Rise of China

Hsin-Huang Michael Hsiao, Cheng-Yi Lin, Hsin-Huang Michael Hsiao, Cheng-Yi Lin

• Publisher: Routledge
• Year: 2009
• ISBN:
  9781134032167
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

Despite the growing internal social unrest and disparity of economic development, the People's Republic of China is the third largest world economy and the second largest defense spender. Showing no clear signs of slowing down, China's rise is seen as both an opportunity and a challenge by the major world powers.

This book examines every aspect of Beijing's strategies, ranging from political, economic and social challenges, to the Taiwan and Hong Kong issues, to the implications of these strategies in terms of China's place within the Asia Pacific, and indeed within the world system.

Written by a stellar line-up of international contributors the book will appeal to students and scholars of Chinese politics, foreign policy, political economy and social policy, and China-watchers alike.

Part I
Overview

1 The rise of China

An overall assessment

Hsin-Huang Michael Hsiao and Cheng-yi Lin (With the assistance of L. C. Russell Hsiao)

Introduction

Perhaps nowhere in the entire world is the impact of China’s rise more visibly acute and viscerally debated than in the Asia-Pacific region. The region encompasses the most dynamic grouping of economies and politically diverse entities undergoing transition and experiencing the opportunities and risks of China’s economic growth as well as its political influence simultaneously. Whether it is through a growing dependency on China’s cheap labor or as a client to its capital outlays, the Asia-Pacific region is fast becoming enveloped by China’s growing economic and political orbit.

In China’s immediate periphery—including Hong Kong—spanning East Asia (Korean peninsula, Japan, Taiwan), Southeast Asia, South Asia, and Central Asia, there is a nascent China strategy in these sub-regions that are driven by different sets of policy priorities for Beijing; however, its reach in the Asia-Pacific has moved far beyond just its many corners. China has moved assertively into Africa and Latin America, and slowly making its oft-stated “peaceful” presence felt in the Middle East—in all these regions, where a country is in conflict with the West, China has found a vocal sycophant. Beijing’s economic inroads are cementing the political ties that help grease the wheels to secure important political support for its bid for energy and natural resources that are needed to fuel its growing economy. In regions throughout the world, China is soft balancing the gradual detachment of the United States in many of these regions due to its changing foreign policy priorities after September 11. On the global financial stage, even at a more alarming pace, Chinese outflow of immense capital is affecting the global market in significant ways.

The effects of China’s growing economic and political clout in the Asia-Pacific are imminent and can already be seen and felt by states throughout the region, eliciting varying reactions that are anchored by a prevailing sense of guarded uncertainty. What then are the reasons behind this combination of hope and angst toward China’s rise? With the Chinese economy booming and for investors there appears, at least on the surface, a seemingly endless well of profits to be made. China is an enormous market that attracts re-cyclical investments with a leadership that appears bent on perpetuating growth at any cost—reminding the astute observers of the gold rush that saw a plummeting of speculators that flooded the United States in the hope of striking gold—and while many people are getting rich, there are also millions left behind as income disparity drives a greater wedge between the urban and rural divide in China. In the process, China also managed to lift millions out of poverty, and there is a growing “new rich” class—less concerned about their political rights than they are for protecting their newly acquired wealth—will increasingly have an economic stake in the well-being of the country, which may potentially serve as the catalyst for more political participation and possible infant democracy in China.

China has not only become a source of foreign direct investment for developing countries throughout the region and world, and its massive accumulation of foreign reserves worth US$1.6 trillion are now becoming the hinges of international financial stability for developed countries as China Investment Corporation offered several high-profile billion dollars bailouts to financial firms in the developed economies of the United States and Europe hit hard by the United States’ ailing economy. In recent years, waning confidence in the“solid” U.S. dollar, the bedrock of the international financial system, has begun to shake as the economy was struck hard with the subprime crisis and residual credit crunch that is now inflicting the United State’s ailing economy.

Indeed, the question debated in policy circles throughout the region no longer falls on whether or not China will become a superpower, but what it will do when it possesses and wields such influence in the international system—and which school of thought will prevail and control the helm of policymaking in Beijing’s opaque leadership decisions.

One thing is clear: no state in the region has a clear strategy for dealing with China’s rise, and no one can assuredly determine where China is going or for that matter where it will lead them. However true, such an assessment is not satisfactory enough to ignore the facts by tossing the scientific premise that, to determine the direction of a thrust; we can at least observe the drivers of that thrust. For China’s rise, we must look at the internal drivers that are pushing the levers while looking at the international environment under which this rise is going to take place to see how far it will take China and where it may ultimately have to stop.

China’s rise is accompanied by a host of protracted and potentially debilitating social and environmental issues that have become more severe in recent years, which can potentially reverse the course of its painstaking economic growth. China remains a one-party authoritarian state that suppresses any form of political dissent; it still regards any form of organized political association as threatening and controls information that may otherwise be available to its 220 million and growing Internet users—surpassing the United States in March 2008—through its sophisticated cadres of Internet police and censorship system. While Beijing is only making perfunctory efforts to curb flagrant corruption, and as long as Zhongnanhai continues to feel that it will be able to maintain control, there appears to be no real reform in the pipeline that would jeopardize this fragile stability and break these critical bottlenecks in the near term in sight.

The existing literature that analyzes the implications of China’s rise has focused almost exclusively on either its economic, political, social, or military dimensions independent of one another. Under the auspices of the Mainland Affairs Council of the Executive Yuan, the Center for Asia-Pacific Area Studies (CAPAS), Academia Sinica held a two-day conference in Taipei on August 24–25, 2006, attracting more than one hundred local and overseas participants to debate the meanings and implications of China’s rise. The strength of this compilation of essays is in its systematic organization of exhaustively in-depth researched essays written by renowned scholars throughout the world that analyzes from many various disciplines and vantage points the design of China’s comprehensive national power, the internal driving forces and the external environment that is shaping many facets of China’s rise. Then followed by a discussion on how regional states are affected by China’s rise and responding on the security challenges that this new dimension to the regional economy brings. Moreover, this compilation offers regional perspectives of the external facets of China’s rise. This volume encompasses the theoretical and topical dynamics and the corresponding dilemmas that regional states face as they attempt to cope with and manage China’s rise.

Origins and Anatomy of China’s “peaceful rise”

In Chapter 2, it is argued that the fourth-generation Chinese leaders are keen in maximizing opportunities for domestic development by diverting international attention away from the perception of the “China threat.” Masako Ikegami, a professor in political science at Stockholm University, points out that Chinese President Hu Jintao, strategically replacing the word “rise” with “development,” is to remove the negative connation that accompanied the word “rise.” In implementing this new concept, Beijing has actively promoted multilateralism, economic diplomacy, and “good neighborliness.” Despite Beijing’s effort of shaping a self-image of embracing “peaceful development” by releasing a white paper outlining its development discourse in December 2005. Ikegami questions whether the underlying Chinese intentions and its military and diplomatic activities truly reflect such a slogan. In fact, she argues that China hopes to constrain the United States and usurp the former Soviet Union’s role in the post-Cold War era. Currently, Beijing scholars endorsed the notion of a “U.S.-China co-management” framework in jointly intervening in international affairs while avoiding direct collision with the United States.

Ikegami succinctly points out that Hu’s proactive foreign policy in Africa, Latin America, and Central Asia serves the purpose of securing resources for China—whether it be energy or oil. For instance, trade between China and Africa witnessed an increasing growth, as a result of China’s mass import of oil from Nigeria, Angola, Zimbabwe, and Sudan. China has become a major investor in oil fields, especially in Sudan. By providing economic assistance in the forms of loans for African states, China not only directly asserts influences in the region, but also upholds authoritarian regimes, hindering the prospect of democratization. With Beijing actively promoting the China-African Cooperation Forum, China sets out to secure raw materials, influence UN’s politics with the backing of the African Union, swaying African nations in de-recognizing Taiwan and expanding the African markets for exporting Chinese goods. Ikegami points out that China’s demand for raw materials inevitably compels Beijing to court controversial regimes in various continents.

Historically, resource-based expansion has always been accompanied by military presence. Resource and energy are critical components of geopolitics, security, and strategy. Therefore, Ikegami argues that China has grown keen in using coercive forces both domestically and externally, specifically on Taiwan. This is evidenced by China’s recent procurement of systems that fall within offensive power projection, such as the development of airborne early warning and control system aircraft. Furthermore, China has perceived Japan as a threat in terms of its provision of logistical support for the United States, should the United States intervene in the event of a cross-Strait conflict. Ikegami points out that the increasing incidences of PLA submarines intruding into Japanese territorial water and the PLA fighter aircrafts flying into Japanese air indicate that the PLA is preparing to deter U.S. intervention with Japanese providing logistical support.

In Chapter 3, Szu-chien Hsu, an associate research fellow in political science at Academia Sinica, examines the outlook of China’s rise from two antithetical theories: liberalism and realism. These serve to explain the reasons behind much of the world’s caution toward China’s rise, the pursuit of comprehensive national power. Despite the fact that China has recently emerged as an economic power, the question of whether it is being a responsible stakeholder in the global community remains much in question. The un-transparent nature of its market economy and its political structure left suspicion among the Western liberal states. This chapter, through Kenneth Waltz’s 2nd image, intends to examine the state structure, specifically the party-state syndication that generates the global concerns about its rise.

Hsu maintains that although China exhibits the characteristics of a market economy, the government still plays multiple roles in this economy—whether it is the “investor,” “profiteer,” or “rent seeker.” The government continues to monopolize the main functions of the economy, in addition to the absolute political power it currently enjoys. The individuals or enterprises often work with the local or central government in joint ventures, leading to a symbiotic relationship. To a certain extent, this not only strengthens the legitimacy of the Chinese Communist Party (CCP), but also compels the enterprises and business personnel to remain supportive of the CCP regime, as the CCP is the sole determinant of the law. Hsu fears that as a result, the concept of the rule of law is fragile and may not be realized, paving way for corruption. Domestically speaking, the concentration of economic power within the political elites and few business people further deepens the economic disparity between the rich and the poor. The existing condition on its present course will only lead to social tension and polarization.

The lack of transparency within the political and economic realm under the existing framework of party-state developmental syndicate leads to the view of an autocratic regime, an unfair economic player, and a security and strategic concern by the international community. China’s model of suppressing democratic values despite its embracement of economic growth continues to rival Western liberal ideals. Similarly, with relatively few constraints, the Chinese state can intervene freely in its economic policies and economy, violating various international economic regulations. The infringement of intellectual property is the main issue that China receives the most criticisms. Reluctance to effectively combat the problem may lead to the deterioration of relations between China and many developed nations. Economic power can be translated into military power. With military modernization, Western nations fear China’s intention in terms of security and foreign policies will change from a defensive one into an offensive one.

Domestic consequences and implications: social unrest and economic challenges

The new trend of market economy brought a new wave of wealth into China. However, Chih-jou Jay Chen, an associate research fellow in sociology at Academia Sinica, argues in Chapter 4 that social tension and polarization have emerged as byproducts of this new economic policy. Despite China experiencing impressive growth, the current social and economic system is fragile. There exist no effective and sound programs for individuals and households who fail to benefit from the new fortune, specifically the employees of the state-owned enterprise (SOE) and rural workers. This in turn causes a widening of income disparity between them and the newly affluent class. These workers and farmers used protests as a channel of expressing grievances disgruntled. Chen argues that although the incidences of social unrests have increased, these rebellions merely reflect an economic grievance and thus they do not constitute a threat to the overall political stability. Chen specifically points out four main reasons as the causes of social unrest: (1) the privatization of SOEs; (2) forced relocation; (3) agrarian turmoil; and (4) below-minimum wages in the foreign direct investment (FDI) firms.

The privatization of numerous SOEs throughout China has displaced workers who received preferential and beneficial social packages in Mao’s era. Collectively banding together, these SOE workers resisted the privatization of SOEs and protested against late paychecks and unreasonable layoffs. Facing the prospect of unemployment, these employees were further irritated by the lack of compensation. Incidences of these rebellions have often erupted in the traditionally heavy industry-oriented Northeast provinces. The local government has relied on the military police to quell these demonstrations.

In major cities such as Beijing, Shanghai, and Nanjing, in a response to the new urban development projects, local governments have forcefully re-located many of its inhabitants, which has caused discontent among the displaced population. Chen portrays that in essence local officials collaborated with developers and sold land-use rights without consulting the occupants. Without being properly consulted or fairly compensated, these dwellers could not write petitions in expressing their grievances. However, with Beijing Olympics inching closer in August 2008, which involves more new urban construction, Chen cast doubts on the Chinese government’s ability and willingness to be concerned with these social issues.

Likewise, in the countryside, the cases of land seizures, in combination with excessive taxes and official corruption and abuse of power, triggered a wave of protests among the peasants. Receiving similar unjust treatments like that of their urban comrades, these peasants were rarely consulted when local governments commandeered their lands—even refusing to provide fair compensations. Furthermore, these peasants who resided on collective lands cannot freely trade their properties like that of urban dwellers. Thus, these peasants are powerless at the hands of the local government. Peasant workers in the FDI firms have repeatedly protested against low wages and exploitation.

In Chapter 5, To-far Wang, an economics professor at National Taipei University, in his paper seeks to answer the following central questions regarding China’s economic development: (1) can China maintain the high economic growth of the past two decades and (2) what are challenges China faces in the years ahead? Wang believes that economic growth driven by investment is somewhat unstable, as investment tends to fluctuate with political policies. Also, China tends to exaggerate its economic growth statistics, and unemployment rate did not include workers laid off from SOEs.

In terms of challenges that China’s economy will face, Wang summarizes several factors such as unemployment, SOEs, overheated investment, fiscal burden, trade friction, and corruption. Unemployment in China often does not count the peasants coming to the cities, and China could have the highest unemployment rate if redundant staff is taken into account. More than 75 percent of the industrial enterprises in China are state-owned. How will China manage to reform and manage these SOEs with heavy debt? Wang detects that too many factories are being built and China is in for a hard rather than a soft landing as suggested by other observers. China has 75 percent of the world’s bad loans, and a great deal of this debt was taken on by the “Big Four” banks, thereby turning it into fiscal debt. In response to Chinese dumping of low-priced export goods on the global market, China has seen many of its goods prohibited in EU countries or boycotted by countries with EU regulations. Many countries have begun to exert pressure on China to allow its currency to appreciate. In addition, corruption in China has tended to pervade Chinese society as a result of a half-reformed economic system and the CCP a ruling party above the law.

In terms of the income gap between the rich and poor, Wang argues that Gini coefficient in China is in excess of 0.48 while international standards for intermediate gaps between rich and poor range between 0.3 and 0.4. Roughly 70 percent of China’s population lives in impoverished rural areas. After joining the WTO, China’s agriculture took a large hit as it was predicted—more than 10 million agricultural laborers were forced out of work. Subsequently, China has been forced to face the growing problem of energy shortages. These shortages can largely be attributed to waste and inefficiency. Some disaster scenarios show that with these continually wasteful energy policies, an economic crisis could result as the central bank raises interest rates in order to control inflation. In the conclusion, Wang advises that China’s economy could be in for a fall. This has effects on Taiwanese enterprises, which have invested heavily in China’s economic development. Thus, Taiwan must realize and prepare for the possibility of a Chinese economic fall.

External strategies to the Asia-Pacific and implications

In Chapter 6, Rosemary Foot, a political science professor at Oxford University, argues that China’s regional strategy is shaped by a combination of domestic needs and its relations with the United States. China hopes to realize its goal of domestic development, stability, and prevention of Taiwan independence under the U.S. unipolar framework, with the intention of building itself as a “responsible great power.” There inevitably exists a conflict of interests between China’s rise and U.S. preeminence in terms of securing natural resources an...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of tables
• List of figures
• List of contributors
• PART I Overview
• PART II Discourse on the rise of China
• PART III Domestic consequences: social unrest and economic challenges
• PART IV External strategies to Asia-Pacific and implications
• PART V Regional reactions to China’s rise
• Glossary