Xi Jinping, Sarah Palin and Asian Business

China watchers were held rapt by the flurry of activities in the second week of 2011.

 
In its first official announcement of the year, the People’s Bank of China, the Beijing-headquartered central bank, allowed further liberalization of the use of the renminbi overseas -- marking yet another incremental step in the deepening internationalisation of China’s currency.
 
Earlier, Ai Weiwei, a prominent artist, hurried from Beijing to Shanghai. He was told that demolition crews – sent by local authorities – were knocking down his Shanghai studio for allegedly flouting the city’s zoning laws. Interestingly, this issue did not exist between 2008 and July 2010, as the studio was being built with support of local officials. Ai could only surmise that the about-turn was the result of his growing domestic and international profile as a dissident.
 
Moving inland into Chengdu, a Chinese-built fighter plane, supposedly with stealth capabilities, was seen sitting on a runway open to public view. Just as international analysts dismissed the aircraft as an early prototype not yet ready for a test flight, the “J-20” took to the sky– just in time to welcome US Defense Secretary Robert Gates’ visit to China.
 
Three events, three locations, and according to the analysis of Harry Harding, each of these three are manifestations of three broad “tendencies” that shape China’s foreign policy today. The Dean and Professor of Public Policy and Politics, Frank Batten School of Leadership and Public Policy at the University of Virginia, was speaking at a seminar held at Singapore Management University’s School of Social Sciences.
 
Harding, a scholar of US-China relations for more than three decades, was speaking on implications of scheduled leadership changes that will take place next year in both these giants of the international arena. Come 2012, President Barack Obama will be fighting for his second term as Republicans attempt to reclaim the White House. Across the Pacific, Vice President Xi Jinping and his band of fifth generation leaders are waiting to take over from President Hu Jintao’s team.
 
Harding’s premise was that because politics in China remains relatively opaque, it would be more fruitful to discuss policy alternatives under consideration, than to identify the specific leaders and interest groups that are promoting them. Each of the three incidents described earlier thus represents a different “tendency”: the incremental relaxation over the use of the RMB is “integrative”; the demolition of Ai’s studio is “defensive” and the timing of J-20’s very public test flight is “assertive”.
 
Integrative: Let’s work together
First up, the “integrative” tendency draws support from two main groups: liberal Western-trained academics and the internationally-oriented business community. Proponents essentially believe that China should deepen its integration with the international community in both security and economic spheres.
 
“The world today, compared to the 19th and 20th centuries, has become more organised,” said Harding. Countries, even the most powerful ones, need to fit into existing international systems before they can effect changes that they want.
 
“This school of thought not only thinks that this integrative approach is necessary, but some are quite confident that this will also be in China’s interest,” said Harding. Their strongest argument is that China’s economy, liberalised just over 30 years ago under Deng Xiaoping’s watch, has benefited tremendously from integration. China’s membership into international institutions like the World Bank and the World Trade Organization, for example, has helped accelerate its economic growth over the past decade.
 
What this integrative tendency means for US-China relations is that China will adopt a more co-operative policy against America. The understanding is that both countries are now in the same “great powers” league, but while there is competition to some degree, they share a bigger common interest in the proper functioning of international institutions. “’We are all in it together, we are all in the same boat’,” described Harding.
 
This tendency, of course, dovetails nicely with the aspect of American policy that is geared towards encouraging greater integration of China into the international order, which implies – from the American perspective – a more predictable and responsible China.
 
Defensive: Don’t interfere
The second tendency, “defensive”, is what Harding sees as presently dominant within China’s civilian leadership. This is a school of thought that is extremely concerned about China’s domestic problems, and worries that certain issues may be seized upon by external opponents to destabilise China. While human rights is the perennial favourite, the headline hogging issue last year was China’s currency, the RMB.
 
Many developed Western economies, and even Brazil, were calling for China to let the RMB appreciate in value as they lamented their trade deficits with China. The call was repeated during Hu’s recent state visit to America. “There is a suspicion that ‘they are doing it precisely to cause trouble for us, so we have to defend ourselves against this’,” said Harding.
 
In this tendency, the typical, miffed response from China would be along the lines of: “Don’t interfere in our internal affairs; you are trying to be subversive”. Such reaction led many outside China to think that Chinese leaders are being excessively defensive. “On the other hand, who would know better than they themselves what is the sum total of all the challenges that they face?” asked Harding.
 
So even as Americans remain frustrated that Chinese are not doing what they want them to do – open up certain sectors of the economy, let the RMB appreciate and so on – proponents of this tendency want China to dig in and keep its deflective wall up.
 
Assertive: China is rising
The third and last tendency, “assertiveness”, has been getting a lot of press over the past year. It is founded on the premise that as a result of the relative decline of old powers like Europe, Japan and America, China’s time has come. Even as the developed world struggles to recover from the 2008-2009 economic crisis, China has maintained steady economic growth. More so, even as other armed forces had to cut spending, the People’s Liberation Army (PLA) continues to enjoy a budget growing at double-digit rates.
 
“China has achieved advances in both civilian and military technology far faster than anybody has expected. I can now begin a file of clippings, organised around the theme ‘earlier than expected’,” said Harding, referring to a growing list of tangible advancements made or poised to be made by the Chinese: world’s fastest supercomputer, a new anti-ship ballistic missile system, an operational aircraft carrier and of course, most notably, the J-20 stealth fighter plane that was purportedly capable only of runway tests – until Gates arrived in Beijing.
 
Naturally, the growing confidence over these achievements, combined with the perception that the West is in decline, has led to a school of thought that says “it is now time for China to renegotiate a variety of arrangements that it was forced to accept in an earlier balance of power, but no longer necessarily that China will tolerate,” said Harding.
 
The proponents of this assertive tendency would have the following list of demands: stop selling arms to Taiwan, stop meeting the Dalai Lama, stop undertaking reconnaissance patrols near the Chinese coast, stop embargoing arms sales to China. The balance of power is changing, the proponents of this third tendency argue, and therefore, the pattern of China’s relationship with the major powers has to change accordingly.
 
Quite clearly, the People’s Liberation Army (PLA) is the core base behind this assertive tendency. However, what is of growing concern is the extent to which the military is independent from civilian control, and that includes Hu’s denial that he knew about the J-20 test flight, just when Gates was in town.
 
“The list of things that the civilian leadership allegedly did not know: selling missiles to Saudi Arabia, how the military managed the EP-3 incident in 2001, and so on – that could be the second file clipping, which will go back even earlier than the file on ‘faster than expected’,” said Harding.
 
As the PLA increasingly adopts a more aggressive posture especially in the past year, they have no lack of cheerleaders in the form of thousands, if not millions of young Chinese not shy at all about expressing their nationalistic fervour both on and offline.
 
Harding recalls sitting in a talk at a Chinese university delivered by a senior Chinese diplomat some years back. The official gave a very balanced presentation, in which he argued that it was important for China to understand, and in some ways, accommodate American demands, since the relationship with the United States was so important to China.
 
“When he finished his presentation, the first question from the floor was: ‘When are we Chinese going to stop responding to what the Americans ask of us and start making our own demands on them?’
 
“The whole crowd burst into wild applause,” said Harding. The message from this group of future elites of China: ‘That was then, this is now, time for a different relationship’. And that view, already evident then, is even more prominent today.
 
2012 is not 1976
To be sure, these three tendencies appear to represent – and they are – distinct differences. However, lest one starts to draw deeper into ancient Chinese history and expect the country to fall back into the cycle of internal conflicts and unification, this will not be so.
 
“These are not diametrically opposing tendencies,” said Harding. Just over three decades ago, when China was coming out of the post-Mao (and post Cultural Revolution) era, Deng Xiaoping was up against the incumbent Gang of Four, with totally different visions of how China should evolve “It was a life and death struggle, literally, not figuratively. You needed a showdown to resolve it,” said Harding.
 
In contrast, even as different interest groups jostle, China today is decidedly more moderate and more consensual. Referring to the three incidents that drew international attention all within that one-week period: the RMB, Ai’s studio and the J-20 – what is happening and will happen, according to Harding, are relative shifts in the balance as various interest groups press for their desired policies in tandem with changes in the international environment.
 
None of the tendencies can eliminate the others at this point, but the balance among them can change from year to year. 2008 was largely defensive, as no one wanted anything to go wrong for the Beijing Olympics, 2009 was perhaps more integrative, whereas 2010 was certainly more assertive.
 
Xi Jinping and Sarah Palin
The key question that remains is where Xi and his 2012 team might lean. How will the balance shift?
 
From Harding’s point of view, not that much. “My gut instinct is that this is by now a ‘routinised’ process.” Ever since the Jiang Zemin era two generations before Xi’s fifth, the pattern of China’s leadership succession has by now pretty much set: the previous generation would decide the team taking over from the current leadership, who, in turn, would chose the subsequent team – giving both China and the world at least five years in which to observe the next team of Zhongnanhai occupants.
 
“Elite politics in China is a system that doesn’t want surprises. What may cause a change in the balance among the three tendencies is a change in the domestic or international environment than in the choice of leadership. So change, if any, is a little bit more of this and a little bit less of that, rather anything more fundamental,” said Harding.
 
For America, the level of noise and number of possibilities leading up to 2012 is seemingly higher. Firstly, Obama might win his second term; the Republicans might take back the White House; or a challenger might even emerge from among the Democrats.
 
The polarising Sarah Palin, John McCain’s running mate for 2008, has already implied that she is considering running. “Even if Palin gets elected, after we get through the first few months, things will probably settle down,” said Harding, to some laughter from the audience. At least that has been the pattern of the past, in which Ronald Reagan, Bill Clinton, and George W. Bush first promised, then abandoned, tougher policies toward China.
 
The same tendency analysis can be applied to America too, but the way Harding puts it, the most likely outcome is the continuation of the dominant “mainstream policy” with two tendencies of its own: integration plus hedging. “On one hand, engage China bilaterally, encourage its integration with the international communities, but on the other hand, hedge against this possibility that this might fail,” he said.
 
Just as in China, there will be changes in the balance between these two tendencies, but not seismic shifts. “Just like any policy that walks on two legs, the relative weight will shift from time to time, but no clear alternative has begun to emerge. Almost all the critics are still talking within this framework. Right now, they are calling for a little more balancing, a little more hedging. But so far there is no fundamental alternative to this mainstream policy has emerged,” said Harding. 
 
Size and choices
Regardless of what kind of tendencies both sides are developing, there is a common denominator: a mutual recognition that a longer term shift in the balance of power is starting to occur. “No matter which strategy, integrative, defensive or assertive, I see virtually all the politically active in China are envisioning that China’s time has come -- if not globally at least regionally,” he said.
 
The time has come, so the thinking goes, for China to reclaim its traditional position at the centre of the region. “I think all Chinese think that this is something that should happen and is going to happen.”
 
At the same time, having played the central and dominant role in world politics for the last century, and having won the Cold War against the Soviets, Americans are not about to just pack up its bases in South Korea and Japan, and stay behind the International Date Line.
 
“Most people in the United States think that they should remain as the paramount power in Asia, for as long as China does not share more political values with the United States. And even then, a democratic China might be difficult for Americans to accept as the successor in playing the dominant role in Asia,” said Harding.
 
As a result, the competition and tension will still go on between the two countries. Hu’s recent state visit has not resulted in any significant breakthroughs. He made the courteous gesture of professing recognition for the universality of human rights, on top of the usual inking of commercial deals – worth US$47 billion this time round -- to keep American factories running.
 
What really matters and will influence actions taken by both countries, will be more of economic factors, and less of who the leaders are. On one hand, China, even as it enjoys economic growth (a higher-than-expected 9.8% in the fourth quarter last year), is suffering from high inflation, which is tipped by Citigroup and Credit Suisse economists to hit 6% later this year. This is a worry that outweighs other problems like corruption, human rights, or even the melamine milk scandal.
 
“So far, we have not seen protests that the regime cannot deal with. However, inflation would be an issue that is extremely difficult to contain,” said Harding. But if severe economic problems should produce higher levels of dissent, Harding predicted that this would be more likely to strengthen the defensive tendency than the assertive one.
 
For America, the possibility of a sluggish economic recovery, or worse, a double-dip recession, coupled with the dissatisfaction over China’s micro-steps over the RMB, would likely lead to a less accommodative policy toward China. But the focus would be on economic protectionism, rather than geopolitical containment.
 
At the end of the day, how much foreign policy wiggle room the leaders of these two economic giants can have is pretty much determined by these kinds of structural factors.
 
“The importance of domestic leadership is a function of the size of the country. Little countries have no choice, big countries have choices. But, I am not sure how much of a choice even big countries like America and China can have, for the choices are very much structured by the domestic situation and international balance,” said Harding.
 
Regardless of what they do, and how much they do, the rest of the world will be paying attention.
 
About the Author

[email protected] is an online resource that offers regularly updated business insights, information and research from a variety of sources, including interviews with industry leaders and Singapore Management University faculty. The resource can be accessed at http://knowledge.smu.edu.sg. 

 

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