Journal of International Affairs
Why China Matters
By Edward Friedman
Is China a great success, a nation solving its internal divisions and moving from strength to strength? Or is China so overwhelmed by problems that its policy makers are paralyzed and its system so corrupt that everything might fall apart?
In either case, China's future is a matter of global consequence. Usually its ascent is imagined as part of a rising Asia, dominated by a democratic Japan, one of the three major regions of the world economy along with a U.S.-centered Americas and a German-based Europe. But Asia's rise is different, with China's role highlighting the continent's distinctness. If the European Union holds, it will be because nationalist passions have been subordinated to shared economic interests. Likewise, the government of Mexico, in opting for membership in the North American Free Trade Agreement, reimagined its nationhood so that it was no longer catalyzed by resistance to the colossus from the North, but instead by the benefits of economic union with the United States.
In Asia, however, nationalist passions are not subordinated to larger economic gain. Japan sees itself as the capital-rich hub of Asia. Other Asian countries should then benefit by linking to the Japanese center, as Japan surrenders lesser technologies to followers while it advances to new leading market sectors. First, the four Asian tigers South Korea, Taiwan, Hong Kong and Singapore benefited from accepting their place in the Japan-led model. Then Thailand, Malaysia and China joined, with more distant hopefuls like Indonesia and Vietnam waiting to link to the Japanese economic hub.
But however much Tokyo might prefer Japan as the center, the potent nationalism of Korea, Taiwan, China and other Asian states rejects subordination to Japan. Taiwan, seeking its own destiny, has become one of the world's leaders in foreign-exchange holdings and computer-related exports. Since 1990, Taiwan has invested more in the emerging markets of Asia, that is, China and states within the Association of Southeast Asian Nations (ASEAN), than has the United States or even Japan. Like Taiwan, Korea is similarly driven by powerful nationalist passions, and so is China, which will not accept permanent subordination to Japan. Politicians in China who appear to submit to Japanese leadership are pilloried as traitors. A stronger China would lead Asia. China has experienced the world's most rapid growth since 1979 within a rapidly rising Asia, the most dynamic region of the world for a quarter of a century. According to World Bank projections, by the year 2020 five of the seven largest economies in the world will be in Asia, with China number one.
The message from China's reform leaders is that the world has nothing to fear. They portray China's rise as a normal event, similar to the prior rise of Britain, the United States or Japan. They hold to an optimistic, patriotic version of China's future.
However, people who have been sobered by the eruption of division or chaos elsewhere in the post-communist world cannot help but notice that similarly dangerous dynamics are also prevalent in China. Why then should analysts accept a happy view of the Chinese future so contrary to developments in virtually every other Leninist state? Similar institutions, ideologies and interests call into question optimism for China.
Should one, therefore, expect China to be defined by expansionist forces looking to take the island of Taiwan and by the mainland's slighting of the claims on oil and gas deposits in the South China Sea by other Asian nations? Indeed, expansionist nationalism is gaining strength in China. Should other nations respond with a policy of military containment, or with deep and broad mutually beneficial engagement, or with initiatives on behalf of anti-expansionist forces in Chinese politics? In order to make a wise choice, one must understand the nature of China's rise and the forces in China striving to direct that rise in the interests of passionate Chinese nationalism.
The rise of China began in the waning years of Mao Zedong's rule, when the nation opened to the world. Mao's welcoming of American president Richard Nixon in Beijing in 1972 joined China and the United States in the cause of containing Brezhnev's Soviet expansionism. Nixon had the clout to facilitate China's entry into international financial institutions, to lower tariffs for Chinese goods entering the United States under China's new most favored nation trading status and to grant China a large quota for textile exports to the United States under a multi-fiber agreement. The United States could even create a special category for high-technology exports to China, all gains of Mao's successful wooing of the United States critical for China's rise. The move from hostility to friendship between the two countries enabled Mao's successor as paramount leader, Deng Xiaoping, to carry out a policy of yet greater openness to the world market, winning ever larger benefits and a means to legitimate openness in terms of patriotic continuity.
China's new economic policies started around 1970 when Mao began to abandon self-wounding isolationist policies. He turned away from injurious reliance solely on China's capabilities and instead sought to grow by openness to the world's knowledge and technology, its science and capital and its best practices in economic organization. Rejecting the self-defeating policy of economic isolation, Mao eventually chose to benefit from interdependence and from opening China to the dynamic forces of the global market.
With the realignment of the U.S. dollar with Asian currencies in 1985 and the subsequent rush of Asian investment into cheaper Chinese labor markets, propelling Chinese growth, China now embodies extraordinary contradictions -- economic dynamism, political stagnation and social alienation. Some see China as an emerging giant. Others insist that a straight-line projection of continued growth for China is ridiculously simplistic in a world of out-of-control global economic forces. The universally held belief in 1989 that Japan, as a leading investor and exporter of capital, could buy the world was quickly contradicted by such forces.
However, the Chinese economy continues to boom. Japanese firms have, after quite a delay, greatly increased their high-technology investment in China. Because Europe and the United States have reimagined growth as tied to emerging third-world markets, a prospering China is central to their own success. Consequently, even when the United States and Japan or the nations of ASEAN have had serious political or military differences with Beijing, none has wanted to weaken its economic ties with China. Fearing losses if excluded from China's economic dynamism, no country will opt for a policy of military containment of China which would injure mutually beneficial economic ties.
Seeing how others need and woo them, Chinese leaders are confident in their expansionist-nationalist agendas. The international community consequently is challenged by and bowing to a resurgent Chinese nationalism. China will reclaim Hong Kong. It claims Taiwan. It insists that the entire South China Sea, right up to the shores of ASEAN nations, belongs to China. In a similar manner, China still asserts sovereign claims on islands between Japan and Taiwan which are controlled by Japan. China's growth, therefore, is creating anxious repercussions in Asia.
Yet, China's economic strength rests on a fragile political base. All could be lost if China cannot reform the inherited Leninist system, which perpetuates money-losing, state-owned enterprises, and a corrupt and privileged apparatus, which refuses to surrender its command over resources. This illegitimate system can hold on to power only by appeals to a super-nationalism articulated as a resurgence of an historically powerful China. Because reforms have stalled since 1985, tensions have heightened, violence has spread and fear of disintegration or civil war has risen. The rising Chinese colossus rests on a fragile and perhaps fragmenting political reality.
This unstable situation is a taboo topic within the highest circles of power in Beijing. Foreign analysts are therefore compelled to speculate about China's on-going power struggle and succession crisis in an atmosphere of secrecy. Much will depend on who emerges on top after the death of Deng Xiaoping, now in his nineties. Much will depend on how empowered regions, which have led China's economic rise, relate to the weakening center. Meanwhile, conservatives will continue to appeal to a strident chauvinism in order to check both reform and determined regional leaders, in an attempt to re-centralize the polity in conservative hands and reverse reforms that challenge that center's power.
A conservative victory, however, is far from certain. While conservatives can appeal to the military and security forces, they cannot, without still greater economic reform, guarantee the military a continuation of the economic growth that alone can again make China strong. Military leaders seem to understand that for China to be a power, continued economic reform remains vital. That reality limits the appeal of hard-line conservatives.
In contrast, reformers would institutionalize political decentralization and perhaps even initiate political liberalization. They would continue the reform process. They would put the anxieties of foreign investors and traders at rest. They would continue and deepen the policies which made China's economic rise possible.
Enemies of reform, however, still reside in the provincial regions and central ministries that benefited from the old order, from the economic irrationality of the Leninist-Stalinist command economy and from the money-losing state-owned enterprises. But provinces that have prospered in world market competition hate having to subsidize state-owned losers and their parasitic backers. By 1994, reformers seemed confident that a coalition had been forged to assure their victory in a post-Deng era. However, conservative forces still appear to be gaining, making use of nationalist sentiment and portraying their reformist opponents as soft on the enemies of the great and rising Chinese nation. Any compromise with Japan, the United States, Taiwan or ASEAN is portrayed by conservative chauvinists as cowardly treason.
Yet, the evidence suggests that the people of China have resisted the wiles of demagogic conservatives for the most part. Powerless Chinese citizens tend to see the beating of war drums as hypocrisy. Nationalistic language seems a thin camouflage for the corrupt, nepotistic and parasitic officials at the state's center, who were lining their pockets and keeping the rest of their illicit gains in foreign banks. It is this painful reality that makes support for real reform in China so broad, deep and popular.
However, the propaganda on national dignity put out by the conservatives also strikes a chord with many. Some Chinese identify with talk of a strong and great people. They crave a world where they will never again have to bow to Japanese or Americans. Even democrats in China speak of resurgence and reestablishing China's place in world history, though popular emotions of patriotic glory ultimately strengthen the power and the voice of the military.
Since key players in China's risky succession struggle have had to hide their moves from adversaries, it is difficult for foreign analysts to see the actual day-to-day maneuvering of the on-going succession crisis. It is impossible to know for sure who the military will support, if the military is split or whether reformers in metropolitan centers have already forged a winning coalition with the fastest growing provinces.
Foreign investors, on the other hand, worry about China's long-term stability and its continued prospects for growth. They see a weakened national center whose reach does not transcend the power of regions. Investors, therefore, have increasingly tended to bet on different regions, with some wagering on the northern region and its key port of Dalien, others on the Yangtze valley heartland centered in Shanghai and yet others on the dynamic southeastern regions adjacent to Hong Kong and Taiwan.
Because of China's contradictions, uncertainties and patriotic pride, American policy makers are caught on the horns of a dilemma. The nationalistic atmosphere of the succession crisis has made it difficult for Chinese reformers to implement the changes necessary to win China entry into the World Trade Organization (WTO). That entry is critical to assure China's future growth. But if the United States were to keep China out of the WTO, that denial would be portrayed in Chinese politics as an effort to make America seem China's enemy and thus make reformers seem friends of that enemy. On the other hand, concessions by the United States on WTO entry and other issues allows the hard-liners to claim that toughness works. Conservatives in China may, in the short run, benefit no matter what policy Washington adopts.
Patience and engagement with China on a broad range of issues of mutual benefit may be America's best option. But such a policy conflicts with political imperatives in Washington when China sells missiles and nuclear technology against American wishes. Why then should the United States facilitate China's access to the WTO and U.S. markets? China cheats on intellectual property rights and clothing export agreements in order to maximize its foreign-exchange earnings. Consequently, it enjoys a trade surplus with America rising to Japanese proportions and costing American jobs. Because Chinese policies alienate so many American interests, it is not easy for the United States to act on a policy of broad engagement.
Internal forces within China will decide its future. China's reformers took new initiatives after an angry Japan ended all concessional loans to China in 1995 in retaliation for Chinese nuclear testing. Hard-line policies on Taiwan, the South China Sea and nuclear weapons were isolating China from other major actors in the Asia-Pacific region. Some conciliatory moves were even taken toward the United States after a summer of diplomatic tension in 1995. Chinese ruling groups see that the combined impact of policies by the United States, Japan, Taiwan and ASEAN countries is not inconsequential for China's economic success, making it important for China's regional neighbors not to misread the competing forces and interests within Chinese politics.
The goal surely is not to block China's rise. The goal, rather, is to remove unnecessary obstacles from the path of those forces striving to ensure that China's rise does not disrupt regional stability. All will suffer if those forces opposing China's peaceful development win out.