Last month China put itself on show when it celebrated the 60th anniversary of the founding of the PRC with a parade to end all parades in Tiananmen Square. The pride and delight of those lucky enough to get through the security screens to attend was shared by the hundreds of millions of ordinary folk who watched it on their television sets.
The organisers took pains to follow all the traditions established in 30 years of Communist rule. As usual it was a triumphalist manifesto, particularly an assertion of China’s military might. You’d have thought that displays of rocketry aren’t necessary in a world where interdependency is the G20’s new buzz word, but in China – even in today’s China which is not officially very warlike – tradition is important. The whole choreography was still that of the Cold War, patent Moscow 1949. Bright blue and green tanks it had to be.
The procession of floats, meanwhile, showed the ideal China that is envisaged in Hu Jintao’s doctrine of ‘Scientific Perspective and Harmonious Society’. China’s conquests of Space was there for all to see, as well as its other achievements in the areas of industry, transport, energy and agriculture. That’s the scientific perspective. Harmony could be seen in the happy tableaux of minorities as each province filed past the country’s leaders, symbolically offering their tribute and allegiance.
While they did so, the President, Hu Jintao, remained as remote and Kremlin-faced as his predecessors, making the jerky waves and robotic responses expected. “Tongzhimen hao” …”Tongzhimen Xinku” like a metronome. It was all very imperial – and imperious – as Mao, with his instinctive understanding of symbolism, had designed it to be.
Hu only smiled once, when a parade of goose stepping female militia passed by in their short skirts and white and black booties. There was a universal sigh of relief around the world. So the Chinese Emperor was human after all….
I shouldn’t make cheap cracks. It was a grand, uplifting spectacle – as dazzling a choreography of human beings en masse as during the Olympic opening last year. It would be churlish for a foreigner to make any criticism of an event that was so appreciated by the people it was designed for. It reflected real pride in the country, as well as satisfaction for the Chinese Government, which, uniquely in the world has an 85% approval rating.
But – for the non Chinese observing it – the whole thing was – well, rather odd. First, it was not totally inclusive. The audience, apart from the diplomatic and foreign delegates, was entirely made up of Communist Party members. There were very few entrepreneurs from the private sector invited, only a token delegation from the Government-run Federation of Industry and Commerce. Nor was any industry outside the narrow State sector included on the floats (this despite the fact that the private sector now employs 78% of China’s workforce and accounts for 60% of its GDP).
Then there was the extraordinary security that surrounded the event. Certainly we live in an age of terrorism, and China has had problems in Xinjiang only months ago, but, even so, wasn’t it a little over the top to evacuate every building in the centre of the city that was in viewing distance of the show? One would have thought they would be bringing in people from far and wide to wave flags – at least vetted communists from round the country, but no, the streets were empty. The only observers outside Tiananmen itself were snipers on the roofs. It was a parade through a ghost city.
I stress that none of my Chinese friends complained, but many foreigners watched with bemusement and concern, and not a few journalists broadcast around the world that the People weren’t invited to their own birthday party because their government was afraid of them.
But why the paranoia, if such it was? On every objective piece of evidence China should be celebrating more than just its anniversary. Its achievements this year have been remarkable.
The Economy
The economic crisis has thrust China onto the world stage. It has awe-inspiring credentials. We’ve all seen the statistics: it’s the fastest growing economy in the world, it’ll soon have the second largest GDP, by next year it’ll be the world’s largest exporter, it is the largest FDI destination on the planet, and it has by far the largest foreign reserves. No wonder if in public speeches some boastful Chinese officials preface Zhongguo with Weida: “Mighty China” – there’s no other market in the world which can compete in size for commodities as diverse as cement, coal, steel, cell phones, autos. It’s even on the way to becoming the world’s largest market for luxury consumer goods.
And it has fulfilled what was thought to be an impossible target and achieved an 8% growth rate when every other country is reeling after the Economic Crisis.
Its stimulus package is having a positive effect in areas as diverse as infrastructure and health care; China has been hurt by a loss of exports but the economies of its inland provinces are growing, and on the international stage, China is more prominent than it has ever been, recognised as a world power comparable to America. For many people China is the country that will lead the world out of its crisis.
When investors, halfway through this year, recovered some of their confidence again, China was the first place which they considered. FDI inflows are growing again at a sharp pace. Few other countries in the world can make the same claim.
But is that the whole story? Actually there are some disturbing undertones to this undeniable success. There are questions that are being asked about the sustainability of the stimulus package and abuses in its implementation, charges of crony capitalism between the distributing banks and the recipients of the government money, mainly SOEs. Only a very small portion of the Government-pledged 4 trillion Renminbi has been made available to the private sector that, as we’ve said, provides 78% of China’s employment and 60% of its GDP. It is China’s state companies that have benefited and many have been given more money than they need for the projects for which the funds are specified.
At the same time, banks, until they were finally reined in by the Government in about June, had been lending on their own account in huge quantities – again to SOEs and often more than was actually needed. It is more than a coincidence that during these nine months automobile prices have surged, house prices have soared, and the stock market has had record highs. This can only mean that a huge proportion of the stimulus money has been diverted into ‘other’ activities.
Good money has indeed gone to good – in a developing economy like China every new mile of road or rail, every new school, every pipeline is an engine of growth – but a lot of the GDP growth – who knows what percentage? – has been the result of speculation or luxury investments. This has led to concerns, within the Chinese government and outside, that much, much more needs to be done before the corner is really turned.
Keeping inflationary and deflationary trends at bay will be a continuing task and one requiring constant adjustment. This year retail prices, after a dip at the beginning of the year, have been steady around the 15% mark, and inflation is under control, but a major problem that has emerged is the realisation of the extent of overcapacity in almost every sector of industry due to lack of planning and controls in the past. A major rationalisation is required if growth is to be maintained.
And that’s the main concern. GDP growth so far has been entirely the result of the stimulus package. With China’s huge reserves – as we’ve said, the largest in the world – there is enough in the government kitty to establish another stimulus package and another – but the object is to kick start the economy so the GDP increases on its own steam rather than by government spending. This has not happened.
In mid October, Vice President Xi Jinping met German Chancellor, Angela Merkel, in Frankfurt. During a surprisingly frank discussion, the Chinese Vice President told Chancellor Merkel that the problem with China’s present economy is that it is “unsustainable, unstructured and unbalanced.” Other Chinese leaders have been making similar statements of concern. Whilst most of the Chinese populace is complacent (so far only those coastal areas affected by collapse of export orders have been directly affected by the economic downturn) clearly China’s leaders are worried. They fear that the 8% growth they have achieved with such effort, may not in fact be able to be maintained without continued spending for years and years to come. Otherwise it would fall back to 6% again.
Now some of us might think that this would be a nice problem to have – a 6% growth would be a dream in any other part of the world – but time is not on the Chinese leaders’ side. They know what major problems they will still have to face with or without the economic crisis: an ageing population, climate change, water shortage, food shortage, energy shortage, pollution. To keep the great machine of China going to a point that it can one day be in a position of strength to solve these problems depends on keeping high growth now.
Social Stability
China’s leaders are showing a confident face to the world – but sadly President Hu and his team just haven’t the luxury of being able to concentrate solely on the economy, despite their consensus and their massive support from the people. For any Chinese administration there is one thing that is even more important than economic well-being and that is social stability – and unfortunately this government sees too many live and present dangers surrounding them. Hence all the security during the National Day parade.
The riots in Xinjiang earlier this year rocked the Communist Party to its core. Tibetan unrest last year in the run up to the Olympics had already alarmed them (that’s when the tightened security in China really began). The July 5 Urumqi riots in Xinjiang this year were traumatic for them, not only in the number killed and injured, 197 and 1,721 respectively, but also because it led to the dismissal of the Urumqi Party Boss, Li Zhi, when popular protest erupted against the high handedness of the overall Party Secretary of Xinjiang, Wang Leqian. That a Central Politburo member could be called to account BY THE PEOPLE! In political terms nothing quite like it has happened since 1989.
Nor did the matter end there. A few weeks later a bout of horrific needle attacks led to more riots and more deaths. Clearly there is a fear that what happened in one outlying part of China may one day occur closer to home.
This is against a background of an increasing number of group protests taking place all over the country, 85,000 in 2005, more than 100,000 in 2008 (that’s 300 a day). Most were not at all violent, some were quite small, but all expressed popular discontent of some form or another – over labour issues, land issues, pollution issues, nepotism and corruption. One episode was particularly alarming for the Party because it was in defiance of an order by the government for Tonghua Steelworkers to accept a merger with another mill as part of SOE reform. During the course of the incident the general manager was beaten to death, a rather extreme way for workers to assert rights they don’t believe they have anymore.
So concerned are the Party and the government that they are now taking action against blatant corruption, for this is what strikes the greatest chord of anger among the people and spills over most often into popular protest. The Party Secretary of Chongqing, Bo Xilai, is leading a fight against so-called ‘black societies’ in his city; numbers of senior policemen have been arrested, including the Head of the Judiciary, former deputy head of police, Wen Qiang. No doubt if the action in Chongqing is seen to be a success, there will be similar campaigns in other cities. Clearly it is an enormous matter of concern for the Central Government, adding to their headaches about the economy.
China on the World Stage
I think it is very important for us to remember that these concerns – about the economy and security – are never absent from President Hu’s or Premier Wen’s minds when they fly to Pittsburgh or London for an international summit. It probably explains the urgency and the doggedness with which this last year these two leaders have been fighting China’s corner
Not since the Second World War have Chinese leaders played such an active role in the world’s councils or been recognised as the equal or superior of other world leaders. It was China after America that dominated the recent sessions of the G20, so much so that the sobriquet G2 is now regularly discussed in political and media circles.
Gone are the days when Chinese leaders in the Security Council made no comment or abstained. Hu Jintao and Wen Jiabao, when they take the rostrum, have things to say. Generally they show support for the initiatives of the G20 – China is keen for the moment to appear as a good international citizen – but more and more they are setting the terms.
At the Pittsburgh summit Hu Jintao pushed the agenda for the coming Copenhagen conference on Climate Change with carbon saving demands that will apparently be more stringent than anybody else’s. Wen Jiabao at the World Economic Forum put the blame for the Financial Crisis entirely on the shoulders of the Western powers, blaming them for their negligence in regulatory controls. He demanded that the IMF should strengthen supervision of currency policies. He came up with an idea for a new standard of currency to replace the dollar, he called for increasing representation in world councils of developing countries. These are all points emphasized again and again and ever more forcefully by all Chinese leaders, wherever they travel.
China has taken the moral high ground. Not only will they no longer stand being criticized for human rights but they are also prepared to assert their economic and geopolitical interests at the top table.
They are also intolerant of any trucking with people they perceive to be their enemies, such as the Dalai Lama or Rebiya Kadeer, the leader of Uighurs in exile, or even lowly dissidents. Sometimes this can be very ugly.
We’ve mentioned that Xi Jinping met Chancellor Merkel in Frankfurt in October. He was there to open the annual Book fair that this year had a China theme – but there was nearly a walkout of the whole Chinese delegation when two dissidents, Bei Ling and Dai Qing, attempted to hold a press conference. After bullying the organizers not to allow them to do so, one of the leaders of the Chinese delegation said the following, “We haven’t come here to be lectured on democracy. Those days are over.”
Many people thought of those strident tones as the first preludes of a new Pax Sinica. The people in Asia certainly see it coming. China’s economic and political dominance is already tacitly acknowledged in ASEAN. Many South East Asian countries perceive China’s rise as beneficial to their own interests. They would like their prosperity to rise on China’s tide. While none of them are tributary states, there are signs of the beginnings of a China Co-Prosperity Sphere.
So is it inevitable? Should we really be expecting a new Pax Sinica rapidly to take over the post WW2 order in the next 50, or 20 (as some would have it) years?
Well, it will take China a bumpy ride to get there.
First it will have to control the new nationalism that seems to spout spontaneously out of Chinese campuses or whenever there is a perception that China has been insulted.
Last year Chinese protesters blockaded Carrefour in Beijing and other cities after the riots in Paris around the Olympic torch. A year or so before that mobs besieged the Japanese Embassy after the Prime Minister Koizumi visited the Yasukuni shrine. These riots were not organised or even encouraged by Government, but the rest of the world thought they were, or at least they felt they had grounds to believe that the government was not unsympathetic. And this is dangerous. Even tacit support of such hotheads – none of whom are over thirty or forty years old and who therefore only knew a China on the rise – will only raise doubts about the government’s intentions. It also makes them look weak. Foreign commentators have named nationalism as one of the biggest threats to China’s stability.
There are other areas of potential friction internationally.
Despite the rhetoric and pledges made in the G20, the same protectionism goes on, leading inevitably to trade disputes, whether over tyres and chicken imports in the case of China and America, or steel pipes, shoes, steel wire and bicycles in the case of China and the EU. At least these disagreements are being handled through WTO and other international institutions, and many people see this as a positive sign that China is prepared to engage on accepted international lines.
More disturbing is China’s economic imperialism in South America and Africa. In the struggle for influence over the Dark Continent the US is losing. In countries like Zambia, Nigeria, Tanzania and Angola China’s provision of everything from arms to infrastructure gives them the same sort of influence over their economies that Britain had over South America in its Empire days.
China is moving people into Africa as much as money. It is colonialism by other means. In a world of shrinking resources it is a new Great Game. Yet from China’s point of view it has no choice but to play it. Its survival depends on securing oil, minerals and coal.
And it will make friends with the world’s political pariahs to do so. There is a dawning understanding that this new member of the Club of Nations shares neither Western aspirations nor its values.
China’s secretiveness and lack of transparency causes suspicion, often intensified by its prickly and sometimes vindictive protectiveness of what it perceives as its interests. The arrest of a RTZ employee in Shanghai after Chinalco was thwarted of its purchase shocked the business and diplomatic communities. And the issue is still to be resolved. Those congressmen in America who see China as a threat to our values have more than enough ammunition to fuel their suspicions.
But what the world sometimes forgets is that actually the suspicions go two ways. It is worth recalling that China less than 35 years ago was totally isolated from the rest of the world, its economy was tiny and the whole population lived in poverty. There was a folk memory, intensified by communist propaganda, of 100 years exploitation by foreign powers and they were still engaging in a Cold War in which the West was their enemy. This was the world in which the present generation of leaders grew up. It was this, as much as the chaos of the Cultural Revolution that formed them. They have been programmed to be as suspicious of the West as die hard liberals in America are anti Communist. And they too find no difficulty to identify the evidence to fuel their suspicions.
Everybody remembers the Unocal case, when the US Congress refused to let China buy a small US oil company.
Last year, China’s launch of a sovereign fund led to accusations that this $US 200 billion fund, of which only a third was earmarked for spending overseas, was a vehicle to effect Chinese state policy by other means.
Increasingly over the last few years China has become more defensive. It really seems to believe that the West is out to contain them.
Sad to say in the last year, tensions have been rising between China and its maritime neighbours
China is building two naval bases in Burma, in Mergui and the Coco Islands, because they are convinced that the 7th Fleet will one day try and stop their cargoes of oil and resources from going through the Straits of Malacca. The result is that both India and Japan have become concerned that China is doing this to threaten their shipping.
This year, Chinese naval vessels, claiming a violation of sovereignty, have been harassing foreign companies drilling oil wells among the Spratley Islands and other parts of the South China Sea that China believes belongs to it.
On March 8, 2009, the US Navy’s destroyer Impeccable, while monitoring submarine activity 75 miles south of Hainan Island, was surrounded by five Chinese ships. This dispute had echoes of the fracas caused by the forced landing in Hainan of a U.S. spy plane and crew in 2001.
And while we’re about it, we should mention the increased tension in Arunachal Pradesh, the part of the Tibetan plateau occupied by India and claimed by China. The PLA has made border demonstrations there following a recent visit by the Indian P.M.
Every incident like this serves to heighten suspicions, which like seeds, are already waiting there to be germinated.
One World
It is likely to be a long hard road with many misunderstandings and altercations along the way before the West learns to accept China and vice versa.
I am inclined to be optimistic.
With regards to China’s economy, China’s muddling approach has always worked in the past. On any given year in the last thirty, China’s problems have appeared intractable – there has been a veritable industry of ‘The Imminent Collapse of China’ books – but somehow in every case solutions are found and China is left more prosperous than before. There is a momentum about China’s growth that seems unstoppable. Maladministration this year has left the important private sector out of the stimulus equation. Rumours in the Capital are that President Hu is making new policies now to include them. Growth and internal consumption will speed faster in the inland provinces when the private sector is given its head, and once the kick start happens then China’s leaders will be able to relax, knowing that recovery is assured. Then perhaps there might also be a more relaxed attitude to security.
Internationally there will continue to be tensions and mutual suspicions. There is only finite energy resources left in the world. Everybody is committed to the new Great Game – but as China becomes more practised in operating in the world institutions it has now so wholeheartedly joined, its methods and procedures will seem less alien, perhaps there will be more understanding by all sides that while interests may continue to conflict, it is not due to conspiracy theory or a desire to contain.
The world will slowly adjust to its new order. China’s politicians have shown signs of increased maturity and experience over the last two traumatic years. It is likely that cooperation and dialogue will be the preferred means for China to pursue its policy.
There can be coexistence between a Pax America and a Pax Sinica. In a world where global interests force countries to work together for survival, interests will ultimately be aligned…
…On the other hand, as a diplomat friend of mine said to me the other day when I put this view to him. “The China we’re seeing currently might be as cuddly as it’s ever going to get.”
As always, interesting times.
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