…
there are several ways that China can evolve. The future will undoubtedly merge
and mix and match combinations of these scenarios, but they are likely to
provide the main themes.
Consolidation First
Term, Economic Reform Second Term, Political Reform Later
It
has become customary, although not constitutionally required, that Chinese top
leaders get two five-year terms. The scenario that many Chinese are hoping for
is that Xi Jinping spends his first five-year term consolidating power and his
second term using that power to ram through decisive economic reforms. While
there is already extensive disappointment that reform has not moved faster,
China is so large and complex that it can indeed take five years to consolidate
power. (It takes 18 months for a US president to consolidate a new
administration, and China is proportionately bigger and more complex.) The
center of gravity of Chinese opinion is to give him great leeway to consolidate
power and then decisively enact reform in the period 2018– 2022. If he were to
follow this scenario, popular support for the anti-corruption campaign would
carry him through his first term and then a critical mass of top elite support
plus some popular support for economic reform would carry him through his
second term. Then anxiety about the economy would pass and his successor would
have to come up with a clear plan for managing the new era of political
complexity.
A
successfully reforming, confident China would have the domestic authority to
clean up the environment, deleverage the country’s debt, and undertake the
great tax/ fiscal reform that is required. Such a China would be a steadier
negotiating partner on difficult international issues. Domestic politics would
be less likely to force the leadership to act tough on key international issues
because of domestic vulnerability, as with Hu Jintao, or because of desperate
need for military support of reform, as in Xi Jinping’s first term. That does
not mean it would back off easily from issues where it disagrees with the United
States, but it would be a predictable force in international affairs with a
strong interest in the overall stability of the international system. Note that
this conclusion is the opposite of the widespread assumption, particularly in
military circles and among political science advocates of inexorable conflict
between rising powers and established powers, that a more successful China will
be a more difficult China.
A
reform success would enable China to become a global leader, in the mode of
Japan and (post-Trump) probably well ahead of the United States, in addressing
climate change and environmental problems. This is in China’s self-interest to
do, because China itself is so much more vulnerable than the United States both
to climate change and to further deterioration in the sea, the air, and the
soil. Likewise a reform success would make the Belt and Road Initiative
feasible and begin to curtail the economic woes that have made Central Asia,
the Middle East, and North Africa the most unstable parts of the world. China
would then be an acknowledged leader of globalization and a force for stability
in what are currently the world’s most unstable areas.
Successful
economic reform does not make subsequent political reform inevitable, but
political issues will eventually have to be on the agenda. They will either get
much better or much worse. As we have seen with Taiwan and South Korea, this
kind of economic success creates the social prerequisites to make a more
liberal society work – without in any way guaranteeing that a liberal option
will be tried. Xi Jinping is sitting on the lid of a boiling kettle. If
economic progress seems good in the face of severe problems, the boiling kettle
will not explode in the short term. But if the political repression does not
seem to be buying successful economic reform, then the mood will shift,
possibly quite suddenly. Similarly, if, later, the debt crisis and the
transition to a new model of growth seem to have been largely resolved, then
pressures will grow to address the political structure. As noted above, the
paradox of repressive reform is that either economic failure or economic
success will eventually bring political modernization to the top of the agenda.
Again
it is useful to emphasize that most leaders of the Chinese Communist Party
acknowledge their political structure to be a developing story. Every reform
administration has been drastically different from its predecessor. The Western
public and commentariat generally do not understand this, except as technical
details, because so many in the West see political structures in Manichean
terms: good democracies and bad dictatorships, with communist dictatorships
being the worst kind. But I write these words a day after attending a brilliant
lecture by planners reporting to the State Council, who passed out a chart of
developments between 2017 and 2050, with a goal of (undefined) democracy by
2050. The previous month a leading administrator from Peking University gave an
impassioned lecture at Harvard about the need for democracy and the rule of
law; the Party leaders know his views and he keeps his job. Future progress is
in no way guaranteed, but neither is continued regression locked in.
As
of 2017, the prospects for the positive scenario of successful consolidation of
power, then successful economic reform followed by political reform later
(under Xi or someone else) are both dimmer and more urgent than they seemed at
the beginning of Xi Jinping’s tenure. The pushback against reform from most
power elites is strong. The trend of increased political repression is even
stronger.
Xi
was allocated great powers in order to implement great reforms, but his
personal political base was never strong. What the Party gives, the Party can
take away. Xi Jinping has so far been far more effective at eliminating
competitors than at implementing decisive reforms. Moreover, Prime Minister Li
Keqiang has been severely weakened, first by Xi Jinping’s overriding decisions
but also by the failure to move decisively on SOE reforms and the mishandling
of stock market volatility. The administration has the full panoply of titles
and positions and propaganda, but it is at risk if it does not deliver
decisively in 2018– 2019 on reforms and growth.
Reform Failure/ Japan
Scenario
Economic
reform success is not assured. Resistance is widespread, and each quarter that
passes enables resistance to become more and more organized behind the scenes.
It is therefore conceivable for Xi Jinping to maintain power and stability
throughout his first term, while propping up the economy with fiscal and
monetary stimulus, but rather than consolidating reformist power he could prove
unable to move his reform agenda forward decisively. This scenario delivers
higher growth in the short run, but much lower growth in the longer term. This
China would be slow-growing for the same reason that Japan grows slowly –
reactionary interest groups controlling the political system and inhibiting
competitive change in the economic structure. The shift to a consumer- and
services-driven economy would slow, the great infrastructure-building programs
would slow, and the resources available to the Belt and Road Initiative and the
military would decline at the margin. In this scenario, unlike Japan, interest
group power would inhibit or block critical environmental reforms.
In
such a scenario China’s growth would not be as slow as Japan’s, but the slowing
would come at a time when China remains much poorer than Japan and has just
begun the immense task of funding its pension, medical insurance, unemployment,
and other social programs. Thus the burden of caring for an aging population
would weigh more heavily than it does in Japan. Because Chinese are so aware of
conditions in the rest of the world, the expectations for improvement in standards
of living would be much higher than in already-wealthy Japan. Political
discontent at the decline of great hopes would not be as easily assuaged, so
movements would emerge demanding a different economic and political model.
In
this scenario, Chinese leaders would be more vulnerable to criticism for
failure of the great international ambitions that have been announced in the
early Xi Jinping years, and they would be under even more pressure to show
their toughness. Since the beginning of the twentieth century, whenever they
were discontented with their own leaders, Chinese students have expressed
discontent by mounting demonstrations against Japan, because it is safer than
demonstrating against their own leaders. A pattern of increasingly vigorous anti-Japanese
and anti-American movements, muted during the 1994– 2014 period of
university-based support for the leadership, would likely arise in this
scenario. Chinese leaders fear these movements, and would react in part by
acting toughly toward the United States and particularly Japan.
A
scenario of economic reform failure combined with highly repressive politics of
the kind that has emerged under Xi Jinping might well lead to earlier domestic
political unrest. That in turn could lead to increasing use of the military to
ensure domestic stability and to a much bigger role for the military in China’s
governance. Military units could well start taking dangerous initiatives
without clear mandates from civilian authority, or with support from particular
Party factions, or with the acquiescence of intimidated Party leaders. This is
one of two particularly dangerous scenarios for regional peace. As Susan Shirk
has educated us in China: Fragile Superpower, 1 contrary to conventional
wisdom, the dangers of a confrontational China come more from leadership
weakness than from strength.
Leadership Fracture
If
Xi Jinping imposes the high degree of repression that has already occurred,
without being able to implement decisive economic reforms, sustain belief in a
long-term rapid rise of living standards, and institutionalize the
anti-corruption campaign, he will lose the support of the “masses,” which
currently give him overwhelming popular support. If he frightens, and damages
the economic interests of, every major interest group in China in the name of
reform and anti-corruption, without actually making rapid progress on economic
reform in the early years of his second term, the leadership could fracture,
and that fracture would coincide with a shift in popular sentiment to what I
called above the second dynamic, a dynamic focused on the family, on comfort,
on freedom. If under these conditions he attempts to remain the top leader even
after serving the conventional two terms, both popular and leadership support
would likely dwindle.
China
could then return to the kind of split it saw between conservative leaders like
Li Peng and reformist leaders like Zhao Ziyang in the late 1980s. Under Jiang
Zemin in the 1990s, the Party leader kept the peace between Zhu Rongji, who was
undertaking stressful market reforms, and Li Peng, who remained more of a
traditional bureaucratic socialist. Under Xi Jinping nobody is performing such
a balancing faction. One force, Xi Jinping, is in charge, holding most of the
key titles and taking all the initiatives, while others ponder their
resentments and quietly organize resistance – very strong albeit not public
resistance. In this situation, a credible allegation of failure could bring
powerful antagonisms into the open. An early indicator will be the negotiations
over who will be promoted to the Politburo Standing Committee for Xi’s second
term, but the open split could come later, if the new team does not seem to be
making rapid progress.
Signs
of potential leadership fracture abound, in relatively mild protests at the
annual National People’s Congress (NPC) meeting, in accounts of the intense
hostility and fear that is endemic in Beijing, and even in high-level rumors
about assassination attempts. In 2017 the political atmosphere in Beijing is
extraordinarily tense. Investment outside the housing sector is collapsing. As
previously noted, the rate of increase of private investment has collapsed.
China’s wealthy and much of the middle class want their money and their
children relocated outside of China. The strong popular support that the
administration received as a result of its anti-corruption campaign could
reverse very quickly if the economic reform seems permanently stalled, if
spending to keep the economy growing fast creates a severe financial problem,
or if the anti-corruption campaign comes to be seen as largely self-serving.
Opposition to Xi is dispersed, fearful, and offset by widespread hopes that his
implementation of policies will prove as impressive as his destruction of
adversaries. But it is intense among groups that are well-organized,
well-funded, articulate and respected. If Xi disappoints, opposition could
suddenly coalesce.
An
open leadership fracture would likely be particularly intense for several
reasons. The groups whose interests have been hurt are exceptionally numerous
and powerful. The individuals whose careers have been destroyed are
exceptionally powerful and still have powerful backers. National security
issues would quickly come to the forefront. One consequence of repressive
domestic politics is that negative feelings toward Beijing’s leadership have
broadened and consolidated in Taiwan and Hong Kong. For the foreseeable future
peaceful rapprochement with Taiwan under a single flag has become impossible,
meaning that there is no chance of unification short of war. Moreover, because
of the way China has handled the maritime disputes, countries that once were
sympathetic to China’s claims over Taiwan now are likely to see any kind of
unification as a security threat to themselves. So the question “Who lost
Taiwan?” will be at the forefront of domestic politics, and the question of
whether to use force against Taiwan will emerge at the forefront of national
security debates.
Such
an open split would be dangerous for China and might well make foreign policy
even more of a domestic political football than it has been. If internecine
elite conflict persisted indefinitely, it could slow the economy even more than
in the Japan scenario, and it could begin to erode the legitimacy of the
Communist Party.
This
scenario would be the worst for China and the worst for the rest of the world.
Aside from the negative economic impact on the rest of the world, Chinese
foreign and security policies would become unpredictable and foreign powers
might get drawn into the domestic Chinese conflicts.
At
the same time it could lead to the kind of deep reflections about China’s political
response to its new social structure that parallel the brilliant economic plans
developed in response to that same new social structure. That is what happened
in South Korea in 1979 and afterward: a political and economic crisis led to
President Park’s downfall and inaugurated a process – a very bumpy process that
included years of dictatorship – toward a more responsive political system.
Gradual
Democratization, Likely a Variant of the Japan Political Model
The
new political complexity of China must eventually be faced. If there is an
indefinitely long effort to sit on the boiling pot, trying to use force to
repress the emergence of a new politics, then some combination of instability,
leadership fracture, and military rule seems virtually inevitable. All Asian
miracle economies have had to confront the political consequences of a more
complex, more mobilized society by undertaking transformative evolution of
their political system. The social changes are objectively enormous; they
demand a response.
That
response need not necessarily be detailed emulation of US- or EU-style
democracy. China has shown that it can transcend many Western economic
shibboleths on the way to economic success. Perhaps it can do so on the
political side too. Anyway, the detailed institutions of Western representative
government are increasingly stressed. In polls the US Congress barely attracts
double-digit levels of support, and in 2016 US candidates for the presidency
were without exception regarded with net public disdain. Citizens increasingly
express their concerns in the street, not by writing to their Congressmen. Both
in the United States and in Europe the representativeness of existing forms of
representative democracy is widely questioned. Nobody has a good alternative,
but Americans don’t think their Congressmen really represent them, British
people reject the representativeness of Europoliticians and Eurocrats, and
Scottish people doubt the representativeness of the UK parliament. In Europe as
a whole, antipathy to the EU is becoming a majority view, and anti-elitist
movements are disturbing individual countries. In the United States, of all the
major national institutions, only the military is held in high regard. Anyone
with a sense of history recognizes that as an ominous development in a
democracy. Change is afoot; history has not ended. China’s challenges are an
order of magnitude greater – hence far more threatening but also perhaps a
greater inspiration to creativity.
Everywhere,
including China, the ideal of “democracy” – outside the West a vague term
signifying some degree of popular input and governance in the common good –
remains preeminent. To Chinese, the idea of “democratization” at some very
abstract level has always been a goal and remains attractive. But within China
the case for Western-style democracy has weakened. The social and economic
failings of poor-country democracies like the Philippines, Thailand, and India
are much more vivid for Chinese than they are for Washington and Brussels. The
great Western financial crisis of 2008 has weakened admiration for the Western
model in general. The United Kingdom’s Brexit, the election of Trump in the
United States, and the EU’s ongoing economic and populist crisis diminish
respect for Western democracy. The catastrophic results of post-Soviet Russia’s
effort at shock therapy democratization and marketization frighten many Chinese
who might otherwise advocate Western-style democracy. Above all, US military
efforts to encircle and contain China, along with the constant pillorying and
subversion of China by two anti-China Congressional commissions, Radio Free
Asia, the National Endowment for Democracy, and much else, and fear of
Western-inspired color revolutions, mean that adoption of a Western political
model would come across as a humiliating national defeat in the eyes of most
Chinese. Ironically, few things support autocratic forces in China more than
the constant pro-democracy propaganda and military pressure out of Washington.
Nonetheless,
China’s dilemma remains. For China any solution must be some analogue of a
market for aggregating interests in a way that does not require the leadership
or the central bureaucracy to impose decisions on each of a myriad of issues.
People want to feel that their voices are heard. Awareness of rights, as
defined in Chinese law or in Western ideas, is pervasive in China. The society
must come to terms with the contradiction between betting the economic future
on globalization and trying to constrict the information link between the
Chinese people and the rest of the globe.
The
rest of the world has so far found only two reliable mechanisms for managing
the complexity revolution. For areas where there is a high degree of stability
in beliefs about what is right, and where high stability is needed for economic
agreements to prosper, rule under law is the mechanism that provides automatic
decision-making without the constant intervention of political leaders. For
areas where society’s needs change and groups’ preferences change, some kind of
representative democracy aggregates social demands through a process that leads
to widely accepted outcomes without imposition by top leaders or violent
strife.
For
decades China’s leaders and thought leaders have been pondering the need for a
more sophisticated way to handle political issues. This is the last phase of
China’s century-long debate about how to adapt to the challenge of
modernization that came from the West in the middle of the nineteenth century.
In both China and Japan, that debate began with minimalism: acquire Western
weapons while retaining traditional institutions and culture. The subsequent
gambit was to acquire Western technology while retaining traditional Chinese
institutions and culture. 2 All such limited strategies proved inadequate, so,
over the course of more than a century China has adopted and adapted aspects of
Western weaponry, civilian technology, government administrative systems,
civilian management systems, constitution, monetary and fiscal management, law,
finance, competition, innovation systems, university structures, educational
curricula, intellectual property, most Western established norms of trade and
international investment, and the principal establishment institutions (the
WTO, IMF, and World Bank) – along with much else.
Western,
particularly US, commentary about China has tended to take the successful
adaptations for granted and to focus on relatively marginal continuing
frictions. It is easy to forget how ridiculous it would have seemed only a
generation ago for someone in Washington to have suggested that China would one
day accept enforcement of WTO trade rulings. The extent to which the post-World
War II system was able to accommodate China’s needs is an extraordinary tribute
to the Western, largely US and UK, founders of that system. The extent to which
China has been able to dovetail its own needs with that system is an
extraordinary tribute to China’s post-1979 leadership.
In
some cases China’s adoption has been partial (the idea of a constitution) or
incomplete (the evolving legal system, protection of intellectual property) or
a synthesis of traditional and Western (Confucian bureaucracy, Western
bureaucracy, the Communist Party as an evolution of the dynastic Censorate).
Some of the adaptations have been more efficient than their Western
counterparts, most notably the overall economic development strategy, which
emulated South Korea and Taiwan while rejecting core Western shibboleths. Some
aspects have been uniquely Chinese, most notably the one country, two systems,
one sector, two systems, and one company, two systems transition strategies.
Overall, this process has so far led to a remarkable, and remarkably
successful, synthesis. But there is as yet no political synthesis and nothing
like a domestic political consensus. Moreover, the lack of a political
synthesis is now interfering with economic reform, with the tension between
political control and market efficiency in the ten areas I identified earlier
and more.
There
is always a debate going on inside China, at high levels, about political
reform as well as economic reform. There was rapid political reform during the
years 1980– 2002, and even under the stasis of the Hu Jintao era there have
been efforts to refine the system of elections within the Party and to demand
that officials expecting promotion display a “democratic” mentality. Currently
most of the debate is repressed and invisible to outsiders, but it continues
and cannot be stopped. 3 Xi Jinping has made it risky to express creative
thoughts, and the United States’ confrontational posture has made advocating
Western-style democracy unpatriotic. For the time being, that has put the
Taiwan model, of starting elections at the bottom and gradually moving them up
the political ladder, off the table; not so long ago it was very much on the
table. Invigoration of the NPC has made significant progress, but it remains a
part-time reviewer of legislation and auditor of government performance, not an
institution that authoritatively aggregates all the conflicting interests of
Chinese society. Elections within the Party have made a great deal of progress,
now receding somewhat, but moving toward the Japanese model, where public
elections modify the balance of factions within a dominant party, would require
open factions within the Communist Party and a mechanism for the public to
influence the balance of those factions.
The
concept of democracy (as opposed to the specific institutions of Western
democracy), which is currently embodied in village elections, accountability
reviews and occasional outspokenness in the NPC, and a variety of elections
inside the Party, remains legitimate and acceptable in all parts of Chinese
society. Some influential political leaders find the Japanese dominant-party system
highly attractive and are studying it carefully. Singapore remains the most
admired model, but it is very hard to scale up, and Singapore is being forced
by internal pressures to evolve in ways (more acceptance of opposition
legislators and diverse opinions, less use of imported foreigners even if they
have superior expertise) that Xi Jinping seemingly would find unacceptable.
Either a crisis or a successful economic reform followed by the advent of a new
administration in 2023 could lead to a revival of open advocacy of liberalizing
political reform. If that seems ludicrous given the heightening
authoritarianism under Xi, one must recall how decisively China has changed
each time it has transitioned from one leadership to the next.
Which of these scenarios
is more likely? The scenario of a relatively smooth consolidation in the
first term and a relatively smooth implementation of economic reforms in Xi’s
second term remains possible, but it will fade quickly if there seems to be no
decisive progress immediately following the choice of a new Politburo Standing
Committee in the autumn of 2017.
The
other scenarios are not mutually exclusive. We may see them in some sequence.
One way to have indicators of direction is to compare today’s China with the
other Asian miracle economies as they hit the era of complexity revolution. Xi
Jinping is definitely not following the pragmatic political adjustments of
Jiang Jingguo’s Taiwan or the longer-delayed ones of contemporary Singapore.
Like Park Chung Hee in the late 1970s, he is doubling down on the old approach
of political repression.
Does
this mean that China today is like South Korea in 1979? The simultaneous
buildup of financial problems and political repression is certainly analogous.
(China’s debt is local rather than foreign, and inflation is controlled, but
even so the financial risks are rising.) China has a much more inspiring
economic plan than Park did, and widespread support for Xi’s anti-corruption
campaign, but a lot more resistance to implementing a new economic direction
than South Korea’s government had. Elite questioning of the administration’s
direction in China in 2017 is perhaps similar to South Korea in 1979, but
popular Chinese enthusiasm for Xi’s anti-corruption campaign and reformist
agenda had no counterpart in South Korea at the end of the Park era. Xi’s
problem is that, if the anti-corruption campaign and the economic reforms seem
to be failing to achieve their results, the popular support could reverse
overnight. Already there are early signs of youth restlessness, shown most
prominently in the rise of youth populism on the internet. The risks of a
Japanese-style stalemate with the interest groups, or of an open split within
the leadership, are serious and rising.
If
either of those happens, the inclination of most of the leadership would be to
leave Xi in place but take the papers off his desk. Although it is dangerous to
rule out any scenario in a crisis, the institutionalized Chinese system is not
inclined toward military coups, assassinations, or sudden public repudiation of
a leader. China is not Thailand or Egypt. But passions are high, and Xi’s tough
actions toward his opponents have raised the stakes in elite conflict.
Xi
Jinping has chosen the most risky political strategy of any leader of a serious
country today. If one looks for examples of leaders who have taken on every
major interest group simultaneously, one comes up with a very short list: the
Shah of Iran in the late 1970s, the Polish leadership at the beginning of 1980,
a few others. To escape their fate, he very much needs that economic plan to
begin to show fruit visibly and soon. He needs to show that the anti-corruption
plan is not a broom pushing back the tide.
Foreign
risks magnify the domestic risks. On top of the domestic risks, Xi is
simultaneously taking on the foreign business community and challenging the US
Navy. His technological plans require high levels of foreign investment from
the most sophisticated economies, but US, Japanese, and Taiwanese investments
are declining just when they are most needed. The growth of the Chinese
military is rapid and impressive, but it remains quite vulnerable and rests on
the foundation of the economy’s fragile finances. All the big countries are
conducting themselves in ways intended to minimize the risks of major
international conflict, but the risk of maritime escalation is there. The only
likely outcome of an unexpectedly escalating major power conflict would be a
humiliating, massively more mutually destructive, analogue of the Opium War. No
power wants this, but then no leader in 1914 wanted a big war. No major bank
wanted an escalating financial crisis in 2008. Banking leaders took big risks
and assumed that, because they deemed themselves wise, the risks would not
materialize. Nonetheless World War I happened and the Global Financial Crisis
happened.
China
is on the cusp of greatness, stagnation or tragedy, and the risks are so high
that small, unexpected events could make the difference. That is the defining
quality of China’s crisis of success.
Overholt,
William H.. China's Crisis of Success (Kindle location 6292-6539). Cambridge
University Press. Kindle edition.
