China’s Uncertain Development

Korea Strategy
By Andrew Gawthorpe

The credit crunch and political paralysis in the western world has enhanced speculation about the future of China, a country which superficially seems to be doing so better than Europe or America. The headline economic growth rate in China in the three months to June 2011 was 9,5 per cent, against a figure of 0,2 per cent for Britain and 1 per cent in the US. It is little wonder that western politicians eyeball China’s trajectory enviously. Meanwhile, China’s growing economic weight has not only made it indispensible to solving global economic problems, but also seems to be translating into growing political and security influence as well. If one was needed, a reminder came recently with the launch of the country’s first aircraft carrier.

Aware that their country’s rapid ascent might be worrying to the rest of the world, Chinese officials have self-consciously promoted a discourse based on what they call “China’s peaceful development” – they used to say “China’s peaceful rise”, but changed their minds when they thought that sounded too threatening.  According to the Communist Party and state media, China merely wants to be allowed to develop its economy and integrate into the current system of globalisation  in a peaceful manner, without the war that has typically heralded the advent of a new great power throughout history.

Whether the Chinese are to be taken at their word on this matter has been a constant source of speculation in western and Asian capitals, where there is a suspicion that China’s rhetoric does not match its true intentions. With its fast-growing economy and steadily-improving military, China can easily appear threatening to the outside world – which is precisely why the country’s leaders have been so careful to present themselves in as non-threatening a manner as possible. But the world as seen from Beijing can appear threatening, too. In fact, if we consider the economic and security challenges faced by China then we can easily see why the Communist Party is likely to favour a strategy of “peaceful development” in deed as well as words for some time yet.

China’s security challenges emanate from both within and outside the country. Almost every country on China’s borders is a potential source of either instability or military challenge. Since World War II, China has fought wars with India, Vietnam, South Korea, and large battles with Russia (or, as it was then, the Soviet Union). It could conceivably have to fight any of these wars again. Meanwhile, North Korea and Myanmar could collapse and flood China with refugees, suck it into a civil war, or invite potentially hostile powers to intervene on its borders. China must play a delicate game in fostering stability and harmony on its borders while trying to prevent its potential enemies from forming a pact against it, especially if this pact includes the US or a remilitarised  Japan.

Meanwhile, China’s internal security challenges are severe and growing. Large resources must be devoted to policing Xinjiang and Tibet, regions which are not ethnically Chinese and are in essence imperial conquests. Unrest here invites foreign meddling. And even in China’s Han heartland, a combination of rising expectations, an unresponsive political system, and growing economic problems are fuelling an explosion of dissent that the regime finds hard to conceal, much less control.  A regime which derives its legitimacy largely from claims of economic competence finds it hard to deal with spiralling inflation or events such as the high-speed train crash which occurred in July this year.

Yet many of the problems China faces are inherent in its current political and economic system and will require change if they are to be overcome. The political problems are the most obvious – pervasive corruption and brutality is less sustainable as a basis for government in the information age, as middle-class Chinese citizens are better informed than ever both about events within their own country and about the world outside. A similar dynamic seems to have led to the Arab Spring. As China’s economy becomes more complex, its society becomes more complex too, and the one-party state becomes less able to manage the diverse problems and meet the aspirations of China’s citizens.

The economic problems are less obvious but perhaps even more fundamental, as they feed political instability. While China’s economy seems to be humming along nicely, there are some severe problems inherent in its export-led model.  To make the country’s exports cheaper, the Chinese central bank artificially lowers the price of the Yuan, the Chinese currency. This leads not only to high inflation – a key factor in the Tiananmen Square uprising of 1989, even though this is frequently misunderstood in the west as having been about “democracy” – but also to a problem with “hot money”, as foreign speculators frantically buy Yuan in anticipation of its price rising at a later date.

The result has been that there is far too much capital flowing around the Chinese banking system, resulting in a bubble not entirely unlike the credit bubble in the west before the beginning of the financial crisis. Taken with inflation, this means that the Chinese economy is soon going to hit a significant speed-bump which will take some time to overcome. Combined with the coming economic slowdown among China’s main export partners in the western world – and even the possibility of renewed recession and the collapse of the Eurozone – China’s economy is on shaky ground indeed. Given that even slight slowdowns have led to significant domestic unrest in the past, the situation could hardly be more precarious for the country’s rulers in Beijing.

The supposed solution to these problems is for a rebalancing of the Chinese economy away from exports and towards domestic consumption. If China’s citizens become richer and more able to buy Chinese products, then the country will not need to rely so heavily on exports and the Chinese central bank can relax and eventually stop the herculean efforts required to devalue the Yuan. But such a rebalancing will take years and probably decades to fully effect, and will be accompanied by a pace of social change which is mind-boggling to contemplate. As China’s citizens become wealthier and better educated, it seems likely they will demand more say in how their country is run – and capitalism will create disaffected losers as well as winners. Meanwhile, the ruling Communist Party – paranoid and obsessed with keeping a narrow elite in power – is singularly unequipped to cope with the social balancing act necessary to maintaining domestic harmony in a wealthy and capitalist society.

To navigate these problems and retain its grip on power, the Communist Party faces a difficult task – one which, more than anything else, is likely to keep Beijing focused on internal problems for some time yet.  World leaders looking nervously at China ought to be as concerned about a descent into chaos as they are about Chinese aggression; given the magnitude of security and economic tasks facing China’s rulers, it will suit them to stick to their strategy of “peaceful development” for some time yet.

 

Andrew J. Gawthorpe is a media analyst and historian of American foreign policy who has previously published on East Asian security.  He is currently reading for a PhD in War Studies at King’s College London.

 

24 September 2011

 

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