Brookings: Topics - Chinese Politics

Premier Li Keqiang of China Goes to India

Tanvi Madan — Sat, 18 May 2013 14:00:00 -0400

On Sunday, Chinese premier Li Keqiang heads out from Beijing for his first visit abroad in that role. His first stop: India. He’s probably wishing the trip had taken place about a month and a half ago. At that time, there was a sense in India that the new leadership in China was reaching out to India for a number of reasons. Over the last month, however, temperatures rose in the Himalayas, as the long festering China-India boundary dispute flared once again. The good news for those interested in stable Sino-Indian relations: the two governments seem to have got past the recent incident. They continued to communicate throughout the crisis. Pre-scheduled China-India talks on Afghanistan were held in the midst of the crisis—their first such dialogue focused on the subject. Chinese and Indian military officers held a border meeting. The Indian foreign minister traveled to Beijing. And Li’s visit is going ahead. The bad news: The border incident reinforced the mistrust that many in India feel toward China and its intentions. Furthermore, it was a reminder that despite increased engagement, bilateral differences have the potential to stall, if not, reverse progress toward more stable relations. Li’s challenge: to get the relationship back on a positive trajectory and begin to convince a skeptical Indian public that the border incident was not representative of the new Chinese leadership’s approach toward India. Overall, the premier has his work cut out for him.

Before mid-April, many observers of Sino-Indian relations noted that under the new Chinese leadership there seemed to be an “upswing in relations.” Chinese president Xi Jinping proposed a five-point formula to improve ties with India. The two countries agreed to discuss Afghanistan. “Positive vibes” were detected at Xi’s subsequent meeting with Indian prime minister Manmohan Singh on the sidelines of the BRICS summit in Durban. The Chinese government indicated that Li soon planned to travel to India.

This trend did not surprise observers. After all, there were enough reasons for Beijing to seek a stable relationship with India: economic ties, cooperation in the multilateral realm and a desire to limit India’s burgeoning relationships with the U.S. and Japan (reports indicated that Chinese officials were eager for the premier to visit India before the Indian prime minister headed to Tokyo in late May), as well as other countries in the region. There were also reasons for the political leadership not to want the relationship with India to deteriorate: such as preoccupation with China’s eastern maritime disputes and the North Korean situation, as well as the need for stability in the region with the impending American withdrawal from Afghanistan.

What did surprise observers was the border incident. Former U.S. deputy secretary of state James Steinberg, who was in India as the crisis played out, said “I don't know what the Chinese leadership is up to…confronting India and Japan, especially when they have been trying to build strong bilateral relations...The Chinese leadership should understand, it will not benefit them in the long run.” The opacity of Chinese decision-making meant that various theories were floated about why Chinese troops had taken the unusual step of setting up camp across the Line of Actual Control (LAC): differing perceptions of the LAC; “a rush of testosterone by local officers;” in response to India building up its border infrastructure; the desire of the People's Liberation Army to assert authority; the result of an internal political power struggle; Chinese expansionism; or Chinese strategic designs against India. One observer contended that a clear motive was near impossible to pinpoint: that “Chinese foreign policy is an enigma wrapped in a mystery.”

Since the resolution of the crisis, Beijing has tried to press a “reset” button, trying to return the relationship to its pre-crisis trajectory. The Chinese ambassador to India unusually took to the editorial pages of an Indian newspaper to emphasize, “To strengthen good-neighbourly and friendly cooperation with India is China’s strategic choice and established policy which will not change.” Chinese officials indicated that greater efforts should be made toward a boundary settlement.

The Chinese government also signaled that the choice of India as the premier’s first stop was very deliberate and a sign of the importance Beijing placed in the Sino-Indian relationship. Hosting an Indian youth delegation, Li put a personal spin on the choice, noting the “the seeds of friendship sown” when he visited India 27 years ago—a trip that he said left a “lasting impact.” Beyond trying to win hearts and minds, he also seemed to want to appeal to Indians’ pocketbooks, talking about the economic benefits of greater ties. Finally, he pointedly mentioned experiencing the “warmth and hospitality of Indian people.”

That hospitality will certainly be forthcoming on the part of key policymakers in the Indian government. Delhi has its own reasons for seeking stable relations with Beijing. Thus, Indian officials had joined their Chinese counterparts in playing down the border incident and seeking to resolve it speedily. Since it’s been resolved, both sides have sought to highlight their success in defusing the crisis, pointing to that as a sign of progress in the relationship. During that visit, they will work toward agreement on certain issues. Expectations are that there will be developments on the economic front. China-India watchers will also be looking for any sign of progress on the border and Brahmaputra river issues.

Among the Indian public, the welcome for Li is likely to be cooler. The recent tensions at the border—heavily covered in the Indian media—reinforced negative impressions of China among many in the Indian public. Many—even beyond the public—will take with a larger grain of salt the new Chinese leadership’s assurance that it intends for China to rise peacefully, be a responsible state, and seek good relations with India. The crisis has reinforced the narrative that has prevailed in many quarters since the 1962 China-India war: that China only understands strength; that while Beijing’s leaders say China and India “must shake hands,” they cannot be trusted—that one hand held out might just be a precursor to the other stabbing one in the back.

The border incident has also kept the focus on bilateral differences and even beyond the border issues there are many of those: China’s growing political and economic ties with India’s neighbors, its Indian Ocean ambitions, the overall lack of trust, cyber-security concerns, Tibet, the diversion of the waters of the Brahmaputra, a trade imbalance and restricted market access in China for Indian companies, the sense that China does not respect India and/or that it will seek to prevent India’s rise and, significantly, China’s relationship with Pakistan, which, of course, is Li’s second stop.

The incident also seemed to strengthen the hands of those inside and outside government who are skeptical of China’s intentions towards India and weakened the voices of those urging engagement with that country. Furthermore, the crisis negatively affected the credibility of the Indian government on issues related to security broadly and China in particular. This matters because significant bilateral progress on crucial fronts will require concessions from both sides—concessions that might now be harder for the Indian government to sell on its side.

Overall, that’s a lot of mistrust and skepticism to turn around in one visit. But if Li Keqiang wants to see the relationship prosper, the trip is a good time to start trying on two fronts. First, substance: progress on key issues will go a long way in building trust. Second, style: Li should take the opportunity to introduce himself and reintroduce the new Chinese leadership not just to Indian government officials and private sector leaders, but also to the Indian public—for it might be tempting to dismiss public sentiments, but they will play a key role in setting the limits of the relationship.

Authors

Tanvi Madan

Image Source: © China Daily China Daily Information Corp - CDIC / Reuters

Chinese National Security Decision-making: Processes and Challenges

Yun Sun — Mon, 06 May 2013 16:03:00 -0400

In studies of contemporary China, information about the national security decision-making process is largely absent, despite the abundance of information and analysis on leadership politics and domestic policy-making. A proliferation of foreign policy actors in China has attracted much attention from researchers, leading to a booming number of investigations into the governmental and non-governmental players involved. The processes themselves―in which these players operate and interact to produce the eventual policy decisions―have eluded academic scrutiny, mostly due to the scarcity of available information. The topic, however, is critically important in achieving an accurate understanding of China’s national security policies which often seem unclear and plagued by conflicting messages.

In the Chinese context, the definition of “national security” is significantly different from that in the United States. For the American policy community, the term “national security” usually refers to the country’s external national security interests and threats. The responsibility for coordinating national security affairs lies primarily with the National Security Council. In China’s case, the term “national security” encompasses both domestic/internal and foreign/external security and, therefore, has a much broader connotation. This paper is primarily focused on the external dimensions of China’s national security. There are many overlapping aspects between China’s national security policy and its foreign policy, as the latter also serves to protect China’s national security interests. However, because national security also covers military security, national defense, economic security and other non-traditional security challenges, the framework and coverage is broader than with foreign policy.

This paper examines three processes of China’s national security decision-making: the decision-making at the top level, the policy-coordination process conducted through the National Security Leading Small Group (NSLSG), and the informational process for national security decision-making. Generally speaking, the supreme decision-making authority in China is monopolized and exercised through the collective leadership of the Politburo Standing Committee; this is especially true with regard to “strategically important” issues, such as Sino-U.S. relations. However, the paramount leader at the time of this writing, President Hu Jintao (the Politburo’s designated person for national security affairs) commanded large authority and privilege in determining regular national security policies. His primary advisor on national security (at the time of this writing State Councilor Dai Bingguo) played a central role in informing and advising him on key policy decisions. As the Director of the Foreign Affairs Leading Small Group (the same organization as NSLSG),[1] Dai also carried responsibility for inter-agency policy consultation and coordination through the NSLSG/FALSG. Information for national security decision-making is produced primarily by participating agencies and think tanks, but there is a standard process of screening, organizing, and disseminating that allows information to flow to the top.

A fundamental challenge for China’s national security decision-making system lies in the conflict between the need for centralization and the diffusion of power (collective leadership) at the top level. Decisions on strategically important issues must be based on consensus, which is created through time-consuming debates; consensus-building proves especially problematic when a timely response is required. As an informal and ad-hoc committee, the NSLSG does not operate as the core national security team designated to follow, analyze, and coordinate daily national security affairs, nor does it have the adequate human resources and professional capacity to play that role. In reality, its role is more or less confined to the organizer of research and coordinator of policies. Its authority on national security affairs is further undermined by unbalanced civil-military relations and the lack of civilian oversight over daily military operational activities. In the informational processes, the players in the Chinese system are extremely risk-averse. Confined by agency perspectives and career advancement interests, they are reluctant to report new findings that are not in line with established conventional wisdom.

Understanding that most of the challenges in the Chinese national security system have deep historical, political and structural roots, any attempt to address them must be bold and might seem politically unrealistic. Nevertheless, the recommendations offered in this paper are aimed at addressing the fundamental deficiencies of the current system. Their feasibility depends on the future of political reform, which although widely agreed as inevitable, has thus far been successfully avoided.

[1] The general understanding of the relationship between FALSG and NSLSG in China is that it is literally the same organization with two different titles (一个机构两块牌子). However, several government analysts pointed out that within the same organization there is a distribution of labor on national security and foreign policy between two different bureaus.

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Yun Sun

Image Source: © Jason Lee / Reuters

Becoming a Techno-Industrial Power: Chinese Science and Technology Policy

Joel R. Campbell — Mon, 29 Apr 2013 09:05:00 -0400

Editor's Note: This paper by Joel R. Campbell, which outlines the history of Chinese science and technology innovation since the founding of the People's Republic, is the April 2013 installment in the Issues in Technology Innovation paper series, which is part of the Center for Technology Innovation in Governance Studies at Brookings.

China’s science and technology policy has developed through four phases since the founding of the People’s Republic in 1949. In the first phase, to 1959, technology supported the creation of heavy industry along Soviet lines, while the second, up through the end of the Cultural Revolution in 1976, saw economic stagnation and ideological domination of technology projects. A third phase, under reforms launched by Deng Xiaoping and carried forward by Jiang Zemin to 2001, stressed building of an independent research base and the gradual shift to market-oriented, product-driven research. Since 2002, Chinese policy has increasingly backed high technology industrialization, along with support for the nascent green technology industry.

Chinese technology policymakers also have promoted an innovation-driven economy. The Ministry of Science and Technology (MOST) is the key policymaking and policy coordination organ, and it funds the five most important technology development projects:

The Key Technologies Research and Development Program, focused on industrial technology
The 863 Program, centered on basic and applied research on marketable technologies
The Torch Program, which supports commercialization of high tech products
The 973 Program, funding multi-disciplinary projects in “cutting edge” technology, and
The Spark Program, promoting development and use of technology in rural areas

Science and industrial parks are key venues for high tech research and development (R&D). Currently, there are fifty-four such parks, mostly located in large cities or provincial capitals. Firms operating in the parks must create or apply technology in high tech fields, devote at least three percent of gross revenues to R&D, and employ at least thirty percent of college degreed workers. The information technology (IT) industry is one of the leading industries in the science parks, and has received special policy recognition since 2000.

The space program has become one of China’s proudest recent accomplishments. Building steadily on its experience with military and civilian missile technology, China has already launched four manned space missions, and has ambitious plans for a space station and unmanned exploration of the Moon, along with possible manned lunar missions. China has also made a major push into green (or “clean”) technology, driven by twin concerns about dependence on foreign oil and serious environmental degradation within China.

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Joel R. Campbell

Image Source: © Jason Lee / Reuters

China-Taiwan-United States Relations

Tue, 23 Apr 2013 09:00:00 -0400

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April 23, 2013
9:00 AM - 3:00 PM EDT

Conference Room B-1
Center for Strategic and International Studies
1800 K Street, NW
Washington, DC

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China and Taiwan have improved both the tone and substance of their relationship over the past five years, especially on bilateral economic issues. But these advances have not been matched by progress on more difficult political or multilateral issues, and some observers believe that the improvement of cross-Strait relations will lose momentum as these more sensitive issues come up for discussion. The respective political calendars in China and Taiwan may further complicate matters.

On April 23, the Center for Northeast Asian Policy Studies at Brookings and the Freeman Chair in China Studies at the Center for Strategic and International Studies hosted a public seminar featuring senior experts from the United States, China and Taiwan. Panelists analyzed the domestic forces influencing cross-Strait relations; prospects for developments in the political, security and regional economic arenas; and possible roles for the United States. Raymond Burghardt, chairman of the board of the American Institute in Taiwan, delivered a keynote address.

Watch video from the event at csis.org »

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The Road Ahead for China’s Economy

Tue, 16 Apr 2013 09:00:00 -0400

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April 16, 2013
9:00 AM - 4:30 PM EDT

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

In recent years, China has increasingly confronted new challenges in economic policy, including rising labor costs, low household consumption, rapid urbanization and inefficient domestic investment. While it is now widely acknowledged in Beijing that major structural adjustments are needed to address these issues, implementing serious reforms pose major challenges for the newly installed leadership.

On April 16, the John L. Thornton China Center at Brookings and China’s Caixin Media Group hosted a conference to examine the daunting challenges confronting China’s new leaders. The morning panels featured a discussion of the financial sector as well as the relationship between the domestic agenda for financial reform and China’s evolving strategy for outbound investment. The afternoon panels took a close look at the political obstacles to implementing major economic reform in areas such as tax policy, the household registration system and land transfers, as well as explore the impact of environmental and natural resource constraints on China’s economic growth.

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20130416_china_economy

The Brookings Institution and Taiwan-China Relations

Richard C. Bush III — Thu, 11 Apr 2013 00:00:00 -0400

Editor’s Note: In a speech delivered at “Between Power and Knowledge: Think Tanks in Transition” at National Chengchi University on April 11, 2013, Richard Bush discusses the Brookings Institution’s long history of conducting research on Taiwan-China relations. A portion of the speech is below; the complete speech can be found here.

A couple of years ago, I chanced upon an aging copy of the January 1945 issue of National Geographic magazine. To my surprise, there was an article about Taiwan (called “Formosa” in the article). As was common with National Geographic at that time, there were many pictures of the island’s aboriginal peoples (in this case, they were all fully clothed). But there were also pictures of U.S. bomb damage during World War II, and a not-bad description of Taiwan’s history, society, and 20^th century circumstances. The author was Joseph Ballantine, who had served in the American Consulate in Taihoku from 1912 to 1914. I had never heard of Ballantine, so I resorted to my default source of information – Wikipedia. Imagine my even greater surprise when I discovered that he had actually been a scholar at Brookings, and that through the Institution’s Press, he had published a book about Taiwan in 1952: Formosa: A Problem for United States Foreign Policy.[1] I had no idea that my own organization’s coverage of the Taiwan Strait issue had such a long history. So I was pleased when Arthur Ding invited me to write about how Brookings had treated the subject over the last six decades. I do so in a basically chronological way and draw on the books that a series of Brookings scholars have written that addressed cross-Strait relations to one degree or another.

[1] Joseph W. Ballantine, Formosa: A Problem for United States Foreign Policy (Washington, D.C.: Brookings Press, 1952).

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Richard C. Bush III

Publication: National Chengchi University

Facing Mainland China: Taiwan’s Future Challenges

Richard C. Bush III — Wed, 10 Apr 2013 00:00:00 -0400

Editor's Note: The following speech was delivered at Tamkang University in Taiwan on April 10, 2013.

It is a great pleasure to have the opportunity to speak at Tamkang University. I was first on your campus almost thirty years ago when I was working as a staff member in the US Congress and my boss, the late Congressman Steve Solarz spoke here. I have probably made visits since then but really can’t remember when they were. In any event, it’s great to be back. Thank you, Dean Dai, for that kind introduction. It’s always good to see Professor Lin, who was a visiting fellow at the Brookings Institution in the first year I worked there.

The topic I picked for my speech today is “Facing Mainland China: Taiwan’s Future Challenges.” Actually, Taiwan has faced challenges stemming from the Mainland for a long time, actually for more than six decades. But the challenges today and in the future are more complex and consequential than ever before. The choices for Taiwan will be difficult, and it is important that they be made well. To avoid making choices is also a choice.

Actually, it’s a bit presumptuous for an outsider to try to give advice to the citizens of another country, particularly a democratic country, on the challenges they face and how to face them. In a profound way, that really is their business. And I readily acknowledge that my own country is having great difficulty meeting its formidable challenges. But my ties to Taiwan were first formed almost forty years ago, and have only grown over time. I care very much what happens to this island and its people. So I hope you will permit me to make a few observations on my topic. I won’t talk for too long, because I want plenty of time for questions.

To begin, it is worth noting that Taiwan would face some difficult challenges even if China were not such an important factor. That is because Taiwan, like some other places in East Asia, has entered a transition in its social and economic development that requires new policy models. Even if China did not exist, these challenges would press Taiwan.

In addition, Taiwan’s economy is increasingly post-industrial and is finding it harder to remain both competitive in the global economy and provide good jobs and good wages for all. Income inequality is trending upward. The unemployment rate was higher in this past decade than it was in the 1990s (1-3 percent). The central government budget has been basically flat over the last few years, government debt is growing, but the tax burden of Taiwan citizens is fairly light (58^th among a group of 65 more advanced countries). The island has already begun to move, correctly, to a knowledge-based economy, but there a still a large number of small, inefficient, family operations. And for a knowledge-based economy, its companies will need people with the right kinds of skills, which probably requires reform of the education system.

If these challenges weren’t enough, demography makes them much more difficult. Taiwan’s total population will peak relatively soon, probably in 2025. The working age population will decline from 74 percent of the total today to around 67 percent in 2025; the elderly’s share of the population will increase from 11 percent today to 20 percent. That means that smaller numbers of workers will be supporting more and more old people. By 2060, half the population (workers) will be supporting 40% of the population (retirees). To make this specific, the students in this room will have to pay for the pensions and health care of your professors after they retire. And as long as young people either don’t get married or don’t have children, that situation will continue.

So even if China did not exist, Taiwan would face tough choices as a society: choices between economic prosperity on the one hand and social welfare—for the old and the young—on the other. But China does exist. It provides Taiwan with opportunities, to be sure. Many of you young people may work on the Mainland. But China is a source of insecurity for Taiwan, and so an added challenge. So the task for the island’s leaders and citizens will be to balance their desire for security, prosperity and welfare.

Let me turn now to the various challenges that Mainland China poses for Taiwan.

The first and fundamental challenge is Beijing’s ultimate objective regarding Taiwan, what it calls “peaceful unification” under the one country, two systems formula. In effect, it wishes to have Taiwan become a special administrative region of the People’s Republic of China, with a status essentially the same as Hong Kong and Macau.

Now Taiwan has always said “no” to one country, two systems (1C2S), and there is little public support for it. It’s important, however, that Taiwan people have a substantive foundation for their opposition rather than be opposed for opposition’s sake. To my mind, there are at least two reasons. The first that there are a serious conceptual differences between Beijing and Taipei over whether Taiwan is a sovereign entity in two important respects: first, the island’s international role, and second, cross-Strait relations. Essentially, this is the issue of the Republic of China, and there is a broad consensus here that the ROC does exist, while Beijing’s formal view is that the ROC hasn’t existed since the founding of the PRC. For Hong Kong and Macau, 1C2S granted a “high degree of autonomy” but not sovereignty. Beijing remains the exclusive sovereign. To my mind, this disagreement over sovereignty is rather fundamental.

The second reason is what 1C2S would mean, hypothetically, for Taiwan’s democracy after unification. Hong Kong is important here as well. When crafted the Hong Kong political system over twenty years ago, through the Basic Law, it skewed the electoral process in ways that made it difficult—or impossible—for individuals and political forces it does not like to come to power. We of course don’t know whether China, as part of a unification deal, would seek to change Taiwan’s political system so that it has the same effect as in Hong Kong. If it did, however, the DPP, which today is a significant portion of Taiwan sentiment, would be marginalized.

But that is just my view. What’s important is how Taiwan citizens and leaders think about this.

When the results of the 2012 presidential elections were announced on the evening of January 14^th last year, President Ma Ying-jeou said that he would “safeguard the sovereignty of the Republic of China with my life.” That’s a strong statement, and I am pretty sure that President Ma knows what he means by it. But I believe that Taiwan as a whole could broaden and deepen its understanding of the sovereignty concept. In this regard, it would be particularly useful for each of the major political parties to come to their own internal consensus and then work on a cross-party consensus.

So Challenge Number One is Beijing’s current ultimate goal, unification under 1C2S. That option – and it’s an option only – creates Challenge Number Two. That challenge is the possibility that as the ROC government negotiates with Beijing today, it may make concessions that undermine its claim of sovereignty when it comes to resolving the fundamental cross-Strait dispute. Note that Beijing has a similar challenge: as it negotiates with Taipei today, it wishes to avoid making concessions that undermine 1C2S.

This challenge has been around a long time – for both sides. It is one reason that cross-Strait relations were so difficult from the early 1990s until 2008, to the point that the United States occasionally feared that the two sides might slide toward a conflict that neither intended. This short term-long term problem remains today. Some in Taiwan say that the Ma Administration has damaged Taiwan’s sovereignty in the way it negotiated various economic agreements like ECFA without specifying exactly how. My own analysis concludes that the Ma Administration has not negotiated badly and has preserved Taiwan’s position on this key issue. But it will become important if and when the two sides begin discussions on political and security talks, because sovereignty is an inherently political issue. Which is one reason why those talks are so difficult to start, and may not start anytime soon.

Challenge Number Three is different. It concerns not the content of cross-Strait negotiations but how Beijing seeks to promote its goals concerning Taiwan. Here we need to think about how China is pursuing its objectives regarding Taiwan, and I find it useful to distinguish analytically between two different ways or paradigms: the paradigm of mutual persuasion and the paradigm of power asymmetry, which is different.

Essentially, the paradigm of mutual persuasion is a shared approach of negotiation, persuasion, incrementalism, and mutual adjustment. I would argue that this is the approach that the two sides have followed since Ma Ying-jeou took office. It is part of what Beijing understands by its concept of peaceful development. It is in Taiwan’s interest that mutual persuasion continue (also, I would argue, it is in China’s and America’s interest).

The paradigm of power asymmetry is different. Here, China would exploit the growing power gap with Taiwan – economic, diplomatic, military, and so on – by pressuring Taiwan to accept a resolution of the fundamental dispute more or less on its terms, and even though many in Taiwan would be unhappy about submitting in this way. But listen to how one influential PRC scholar of cross-Strait relations has put the matter: “The severe asymmetrical balance of power between mainland China and Taiwan is a fact that no one can change. Moreover, this problem . . . will continue to increase, a situation that Taiwan needs to handle pragmatically and calmly.” We can speculate on what the scholar means by “pragmatically and calmly.”

Why would Beijing decide on a shift in paradigm? First of all, it might do so if it decided, based on its perceptions or misperceptions, that a future Taiwan government was moving towards de jure independence, and if it could not get Washington to restrain Taipei.

But let us assume, purely for purposes of discussion, that the KMT remains in power, why then might Beijing decide to shift to a strategy of pressure and intimidation? This would happen, I speculate, if it became impatient and decided that Taiwan would never move from the status quo to unification. We have seen hints of that impatience in Chinese suspicions that President Ma’s true objective was “peaceful separation” with a “two Chinas” or “one China, one Taiwan” character. And recall that one of the circumstances specified in the 2005 anti-secession law is that “possibilities for a peaceful reunification should be completely exhausted.”

Now I actually don’t think that China will lose patience in the foreseeable future – for the rest of President Ma’s second term, perhaps. I believe that the PRC officials responsible for the conduct of cross-Strait relations are realistic about the views of the Taiwan public and the limits that places on the Taipei government. They seem to believe that time is on Beijing’s side. On the other hand, I don’t know what “new thinking” Xi Jinping may have concerning Taiwan policy, and recent statements by PRC officials urge movement on political issues. So it’s impossible to know whether Beijing’s patience will last indefinitely. No-one should assume that it will.

Note that when I talk about a Chinese strategy of pressure and intimidation, I don’t mean the use of force or even the explicit threat of force. In a situation of power asymmetry, the stronger power need not act overtly to compel the weaker power. In the Taiwan case, Beijing might conclude the very fact that Taiwan is quite dependent on the Mainland economically and the mere existence of its increasingly robust military capabilities will be sufficient to secure Taipei’s submission more or less on its terms.

Obviously, a pressure strategy would create a great challenge for Taiwan. It would. I think, create intense pressure on Taiwan’s leaders and turmoil among the public. The political system would be under tremendous strain.

So what should Taiwan do about this situation? This is my final challenge, the challenge of self-strengthening. It is really a set of challenges. And Taiwan isn’t the only country that needs to strengthen itself from within. In my view, frankly speaking, there is a lot that the United States must do to strengthen itself from within in order to rebuild the pillars of national power that have permitted it to play a dominant role in world affairs since World War II.

I have already referred to the first of these self-strengthening challenges. It is to maintain and enhance Taiwan’s global economic competitiveness in spite of the demographic shift. This requires the continued building of a knowledge-based, innovation-driven economy, and all that this implies for education, financial markets, and the level of government regulation. It requires that the Mainland side properly protects the intellectual property owned by Taiwan companies.

But economic self-strengthening also requires liberalizing its economic ties with all its major trading partners, not just China. To liberalize with China alone runs the risk of being too dependent on the Mainland. Liberalizing with all major trading partners will require eliminating some protectionist barriers, but the structural adjustment that this stimulates will work to Taiwan’s benefit. In fact, this is the policy of the Ma Administration.

I have also suggested that n terms of fundamental policy, it is a good idea for Taiwan to foster a clearer sense of what it means to say that Taiwan or the ROC is a sovereign entity, not just for its role in the international system but also regarding cross-Strait relations and the domestic political system. This will ensure that if and when political and security talks come, Taiwan’s negotiators will no what aspects of sovereignty are relatively minor and can be conceded and which are so important that they must be defended at all costs. One part of this self-strengthening will be public education so voters understand along with officials.

Diplomatically, Taiwan should ensure that its relationships with its most important diplomatic partners are strong and positive. This includes, of course, the United States and Japan, but also the principal countries of Western Europe. In this regard, I am pleased to report that relations with the United States have improved in recent years.

Militarily, Taiwan should skillfully enhance the deterrent capabilities of Taiwan’s armed forces. By this I mean raising the costs and uncertainties for Beijing if it were ever to mount an intimidation campaign, which at least implies a willingness to use force. Here, I associate myself with the Obama Administration which, in the words of one official, believes that “Lasting security cannot be achieved simply by purchasing limited numbers of advanced weapons systems. Taiwan must also devote greater attention to asymmetric concepts and technologies to maximize Taiwan’s enduring strengths and advantages.”

Finally, there is the question of the political system. Frankly, I believe that Taiwan’s political system tends to focus on relatively superficial issues – such as the security of President Ma’s daughter – rather than on the fundamental challenges that face the island. Politicians are aided in this tendency by this mass media.

Now, I understand that this is a structural problem, created not by individual politicians or media companies but by the nature of competition within both the political and media world. I also believe that Taiwan is better off having a democratic system than something else, in part because it creates a challenge for Beijing – that if it wishes to achieve its political goals concerning Taiwan, it will have to satisfy a broad spectrum of public opinion. And I realize that reforming a political system is very hard to do. Just look at the similar problems that exist in the United States. But it is Taiwan’s political system that will be the mechanism by which self-strengthening occurs in the other areas I have mentioned. So if that mechanism is not strong and effective itself, everything else will be difficult. The fundamental question is, are the people of Taiwan being well served by their political system.

None of these forms of self-strengthening will be easy, particularly in a divided polity. But they are areas where a broader and deeper Taiwan consensus will buoy Taiwan’s psychological confidence and reduce the chances of PRC pressure in the first place. In this regard, young people have a special role to play, for the simple reason that over the long term, you have the most at stake. On the other hand, for Taiwan to remain divided and forego the opportunity for self-strengthening only increases the island’s vulnerability. And it will be young people who have the most to lose.

My final question, Question 8, is what are the implications of all of this for the United States? You may have seen the policy brief of mine that Brookings issued recently, so I will just summarize its conclusions.

First of all, the fact that stabilization has only gone part way and could stall should allay any American fears that, in effect, Taiwan will “abandon America” for the sake of its relationship with China.

Second, it would be unwise for the United States to “abandon Taiwan” for the sake of its relationship with China. I and other scholars have offered several compelling reasons why this is so (as long, of course, as Taiwan desires American support):

First of all, Although Taiwan has at times been the most important source of U.S.-China differences, it is not the only one. Frictions over maritime East Asia and North Korea are examples. So conceding to Beijing on our security relationship with Taiwan would not necessarily foster a more friendly China.
Second, U.S. allies and partners—Japan, the Republic Korea, and others not necessarily in the Asian region—have much at stake in Washington’s future approach to Taiwan. Simply put, a United States that would abandon Taiwan could abandon them too.
Third, whatever China says, U.S. arms are actually not the reason that Beijing has been unable to bring Taiwan “into the embrace of the Motherland.” More to the point, China has not been able to persuade Taiwan’s government and public to accept its “one country, two systems” formula. If China were to make an offer that was actually to Taiwan’s liking, Taipei would not refuse that offer because of U.S. arms sales.
Fourth, there have been points in the past when the United States has acted in ways that placed Taiwan in a vulnerable position. Most or all of those occurred before the people of Taiwan had any say in their future, as they clearly do now. I hope that we don’t repeat this unfortunate history.

Finally, how a status quo United States and a reviving China cope with each other will be played out over the next few decades in a series of test cases. North Korea, maritime East Asia, and Iran are a few of them. Taiwan is another. Should the United States concede to China on Taiwan, the lessons that Beijing would learn about the intentions of the United States would likely discourage its moderation and accommodation on other issues like North Korea or maritime East Asia; in that respect, America’s friends and allies are right. Continuity of U.S. policy toward Taiwan will not guarantee that China’s actions in other areas will support the status quo, but it increases the likelihood that it will. Conversely, a China that addresses its Taiwan problem with creativity and due regard to the views on the island says something positive about what kind of great power the PRC will be. A more aggressive approach, one that relies on pressure and intimidation, signals reason for concern about its broader intentions. In this regard, Taiwan is the canary in the East Asian coal mine.

Authors

Richard C. Bush III

Publication: Tamkang University

Image Source: © Reuters Photographer / Reuters

China Needs Political Capacity, Courage to Force Change

Kenneth G. Lieberthal — Sat, 30 Mar 2013 00:00:00 -0400

Editor's note: In an interview with Business Standard, Kenneth Lieberthal explains what talks about the changes China is likely to see under the new leadership, the prospect of China-India relations and China’s relations with its neighbors. Read an excerpt below.

Business Standard: What does the change of guard in China mean for the nation internally? What does it mean for the outside world?

Kenneth Lieberthal: There's been a 70 per cent turnover of the leadership of the Communist Party of China (CPC), government and military in November last year and March this year. They have a good idea about the challenges China faces. But whether the new leadership has the political capacity to meet these challenges is the question.

The leadership understands that the development model on which China has been operating its economy for the last few decades is no longer viable: it was a natural resources-intensive model that has led to deepening inequalities, environmental destruction and corruption.

The assumptions on which the model was based are no longer valid. The assumptions were that China can develop based on continuing to expand exports rapidly, leveraging a large, cheap, young and flexible pool of labour, and counting on social tolerance of various problems such as inequality, corruption, and pollution as the inevitable costs of transitioning from plan to market.

The new model is significantly different. It sees a bigger contribution to the Chinese economy from services - versus manufacturing - and visualises a bigger contribution by the Chinese private sector. It envisions a much bigger social safety net, accelerated urbanisation and an increase in domestic consumption as a driver in the domestic economy. It wants to see the Chinese economy become innovative and high quality.

Today, while everyone knows what the objectives are, if the political capacity is missing, these objectives cannot be achieved. Will the changes in the political leadership produce the necessary changes in the economy?

Authors

Kenneth G. Lieberthal

Publication: Business Standard

Image Source: © Jacky Chen / Reuters

China’s Rise: Assessing Views from East Asia and the United States

Fri, 29 Mar 2013 09:00:00 -0400

Event Information

March 29, 2013
9:00 AM - 1:00 PM EDT

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

Register for the Event
The opportunities and challenges presented to East Asia by China’s rapidly increasing international stature, economic influence and military heft have been thrown into sharp relief over the last few years. Escalating tensions over a series of maritime territorial disputes have contrasted with a marked improvement in cross-strait relations and with efforts by China to pursue free trade agreements with ASEAN countries as well as Japan and South Korea. Until recently, however, scholars who follow this issue have not had access to survey data that might allow them to draw more specific conclusions about the attitudes of other East Asians towards the rise of China.

On March 29, the John L. Thornton China Center and Center for Northeast Asian Policy Studies at Brookings, the Program for East Asia Democratic Studies of the Academia Sinica and National Taiwan University, and the Institute of Arts and Humanities of Shanghai Jiaotong University will host a half-day conference to address this question. At the conference, panelists will present data from the Asian Barometer Survey and compare these findings with prevailing survey data in the United States. Leading experts from both sides of the Pacific will weigh the potential implications of these studies for future relations between China and other East Asian countries and for U.S.-China relations.

After each set of presentations, speakers will take audience questions.

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Event Materials

The 2013 People’s Congress: A New Government, A New Direction?

Kenneth G. Lieberthal — Thu, 28 Mar 2013 17:00:00 -0400

In China, where the 12th National People’s Congress officially selected its new leadership, many economic, domestic and foreign policy challenges persist. My colleagues Cheng Li, Jonathan Pollack, Feng Wang, Ran Tao and I discussed China’s most pressing issues and possible outcomes.

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BRICS and China’s Aspiration for the New “International Order”

Yun Sun — Mon, 25 Mar 2013 16:24:00 -0400

The destinations of new Chinese leader’s first foreign tour are always carefully chosen and reflect two things: 1) They are important countries and represent certain foreign policy priorities for China, and 2) they are China-friendly, therefore the new leader will be met with open arms and a warm welcome rather than difficult questions or a long list of demands. Russia, China’s close neighbor and former ally, fits the profile and has been the first destination for both former President Hu Jintao in 2003 and for Xi Jinping this year. However, a decade ago, Hu focused on China’s periphery—Russia, Kazakhstan and Mongolia—while today Xi is taking China’s agenda further away. With the exception of Russia, Xi’s foreign tour focuses on Africa: specifically Tanzania, South Africa and the Republic of the Congo. The highlight is the fifth BRICS (Brazil, Russia, India, China and South Africa) summit in Durban, South Africa from March 26-27.

The unprecedented level of emphasis the new Chinese leader is attaching to the BRICS nations reflects the profound changes in China’s perceptions of itself and of the outside world. In the past decade, China has grown into the second largest economy in the world. However, this economic muscle is yet to be translated into comprehensive national power and the United States, despite its relative decline, remains the sole superpower in China’s foreign policy lexicon. As the U.S. rebalances to Asia, China feels a heightened pressure in its immediate periphery from Washington’s enhanced military deployment, alliances and “interference” in China’s territorial disputes. As the new Chinese leaders contemplate how to break away from this new “containment and encirclement of China,” the reliance on and cooperation with non-Western, rising economic powers are of high importance for China.

China sees natural common ground with emerging economies, especially in the pursuit of a new international economic order and the democratization of international relations. In Beijing’s view, the 2008 financial crisis dramatically changed the mapping of the world economy, deeply damaging the strength of the traditional developed countries. The economic recovery of the U.S. and Japan has been sluggish, while the eurozone crisis has lingered on for years. The relatively impressive momentum for growth comes from emerging economies, especially the BRICS nations.

For China, since the BRICS countries’ share and importance in the world economy has been growing but has not yet surpassed the developed countries’, the next step, naturally, would be for them to act as one group to increase their collective voice and bargaining power against traditional developed countries. In China’s view, this momentum would democratize international relations by offering developing counties more voice and rights. As Xi pointed out in his interview with journalists from BRICS nations right before his trip on March 19, the international economic governance system must reflect the profound changes of the global economic reality, and emerging markets/developing countries deserve more representation and bigger voices. The reform of voting rights at the IMF and World Bank signifies the direction to which China aspires—in Beijing’s dictionary, more responsibility is only justified when it is accompanied with more rights.

China also wishes to strengthen its identity as an emerging economy and a developing country by enhancing its contribution to the BRICS nations and their international status. Xi pledged to deepen the cooperative partnership and improve the cooperation mechanism among the BRICS nations. One possible major move would be the potential plan for the BRICS countries to establish their own development bank to provide funding assistance to Africa’s infrastructure development. If this plan transpires, it would demonstrate a major advancement by China in the field of international development assistance. By forming a de facto alliance among themselves, BRICS nations will gain more legitimacy and increase competitiveness for their development assistance, which is often criticized and even marginalized by traditional donors.

Xi’s first overseas trip reveals the international quagmire China is in. The past 10 years witnessed unprecedented growth of Chinese economy, but it was also accompanied by unparalleled foreign policy challenges. As many Chinese analysts observed, China’s external environment did not improve as a result of China’s rise, instead, it has worsened. China has become richer, but less respected. It has more transactions with the world than ever, but less friends.

Therefore, Xi’s trip to Russia, Africa and the BRICS summit genuinely reflects China’s strategic moves to break away from this predicament. It seeks to reconsolidate friendship with a Russia also antagonized by the West, with Africa to reinforce its developing-country identity and solidarity with the developing world, and with other emerging economies to align their collective power against the traditional developed countries. China learned its lesson that it is yet to be strong enough to challenge the existing international order (and the supremacy of the U.S.) alone. Alignment with other rising powers, like the BRICS countries, and reinforcement of its friendship base among developing countries will be a new emphasis for China’s foreign policy in the foreseeable future.

Authors

Yun Sun

Lifting the Veil: Book Review of China’s Superbank

Erica S. Downs — Wed, 20 Mar 2013 16:27:00 -0400

What do the Three Gorges Dam, local-government investment companies (LICs), the China-Africa Development Fund, Huawei’s transformation into a global player, China’s world-beating solar technology companies, and the issuance of tens of billions of dollars in energy-backed loans all have in common? They were financed by China Development Bank (CDB), one of China’s most powerful institutions and an increasingly important player on the world stage.

Despite CDB’s central role in developing China’s economy and bankrolling the international expansion of Chinese companies, China’s biggest policy lender rarely makes an appearance in most English-language chronicles of the country’s economic rise. All the more reason then to praise a superbly researched new book, written by two Beijing-based reporters for Bloomberg, in which CDB finally makes a star turn. In China’s Superbank: Debt, Oil and Influence—How China Development Bank is Rewriting the Rules of Finance, Henry Sanderson and Michael Forsythe chart CDB’s transformation from an ATM for officials financing pet investment projects into “the world’s most powerful bank.” Lifting the veil on one of global finance’s least understood institutions, the book is essential reading for anyone seeking insight into the workings of Chinese state capitalism.

Read the full review »

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Authors

Erica S. Downs

Publication: China Economic Quarterly

Image Source: © Mohamed Nureldin Abdallah / Reuters

Examining U.S. Concerns on Trade, Security as China Welcomes New President

Kenneth G. Lieberthal — Thu, 14 Mar 2013 00:00:00 -0400

Editor's note: China officially installed Xi Jinping, already the Communist Party leader, as president for the next 10 years. In an interview with PBS's Judy Woodruff, Kenneth Lieberthal discusses contentious issues of trade, defense, and cybersecurity for China and the U.S. Read an excerpt below.

Judy Woodruff: And let me start with you, Ken Lieberthal. What do we need to know about Xi Jinping? Tell us something about him.

Kenneth Lieberthal: The most important thing we need to know is that he's going to govern China for the next decade.

And the next decade is going to be enormously important for U.S. interests, for China, for Asia and globally. He's worked his way up through every level of the Chinese political system, so he's a very experienced politician and administrator.

He's come in on a program of saying he's going to clean up corruption, he's going to revitalize the Communist Party and keep it in power and use his capabilities to reform the Chinese economic system while maintaining and building military strength.

Authors

Kenneth G. Lieberthal

Publication: PBS Newshour

Image Source: © China Daily China Daily Information Corp - CDIC / Reuters

High Expectations for China’s National People’s Congress

Cheng Li — Fri, 01 Mar 2013 00:00:00 -0500

Editor's Note: In an interview with The Wall Street Journal’s Tom Orlik, Cheng Li provides his analysis on what to expect at the upcoming National People’s Congress, where China’s new leaders will be officially installed. Read an excerpt below.

Tom Orlik: Some people’s expectations for the NPC seem to be quite low, why is that?

Cheng Li: Many observers are cynical about any substantial policy changes. That’s due to resistance from powerful interest groups, lack of consensus in the leadership, and because Xi Jinping and Li Keqiang need time to consolidate their power and place their people in the right places.

In addition, some of China’s leaders may not want to generate high expectations prior to the NPC meetings. That helps reduce political pressure and could pleasantly surprise the public and business communities if there are major policy initiatives.

There’s also a historical precedent for having big policy decisions come at the third plenary meeting of the Central Committee of the Chinese Communist Party in October following the NPC meeting rather than at the NPC meeting itself.

Orlik: You have higher expectations?

Li: I believe that we will see the announcement of some important policy initiatives at the NPC, for several reasons:

First, there is a sense of urgency on the part of Mr. Xi to lift public confidence by initiating major policy changes, especially to please the middle class and to do so now rather than waiting another seven months.

Second, Mr. Xi is now in his “honeymoon period,” and he should cash in his political capital to carry out new policies promptly.

Third, in contrast to the previous 10 years when there was often policy deadlock resulting from the factional infighting of the top leadership, Mr. Xi now has a six-to-one concentration of power in the Politburo Standing Committee — a great advantage that should allow him to do substantive things .

And fourth, Li Keqiang is under tremendous pressure to demonstrate his leadership ability. Evidence seems to suggest Messrs. Xi and Li understand very well their need to support each other. Their different policy preferences can also complement each other, resonating well in different sectors and with different classes throughout the country.

Still, some eagerly awaited policy changes – like land and hukou reform – are not in the interest of the middle class, and so we may only see lip service paid to some of these policy areas. But from the perspective of the Chinese leadership, the interests of vast numbers of farmers, migrant workers and urban poor should also be addressed.

Read the rest of the interview at The Wall Street Journal »

Authors

Cheng Li

Publication: Wall Street Journal's China Real Time Report

Image Source: © China Daily China Daily Information Corp - CDIC / Reuters

Population, Policy, and Politics: How Will History Judge China’s One-Child Policy?

Feng Wang, Yong Cai and Baochang Gu — Mon, 25 Feb 2013 00:00:00 -0500

One of the main puzzles of modern population and social history is why, among all countries confronting rapid population growth in the second half of the twentieth century, China chose to adopt an extreme measure of birth control known as the one-child policy. A related question is why such a policy, acknowledged to have many undesirable consequences, has been retained for so long, even beyond the period of time anticipated by its creators.

With the world’s population growth rate now at half its historical peak level and with nearly half of the world’s population living in countries with fertility below replacement level, we can look back at the role politics played in formulating, implementing, and reformulating policies aimed at slowing population growth (Demeny and McNicoll 2006; Robinson and Ross 2007; Demeny 2011). In this context, an examination of China’s unprecedented government intervention in reproduction offers valuable lessons in appreciating the role of politics in the global effort of birth control in the twentieth century.

Aside from the rise and fall of Communism, family planning programs along with the Green Revolution could be considered two of the most consequential social experiments of the twentieth century. These two experiments differ, however, in both content and approach. The Green Revolution was aimed at feeding the population, while family planning programs were designed to curtail its growth. The Green Revolution was technological, economic, and global, while family planning programs were social, political, and often country specific.

Nowhere in the world did politics and policies figure more prominently in the effort to control population growth than in China. The policy of allowing all couples to have only one child finds no equal in the world and it may be one of the most draconian examples of government social engineering ever seen. In this essay, we cast China’s one-child policy in the changing global context of population policymaking, we revisit the supposed necessity of such a policy by examining the claim that the policy was responsible for preventing 400 million births, and we discuss the reasons such a policy, with all its known negative consequences, has been allowed to stay in place for more than thirty years since its inception.

Editor's Note: this paper first appeared in Population and Development Review, published by the Population Council.

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Authors

Feng Wang
Yong Cai
Baochang Gu

Publication: Population and Development Review 38 (Supplement): 115–129 (2012)

Issue Brief: Water Resource Issues, Policy and Politics in China

Scott Moore — Tue, 12 Feb 2013 13:16:00 -0500

Editor’s note: Scott Moore is Giorgio Ruffolo Doctoral Research Fellow at the Belfer Center for Science and International Affairs, Harvard Kennedy School. He was a guest researcher at Brookings’ John L. Thornton China Center and Brookings-Tsinghua Center for Public Policy in the spring of 2012. His research project was made possible by the generous support of the Ford Foundation.

Among the many challenges to China’s current economic development trajectory, water resource constraints are among the most worrisome. According to Barry Naughton, one of the foremost experts on the Chinese economy, “China’s greatest development challenges…are in the areas where a dense population pushes up against the limits of water and what the land can provide.”[1] The water resource challenge to China’s development is exceptionally complex, encompassing a blend of geographical, political, economic, and social dimensions. This Issue Brief describes the root causes of China’s water resource challenge, assesses the Chinese government’s policy response to date, and finally offers recommendations to increase the effectiveness of these policies.

In short, China’s water resource challenge consists of both water quantity and quality issues, each of which present distinctive challenges for Chinese policy. Although the Chinese government is implementing perhaps the world’s most ambitious water resource management strategy, its efforts risk being undermined by inter-governmental rivalries, corruption, and incentives that favor economic development over sustainable resource use. In particular, inter-jurisdictional conflicts over water resources threaten to undermine policies to address water scarcity, while mis-matched incentives between pollution control and economic development at local levels of government threaten to undermine water quality control objectives.

Plenty of water, in all the wrong places

In aggregate, China possesses substantial water resources, constituting the world’s fifth-largest national endowment of fresh water. By per-capita standards, however, China’s water resources are much more modest at approximately 2000 cubic meters per person annually, as compared to a global average of about 6200 m³/person/year.[2] These aggregate statistics nonetheless conceal marked regional discrepancies in precipitation and irrigation patterns, which combined with uneven distributions in population and economic activity mean that some areas possess plentiful water resources while others face chronic and crippling shortages. While residents of the sparsely populated, mountainous southwest enjoy some 25,000 cubic meters of freshwater per person annually, those of the populous and arid north have less than 500.[3] Some of China’s largest and fastest-growing urban areas, notably Beijing and Tianjin, and its most water-intensive crops, especially wheat, are located and grown in the arid north, where annual precipitation is less than one-third of that in southern coastal areas. For the past few decades, water-stressed areas have relied on groundwater to make up the difference, but since at least the 1970s rates of withdrawal have become unsustainable, and water tables are dropping by approximately one meter annually throughout the North China Plain.[4] Apart from making water more difficult and expensive to access, over-pumping of freshwater allows saltwater to penetrate aquifers in some areas, rendering them unfit for human consumption.[5]

Other factors exacerbate this fundamental geographic mal-distribution of water availability and demand. Climate change is expected to intensify aridity in northern China,[6] enhancing its scarcity of both surface and subsurface water supplies. Moreover, although the arid north depends on irrigated agriculture, its irrigation systems are exceptionally inefficient. Less than half the water withdrawn for irrigation actually reaches crops because of leaky equipment and rapid evaporation, while the overall economic productivity of water is about US$3.50 per cubic meter, compared to a developed-nation average of US$36.[7] Rising demand for water-intensive crops like wheat,[8] as well as other commodities which require large quantities of water to produce, process, and refine, further stress water resources. China’s coal use, in particular, contributes to its water scarcity challenges—independent estimates suggest that it takes between 800 and 3000 gallons of water to process a ton of coal.[9] China's largest coal basin stretches across five provinces in the North, and the scarcity of water there is already constraining production, especially for smaller, less-efficient mines. These growing pressures on water resources, particularly in north China, are of mounting concern to the Chinese government. The Vice-Minister for Water Resources confided last year that China faces an “increasingly grim” water scarcity situation.[10]

The Chinese government has adopted two basic policy responses to the water scarcity problem. First, it has continued to finance the gigantic South-North Water Transfer Project, or SNWTP (Nanshui beidiao gongcheng 南水北调工程). The SNWTP eventually aims to transfer some 45 billion cubic meters of water per year from central and southwest China to augment the flow of the Yellow River and meet urban water demand in the Beijing-Tianjin region. The Project envisions eastern, central, and western routes, of which the first is under construction and the second in a stage of advanced planning. All three routes pose enormous technical challenges: the eastern and central routes will be channeled under the Yellow River, while the western route entails pumping water at elevations of 10-16,000 feet above sea level over part of the Himalayan mountain range.

Although completion of the three routes is expected to meet projected water demand growth in the north, thus redressing China’s fundamental geographic disparity in water availability, its costs will be enormous. Estimates suggest a figure of around US$62 billion, the final cost is likely to be markedly higher. Moreover, estimates of the number of people who must be resettled range from several hundreds of thousands to over a million, adding substantial social disruption to the Project’s total cost.[11] Moreover, the SNWTP has necessitated additional water diversion and storage works to bring water into regions tapped to export water to the north, as well as treatment facilities to ensure that the water is clean enough to supply drinking water to northern cities.[12]

In addition to the supply-augmentation approach represented by the SNWTP, the Chinese government has also attempted to improve water use efficiency and to limit overall demand. A 2002 Water Law attempted to establish a strict licensing regime whereby virtually all water resources were declared to be the property of the state, and water use was made contingent on obtaining a usage license from local authorities. At the same time, the Water Conservancy Commissions (WCCs; Shuili weiyuanhui 水利委员会) established under the Ministry of Water Resources (MWR; Shuilibu 水利部) in China’s major river basins were given comprehensive water use planning responsibilities which were intended to guide local water use licensing.[13] Subsequent regulations[14] have established the basis for water rights trading, and a few such transfers have taken place between municipalities.[15]

In 2010, China’s Communist Party Central Committee and State Council promulgated a “three red lines” (santiao hongxian 三条红线) policy intended to establish clear and binding limits on water quantity usage, efficiency, and quality. In early 2012, the State Council announced that the “three red lines” policy would limit total national water consumption to less than 700 billion cubic meters per year, amounting to approximately three-quarters of China’s total annual exploitable freshwater resources.[16] In addition, the policy attempts to increase irrigation use efficiency to 60% by 2030.[17] These headline policies are augmented by increased investment, including 1.8 trillion RMB in 2011-2015, primarily for irrigation infrastructure improvements, rural clean water delivery, and reservoir enhancements.[18]

In combination, these policies seek to redress China’s regional imbalance in water availability, while making overall water use sustainable. However, they are likely to be undermined by conflict between regions which are asked to bear the costs of storing and transferring water, and those which benefit as a result. The dynamics of these conflicts is illustrated by the case of a dam, first proposed in 1954, intended to be built on the upper reaches of the Yellow River in order to provide water to poor farmers in Ningxia. Gansu Province, claiming that the dam would inundate some of its best farmland, has managed to prevent construction of the dam by lobbying different elements of the central government than those which had supported the dam. The dispute remains unresolved; in 2010, Ningxia’s representatives to the China People’s Political Consultative Conference (zhengzhi xie shanghuiyi 政治协商会议) took the unusual step of presenting a petition to the full Conference to build the dam.[19]

Similarly, water-exporting provinces in central China have complained at the costs they are expected to bear as part of the SNWTP for water treatment, refugee resettlement, and other issues, prompting the central government to impose an “SNWTP tax” on Beijing and other beneficiaries of the project.[20] Similar rivalries threaten to undermine water licensing and water rights trading schemes. In times of shortage, upstream provinces often reduce flows to their downstream neighbors,[21] and regularly appropriate water in excess of MWR quotas.[22] In short, although China’s current policies can theoretically alleviate the geographic imbalance in water resources, they do not adequately address the inter-jurisdictional political and economic conflicts which are likely to result. In a similar fashion, policies to improve water quality are undermined by the complexity of relationships between central and local levels of government.

A crisis of water quality

Water quality is arguably an even more serious problem than is water shortage. In rural areas, where less than half the population has access to purified water, agricultural run-off is the dominant pollution source, while in urban areas human and industrial waste are left largely untreated, contaminating both surface and underground water supplies.[23] Recent reports from China’s environmental protection authorities indicate that in the country as a whole, less than half of China’s water can be treated to the point where it is safe for drinking, and a quarter of surface waters are so polluted that they are unfit even for industrial use. Independent estimates are even more pessimistic.[24]

This crisis of water quality has contributed to a serious environmental health crisis. Arsenic poisoning from contaminated groundwater is thought to be widespread, and in some areas high incidences of particular cancers have been linked to organic water pollution.[25] The ecological impact of high pollution levels is also acute, dramatically reducing freshwater wild fish populations as well as driving larger animals like the baiji (白鱀豚), or Yangtze dolphin, to the very brink of extinction.[26] Water pollution issues have, moreover, proved to be particularly politically contentious. In 2005, the accidental release of some 100 tons of carcinogenic chemicals into a river near China’s northeastern border with Russia produced a diplomatic crisis,[27] and in 2001 pollution from dye factories in Suzhou provoked residents of downstream Jiaxing, Zhejiang Province to pool funds to buy old boats and sink them in the waterway, forming a dam that blocked up the polluted water into neighboring Jiangsu Province.[28]

The Chinese government’s policy responses to water quality issues rely largely on strengthening monitoring capabilities and enforcement mechanisms. The 2008 Water Pollution Law attempted to strengthen earlier legislation by providing for increased penalties, including stiff fines for the executives of polluting enterprises.[29] As part of a broader push to expand monitoring of pollution, Regional Supervision Centers were established throughout China to keep an eye on local enterprises,[30] and water quality bureaus were set up within the MWR’s river basin commissions. This institutional expansion has been complemented by continuing regulatory reform. The “three red lines” policy introduced a new requirement that 95% of tested water must meet national water quality guidelines, which have recently been expanded and updated to cover a wide range of organic and microbial pollutants as well as concentrations of heavy metals.[31] To help meet these standards, the government announced in late 2011 a five-year, 380 billion RMB investment plan to improve urban wastewater treatment facilities, as well as the establishment of some 14,000 monitoring stations throughout the country to continuously monitor water quality.[32]

Just as regional rivalries threaten to undermine water quantity policies, however, bureaucratic fragmentation and capacity discrepancies threaten to de-rail these water quality initiatives. Although MWR is broadly responsible for water project construction and water quantity issues, the Ministry of Environmental Protection (MEP; Huanjing baohu bu 环境保护部) is primarily responsible for water pollution control. MEP is a relatively new entity, having been elevated to ministerial-level status only in 2008, and it is generally less powerful than the older and more established MWR. MEP also lacks institutional capacity relative to MWR; while MEP must supervise hundreds of thousands of enterprises with a core staff numbering in the hundreds, the MWR’s Yellow River Conservancy Commission alone employs some 30,000 people.[33] This imbalance in resources means that MEP relies on local environmental protection bureaus (EPBs), over which it possesses only partial control, to enforce water pollution regulations.

Such incomplete control is a consequence of China’s distinctive tiao-kuai (条块) administrative system, in which officials at lower levels of government are responsible both to line control by functional bureaucracies, such as the various ministries, as well as to territorial government leaders, including mayors and provincial governors.[34] These territorial government cadres are evaluated and promoted based on a detailed set of criteria known as kaohe (考核) which prioritizes economic growth, with the result that they often pressure EPBs to employ “light-touch” regulation, or encourage enterprises to channel pollution into waterways which flow into neighboring jurisdictions. MEP’s difficulty in exercising control over EPBs also stems from China’s decentralized fiscal structure, in which environmental protection authorities are financed largely by pollution fines levied in their individual jurisdictions rather than centrally-disbursed grants. [35]

MEP’s difficulties in exercising sufficient supervision and enforcement of local EPBs are illustrated by a recent chemical pollution incident in Yancheng, Jiangsu Province.[36] In 2004, environmental protection authorities raised concerns regarding water pollution in the city, and in 2005 the Biaoxin Chemical Company was fined for exceeding pollution discharge limitations and ordered to eliminate discharges into waterways within Yancheng. In 2008, local environmental protection authorities decreed that all industrial enterprises were to be re-located away from the city’s river, its primary source of drinking water. These directives were ignored, however, and in 2009 Biaoxin Chemical released large quantities of carbolic acid into the waterway, forcing some 200,000 people to rely on bottled water and wells for several days. MEP called a press conference pledging to punish those responsible, and a subsequent investigation concluded that company officials concluded simply that regulatory “compliance is expensive, evasion is cheap” (shoufa chengben gao, weifa chengben di守法成本高，违法成本低). As a result of the investigation, two local environmental protection officials were fired for neglecting their duties, and another five were reprimanded.[37] Nonetheless, similar if less dramatic releases of highly toxic pollutants remain common, reflecting the institutional barriers to resolving China’s water quality crisis.

Management of the Yellow River: a partial success story

China’s water quantity and quality problems coincide dramatically in the case of the Yellow River, where management efforts in recent decades have partially succeeded in easing chronic over-use of water resources while nonetheless leaving fundamental issues unaddressed. The Yellow is one of the world’s most intensively exploited river systems, being home to some 110 million people in the semi-arid North China Plain. Since the early 1970s, the scale of water withdrawal from the river has meant that it has failed to reach the sea for much of the year, a phenomenon known in Chinese as “desiccation of the Yellow” or Huangehe duanliu (黄河断流). In the early 1980s, the MWR’s Yellow River Conservancy Commission (YRCC; Huanghe shuili weiyuanhui 黄河水利委员会) formulated a provincial water resource allocation plan which granted the more economically-developed provinces of the middle and lower reaches the right to utilize much of the river’s flow. [38] However, rapid population growth and economic development along the upper reaches outstripped estimates, and in 1995-1998, the Yellow failed to reach the sea for about 120 days each year, in some years failing even to reach Shandong Province.[39] Consequently, in 1998 the YRCC promulgated more strict provincial water use regulations[40] and began planning a sophisticated “Digital Yellow River” (shuzi Huangehe 数字黄河)system to monitor water use and flow conditions in near-real time.[41]

These efforts have been successful in halting the desiccation of the Yellow, which has continually reached the sea since 1999. However, flows remain below levels considered necessary to satisfy ecological needs, and water quality has continued to deteriorate, with the percentage of river water designated as “Class V” or lowest-quality water increasing from 34 to 42% from 1998-2001.[42] Much of these lingering problems stem from the inter-jurisdictional conflict and mismatched incentives described above. Referring to the 1998 regulations, a 2011 YRCC report acknowledged that “In implementing the Yellow River water quantity regulations, there exist some localities which do not put into practice the water quantity allocation and dispatch plan, and exceed the allocation limits in using water resulting from inter-provincial flows not according with control limits.”[43] A recent Caijing news report likewise notes that provinces skirt Yellow River allocation rules by extracting water from tributaries of the Yellow before it enters the main stream. “Tributary water quantity allocations are not clearly defined,” the report notes, “meaning that each province can utilize water before it enters the Yellow River, and before it becomes part of the Yellow River water quantity allocation limits.”[44] The case of the Yellow River thus illustrates that while China has the capacity to address some of its pressing water resource challenges, fully meeting them will require deeper and more systematic reform of governance systems and institutions.

Water Scarcity and Pollution: Constraints on China’s future?

China’s water resource challenges are acute, but it has also developed a substantial policy infrastructure to meet them. What remains is to ensure that policies to address water scarcity and to improve water quality are implemented effectively and efficiently. The barriers to policy implementation identified in this Issue Brief reflect some deep-seated and systematic issues in China’s governance system. Inter-jurisdictional and inter-agency coordination, cooperation, and communication mechanisms are under-developed, while weaknesses in the rule of law undermine regulation and enforcement procedures. Fully addressing water quantity and quality issues therefore entails some basic and systematic institutional and political reforms, all of which will require substantial political will. Nonetheless, if this can be mustered, five reforms would greatly aid China in addressing water resource quantity and quality issues.

First, the Party’s cadre evaluation system should be overhauled to emphasize environmental and water resource management metrics. Some reforms have already been undertaken, but economic and stability criteria remain of paramount importance. [45] Although environmental outcomes are more difficult to measure than GDP growth, technologies like those employed in the Digital Yellow River system make it easier to hold cadres responsible for water quality and quantity issues within their jurisdictions.
Second, formalized mechanisms for inter-provincial consultation should be established at regional scales. In particular, provincial governments should be given formal representation on the Water Conservancy Commissions which manage China’s major river basins on behalf of MWR. Although the Commissions maintain extensive links with local governments, formalizing representation would improve stakeholder involvement and enhance policy buy-in.
Third, high-level encouragement should be given to inter-governmental cooperation on water resource issues, which are by nature inter-departmental. As part of this initiative, a high-level working group should be established under the State Council to coordinate policy implementation between MWR, MEP, and other relevant entities, and provide advice to decision-makers. This effort should be led by a senior leader, preferably at the Presidential or Prime Ministerial level, in order to ensure active participation by ministerial units.
Fourth, the central government should aim to strengthen the legal system to enable more effective water rights trading. Title and trading procedures should be clarified, special courts for dispute resolution created, and markets brought to a larger scale. Ideally this effort should be undertaken as part of a broader set of legal reforms which might aim to strengthen judicial independence and the rule of law more generally.
Fifth, both MEP and MWR should encourage the involvement of civil society groups in water pollution monitoring. Although the government is wary of such involvement, it can channel growing concern over water issues for constructive purposes by making civil society groups an adjunct to water pollution monitoring efforts.

The gravity of China’s water resource challenges cannot be overstated—in order to chart a sustainable development pathway in future decades China must use substantially less water much more efficiently, while also improving water quality. The government has built the foundations of a credible policy response, but these must be strengthened, expanded and built upon if China is to avoid a water resource constraint to its future growth and development.

[1] Barry Naughton, The Chinese Economy: Transitions and Growth. Cambridge, MA: MIT Press, 2007, 30.

[2] World Bank, “Renewable internal fresh water resources per capita (cubic meters),” 2012, available at http://data.worldbank.org/indicator/ER.H2O.INTR.PC (accessed October 28, 2012).

[3] UN Food and Agriculture Organization, “China,” 2010, available at http://www.fao.org/nr/water/aquastat/countries_regions/china/index.stm (accessed 22 July 2012).

[4] Eloise Kendy, David Molden, Tammo Steenhuis, Changming Liu, and Jinxia Wang, Politics Drain the North China Plain: Agricultural policy and groundwater depletion in Luancheng County, 1949-2000. Colombo, Sri Lanka: International Water Management Institute Research Report 71, 2003; Jane Qiu, “China faces up to groundwater crisis,” Nature 466 (308): 2010, doi:10.1038/466308a.

[5] KP Chen and JJ Jiao, “Seawater intrusion and aquifer freshening near reclaimed coastal area of Shenzhen,” Water Science and Technology: Water Supply 7 (2007), 137-145.

[6] National Development and Reform Commission, National Climate Change Program. Beijing: National Leading Group on Climate Change, 2009.

[7] UN Food and Agriculture Organization, op. cit.

[8] Jeff Wilson, “Corn, soybeans, wheat gain as China’s demand for imports climbs,” BloombergBusinessweek, October 14, 2011, available at http://www.businessweek.com/news/2011-10-14/corn-soybeans-wheat-gain-as-china-s-demand-for-imports-climbs.html (accessed 28 October 2012).

[9] Keith Schneider, “Choke Point: China – Confronting water scarcity and energy demand in the world’s largest country,” Circle of Blue, February 15, 2011, available at http://www.circleofblue.org/waternews/2011/world/choke-point-chinaconfronting-water-scarcity-and-energy-demand-in-the-worlds-largest-country/ (accessed 28 October 2012).

[10] Zhang Jiaoyong, “Quanguo Shuiziyuan zonghe guihua [Comprehensive National Water Resource Plan],” Huanghe Shuili Weiyuanhui [Yellow River Water Conservancy Commission], August 2011, available at http://www.yellowriver.gov.cn/zwzc/zcfg/zcjd/201108/t20110811_82252.html (accessed 30 March 2012).

[11] Carla Freeman, “Quenching the Dragon’s Thirst: the South-North Water Transfer Project—Old Plumbing for New China?” China Environment Forum Report. Washington, DC: Woodrow Wilson International Center for Scholars, 2011.

[12] See National SNWTP Project Office, “Li Jincheng Fuzhuren diaojiu Nanshuibeidiao dongxian jiewu daoliu gongcheng he zhiwu gongzuo [Vice-Director Li Jincheng inspects the SNWTP east line pollution control efforts]”, available at http://www.nsbd.com.cn/NewsDisplay.asp?id=195490 (accessed 25 July 2012).

[13] Patricia Wouters, Desheng Hu, Zhang Jiebin, Philip Andrew-Speed, and Dan Tarlock, “The new development of water law in China,” University of Denver Law Review, 7, No. 2 (2004), 243-308; Dajun Shen, “River basin water resources management in China: a legal and institutional assessment,” Water International, 34, No. 4 (2009), 484-496.

[14] Nicola Cenacchi, Yunpeng Xue, Fu Xinfeng, and Claudia Ringler, “Water rights and water rights trading: option for the Yellow River basin?,” International Food Policy Research Institute, 2010.

[15] Zhou Jigang, Peng Guangcan, and Ceng Zhen, “Trading water in thirsty China,” China Dialogue, June 26, 2008, available at http://www.chinadialogue.net/article/show/single/en/2144-Trading-water-in-thirsty-China (accessed 28 October 2012).

[16] China Daily, “Water usage to be monitored better,” China Daily, May 8, 2012, available at http://www.china.org.cn/environment/2012-05/08/content_25332381.htm (accessed 28 October 2012).

[17] State Council, “Guowuyuan guanyu shixing zuiyange shuiziyuan guanli zhidu de yijian [State Council Opinion regarding the most strict water resource management system],” State Council Document No. 3 (2012), available at http://www.gov.cn/zwgk/2012-02/16/content_2067664.htm (accessed 25 July 2012).

[18] Xinhua, “China to invest heavily in water conservation,” Xinhua, February 10, 2012, available at http://news.xinhuanet.com/english/china/2012-02/10/c_131403240.htm (accessed 28 October 2012).

[19] Huanghe Shuili Weiyuanhui [Yellow River Water Conservancy Commission], Huanghe Guihuazhi [History of Yellow River Planning], Huanghezhi Quan Liu [Yellow River History Volume 6] (Zhengzhou, China: Henan Renmin Chubanshe [Henan People’s Press], 1991), p. 268-9.

[20] Freeman, op. cit., pg. 5.

[21] Zhou, Peng, and Ceng, “Trading water in thirsty China.”

[22] Caijing, “Huanghe zhengduozhan: shui quan zhuan rang shichanghua jincheng shouzu [Yellow River Turf Battle: Water rights trading hinders the process of marketization],” Caijing News, July 28, 2011, available at http://www.caijing.com.cn/2011-07-28/110791023.html (accessed 28 October 2012).

[23] Xinhua, “Half of China’s urban underground water polluted,” China Daily, May 28, 2012, available at http://www.chinadaily.com.cn/china/2012-05/28/content_15404889.htm (accessed 28 October 2012).

[24] David Stanway, “Pollution makes quarter of China water unusuable: ministry,” Reuters, July 26, 20120, available at http://www.reuters.com/article/2010/07/26/us-china-environment-water-idUSTRE66P39H20100726 (accessed 28 October 2012).

[25] Wen-Qing Lu, Shao-Hua Xie, Wen-Shan Zhou, Shao-Hui Zhang, and Ai-Lin Liu, “Water Pollution and Health Impact in China: a Mini-Review,” Open Environmental Sciences 2 (2008), 1-5.

[26] US National Oceanographic and Atmospheric Administration, “Chinese River Dolphin, “ February 17, 2012, available at http://www.nmfs.noaa.gov/pr/species/mammals/cetaceans/chineseriverdolphin.htm (accessed 28 October 2012).

[27] World Bank, Water Pollution Emergencies in China: Prevention and Response. Washington, DC: World Bank, June 2007.

[28] Tang Zhen and Zhou Haiwei, “Chang Sandiao diqu kuajie shuishi jiufen xieshang mianlin de wenti ji duice [Problems and Solutions Faced in the Resolution of Yangtze Delta Trans-boundary Water Disputes],” Shuili Jingji [Water Conservancy Economics], Vol. 25 No. 2: 2007, pp. 70-77.

[29] Xinhua, “Tougher law to curb water pollution,” China Daily, February 29, 2008, available at http://www.chinadaily.com.cn/china/2008-02/29/content_6494712.htm (accessed 28 October 2012).

[30] Scott Moore, “Shifting Power in Central-Local Environmental Governance in China: the Regional Supervision Centers,” China Environment Series, 11: 2010/2011, 188-200.

[31] Shanghai Daily, “Stricter water standards to be applied nationwide,” May 14, 2012, available at http://english.cri.cn/6909/2012/05/14/1461s699430.htm (accessed 28 October 2012).

[32] Global Water Intelligence, “Five years to clean up China’s wastewater,” Global Water Intelligence 13(1): January 2012, available at http://www.globalwaterintel.com/archive/13/1/general/five-years-clean-chinas-wastewater.html (accessed 28 October 2012).

[33] Interview with foreign consultant to Yellow River Conservancy Commission.

[34] Andrew Mertha, “China’s ‘soft’ centralization: shifting tiao/kuai authority relations,” China Quarterly, 184, December 2005, pp. 791-810.

[35] Abigail Jahiel, “The Contradictory Impact of Reform on Environmental Protection in China,” The China Quarterly, Vol. 149 (1997), pp. 81-103.

[36] For an English account see Dolly Wu, “Two govt officials fired over China’s Yancheng pollution,” ICIS, March 4, 2009, available at http://www.icis.com/Articles/2009/03/04/9197274/two-govt-officials-fired-over-chinas-yancheng-pollution.html (accessed 28 October 2012).

[37] Jean-Francois Tremblay, “Chinese mayor orders chemical plant closures,” Chemical and Engineering News, March 5, 2009, available at http://pubs.acs.org/cen/news/87/i10/8710news4.html (accessed 28 October, 2012).

[38] Li Dong, “Guowuyuan Huanghe fenshui yu shuidiao fangan [State Council Yellow River Water Division and Water Transfer Plan],” Shui Xinxi Wang [Water Information Net], available at http://www.hwcc.gov.cn/pub/hwcc/wwgj/bgqy/jjqk/201003/t20100302_314548.html (accessed 5 April 2012), Guowuyuan [State Council], “Guowuyuan Bangongting Zhuanfa Guojiajiwei he Shuidianbu guanyu Huanghe Kegong shuiliang fenpei fangan baogao de tongzhi [Notice by the State Council Office to the State Planning Commission and the Ministry of Water and Power regarding the Report on the Yellow River Water Use Quantity Allocation Plan],” Guowuyuan Wenjian [State Council Document] 1987, No. 61.

[39] Michael Giordano, Zhongping Zhu, Ximing Cai, Shangqi Hong, Xuecheng Zhang, and Yunpeng Xue, “Water Management in the Yellow River Basin: Background, current critical issues and future research needs,” Comprehensive Assessment of Water Management in Agriculture Research Report 3. Colombo, Sri Lanka: Comprehensive Assessment Secretariat, International Water Management Institute, 2004, p. 19.

[40] Shuilibu [Ministry of Water Resources], “Huanghe Shuiliang tiaodu guanli banfa [Yellow River Water Quantity Dispatching and Management Measures],” 14 December 1998, Tongzhi [Notice] No. 2520.

[41] China Daily, “Yellow River gets digital hydrological station,” China Daily, June 16, 2002. Available at http://www.china.org.cn/english/environment/34780.htm (accessed 28 October 2012).

[42] Giordano et al. 2004, p. 28.

[43] Huangshuihui [YRCC], “’Huanghe shuiliang tiaodu tiaoli’ zhiding yu shijian [Formulation and Implementation of the ‘Yellow River Water Quantity Dispatching Regulations’],” 14 August 2011, available at http://www.yellowriver.gov.cn/zlcp/kjcg/kjcg07/201108/t20110814_103291.html (accessed 5 April 2012).

[44] Caijing [Finance and Economics], “Huanghe shui zhengdouzhan: shuiquan zhuanrang shichanghua jincheng shouzu [Struggle over Yellow River water: water rights transfer and marketization process hits a snag],” 28 July 2011, Caijing Wang [Finance and Economics Net], available at http://www.caijing.com.cn/2011-07-28/110791023.html (accessed 5 April 2012).

[45] Kai-yuen Tsui and Youqiang Wang, “Between Separate Stoves and a Single Menu: Fiscal Decentralization in China,” The China Quarterly, Vol. 177 (2004), pg. 75.

Authors

Scott Moore

China's New Leaders: Rule of the Princelings

Cheng Li — Sun, 10 Feb 2013 00:00:00 -0500

Editor’s note: This article first appeared in The Cairo Review of Global Affairs.

The much-anticipated 18th Party Congress of the Communist Party of China (CPC) in November unfolded according to that classic rhythm in the study of Chinese elite politics: predictability giving way to ambiguity, and optimism alternating with cynicism.

Prior to the announcement of the composition of the new guard, led by new party General Secretary Xi Jinping, many analysts both in China and abroad had believed that the new leadership would continue to maintain the roughly equal balance of power that existed between the Jiang Zemin camp and the Hu Jintao camp. Yet in the end, the results were a huge surprise: the Jiang camp won a landslide victory by obtaining six out of the seven seats on the Politburo Standing Committee (PSC) while only one leader in the Hu camp—Li Keqiang, now designated to become premier in March—was able to keep a seat on this supreme decision-making body.

In the wake of the recent Bo Xilai scandal and the resulting crisis of CPC rule, many had anticipated that party leaders would adopt certain election mechanisms—what the Chinese authorities call “intra-party democracy”—to restore the party’s much-damaged legitimacy and to generate a sense that the new top leaders do indeed have an election-based new mandate to rule. For example, some analysts had anticipated that the CPC Central Committee might use competitive (though limited) multiple-candidate elections to select members of its leadership bodies, such as the twenty-five-member politburo or even the PSC. Such high-level elections, however, did not take place. The selection of elites at this congress continued to be done the old fashioned way—through the “black box” of manipulation, deal-cutting, and trade-offs that occur behind the scenes among a handful of politicians (e.g., outgoing PSC members and retired heavyweight figures—most noticeably the 86-year old Jiang).

What is even more troubling is the fact that four out of the seven PSC members are princelings—leaders who come from families of either veteran revolutionaries or high-ranking officials. It has been widely noted that large numbers of prominent party leaders and families have used their political power to convert state assets into their own private wealth. The unprecedentedly strong presence of princelings in the new PSC is likely to reinforce public resentment of how power and wealth continue to converge in China.

Chinese politics thus seem to be entering a new era characterized by the concentration of princeling power at the top. This gives rise to important questions regarding the nature and implications of the new leadership. What caused the dramatic defeat of the Hu camp in this political succession? Does the six-to-one split of the PSC mean a shift from factional power-sharing to a new “winner takes all” mode of Chinese elite politics? Will the factional imbalance at the top seriously undermine leadership unity and elite cohesion, thus potentially threatening the sociopolitical stability of the country at large? What are the main characteristics of this new princeling elite? What should we expect in terms of economic policies, political reforms, and foreign relations under the Xi Jinping administration? And can the identities of newly promoted leaders help us understand where China is headed?

Because of the key role China plays in the global economy and in regional security, the international community needs to grasp these new tensions and dynamics in the Chinese leadership now emerging at a time when the Middle Kingdom is facing many daunting challenges. How the princelings govern China, especially how state-society relations unfold, will undoubtedly have profound ramifications far beyond China’s borders.

One Party, Two Coalitions

Though China is a one-party state in which the CPC monopolizes power, the party leadership is not a monolithic group. CPC leaders do not all share the same ideology, political association, socioeconomic background, or policy preferences. Two main political factions or coalitions within the CPC leadership have been competing for power, influence, and control over policy initiatives since the late 1990s.

This bifurcation has created within China’s one-party polity something approximating a mechanism of checks and balances in the decision-making process. This mechanism is, of course, not the kind of institutionalized system of checks and balances that operates between the executive, legislative, and judicial branches in a democratic system. But this new structure—sometimes referred to in China as “one party, two coalitions”—does represent a major departure from the “all-powerful strongman” model that was characteristic of politics in the Mao Zedong and Deng Xiaoping eras.

One of the two intra-party groups in China is the “elitist coalition,” which emerged in the Jiang Zemin era and used to be headed by Jiang and is currently led by Xi Jinping. The other is the “populist coalition,” which was led by President Hu Jintao prior to the 18th Party Congress and is now headed by his protégé Li Keqiang.

These two coalitions represent different socioeconomic and geographical constituencies. Most of the top leaders in the elitist coalition, for instance, are princelings. Many of these princelings began their careers in the economically well-developed coastal cities. The elitist coalition usually represents the interests of China’s entrepreneurs and emerging middle class. Most leading figures in the populist coalition, by contrast, come from less-privileged families. They also tend to have accumulated much of their leadership experience in the less-developed inland provinces. Many advanced in politics by way of the Chinese Communist Youth League and have therefore garnered the label tuanpai, literally meaning “league faction.” These populists often voice the concerns of vulnerable social groups, such as farmers, migrant workers, and the urban poor.

Some clarifications about China’s intra-party factionalism are in order. Factional politics and political coalitions in present-day China, although not really opaque to the public, still lack transparency. With a few noticeable exceptions—such as former party chief of Chongqing Bo Xilai and party chief of Guangdong Wang Yang, both of whom conducted distinct self-promotion campaigns a couple of years prior to the 18th Party Congress—a majority of political leaders in China usually take a low-profile approach, lobbying for promotion in a non-public manner. Unlike the decades of Liberal Democratic Party hegemony in Japan (1955–94), for instance, factional politics within the CPC have not yet been legitimated by the party constitution. A few leaders may have dual identities as both princeling and tuanpai, although one can usually identify their factional affiliations by the channel through which they are promoted and who their patrons are.

Leaders of these two competing factions differ in expertise, credentials, and experience. Yet they understand the need to compromise in order to coexist—especially in times of crisis. By and large, these two competing camps have maintained a roughly equal factional balance of power over the past decade. The previous nine-member PSC, for example, was characterized by a five-to-four split, with five seats held by the elitist coalition and four by the populist coalition.

The Hu Camp’s Waterloo

This factional balance of power now appears to be broken. There were three eligible candidates who served on the previous politburo and met the age requirement but failed to be elevated to the PSC at the 18th Party Congress—all were tuanpai leaders. These include the only woman candidate, State Councilor Liu Yandong, and two rising stars, the aforementioned Wang Yang, and former head of the CPC Organization Department Li Yuanchao. All three, especially Wang and Li, are regarded as staunch advocates of political reform.

The Chinese public will likely understand why Wang was not elevated: many conservative leaders saw him as a threat. Wang’s main political rival was Bo Xilai, and the two tended to balance each other in terms of power, influence, and policy agenda. Now that Bo is out of the political game, the conservatives do not want Wang to remain in it. That Li Yuanchao was not elevated, however, was surprising. In charge of personnel promotion within the CPC over the past five years, Li carried arguably the strongest weight in selecting delegates to the 18th Party Congress. An instrumental voice for rule of law, governmental accountability, and intra-party democracy, Li has many supporters, especially among liberal intellectuals. He has also played a crucial role in recruiting foreign-educated returnees and promoting college graduates who work as village cadres.

Furthermore, at the congress Hu Jintao ceded his military position instead of following the practice of his predecessor Jiang Zemin, who retained the chairmanship of the powerful Central Military Commission (CMC) for two years after resigning from the formal party leadership. Now the number of princelings in this supreme military leadership body is unprecedentedly high. Four of the eleven members of the CMC are princelings, doubling the representation of princelings since the formation of the previous CMC five years ago.

This outcome is particularly startling when one considers the fact that Hu Jintao and his ally Wen Jiabao decisively expelled Bo, a notoriously ambitious princeling, from the party in 2012. This occurred in the wake of the dramatic incident in which former Chongqing police chief Wang Lijun defected to the United States Consulate in Chengdu, and the subsequent revelation of the murder of British businessman Neil Heywood, carried out by Bo Xilai’s wife. By levying a long list of criminal charges against Bo (presently awaiting trial)—including obstruction of justice, abuse of power, violation of party rules, bribery, and other crimes—Hu and Wen seemed to have won a landmark political battle.

The Bo Xilai scandal was a huge blow for the princeling faction. How is it possible that leadership infighting has taken yet another dramatic twist since his downfall? What has caused this profound change in the power equation? Though full answers to these politically sensitive issues will perhaps take time to emerge, clues have already surfaced.

The first relates to the now well-known Ferrari crash that occurred in Beijing on March 18, 2012, three days after the Chinese authorities fired Bo Xilai as Chongqing party chief. The crash immediately killed the driver, who was the son of Ling Jihua, the then director of the CPC General Office and Hu Jintao’s chief of staff. It also critically injured two young female passengers, one of whom died mysteriously at the hospital months later. It was believed that Ling not only managed to hide his son’s death from the leadership but also asked the CEO of the China National Petroleum Corporation to pay a large sum of money to the families of the two women in exchange for their silence, and even ordered the Central Guard Bureau, China’s secret service corps that manages the top leaders’ security, to handle—and cover up—the incident.

There have been two main rumors explaining how Ling Jihua sought to cover up the crash. One is that Ling helped fabricate information about the incident, which spread by social media, stating that the dead driver was a son of then PSC member Jia Qinglin. Upon hearing such rumors, an outraged Jia brought his grievance to the top leadership, including former party chief Jiang Zemin. The other rumor is that Ling attempted to make a deal with a prominent princeling, then PSC member and police tsar Zhou Yongkang, who was involved in the Bo Xilai scandal. The deal was simple: Zhou would help Ling cover up the car crash incident, and in return Ling would refrain from investigating Zhou’s involvement in the Bo case.

Regardless of which rumor holds the most truth, the Ling scandal was the second earthquake to rock Chinese elite politics last year, second in magnitude only to the Bo crisis. Ling has long served as Hu’s closest confidant and “political fixer.” This episode has severely damaged the authority and credibility that Hu Jintao wields in the leadership. The PSC’s decision in July to remove Ling from his post as director of the powerful General Office and to instead appoint him to a less important post was seen by many as a prelude that the Hu camp would be far less competitive in the power jockeying of the fall congress than had been previously thought.

The second incident was the accusation that Premier Wen Jiabao’s family was corrupt. This charge was widely circulated both by Chinese social media and in the foreign press, notably by the sensational story published by the New York Times in October charging that Wen’s relatives have controlled assets worth $2.7 billion. Whether or not Wen and his immediate family have been involved in illegal business activities is not clear. What is also not clear is whether this accusation against Wen was initiated by his political rivals.

The ideological differences between Wen on one end of the factional spread and politically conservative leaders in the Jiang camp on the other, however, are widely known to the Chinese public. Over the past several years, Wen has consistently emphasized the universal value of democracy, the political bottlenecks that undermine Chinese economic development, and the necessity for fundamental political transformation in the country. In contrast, Wu Bangguo, the second-highest ranking leader in the previous PSC and a heavyweight leader in the Jiang camp, rejected Wen’s call for democratic reform by claiming that the Wen’s appeals (for elections, constitutionalism, and media supervision) would lead the country into an uncharted sea of drastic political change or even chaos, and thus should be resisted at all cost.

The timing of the latest wave of criticism against Wen that circulated in both the Chinese social media and overseas mainstream news outlets has effectively undermined the premier’s reputation and sabotaged his well-known political reform agenda. Wen, potentially the strongest supporter of like-minded political reformers in the fifth generation (such as Wang Yang and Li Yuanchao), was thus forced to fall largely silent during the most crucial period of the leadership succession.

Third, even without these two incidents, the Hu-Wen administration has confronted an increasingly profound sense of public disappointment and criticism as the Hu era wound to a close. Hu has been criticized by the political and economic elites in the country, including the middle class, for his “inaction” (wuwei), a frequently used term in both Chinese blogs and daily conversations in the country. Some critics also portrayed Wen Jiabao as an ineffective premier who is famous for crying in public but not for getting things done. Some prominent Chinese public intellectuals have openly called the two five-year terms of the Hu leadership “the lost decade.”

For many critics, Hu’s rhetoric of a “harmonious society” (a buzzword in the Hu era for the principal policy objectives of reducing social tensions and economic disparity) resonates poorly (and ironically) given that the country’s Gini Coefficient, the standard measurement of the income gap, has worsened. Since 2002 it has risen to 0.48 in 2009 and to 0.61 in 2010, according to two recent studies conducted by the World Bank and China’s Southwestern University of Finance and Economics respectively, far exceeding the 0.44 figure that scholars say indicates the potential for social destabilization. Furthermore, the country’s spending on internal public security has skyrocketed in recent years, for the first time overtaking spending on national defense in 2010 to the tune of $84 billion.

On the foreign policy front, critics have argued that Hu’s “good neighborhood policy” has largely failed because China seems to have generated serious tension or distrust with virtually all of its neighboring countries, including a number of flash points along China’s borders and seas. China confronts an increasingly complicated and challenging international environment yet, despite its growing power and influence on the world stage, has few friends.

Disillusionment over Hu’s leadership is arguably most salient among the vast number of the country’s middle class. Members of this stratum often complain that they (rather than the upper class) shoulder most of the burden incurred by Hu’s harmonious society policies that are targeted at helping vulnerable socio-economic groups. Another thing angering the middle class is the high unemployment rate among college graduates, who often come from middle class families: nearly two million each year fail to find work. The admission rate for civil service exams has fallen remarkably low, reaching just 1.9 percent this year, in sharp contrast to ten years ago when government employees were leaving to “jump into the sea of the private business sector” (xiahai). This change reflects the shrinking of the private sector in recent years.

However, it is too early to hand down a definitive verdict regarding the legacy of the Hu era. For instance, many of the issues that emerged or were not resolved during Hu’s administration may have structural or cyclical origins and thus were beyond his control. The above criticisms also reflect only the views of certain groups such as opinion leaders and the middle class. Hu and Wen may remain popular among the vast number of peasants and migrant workers; and Wen may still have strong support from liberal intellectuals in the country. Many problems might also be attributable to policy deadlock—and political gridlock—caused by the factional jockeying as played out in the collective leadership. It is possible that the situation could have been even worse without Hu and Wen’s efforts to constrain the powerful elitist coalition. Nevertheless, the fact that Hu has been in charge during the past decade has made him the natural target for blame.

More importantly, the argument that factional deadlock was at the root of the Hu-Wen administration’s ineffectiveness has now apparently played into the hands of Jiang’s camp. If a more balanced factional composition at the PSC has often led to policy deadlock, why shouldn’t the 18th Party Congress have a leadership lineup where power is concentrated in the hands of the new top leader Xi Jinping and his team? This is another important factor behind the six-to-one split of the new PSC.

This does not mean, however, that the winner now takes all in Chinese elite politics. Hu’s protégés are still well represented in other important leadership bodies. Although the Jiang camp has dominated the new PSC, the balance between the two camps in the 25-member politburo, the Secretariat (the organization that handles daily administrative affairs), and the CMC have largely remained intact. In fact, many tuanpai leaders have made it into the new 376-member Central Committee. This writer’s research indicates that tuanpai leaders now occupy ninety-six seats in the new Central Committee constituting 25.5 percent of this very crucial decision-making body, a steep uptick when compared with the tuanpai’s eighty-six seats in the previous 371-member Central Committee (23.2 percent).

Prominent tuanpai leaders such as the aforementioned Li Yuanchao and Wang Yang will still be eligible in terms of age for the next PSC in five years. If the “one party, two coalitions” dynamics is a new experiment in Chinese elite politics, the CPC can also experiment with a new mechanism of “factional rotation” (paixi lunhuan). This may explain why the Hu camp quietly acquiesced to its political Waterloo in the latest leadership succession.

Xi’s Mandate

Xi Jinping has had an auspicious beginning as China’s new leader. He enjoys a majority in the PSC and is the top leader in the wake of a complete succession in both the party and military leadership. Xi thus has obtained the power and authority to initiate his new policy agenda. His predecessor’s unpopularity among opinion leaders and the middle class has also enhanced Xi’s public support—giving a sense that he has a new mandate. In the wake of the recent Bo Xilai and Ling Jihua scandals, all party elite regardless of factional affiliation will unite, at least for the time being, under Xi’s leadership in order to maintain CPC rule.

Most importantly, the new leadership seems to be very capable on the economic front and it has strong policy preferences for accelerating market reforms (see chart). Four princeling leaders on the PSC—Xi Jinping, Zhang Dejiang, Yu Zhengsheng, and Wang Qishan—all have decades of experience and high levels of competence in economic and financial affairs. Some Chinese analysts argue that due to their princeling background, these leaders have more political capital and resources than did their predecessors Hu Jintao and Wen Jiabao (who came from humble family backgrounds) in terms of running the Chinese economy and coordinating various governmental agencies.

Table 1: Policy Priorities and Preferences of China’s Top Seven Leaders (New PSC Members)

Xi has long been known for his market-friendly approach to economic development for domestic and foreign businesses alike. Xi’s leadership experience in running Fujian, Zhejiang, and Shanghai, three economically advanced regions in the country, has prepared him well for pursuing policies to promote the development of the private sector, foreign investment and trade, and the liberalization of China’s financial system—all of which have experienced serious setbacks in recent years under the previous administration. Another good example of effective leadership is Wang Qishan, the newly appointed anti-corruption tsar. Over the past few years Wang has served as a principal convener for China in the Sino-U.S. Strategic and Economic Dialogue. Wang, whose nickname is “the chief of the fire brigade,” is arguably the most competent policy maker in economic and financial affairs in the Chinese leadership. The Chinese public regards Wang as a leader who is capable and trustworthy during times of emergency or crisis, whether it be China’s response to the 1997 Asian financial crisis, the 2003 Severe Acute Respiratory Syndrome (SARS) epidemic, or China’s ongoing rampant official corruption. Based on his previous leadership experiences and policy initiatives, Wang will most likely promote the development of foreign investment and trade, the liberalization of China’s financial system, and tax-revenue reforms, which are all crucial for the maintenance of smooth central-local economic relations.

In spite of (or because of) their weaknesses and liabilities in terms of fundamental political reforms, the new leaders will likely opt for bolder and more aggressive economic reforms to lift public confidence. The upcoming economic reforms will probably prioritize three sets of policies. First, the new leaders will work hard to please the middle class. Such policies would include tax cuts, more loans to private small and medium enterprises (SMEs), and more preferential policies to the services sector. A richer and larger middle class in China would also help to stimulate domestic consumption, the next driver for China’s economic growth. Second, the new leaders will promote financial liberalization by inviting more foreign competition to the Chinese banking sector. Finally, they will accelerate urbanization, especially in second- and third-tier cities, by reforming policies involving both rural land reform and the urban household registration system (hukou).

Xi Jinping’s first domestic trip after becoming the party general secretary was to Shenzhen, the point of origin for Deng Xiaoping’s “reform and opening” policy in the late 1970s. China’s stock market, after two years of sluggishness, rebounded very strongly after Xi’s symbolic trip. The central question, however, is whether or not Xi and the princeling-dominated PSC can achieve sustainable economic development without pursuing systemic political reform. Can China really adopt an innovation-driven economy while the country’s political system remains as it is?

Daunting Challenges

The ascent of the princelings has occurred at a time when public criticism of rampant official corruption is unprecedentedly high. Some Chinese public intellectuals use the term “statist crony-capitalism” (quangui zibenzhuyi) to refer to the growing phenomenon in which senior leaders and their families control some state-monopolized industries or major state-owned enterprises (SOEs) for their own profit. This cronyism is especially noticeable in the major business domains such as railways, petroleum, utilities, banking, and telecommunications.

The remarkable growth of some SOEs such as China Mobile, for example, has primarily been attributed to the company’s monopoly on telecommunications in the Chinese domestic market. This has two troubling consequences. First, there is no incentive for these flagship companies to pursue technological innovation. While China’s large SOEs have dramatically increased their profitability and standing among the Global Fortune 500 over the past decade, no single Chinese brand has truly distinguished itself in the global market. Second, the real beneficiaries of China’s economic rise on the world stage are not the Chinese people, but merely a small number of corrupt officials and their families.

The state-of-the-art high-speed train system is often seen as the symbol of China’s economic take-off, but the country’s railway industry has been running a budget deficit. China’s official media recently reported that a bureau-level official in China’s Ministry of Railways held Swiss and American bank accounts with assets of $2.8 billion. What is even more astonishing has been the scandal involving the former minister of railways, Liu Zhijun. Liu’s nickname—“Mr. Four Percent”—derived from his reputation for demanding a personal cut of every business deal in the industry. According to the Singapore media, Liu intended to spend two billion yuan ($320 million) to “purchase” the post of vice premiership, and even a seat in the 2012 politburo, before he was arrested on corruption charges in February 2011. Almost two years after the arrests of the bureau-level official and the minister, the two cases have not yet been tried.

According to an internal report by the CPC Organization Department, of the 8,370 senior executives in China’s 120 flagship state-owned companies, 6,370 (76 percent) have immediate family members who live overseas or hold foreign passports. It is also widely noted that a significant number of children and siblings of senior CPC leaders live, work, and study in Western countries. The Chinese public has often linked this trend to the large-scale outflow of capital in recent years. According to a 2012 report released by Washington-based Global Financial Integrity, cumulative illicit financial flows from China (primarily by corrupt officials) totaled a massive $3.8 trillion from 2000 to 2011.

Since a top priority of the CPC leadership is the maintenance of its own rule, it is no surprise that the police have become more powerful, not only in terms of their input into socioeconomic policies but also in terms of budget allocation. For example, the total amount of money used for “maintaining social stability” in 2009 was 514 billion yuan—almost identical to China’s total national defense budget (532 billion yuan) that year. The Chinese government budget for national defense in 2012 was 670.3 billion yuan, while the budget for the police and other public security expenditures was 701.8 billion yuan (an 11.5 percent increase).

Two factors have contributed to the growing power of the police force. First, the Arab Spring led CPC leaders to fear that they could face an outcome similar to that, for example, of the Hosni Mubarak regime in Egypt. Second, business elites—especially those who work in state-monopolized industries—have often bribed government officials including police officers and formed a “wicked coalition.” This coalition constantly talks about the need for stability in the country but in fact is more concerned about maintaining its own interests.

The oligopoly of SOEs not only jeopardizes the commercial interests of foreign companies but also hurts the country’s own private enterprises, thus detracting from the long-term potential of China’s market economy. A study conducted by Chinese scholars shows that the total profits made by China’s 500 largest private companies in 2009 were less than the total revenues of two SOE companies, China Mobile and Sinopec. Ironically, the private sector’s net return on investment was 8.18 percent, compared to the 3.05 percent return of SOEs in the country in 2009.

All this not only shows that China’s future economic development will increasingly depend on much-needed political reforms, but also reveals the enormous challenge for the new leadership in its pronounced commitment to crack down on official corruption. This commitment is as essential as it is dangerous, because the sociopolitical demands unleashed will be overwhelming. Ultimately, it is a test of Xi Jinping and Wang Qishan’s anti-corruption campaign. Is it driven merely by factional interest in getting rid of political rivals? Will it primarily target “small potatoes”? Will it simply be adopted as a temporary tactic instead of pursuing the institution building necessary to effectively control corruption?

It is interesting to note that within a week after Xi and Wang made their speeches calling for a tougher crackdown on official corruption, journalists in the commercial media and netizens using social media leveled accusations against three senior leaders—one new politburo member and two ministers—of nepotism in elite recruitment, fake academic credentials, womanizing, and corruption. Social media has become so influential that Chinese authorities often shut down domestic micro-blogging services.

China’s various new economic and sociopolitical forces are also becoming increasingly protective of their interests. For example, a manual labor shortage in some coastal cities in recent years has reflected the growing political consciousness of the younger generation of migrant workers to protect their own rights. Migrants, effectively second class citizens in China, are resentful over all manner of discriminative policies. They have moved from one job to the next in order to receive a decent salary. Due at least partly to their repeated demands, China has recently witnessed a dramatic increase in wages.

More broadly, as the American political scientist Minxin Pei has observed, the Chinese citizenry now routinely challenges the party on a wide range of public policy issues, including environmental protection, public healthcare, food safety, social welfare, social justice, rural land reforms, urban development, religious rights, and ethnic tension. Official statistics report that there are on average 500-plus mass protest incidents each day.

The lack of a legal channel for public participation combined with tight police control has created a vicious circle in which the more fiercely the police suppress social protests, the more violent and widespread the protests become. There is a similar vicious circle in the realm of the media: the more that sensational rumors in social media are suppressed by the government, the more influential they become.

Meanwhile, growing popular nationalistic sentiment, particularly xenophobic views against the Japanese government (and perhaps the United States government as well) over the territorial disputes on the East China Sea, also constitutes a major political challenge for the Xi administration. Contemporary Chinese history shows that the practice of trying to distract the public from domestic problems by playing up foreign problems has often ended with regime change. Xenophobic public sentiments can quickly transform into an anti-government uprising. Yet CPC leaders may be cornered into taking a confrontational approach to foreign policy due to the nationalistic appeal from both the Chinese military and left-wing opinion leaders.

All of these sociopolitical challenges are reinforcing the necessity and urgency for profound democratic political reforms. A democratic system, of course, can neither solve social tensions nor the problem of extreme nationalism. Yet, it does provide a much better chance to channel social conflicts through the legal process and provide open debate in search of a more rational foreign policy.

The sense of urgency was bluntly explained on the eve of the 18th Party Congress by Zhang Lifan, a well-known public intellectual in Beijing: “If the next generation of leaders does not pursue political reforms in their first term, there is no point in doing so in their second term.” In his words, “China should witness either reforms in the first five years, or the end of the CPC in ten years.” Interestingly enough, in speeches given after becoming party general secretary, Xi Jinping also talked about the possible collapse of the CPC if the leadership failed to seize the opportunity to reform and revitalize the party.

Some Chinese liberal intellectuals explicitly regarded Xi as mainland China’s Chiang Ching-kuo. Also a princeling (the son of Generalissimo Chiang Kai-shek), Chiang Ching-kuo surprised many in the mid-1980s with his bold and historical move to lift the ban on opposition parties and media censorship in Taiwan, initiating the island’s transition from authoritarianism to democracy.

The next few years will likely tell whether Xi will be a transformative leader, or merely a transitional leader.

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Cheng Li

Publication: The Cairo Review of Global Affairs

China's Political Transition: A Balanced Assessment of its Problems and Promises

Cheng Li — Thu, 07 Feb 2013 00:00:00 -0500

Editor's Note: In testimony to the U.S.-China Economic and Security Review Commission's hearing on "China’s New Leadership and Implications for the United States," Cheng Li gives his assessment on China's leadership transition, and the problems and promises the country faces as it enters a new political era.

Seldom in history has the attention of the world been so closely focused on political succession in the People’s Republic of China (PRC) as it was during the 18th National Congress of the Chinese Communist Party (CCP) held last fall. The international community’s strong interest in the event should not be surprising for four main reasons. First, this is the first CCP leadership transition taking place at a time when China has fully emerged as a global economic powerhouse. In China, as elsewhere in the world, new leadership often means new policies. The policies––be they monetary, trade, industrial, environmental, or energy related–– of the incoming top leaders in China have the potential to make a major impact on the global economy.

Second, the significance of the leadership change in China goes well beyond the economic realm. As the PRC now carries more weight on the world stage, the Chinese government’s handling of domestic political issues, from human rights and religious freedom to ethnic tensions and media censorship, is increasingly in the international spotlight. Foreign commentary and criticism, especially that which originates in the United States, is often interpreted in China as a U.S.-led conspiracy to curtail China’s rise. The Chinese leadership has therefore tended to adopt a nationalistic foreign policy toward the United States, other Western countries, and some neighboring countries with which is has territorial disputes. Whether China’s new leadership will become more militant and confrontational in its foreign policy has become a central concern in the Asia-Pacific region, especially in the wake of recent tensions with Japan.

Third, there were several scandals and political crises on the eve of the 18th Party Congress last year, most notably the dramatic downfall of Bo Xilai, who was the former Party chief of Chongqing and a rising star in the top ranks of the CCP. These events exposed the deep flaws of China’s political system. Although the CCP has been guilty of political repression and has made grave mistakes during its long rule, senior Party leaders have generally not been known for gangland-style murders. But now Bo’s wife has been convicted of having plotted the murder of a British business associate while Bo’s former lieutenant, the police chief of Chongqing, has also been found guilty of abusing his power. The public is left wondering: What expectations of impunity moved Bo to engage in the misdeeds, including obstruction of justice, alleged on his long charge sheet? The astonishingly great amount of bribery in the case of the Bo family and also in the cases of other national and local leaders––e.g., recent cases involving former top officials in the Railways Ministry taking bribes totaling several billion U.S. dollars—has vividly portrayed to the world the unprecedented scale of official corruption. These scandals have profoundly undermined the legitimacy of CCP rule, thus constituting an overwhelming challenge for the new leadership. The sense of political uncertainty––and fear of disruptive social uprising in the world’s most populous country––is on the rise.

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Cheng Li

Publication: U.S.-China Economic and Security Review Commission

Uncharted Strait: The Future of China-Taiwan Relations

Richard C. Bush III — Mon, 04 Feb 2013 00:00:00 -0500

China and Taiwan have been, for decades, adversaries separated by a 110 miles of water. Yet today, robust travel, trade and investment flow between the two nations. But despite their friendly terms, the troubling issue of unification continues to loom. Senior Fellow Richard C. Bush in his book, Uncharted Strait: The Future of China-Taiwan Relations, explores the future of cross-Strait relations.

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Uncharted Strait: The Future of China-Taiwan Relations

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Richard C. Bush III

March West: China’s Response to the U.S. Rebalancing

Yun Sun — Thu, 31 Jan 2013 15:00:00 -0500

In China, Mao Zedong once had a famous exposition on military strategy: “Where the enemy advances, we retreat. Where the enemy retreats, we pursue.“ (敌进我退，敌退我追) As China’s foreign policy community contemplates how to counter the U.S. rebalancing to Asia, a grand strategic proposal has been made that China shift its attention from the heated competition in East Asia and rebalance its geographical focus westwards to the vast area from Central Asia to the Middle East, where the U.S. is pivoting away from.

The strategy, branded “March West” （西进）, was recently articulated by Wang Jisi, China’s most prominent and influential international relations scholar and a professor at Peking University, in a piece published on Global Times in October 2012. Due to the heightened tension in the East China Sea and the 18th Party Congress, most analysts in and outside China missed this key message. However, the proposal has currently passed the stage of academic research and the frontrunners of the foreign policy apparatus have been mobilized to study the feasibility, implementation and the potential reactions from the world. According to a distinguished Middle East scholar in China, Wang’s article is the most important policy exposition of China in the past 2-3 years. The U.S. Embassy in Beijing is also actively investigating the details and implications of “March West”.

The logic of “March West” is rather simple and reflects the complex regional quagmire China is in. As Washington rebalances to Asia, the relation between the U.S. and China has become increasingly contentious and “zero-sum”. In Beijing’s view, deeply embedded in the rebalancing is Washington’s profound concern about China’s rise in the region and a determination to curtail its expanding influence. Under this overarching theme, Beijing sees a comprehensive policy of Washington to block China’s rise in the East through strengthened military alliances, “sabotaging” China’s ties with ASEAN and undercutting China’s effort to lead the region economic integration by pushing U.S.-centered and China-free Trans-Pacific Partnership. Since both Beijing and Washington are seeking to expand their influence in East Asia, as Wang argued, if China continues to push forward, more problems, even a head-on military confrontation with the U.S. (such as over Diaoyu/Senkaku dispute), would be inevitable.

In comparison, the region to the west of China, including Central Asia, South Asia and the Middle East, bears no such risks. In Wang’s view, the area is free from a U.S.-dominated regional order or a pre-existing economic integration mechanism. Strategically, Washington is retreating from the area (manifested by its withdrawal from Iraq and Afghanistan), leaving more space to be filled and China a perfect opportunity to advance in. Unlike in East Asia, the relationship between the U.S. and China would conceivably be more cooperative in the region, due to their common interests in economic investment, energy, anti-terrorism, non-proliferation and regional stability. Furthermore, “March west” would offer Beijing additional strategic leverage against Washington since “U.S. is desperate for China’s assistance in stabilizing Afghanistan and Pakistan.” In this sense, it will help build a “more balanced” U.S.-China relationship.

Still under construction, “March West” in Wang’s vision would center on enhancing China’s presence, resources, diplomatic efforts and engagement in Central Asia, South Asia and the Middle East. Beijing will speed up the construction of a “New Silk Road” led by China to ensure the smooth flow of energy supplies and commodities through Eurasia into western China and enhance economic cooperation with the region. To turn China’s economic muscles into political strength and soft power, China will allocate more resources into forging closer ties with countries in the region through diplomatic engagements, human exchanges, foreign assistance, and academic research projects. Furthermore, given the grave security conditions in Xinjiang and Tibet, China will also design comprehensive social, religious and foreign policies to reinforce its national security and improve relations with the ethnic minorities.

The strategy is already being tested out. In Afghanistan, Politburo Standing Committee member Zhou Yongkang visited Kabul in September 2012, the first visit by a top Chinese leader since 1966 and signed a number of security and commercial agreements. Almost unprecedentedly, China pledged to assist in “training, funding and equipping Afghan police”. The move signals a significant policy shift from China’s previous hands-off approach to an active engagement to stabilize the turbulent neighbor. China is also hosting an annual China-Arab States Economic and Trade Forum in Ningxia Hui Autonomous Region. In the most recent event in September 2012, the focus has substantially expanded from economic and trade to cooperation on energy, culture, human resources and education with Arab countries.

“March West” would benefit China greatly. It would provide China with an alternative geographical area, one that is free from U.S. dominance to expand its influence. By returning to its roots as a continental power, China hopefully will avoid further competition/confrontation with the U.S. in East Asia, foster stability, and build a better relationship with Washington through cooperation in the West and on issues such as Afghanistan and Pakistan. Internally, “March West” would accelerate the “Grand Western Development” (西部大开发), a national strategy launched in 2000 to promote the growth of China’s western provinces in light of its unbalanced development compared to the eastern coastal provinces. It would facilitate better economic integration between these two areas while strengthen the security of China’s western borders and provinces.

It should be noted that by “March West”, Wang is not proposing an abandonment of East Asia, just like the U.S. pivot does not indicate Washington’s abandonment of the Middle East. In fact, what he argues is China’s own “rebalancing” between its historical, singular emphasis on East Asia and another geographical angle to advance China’s rise, a parallel pursuit of both sea power and land power. Indeed, with the unstable “hotspots” such as Taiwan, North Korea and the maritime disputes in East and South China Seas, East Asia is not a region China could withdraw from. To mitigate the current tensions, Chinese policy analysts are actively promoting a “reset” of U.S.-China relations. This would inevitably translate into certain tacit concessions on China’s contentious and assertive moves in the region to reduce tension, distrust and potential confrontation.

“March West” is not the first time prominent Chinese strategic thinkers argued for the strategic importance of the West. Neither is it free of controversy. PLA General Liu Yazhou proposed for China to march westward to “seize for the center of the world (the Middle East)” as early as 2004. His and Wang’s proposal is met with strong oppositions from strategists such as PLA Admiral Yang Yi, who argue that China’s strategic priority invariably ends in the East and with the sea. Yang believes China’s expansion into the Pacific and Indian Oceans is a prerequisite for China’s rise to a global great power, therefore the West is at most a strategic backyard where China should pursue stability rather than advancement.

However, with the rapid deterioration of China’s external environment in East Asia in recent years and the leadership transition in 2012, the new Chinese leaders see an urgent task to break away from China’s traditional confinement in East Asia. They wish to explore new territories and diversified options for China to continue its rise and the West seems both feasible and promising. This is the fundamental reason why “March West” has gained serious attention from the top. This strategic rebalance does not necessarily indicate a change of their world vision or their pursuit of global power status. The underlying “retreat-pursuit” philosophy of “March West” still anchors on a zero-sum perception of the U.S.-China relations. Therefore, as the U.S. pivots away from the region and becomes deeply immersed in Asia Pacific, it needs to seriously consider the implication of and prepare for China’s “March West”.

Authors

Yun Sun