50,000 miles of largely
high-speed railway construction, connecting the Atlantic to the Pacific coast
and the Pacific to the Indian Ocean littoral.
Within a decade or two, train travel between Beijing and Istanbul,
Karachi, Kolkata, London, Madrid, Moscow, Riyadh, Singapore, or Tehran is to take only a couple of days. Paralleling the railways are planned
superhighways, pipelines, and industrial estates. The system is conceived as
intermodal, facilitating maximum logistical flexibility in the choice between
air, land, and sea transport. Ports are
to connect to highways, railways, pipelines, and airports, and all are to
connect to industrial estates, with all routes leading to China’s ancient
capital of Xi’an and onward to Beijing. Overland
fiber optic connections across Asia will speed global telecommunications while
reducing reliance on undersea cables or the need for transmissions to transit
the United States. The scale of what is
projected is unprecedented in human history.
The “belt and
road” plan will not solve China’s current conundrums, though it can mitigate
some of them. Creating demand for steel,
aluminum, cement, and constructions services through projects in China’s West
and the lands and seas between China and Europe will reduce the amount of
overcapacity in these industries to be eliminated in China’s East. “Belt and road” projects provide an excuse
for countercyclical spending by Beijing to curb recession and boost economic
growth. But the concept is more than a
framework for softening the transition to a more services and
consumption-dominated economy in China.
The plan aims
at breaking down barriers to trade, investment, and the transit of goods across
the vast space it encompasses. China
proposes to conclude as many as 65 bilateral free-trade agreements modeled on
its recent FTA with south Korea. “Belt
and road” projects are being underwritten by new international financial
institutions. These include various
Silk Road funds and banks, the Asian Infrastructure Investment Bank, and the
New Development Bank, with more yet to come.
The new institutions will support the further internationalization of
the Chinese Renminbi yuan. Much of the
project finance will involve the issuance of Renminbi bonds by local
partners. Co-financing with the World
Bank, the Asian Development Bank, and other international lenders will leverage
Chinese capital, speed the development of Chinese-sponsored financial
institutions, and promote partnerships between Chinese and foreign banks and
companies.
Over the past three-and-a-half
decades, China has quite unexpectedly bootstrapped itself into a position at
the heart of the global capitalist economy.
“One belt, one road” promises to place China at the center of Eurasia,
the world’s geopolitical and geo-economic heartland. If China realizes its vision, it will fully
deserve the name by which it calls itself – Zhongguo [中国] – the country at the center of the world’s
affairs. China's dream of resuming its
status as the preeminent society on the planet will have been achieved and U.S.
policies directed at limiting the regional effects of its rise will look like
transitory and irrelevant distractions. But,
the future, including this quite plausible future, remains a matter of
speculation. Nothing is certain -- except
that China will continue to surprise the world as well as its own people, and
not always in ways either find congenial.
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