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Why China Will Not Dominate the 21st Century
J. Fenby

Set to become the biggest economy on earth in a few years' time, with nuclear weapons a permanent seat on the UN Security Council, a fast-rising military budget and the world's largest standing army not to mention an ancient civilization, the biggest population on the planet and a determination to expunge the 'century of humiliation' —there can no doubt about the way in which China has altered the global balance. But that does not mean it is destined to dominate the world- Indeed, the concept of any one nation ruling the world is even more highly questionable today than it was in the past —and long-range forecasting of any country owning the century must be a highly audacious undertaking.

The previous three chapters explored the domestic limitations which constrain the PRC, these problems are perfectly normal for a country that has come so far, so fast, but they provide a powerful argument against being swept away by Sinomania based a combination of ancient civilizational claims and crude GDP numbers. China's future involves an array of more subtle factors.

To start with, impressive as it has been, its rise has be kept in perspective. After the woes it suffered between the mid-19th century and the death Mao in 1976, China has been coming from a long way back, and the more it progresses, the less the incremental effect of each advance and the greater the complications that envelop it. Chinese commentators say their country deserves equality with the United States. The claim is aided by the climate of diclinism in the developed world.

The campaign commercial in the 2012 US presidential election depicting a Chinese university lecturer laying out America's decline and concluding 'Now they work for us' first neatly with the zeitgeist at a time when Gallup reports that Americans are more pessimistic than ever since it started polling on the matter in 1959, and when Europe is sunk in existential despond. But what is fast becoming conventional wisdom begs loo many questions — and pessimism tends to be cyclical.

Extrapolation from the last three decades is misleading because it does not take into account the relative simplicity of the first stage of economic growth and the increasing complexity Of the Second lap. It also assumes that Beijing wants domination.

But as Lee Kuan Yew of Singapore has noted, 'The Chinese are in no hurry to displace the US as the Number I power in the world and to carry the burden that is part and parcel of that position. 'l on the one hand is a country with the world's largest economy, the top destination for international investment in 2013, allies stretching from Japan to the frontiers of Russia — many of them rich and some still growing. Accounting for 39 per cent of global military spending, it enjoys enormous preponderance in weapons systems, a huge capacity for innovation, most of the world's top universities, a reasonably young population, and may even be on the brink of an energy revolution with major economic effects.

It has a functioning, if imperfect, legal system, free media and global cultural appeal. Its political system can be dysfunctional, as in logjam over government spending and the budget in 2013, but it provides alternatives and safety valves, and much of its capacity for self-regeneration exists outside the Washington Beltway.

On the other is a state with an economy half the size of the other nation´s in nominal terms, ranking 94th globally in purchasing power parity per capital.

It has substantial problems of capital misallocation and excess capacity, weak safety standards, a pollution crisis, endemic corruption, a dependence on imported resources and foreign advanced technology plus a weak record in innovation. Its financial system is fragile and hemmed in with controls. It may possess foreign exchange reserves of more than 3 trillion dollars, but it cannot use the money for domestic purposes because of its financial controls for fear of setting off a slump from the value of its dollar assets chat would undermine this treasure trove.

Despite China's fast-rising military spending, it amounts to only a quarter of that Of the United States. The PRC has 22,000 kilometres of borders with 14 states, some of them potentially or actually unstable. The ruling party jealously guards its political control, using repressive means when necessary and wielding the law as a legalist instrument to but- tress its rule. Its population is ageing and it faces a mounting range Of Other social problems. Its army and security apparatus impose Chinese rule on the two huge and recurrently restive territories Of Tibet and Xinjiang, Among the permanent members of the Security Council, it is the biggest contributor of non-combat personnel to UN peace-keeping forces and, in 2013, agreed to send fighting troops to help maintain order in Mali, but it plays little role in seeking resolution in major global trouble spots.

While the PRC has cooperative associations with many countries which value its assistance, its only formal ally is North Korea. Its constant associations tend to be with poor, troubled nations such as Pakistan and Sudan. The international record of the United States. from Vietnam through Iraq to Afghanistan, is pitted with failure. But, while China's purchases of raw materials and willingness to accord aid in return without Other strings Wins plenty of friends, Beijing has not established itself as a geo-political stakeholder commensurate with its economic clout.

The PRC unwaveringly insists on its 'core interests', especially in Tibet and Xinjiang, and in the recovery of Taiwan. Retribution is swift for those who transgress: Britain was put into the dog house for more than a year after the Prime Minister, David Cameron, met the Dalai Lama in London in 2012, with ministerial-level visits blocked by Beijing. China brooks no criticism of its human rights record and, again, is ready to take concrete action to show its displeasure its purchases of Norwegian salmon fell to one-third of the previous level after the dissident Liu Xiaobo was awarded the Nobel Peace prize in Oslo in 2010. It stresses the importance of non-interference by nations in affairs of others, but its foreign policy is largely a matter of resources diplomacy conducted on a bilateral, case-by-case basis.

As the major rising state in a world system constituted by the West after the Second World War and reinforced by the fall of the Soviet Union, the PRC is, by nature, a revisionist power. But this involves a paradox for its rise has been made possible by the status quo as regards both its trade and its ability to exclude unwanted external influences. It is understandably miffed by the strong US military presence and the 'island chain' of Washington's allies running from Okinawa through Taiwan to the Philippines. Yet the regional security that bas underpinned its export growth depends in the end on the presence of the country from the Other side of the Pacific. Beijing resents the way in which the operations of international organizations were set before it emerged from the isolation of the Mao era, but it advances few concrete propositions for change.

As the British China watcher Guy dc Jonquières put it pithily: 'Over the past three decades, China has shown that it can shake the established World order. It has yet to show that it can help shape a future one.' That may be in keeping with the Sino-centric altitude of the dynastic past, but it hardly points to global dominance for the heirs of the Middle Kingdom.

In Asia, Beijing pursues asymmetrical relationships as it seeks to assert itself as top dog, echoing the tributary States system of the imperial era. But, important as their economic ties are with the main-land area, its neighbours are none too keen to fall in with China's wishes, and have the protective umbrella of the United States to encourage resistance. The effect Of the PRC's assertive claims to sovereignty over virtually all the 3.5 million square kilometers of the South China Sea, based on a map dating from 1947, and to a group of uninhabited islands off Japan, on even less convincing grounds, has been to drive the Other states involved ever deeper into the arms of Washington. The Obama administration was encouraged to 'pivot' to the Pacific, while the maritime dispute led the Philippines to seek a judgment from a UN tribunal, which Beijing boycotted.

Relations with India, where four-fifths of those polled regard the PRC as a security threat, are scratchy, with a running territorial dispute on the Himalayan frontier and Indian unhappiness about its US$ 40 billion annual trade deficit with the PRC; synergies between Chinese hardware and Indian software spoken of in the 1990s have not materialized Xi Jinping has described Russia and China as the 'most important strategic partners' who spoke a 'common language', and they conducted large joint maritime exercises in the summer of 2013. But relations are watchful — the two countries have been engaged in long-running negotiations over gas and Moscow is the mainland's principal arms supplier, but the first has been repeatedly delayed by wrangles over price while Russia has not sold a major weapons system to Beijing for a decade and worries about Chinese economic expansion over Che Siberian border.

A survey in 2013 reported that only 5 per cent of Japanese had a positive view of the PRC. After taking office at the end of 2012, the government of Shinzo Abe adopted a far more assertive stance than its predecessors in dealing with the mainland, and, with majorities in both houses of parliament, may try co re-write the constitution to lessen restrictions military activity while strengthen relations South-East Asia as a hedge against the PRC. As Chinese and Japanese ships and planes caried out operations around the disputed Senkaku/Diaoyu islands in 2013, there was no shortage of provocations.

Japan's biggest naval vessel, a helicopter-carrying destroyer launched in August 2013, carried the same name as a cruiser chat had been moored in the International Settlement in Shanghai during the Sino-Japanese war. A couple of months earlier Abe had been photographed in the pilot's seat of a training jet with the number given to the Japanese biological warfare unit in Manchuria where human guinea pig experiments were conducted on Chinese. Meanwhile Beijing used its sorties into the disputed area to establish a de facto basis for negotiations over a dispute that Deng Xiaoping had shelved in the interests of fruitful relations with Tokyo.

The key global relationship, between China and the United States, is cool or chilly. Each side knows that it needs the Other and has every interest in avoiding the 'Thucydides Trap' whereby a rising power and the ruling State come into conflict, like Athens and Sparta in Greece or Germany and Britain in the early 20th century, though parallels between East Asia and pre-1914 Europe are over-done, if only because of nuclear deterrence.; But neither trusts the other.

The Obama administration has been emboldened to push negotiations for a Trans Pacific Partnership (TPP) free trade zone involving a dozen nations but excluding China; it Japan and South Korea pin, it would account for 30 per cent of the global trade in goods and services and would help to set the global rule-book on commerce. Though cross-Strait relations have improved Since the Kuomintang recovered Taiwan's presidency in 2008 and Beijing and Taipei agreed to work together, the United States would find it hard not to react it the PLA ever delivered on its latent threat of military action to recover the democratic 'renegade province'.

The G2 concept of 'Chimerica' reflects reality of the world's two major economies which are interlocked, but it has meant little in terms of forging new co-operative policies. Americans are concerned at the rise of the PRC, the loss Of jobs through outsourcing of production to the mainland, Beijing's mercantilist approach to trade and allegations of Sharp practice, from currency manipulation through counterfeiting and lack of respect for intellectual property Fights to cyber-spying — though revelations in 2013 about their own government's activities may blunt that charge, and Chana insists that it has 'mountains of data' on cyber-attacks by the United States.

For Beijing, Washington is trying to force it to abide by global rules formulated in the pre-China age while the 'Anyone China' TPP and the Obama administration's 'Pacific pivot' have all the hallmarks of Cold War containment. Meeting the US President for a short-sleeve summit at a resort in California in mid-2013, Xi linked his 'China Dream' to the 'American Dream', bur, in practical terms, the two remain far apart in basic values —even if human rights are little mentioned in public by US administrations these days. A survey in 2013 showed that the proportion of Americans expressing a positive view of the PRC had slumped from 51 to 37 per cent in two years while Chinese good opinions of the United States fell from 58 to 40 per cent.

Xi says the Pacific Ocean is big enough to accommodate the development of two great powers — a perfectly accurate observation, but one which is vitiated by the presence of the US military off China's coast. If the Seventh Fleet was in Guam, there might be more than enough space, but it happens to be in Okinawa, with 60—70 ships, 300 aircraft and 40,000 troops. While Obama said the United Stares sought 'a new model of cooperation', there was no sign of a shared understanding on what the relationship should be. As for Other states in the region.

Lee Kuan Yew expresses a widespread view when he Says: 'The size of China makes it impossible for the rest of Asia, including Japan and India, to march it in weight and capacity in about 20 to 30 years. So, we need America to strike a balance.' Seen in those terms, the dominance of the PRC appears even more unlikely. China might become economically stronger than the United States though this entails a continued weakening of the which is by no means inevitable but the equation looks different when One lines up America plus a more confident Japan plus India, which may well have the world's biggest population by 2025 and have advanced in its messy, democratic manner.

Then, from the Other side of the world, one must add in the European Union with the largest GDP in the world (more than twice that of China) and its 26 nation-states, including one major Power in Germany and two substantial middle rankers in France and Britain. If free trade talks between the United States and the EU reach fruition, and there is breakthrough in US-backed negotiations for a similar agreement in the Pacific, China risks finding Itself with an awkward choice between being an outsider or conforming to rules set, once again, by others which do not favour its economic model.

Then there are Other nations round the globe which ate not keen on seeing China becoming a hegemon. These countries still have to work out how they are going to deal with the rise of the PRC, and one prospect is for them to cooperate more closely on the basis of shared values. This is not an anti-Chinese coalition but may be facilitated by Beijing's lack of allies. In any case, the Scale and momentum of the mainland's growth should not blind us to the strengths of rest of the world to place in the balance when Considering if the rising great power Will own the 21st century.

When it comes to 'soft power', where one might expect China's civilizational strengths to make themselves felt, the case for PRC dominance is equally unproven. Yes, there are 700 Confucius Institutes and classrooms round the world teaching Mandarin while the CCTV State network has opened international operations and China Daily publishes editions in Europe, North America, Asia and Africa. But few people choose to adopt the Chinese way of life. Confucianism is presented by some of its advocates as a system that puts brute Western ways to shame and has deeply influenced East Asia.

But it has little global traction; those seeking to change autocratic systems and to advance their societies to a less inequitable future are more likely to agitate for competitive democracy than for a set of hierarchical behavioural norms which, in the words of a 19th-century follower of the sage, stress 'proper relationships, between ruler and minister. father and son, superiors and subordinates, the high and the low, all in their proper place, just as hats and shoes are not interchangeable'.

Individuals, companies and civil society that thrive in less authoritarian states generally enjoy greater outreach China's government-directed efforts. A regime which cannot admit to uncomfortable facts in its own history and refuses debate on its assumed truths is hardly in a position to win intellectual support except from those whose appetite for the downfall of the United States was left unrequited by the failure of the Soviet Union.

The reason Chinese give for buying foreign-made goods says much about the advantages products of other countries possess — their genuineness, high quality and Safety, as well as their brand appeal. There is scant evidence for the thesis chat the world Will become more Chinese — walk the streets of a mainland city and you Will see far more foreign influences, from clothes and magazine covers to fast food outlets and hair styles, than you Will find traces of China in the West. English remains the global lingua franca — more people are learning it in the PRC than foreigners arc learning Chinese.

Despite their country's increased prosperity, plenty of Chinese seek to move abroad. Apart from North America, Australia and New Zealand, around one million Chinese are estimated to have gone to live in Europe this century, whether legally of illegally. Some 80,000 gained US green cards in 2011. Those who have done well from the system are among the keenest to move. A survey in 2011 found that 27 per cent Of Chinese with a net worth of 100 million yuan or more have emigrated or obtained foreign passports or residence permits while another 47 per cent were considering leaving the PRC.

An agency in Beijing charges US$ 15,000 or more to advise the well-off on means of gaining foreign residence status. Capital flight in 2011 has been estimated at US$ 600 billion. More than 85 per cent of millionaires polled in 2012 planned to send their children abroad for education — Xi Jinping's daughter went to Harvard (under an summed name) and Bo Xilai's son attended Harrow school in England-Balliol College at Oxford and the Kennedy School at Harvard.

Warmth for China seems to be somewhat on the wane. The 2013 edition of an annual all conducted for the BBC put China ninth of 21 nations in terms of positive appreciation, with 42 per cent approval and 39 per cent disapproval — the latter verdict was up eight points since the previous year. Crowds demonstrate for democracy in the Middle East and Africa, but nobody turns out to call for the installation of a Chinese-style system of government.

In the PRC itself, the Pew survey of 2012 reported that 52 per cent of those questioned said they liked American ideas on democracy, with only 29 per cent disagreeing — 70 per cent of those in the revenues in China, have dropped steadily since 2009. Many foreign firms have found it harder than expected to penetrate the mainland market and some ran into legal problems as they became targets for anti-trust action as well as grappling with a non-level playing field.

But the economy remains quite dependent on foreign-invested firms, which account for the bulk of Chinese exports of high-technology products. The PRC may have some of the world's biggest companies, which is hardly surprising given its size and growth, but the major World enterprises operating on a global scale ate based in the West or Japan. China's big firms do not enjoy international consumer reach, except as anonymous assemblers for foreign brands, and lack the brand image that helps to spread American, European, Japanese and South Korean influence among consumers round the planet.

Such issues have their importance. But the central argument of this book lies, rather, in the nature of the Chinese system of governance, which, given the intense centralization of authority m the Party State, affects everything. The enormous material achievements of the last 35 years have not been matched by a corresponding development of the country's ruling ethos. It would be obtuse to deny the short-comings of democratic states, but they have also shown a considerable ability to rectify themselves.

The danger for the PRC is that the Communist party Straitjacket inhibit the change the nation needs to continue its ascent. Reaching back into more than two thousand years of often mythical history is no great comfort in this respect, given the degeneration of dynasties — if the party is the latest occupant of the Dragon Throne, it is all too easy to see it being encircled by the kind of tribulations that brought down the Qin, the Han, the Tang, the Song, the Ming and the Qing. Rather than being a source of strength, the past is replete with pitfalls that the latest holder of the Mandate of Heaven in its Marxist-Leninist-Maoist-market incarnation would do well to avoid.

Indeed, even if the political attitude of its rulers are often redolent of the Middle Kingdom mentality, the Country's socio-economic development sets today's China apart from the past in many directions. It is engaged with the world in a way that it has never been before. It has a middle class with aspirations that are closer to those of upwardly mobile human beings anywhere than to behaviour patterns stretching back to the First Emperor and beyond. Technology means that Chinese can communicate with one another in an unprecedented manner. The Party State may seek retam control of what its citizens say, but the size of the population makes this difficult to enforce and the mere fact of individual exchanges is a major liberalizing step in the emancipation of thought. The traditional belief that allegiance and obeisance of the governed to the governors take precedence over personal interests and ethics holds less and less purchase on citizens.

Such developments are healthy for the evolution of the nation but confront the regime with major challenges, as chis book has shown. Xi Jinping's recourse to rule by slogans, complete with his 'mass line' and 'rectification' campaigns, study sessions and self-criticism, demonstrates how difficult it is tor a hermetically sealed elite to adapt to the very process set in train with Deng's economic reforms at the end of the 1970. By the time Xi and Li Keqiang took over in 2012-2013, the most important issue for the PRC stemmed from the tension between the need for change and the strength of the status quo built on the material Success Of the previous 35 years.

Enthusiasts for the China model insist that the system is in a constant process of ameliorative change; the commentator and private equity financier Eric Li, suggests chat the Communist Party is 'the world's leading expert in political reform'. Such a claim is difficult to credit except in terms of a ruling organization which is constantly scrabbling to assert its authority and legitimacy. Its leadership faces a classic paradox, as we have seen throughout this book: it needs to reform in order to rule more effectively, bur form brings with it the threar of weakening the system. After a decade in which the status quo was strengthened, the far-reaching repercussions of necessary change risk shaking the system, in part and as a whole, and resulting in a slowing of the economy — and, most probably, higher inflation.

Strengthening land ownership rights to encourage modernization of agriculture and liberalizing the hukou residence registration system would each entail a relaxation of central control. There would have to be significant devolution of revenue-raising powers to local authorities since they would lose the ability to requisition and auction off land and- in cities, would have to provide for millions of new residents moving in from the countryside.

Liberalizing the financial system and interest rates would put pressure on SOEs which have benefited from a cushion of cheap money and subsidies. Opening up the capital account would lead to a flood of money out Of China as people sought to diversify their holdings. Freeing the currency would expose the PRC to the ebbs and flows of the global market. Again, the control of the centre would diminish. Raising energy and water prices to the level at which waste would be eliminated would have a substantial impact on inflation. Introducing an independent legal System would expose vested interests of all kinds to prosecution and would bring an ultimate loss of control as the Communist Party would have to put itself under the law. Granting greater participation by citizens in decision-making, if not competitive democracy, would be a major shock to the system as it would open debate about the history and role of the monopoly political movement which asserts that it knows what is best for the people.

The challenge of such change would be all the greater because of the nature of the PRC, which everything leads back to the Party State. Remove one or two bricks and the whole edifice could be at threat, or so the power-holders fear. The spectre 01 Gorbachev and the Bourbon monarchy is never far away. But if action is not taken, the regime risks growing steadily more out of touch with "the population, starting with the vital middle class.

So China finds itself at a watershed in which it needs to change but knows that change Will face it with its biggest test since Deng Xiaoping found the way out of the disaster of the Mao era in the late 1970s. This, as we have seen, is not simply a matter of re-modelling the economy but has much wider social implications. As Zhou Qiren, Dean of the National School of Development at Peking University, puts it: Without true reform, even bigger trouble Will be waiting. First, reforms must be made in certain key areas, such as the orientation of a socialist market economy and progress in the functioning of a social democratic political system. Without tangible signs of advancement on these fronts, conflicts are bound to erupt … woven into the social fabric of a rising China is a certain disturbing institutional disease.

The younger generation is becoming the driving factor in society. Their evaluation of the system, policy and the surrounding environment is different than previous generations — and they also have higher expectations. Finally, because institutional variables are changing too slowly or are absent, a parallel 'extra-judicial' system is taking root- In many ways, the law says one thing white people actually, practice something else. Many choose not to abide by the law because it is so unreasonable, while economic regulations are so impracticable that people end up going underground to survive.

The authorities seem to have forgotten that if nothing is to be challenged OK reviewed, this Will naturally lead LO heterodoxy. China is standing before a critical crossroads, where reforms are as difficult as they are necessary. The more chat progress is delayed, the harder it becomes. The success of the China model adopted by Deng bred systemic inertia in the first decade of the present century, just as the endurance of the empire had done for previous dynasties. One can understand why. If progress had been so Impressive, why alter the machine? But the result was that everything in the existing apparatus became exaggerated, now as then.

Economically, growth got out of hand, and, when it was threatened at the end of 2008, the reaction was to pile on more crude expansionary measures, resulting in a credit boom, huge capital misallocation and further distortions. Politically, despite all Wen Jiabao's talk of liberalization, the Party's grip tightened. Territorially, protests in Xinjiang and on the Tibetan Plateau were put down, but ethnic violence and self-immolations increased. Socially, the disjunctions described in the previous chapter deepened. Internationally, China lunged into confrontations with Other regional States and held back from assuming a global role in keeping with its economic strength.

Its resentment at being part of a global system whose rules it did not frame is generally underestimated in the West, which set those rules and is happy with them. The belief in Washington and elsewhere that all that is required is for the PRC to operate by those standards, as if they had the ever, lasting sanctity of tablets of global law, is extremely short-sighted. But, equally, Beijing's failure to put forward discussable alternatives risks relegating ng it to the status of a querulous outsider in a World system it has joined and needs, but with which it has not really engaged beyond short-term advantage.

Given China's economic weight and the lasting change it has brought to the international balance, this is potentially very dangerous; the big outsider is never a good factor for Others, or, in the end, for itself, and its size and exclusion, real or perceived, can lead to escalating conflict that imperils all. The result is a watershed which Will determine the course the country takes in this decade and beyond. The accumulation of problems listed in this book are, in a sense, hardly surprising, given the extent of development and the priorities adopted since 1978 and do not, in themselves, point to the coming collapse of China, given the resources of the Party State.

But they are now piling up in a dangerous fashion and there may not be much time to deal with the combination of pressures. Decision-making Will be difficult for a leadership which has long avoided hard choices and is hemmed in by the cocoon of embedded Party rule. If reform is not undertaken in a far-reaching manner, the PRC Will lurch from problem to problem, limiting future development. If change is grasped, there Will be a protracted period of difficult transition which Will affect the system built up since 1949. Either way, these domestic factors Will constrain the extension of the country's global influence as the leadership focuses on internal matters. Domination of the 21st century is not in prospect when the prime concern Will be to keep the 'China Dream' alive at home.
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