China's Place in Global Geopolitics : Domestic, Regional and International Challenges [1 ed.] 9781136126666, 9780700715329

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

CHINA'S PLACE IN GLOBAL GEOPOLITICS International,Regional and Domestic Challenges

Edited by

Kjeld Erik Brf1dsgaard and Bertel Heurlin

I~ ~~o~~~~~~~UP LONDON AND NEW YORK

First published2002 by Routledge 2 Park Square,Milton Park, Abingdon, Oxon, OX14 4RN Simultaneouslypublishedin the USA and Canada by Routledge 270 MadisonAve, New York NY 10016 Routledgeis an imprint of the Taylor & Francis Group

Transferredto Digital Printing 2006 Editorial Matter © 2002 Kjeld Erik Bmdsgaardand Bertel Heurlin All rights reserved.No part of this book may be reprintedor reproducedor utilised in any form or by any electronic, mechanical,or other means,now known or hereafterinvented, including photocopyingand recording,or in any information storageor retrieval system,without permissionin writing from the publishers. British Library Cataloguingin Publication Data A cataloguerecord of this book is availablefrom the British Library Library of CongressCataloguingin Publication Data A cataloguerecord for this book has beenrequested

ISBN 0-7007-1532-0 Publisher's Note The publisherhasgoneto greatlengthsto ensurethe quality of this reprint but points out that someimperfections in the original may be apparent

Contents

Preface

vii

List of Contributors

viii

1 Introduction Kjeld Erik Bredsgaard

Part I: International Challenges 2 EastAsian SecurityandJapan-US-China Relations

15

RyoseiKokubun

3 Doesthe ChineseEconomyMatter?

32

RobertAsh

60

4 Chinaas a GlobalPower StephenA. Schlailqer

5 The EU and China: EconomicGiants

70

AngelosPangratis

Part II: Regional Challenges 6 DevelopmentandInternationalEconomicIntegration ChristofferHowe

7 ChinaandRegionalCo-operation Michael Yahuda

v

102

CHINA'S PLACE IN GLOBAL GEOPOLITICS

8 PopularSovereigntyin TaiwanandCross-StraitRelations Fran~oise

114

Mengin 130

9 China andCentralAsia PeterFerdinand

Part III: Domestic Challenges 10 Ethnic Conflict andAccommodationin China

149

MetteHalskovHansen 11 Challengesto the ChineseParty-State

164

Stig Thegersen 12 The Dual Significanceof Political Reforms

181

ShenMingming & SamuelJ. Eldersveld

202

Index

vi

Preface

The chapters in this volume are revised and updatedversions of papers originally presentedat the Third Annual Conferenceof ECAN (EO-China Academic Network), held in Copenhagenin February 2000. Financial support for the conferencecame from the EO Commission. Additional supportwas providedby the DanishFederationof Industriesand the Danish Institute of InternationalAffairs (DUPI). The editors are grateful to Mr. Aw Beng Teck and Miss Anna Riis Hedegaard for their comments and suggestions.Anna Riis Hedegaardalso producedthe camera-readyversion of the fmal manuscript March 2002

Kjeld Erik Bmdsgaard Bertel Heurlin

vii

List of Contributors

Robert Ash holds the Chiang Ching-kuo Chair of Taiwan Studies at the School of Oriental and African Studies(SOAS), University of London. He is also Co-ordinatorof the EU-ChinaAcademicNetwork (ECAN). Kjeld Erik Brodsgaard is AssociateProfessorat the Departmentof Asian Studies,University of Copenhagen,and Visiting Senior ResearchFellow at the EastAsian Institute,NationalUniversity of Singapore. Samuel J. Eldersveld is Professor Emeritus of Political Science at the University of Michigan. Peter Ferdinand is Director of the Centre for Studiesin Democratisation, University of Warwick. Mette Halskov Hansen is AssociateProfessorat the Departmentof EastEuropeanand OrientalStudies,University of Oslo. Bertel Heurlin is ResearchDirector at the Danish Institute of International Affairs (DUPI) and Jean Monnet Professor in European Security and Integrationat the Instituteof Political Science,University of Copenhagen. Christoffer Howe is Professor of Chinese Business and Management, Centrefor Financial andManagementStudies,SOAS. Ryosei Kokubun is Professor of Political Science and Director of the Centrefor Area Studies,Keio University, Tokyo. Fran~oise Mengin is Research Fellow at the Centre d'Etudes et de RecherchesIntemationales(CERI), Paris.

Angelos Pangratis is Headof Unit Hl2 (Relationswith China, Hong Kong,

viii

CHINA'S PLACE IN GLOBAL GEOPOLITICS

MacauandTaiwan) in DG ExternalRelations,EU Commission.

Stig Thogersen is AssociateProfessorin Chineseand Director of Studiesat the Departmentof EastAsian Studies,University of Aarhus. Stephen Schlaikjer is Foreign Policy Advisor to the Chief of Naval Operations, Admiral Vern Clark. Prior to that he was the U.S. State Department'sDirectorof Chineseand MongolianAffairs. ShenMingming is Director of the ResearchCentrefor Contemporary ChinaandAssociateProfessorat the Departmentof Political Scienceand PublicAdministration,Beijing University. Michael Yahuda is Professor of International relations at the London Schoolof EconomicsandPolitical Science.

ix

Chapter 1

Introduction

Kjeld Erik 8redsgaard

INTRODUCTION

During the last 20 years China has experiencedtremendouschanges.These changescomprisealmost all aspectsof Chinesesociety as well as China's relations with the outside world. Here at the beginning of the new millennium it is appropriateto evaluatethe importanceand impact of these changeson China,the region andthe world. Since 1978 the Chineseeconomy has grown by an annual averageof almost 10 percent,which is only rivalled by diamond-richBotswana.As a result, 150 million Chinesehavebeenlifted abovethe poverty line and there are areas in China today where real per capital income is rapidly approachingSouth Europeanlevels. Foreign trade has surgedwith average annual growth rates of about 15-17 percent.The country is now is the 7th most importanttrading nation in the world. Foreign direct investment(FDI) in China has also increaseddramatically,turning China into the secondmost important recipient of FDI in the world, next only to the United States.By the end of 1999 more than 212,436foreign investedenterprises(FIE) were in operation in China They accountedfor 15 percentof gross industrial outputand45 percentof China'sexports.1 Another measurementof a country'sintegrationin the world economyis the percentageof foreign tradeto its GDP. In Chinathis percentagehas risen from 5 percent during the Cultural Revolution to 37 percent in 1999.2 Recently China has signed comprehensivetrade accords with the United Statesand the EuropeanUnion, seeminglyclearing the last major hurdlesin SeeZhongguotongji nianjian 2000 (China StatisticalYearbook 2000) (Beijing: Zhongguo 2 chubanshe,2000hPp. 602-603,612. Ibid., pp. 22 and587.

CHINA'S PLACE IN GLOBAL GEOPOLITICS

China's accession to the WTO. The full impact of China's WTO membershipremains to be seen, but undoubtedly it will further deepen China'sintegrationinto the world economy.3 Basedon purchasingpowerparity (PPP)estimatesChina'sshareof global GDP alreadyamountsto 11.6 percent.4 This meansthat China now has the world's secondlargesteconomy,only next to the US. It is no exaggeration to claim that China has beenan importantplayer in the global shift that has takenplace in the world economyin recentyearsand the WTO membership is boundto further strengthenChina'srole in this process. As a nuclearpower and a memberof the UN SecurityCouncil Chinahas long played a major role in world politics. Undoubtedly the increased economic strength will make Beijing an even stronger player on the international scene. In regional terms China is perhaps the dominating military power and certainly none of the current hotspotsin the East Asian region - such as tension on the Korean peninsula,the Taiwan issue, the dispute over the South China Sea - can be resolved without Chinese participation. This was evidencedin May 2000 when the North Korean leader Kim Jong-II paid the Middle Kingdom a visit as a prelude to his historic meetingwith Kim Dae-Jungof SouthKorea. RecentlyChinabought four new destroyers from Russia equipped with Sunburn missiles and additional SU 29 military aircrafts, thereby increasing its military capabilitiesin the region considerably.During Putin's visit to China in July 2000 the Russianleaderreaff"rrmed his willingness to increasepolitical and military co-operationbetweenChinaandRussia. But China also seems to have become more accommodating in international affairs. It has, for example, begun to embrace multilateral security arrangementsas means to enhance mutual understandingand stability in the region. Chinahas beenparticipatingin the ASEAN Regional Forum (ARF), the main security arrangementin the region. China has also been involved in multilateral dialogues on security issues through such regional fora as the Conferenceon Interaction and Confidence-Building Measuresin Asia (CSCAP), and the NortheastAsia Co-operationDialogue (NEACD). Moreover, China has taken concrete steps toward multilateral security. For examplein April 1996 China was party to the Agreementon Confidence-Buildingin the Military Field along the BorderAreas, signedby Russia,Kazakhstan,Kyrgyztan andTajikistan.5 3 SeeJohnWong,'The Sino-USTradeAccord (I): Implications,"EAI BackgroundBrie/No. 49 (22 November1999). 4 The World Bank, World DevelopmentReport 200012001(New York: Oxford University Press,2001),p.274. See Wang Hongying, '''A Responsible Great Power?' China's International Image

2

IN1RODUCTION

These developmentshave been overseen by a leadership alignment, which not only seems committed to the full implementation of Deng's reform program, but also has managed to maintain a certain political stability in spite of large social changes.Although it is certainly not basing its rule on democratic practices, the present leadership seems to be concernedabouthow it is perceivedamongordinary Chinese.In this sensea transition away from the authoritarianismof the Deng period has been initiated. In the economic field China has proceededin a gradual and incrementalmanner.It is importantto note that the presenttransition away from a Leninist type of administrativeand political systemalso is also taking placein a gradualand orderly manner. The ongoingvillage electionsare a casein point. After the dismantlingof the old communesystemin the 1980sthe township governmenttook over the governmentfunctions of the communeand a new organisation,called the villagers' committee,assumedthe administrativefunctions of the former brigade. Peasantsat the local level can now elect the leaders of these villagers' committeesin direct and competitiveelections.In a few instances there have even been similar experimentsat township level. Thesevillage elections have attracted considerableattention since they seem to indicate that a new and more democraticChina is slowly emergingfrom the grassroots level.6 INTERNAL AND EXTERNAL PRESSURES

However from the vantagepoint of year 2000, China'sinternal and external situation is not without its problems.On the world sceneChina is facing a US which, comparativelyspeaking,appearsto be militarily strongerthan at any time since World War II. The Gulf war of 1991 and the Kosovo airwar of 1999 drove this home to Chineseleaderswith unmistakableclarity. As a result Chineseglobal strategic thinking is no longer founded on the belief that the world is developing from a bipolar to a multipolar structurewith severalcentresof power and no power in particular being able to establish hegemony?Now Chinese military plannersand analysts admit that for a long time to comethe world will be dominatedby just one superpower,i.e., 6 Managementin the 1990s,"EAl WorkingPaper,No. 44 (2000). SeeAmy B. Epstein,"Village Elections in China: Experimentingwith Democracy"in Joint EconomicCommittee,China'sEconomicFuture: Challengesto U. S. Policy (Armonk, New York: M.E. Sharpe, 1997), pp. 403-422, and Minxin Pei, "Creeping Democratizationin 7 China,"JournalofDemocracy,Vol. 6, No.4 (October1995),pp. 65-79. SeeJing-DongYuan,"StudyingChineseSecurityPolicy: Toward an Analytical Framework," TheJournal ofEastAsianAffairs, Vol. XIII, No.1 (Spring/Summer1999),pp. 131-195.

3

CHINA'S PLACE IN GLOBAL GEOPOLITICS

the United States. Recently, US plans of deploying a national missile defencesystem(NMD) have increasedChina's suspicionof US intentions. Washingtonclaims that the systemis designedto preventattacksfrom 80called "rogue states"and not meantto neutralisethe nuclearcapabilitiesof Russiaor China. However, Beijing realisesthat a successfuldeploymentof the systemwill have consequences for US military assessments of China's options and military capabilitiesin a crisis situation. ThereforeBeijing has warnedthat a decisionto actually establishthe NMD systemwould sparkan expansionof China'snuclearforces and might eventhreatentreatiesBeijing has already signed on issues such as nuclear and chemical weapons proliferationandthe testingof nucleardevices. The US on its part is wrestling with how to place China in the postKosovo world. Sincethe mid-1990sthe US has increasinglyviewed Asia as the most likely arenafor future military competitionand conflict. This was reflectedin a numberof changes,which togetherconstituteda pattern:more attack submarinesbeing deployedto the Pacific, more of the new forwardlooking war gamesstagedby the Pentagontook place in Asia, and more diplomacy was being used to deal with US interestsin the area.8 The new Bush administrationhas unequivocallyfocussedits attentionon the PacificAsian region. It is scepticalof Chineseintentionsto follow the norms of the new world order and basically views the Middle Kingdom as a revisionist power. In CondolezzaRice's article in Foreign Affairs - which many analystsview as a blue-print for the new administration'ssecuritypolicy - it is clearly statedthat China wantsto alter Asia's balanceof power in its own favour and that China is a strategiccompetitor,not a strategicpartneras the Clinton administrationoncecalledit. 9 In the regional setting the United Stateswill continueto be the dominant power due to its power projecting capabilities.The importanceof the US was shown in March 1996 when the US sent two aircraft carriers with support ships to the Taiwan straits during the Taiwan missile crisis. Currently the Chinese are most worried about US plans to establish a regional variant of the NMD system,the TheaterMissile Defense(TMD), systemcomprisingJapanand possibly also Taiwan. The likely inclusion of Japanin sucha systemcoupledwith the passingin May 1999 of the Revised Guidelines for US-JapanDefenceCo-operationis perceivedin China as a clear indication that Japanwill continue to support the US in the China8 See Thomas E. Ricks, "Changing Winds of US Defence Strategy," International Herald Tribune,May 27"'-28'\ 2000. 9 See CondolezzaRice, "Promoting the National Interest," Foreign Affairs, Vol. 79, No.1 (January/FeblUlll)'2000),pp. 45-62.

4

lNfRODUCTION

Japan-UStriangular power relationshipand perhapseven harbourambitions of developing into the dominant military power in the region under the protectiveumbrellaof the US. The Taiwan-questionis an even more pressingproblem. Taiwan has been characterisedas an ''unsinkableaircraft carrier." This "aircraft carrier" has great strategic importance in controlling important sealanesand it also constitutesa barrier to China's ambitions of establishinga strongernaval posture in the region. Security concernsover the Taiwan question became even more acute following DPP-candidateChen Shuibian's victory in Taiwan's presidentialelections.Since the DDP has Taiwan's independence in its party platform, there is now a real risk that Taiwan may fmally choose its own courseand formally declareindependence.If this were to be capped by Taiwan'sinclusion in a 1MD-system,Beijing would suffer an intolerable loss of face and would be placed in a new and more volatile security environmentthat could prompta Chinesemilitary reaction. The situation on the Korean peninsulamay also causeanxiety in Beijing. To be sureChina has earnedmuch credit for its role in supportingthe North Korean leader Kim Jong-II in his decision to meet with his South Korean counterpartKim Dae-Jung.In fact the talks betweenthe two Koreas have put new pressureon Taiwan to agreeto start discussionson reunification. However, in the event that the two Koreas were to be united, it would happen with South Korea as the strongerparty thereby strengtheningUS influence in the peninsula. If such a scenario were to be coupled with continuedUS military presencein Korea, it is highly likely Chinawould feel its securitycompromised. Internally China is also facing pressures.The economyslowed down in 1997-1999.Instead of the planned 8 percent growth rate for 1998, China only managed7.8 percentin spite of massivestateinvestmentsat the end of the year. In 1999 growth was further reducedto 7.1 percent.10 Theseare the official figures as reported by the State Statistical Bureau. Some foreign observersbelievethat the Chinesegrowth rate may have slowedeven more. The slowdown in foreign trade was another worrisome factor. In 1998 Chinese export to the outside world only grew a worrisome 0.5 percent. However, the Chinese economy started to rebound in 2000 with an economicgrowth rate of 8 percentand a hefty 25 percentincreasein export. It remainsto be seenwhether this reboundcan be sustainedor whetherthe economywill experiencenew problemsas it faces new economicturmoil in the region andweak demandfrom the importantAmericanexportmarket. 10 "Statistical Communiqueon National Economic and Social DevelopmentDuring 1999," FE/3776.

5

CHINA'S PLACE IN GLOBAL GEOPOLITICS

A third significant recent phenomenon is decreasing foreign direct investment(FOI). Investmentcoming from the rest of Asia is experiencinga downturn and is only partially being replacedby increasingAmerican and EuropeaninvestmentThe most significant trend is the Japanesepullout as shown in decreasingJapaneseFOI in China, which fell by 21 percent in 1998 and continued its downward trend, although at a slower pace, in 1999,u However, in 2000 the amountof contractedFDI reachedits highest level since 1996, indicating a renewedinterestin investing in a China at the thresholdof joining the WTO. Social problemshave sharpenedas a result of the slowdown. One set of problemsis connectedwith increasingunemploymentdue to the combined effect of slowereconomicgrowth and a restructuringof the statesector.This restructuringhas especially affected the traditional heavy-industry-oriented Northeast;and in some cities such as Shenyangand Harbin unemployment may haverisento constitute15-20%of the workforce. Corruption remainsa seriousproblem in China today. There are all kinds of corruption ranging from cadresmisusing their position to appropriatea mobile telephone or car for personal use to the kind described by He Qinglian in her much debatedbook Xiandaihua de xianjing (The Pitfall of Modernisation).12He Qinglian describesthe different ways a corrupt class of officials misuse or siphon off state resources.The recent billion-dollar smuggling and corruption casein Xiamen involving high level officials is illustrative of the problem. It hasbeenarguedthat the intensificationof social problemsand pressures has led to erosion of the social fabric. This is not only a big city phenomenon.In many parts of the countrysidelocal leadershipis finding it difficult to maintain a senseof moral and social community among the peasants.The party blames it on the poor moral quality (suzhi) of the peasantsthat are increasingly thinking in individual rather than collective terms. They are inspired by thosewho make money and have success,but who have put their own interests above that of the community. The new systemof direct electionsto the villagers' committeeshas not helpedmuch. In many areasthe local party secretarystill holds the power and the elected leaderis only secondin command.13 In fact the pressuresand problemsin China today is of such a magnitude 1999 (China Statistical Yearbook 1999) (Beijing: Zhongguo chubanshe,1999),p. 596. 12 He Qinglian, Xiandaihuade xianjing (The Pitfall of Modernization)(Beijing: Jinri Zhongguo chubanshe,1998). 13 JeanOi and Scott Rozelle,"Electionsand Power: The Locus of Decision-Makingin Chinese Villages," The China Quarterly,No. 162 (June2000),pp. 513-39. 11 Zhongguo tongji nianjian

6

INTRODUCTION

that one may wonder whetherChina will keep together.This is a question, which arises in an even more acute form when one studiesthe situation in China's outer regionsand amongthe national minorities. In Xinjiang, Tibet and other so-calledautonomousregionsthereare strong feelings againstthe centralgovernmentand the control and dominationof the Han Chinese.This is an especiallyworrisomepolitical problem for the Chineseleadershipsince this internal dissatisfaction connects with external pressures for more democracy and self-determination.Thus NATO intervention in Kosovo againstthe Yugoslaviancentral governmentwas viewed with greatconcern in China as it seemedto indicate NATO's willingness to support the aspirationsof a national minority againstits own governmentand thereby undermining the unity and integrity of the country in question. If NATO could intervenein Kosovo, as hasbeenaskedin Beijing, why could they not do likewise in a crisis situationin Tibet or Taiwan? In short, while there are many victories to celebratefor the Chinese governmenthere at the beginning of the new millennium, there are still many developmentsand trends that give causefor concern. Even though China has come a long way towardsmodernisationand integrationwith the world since the Mao period, the country probably feel less securenow than at any time sincethe early 1950s.This is causedby the perceivedinequality of the Sino-US relationship and the apparentUS willingness to make its presencefelt closeto China'sborders. This volume doesnot takean alarmistview of China'sposition in the new world order. As Wang Gungwu has pointed out, for most of its history "no armies marched out of traditional Middle Kingdom (Zhongguo) lands.,,14 The only exception was the 90 years when China itself was part of the Mongol Empire and attempts were made to invade Japan and Vietnam. Already the Ming dynasty returned to the control of traditional lands and forbade foreign adventures.Even today Chineseleadersare turning inward towards their land frontiers, and the belief that China may want to be a superpowercomparableto the US does not seemto be part of the Chinese 15 However, this is not to say that no seriousconflicts may self-perception. evolve in the Taiwan straits or in the South China Sea. Also internal pressuresin China might affect China's regional and global posture.And whatever the intentions and self perception of the Chinese, the Middle Kingdom's size and location alonewill arouseinterestand concern notonly in the regionbut also - asthe dragonawakens- on a global scale. 14

See Wang Gungwu, The Chinese Way: China's Position in International Relations(Oslo: ScandinavianUniversity Press,1995),p. 54. IS Ibid., p. 69.

7

CHINA'S PLACE IN GLOBAL GEOPOLITICS

THE CONTRIBUTIONS

The contributionsto this volume deal with these issuesby examining the internal and externalconstraintsfacing China as it entersthe next century.It is widely recognisedthat in its capacity as a memberof the UN Security Council China plays a major role in world politics. Ryosei Kokubun discussesthis role by focussing on the trilateral relations among Japan, China and the US. During the 1970s and 1980s relations betweenJapan, Chinaand the US were characterisedby a combinedoppositionto the Soviet Union (three-against-outsider).This pattern endured until Sino-Soviet normalisationof ties in 1989 and the end of the cold war. During the 1990s the overarchingstructureof the relationshipremainedelusive. In the early 1990s the TiananmenMassacrecast a shadowover China's relations with the US, but relations improved during PresidentClinton's secondterm in office and the US beganto use conceptssuch as "strategicrelationship" in describingits relationshipwith China The atmospheredeterioratedin early 1999 with the bombing of the Chineseembassyin Belgradeand the release of the Cox report accusingChina of spying in America. The rhetoric has now changed, under the Bush administration, from partnership to competition. Kokubun also discussesthe fluctuations in Sino-Japaneserelations and the implications of the updated "Guidelines for US-JapanDefence Cooperation"and Japan'spossibleinclusion in a regionalversionof the NMDsystem.He concludesthat the trilateral relations have assumedthe form of an isoscelestriangle rather than an equilateral triangle. In fact, Japan-USChina relations have evolved into a two-against-onestructurewith the US andJapanopposingChina. RobertAsh analysesChina'sglobal economicrole in trying to answerthe questiondoesChina'seconomymatter?Do China'seconomicfundamentals support the view of it as an emerging superpower?From a historical perspectivethe Chineseeconomydoesnot matteras much as it did only less than 200 yearsago, when its shareof global GDP amountedto 33 percent. China'sshareof global GDP declinedto 13 percentin 1913 and 5 percentin 1978. Sincethen the sharehas increasedagainto currently about 11 percent. This is a remarkableachievementof the reform era, but there is still a long way to go, beforethe Chineseeconomycan matchthe American.Moreover, as Ash points out, there is a number of worrying trends such as falling domesticenergysupplies,rising income disparitiesamongdifferent regions, tensionsin the agriculturalsector- all factors that could seriouslyundermine China'seconomicsecurity. Ash's conclusionis that China's economicpotential is, as yet, far from 8

IN1RODUCTION

being fulfllied. For quite some time its international economic role is unlikely to match its regional impact. In fact seenfrom a global perspective China will matter considerablyless than is suggestedby its geographic, demographic and economic size. However, the difficulties are not insurmountableand there remainsa presumptionthat the 21sl century could yet turn out to be "China'sCentury". StevenSchlaikjerdiscussesChina'sglobal role in a historical perspective. He underlinesthat with the establishmentof the People'sRepublic of China (PRe), China for the fIrst time in a century becamea force to be reckoned with. He points out that China's recentmilitary modernisationis basedon new conceptionsof comprehensivesecurity.There is a noticeablechangeof strategy away from land-basedforces in order to build a strongerpowerprojection capability. Key elements in this strategy are purchases of advancedweaponrysuch as fIghter planesand destroyersfrom Russiaand improvementof the Chinesemissile forces (both nuclearand conventional). However, this modernisationprogram does not yet translateinto a major threatto Japanand the US. Schlaikjer draws attention to an interestingfeedbackmechanismat work betweenChina'sglobal power and its economicdevelopment.This linkage could be an impetusfor China to changeinto a status-quopower. In fact, it is possible,he concludes,that China could become,later in this century, a stabilising great power, one of the several poles in an increasingly integrated, multipolar world. The view of the new Bush administration seemsto be less optimistic and CondolezzaRice and other membersof Bush'sinner circle explicitly view China as a revisionistpower ratherthan a status-quopower. The US, China and Japanare today not the only existing or emerging economicgiants. In fact, in aggregateterms, the EU constitutesthe world's largesteconomy.In spite of somefoot-draggingby somemembercountries, continentalEurope seemsheadedtowards greaterpolitical integration. The new Europehas an interestin expandingits economicand political relations with China. Angelos Pangratisoutlines the challengesand prospectsfor the EU-China relationship. In political terms the EU's overall strategy is containedin two documents:(1) "A Long-Term Policy for China-Europe Relations" (1995) and (2) "Building a ComprehensivePartnershipwith China" (1998). In addition there is a well-structuredseries of meetingsat severallevels. In the economic fIeld the EU is keenly interested in more trade and economic interactions. As Pangratis underlines, the EU has consistently advocateda rapid accessionof China to the WTO and believes that the

9

CHINA'S PLACE IN GLOBAL GEOPOLITICS

signing of the EU-China Trade Agreement is a significant step in that direction. In short, according to Pangratis,the EU's relationship with China is evolving and has much potential for growth. In Pangratis' mind the challengeof creating an enduring and comprehensiverelationshipwith the Middle Kingdom will be one of the greatgeo-strategicchallengesof the 21 st century. However, is China really ready for the kind of economic integration a WTO-basedworld economycan provide? ChristopherHowe considersthe questionfrom three viewpoints: (1) ideological preparedness, (2) industrial and technologicalcapabilities,and (3) regional considerationin the senseof key neighboursassistingChina'sintegrationprocess. In the ideologicalfield Deng preparedthe groundfor economicreform by stressingeconomicdevelopmentas the goal of socialism.Deng's approach has been sustained, although not without internal opposition among conservativecadres. In the economic field the Chinese economy retains serious structural weaknessesin the industrial, financial and technological sectors. As to China's neighbours, most seem to have only limited capabilities of providing a robust environment conducive to China's institutional developmentand economicand technologicalprogress.This is compoundedby the fact that Japanseemsto be scalingdown on its FDI and economicassistanceto China However, although China may not be quite ready for integration into a WTO-basedworld economy,Howe thinks that WTO entry involvesrisks that areworth taking. Michael Yahuda in his contribution on China's role in regional cooperationpoints out that it is only sincethe beginningof the reform process that China has developed distinctive regional policies. Formerly, China tended to treat the region within the context of its relations with the two superpowers.Although China's experienceswith internationalco-operation is limited and the country seems to have preferred to conduct foreign relations in a bilateral rather than a multilateral framework, judged as a whole, China's co-operative policies towards its neighbours have increasingly shown flexibility. In recent years China has also gained valuable experienceby participating in regional organisationssuch as the Asia-Pacific Economic Co-operation forum (APEC) and the ASEAN Regional Forum (ARF). However, in matters of sovereignty,the Chinese have shown minimal flexibility. This is evidently the case in relation to cross-straitrelations. In her contribution FrancoiseMengin discussesTaiwan and cross-strait relations. She is especially interestedin the possible impact of Taiwan's

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IN1RODUCTION

internal political developmentson cross-straitrelations. In their proposals and policies concerning this question Beijing has striven to separate domestic issues and international issues. However, Mengin demonstrates that this is not possible.The very processof democratisationin Taiwan hasa close impact on cross-straitrelations by introducing new constraintsto the Taipei authorities in their dealings with Beijing. Similarly political developmentsin the PRC will continueto impinge upon Taiwan'sdomestic partisancleavagesanddecision-makingprocesses. Issuesconcerningsovereigntyare also touchedupon in PeterFerdinand's chapteron China and CentralAsia. The important factor in China'srelations to Central Asia is Xinjiang province, where about 54 percent of the population are Muslims. The Chinese government'sstrategy for dealing with the problems in Xinjiang has centred on economic development combined with suppressionof dissidents.Moreover, Beijing has courted Kazakhstan and Kyrgyzstan in order to prevent these former Soviet republics from supportingtheir Muslim kins acrossthe border in Xinjiang. Muslim Afghanistan remains a potential destabilisingfactor in the region, but the new Afghan leaders are still preoccupiedwith their efforts to consolidatetheir power and through Pakistan,China has a useful channelto influencethe Talebanregime. The Xinjiang issue highlights the problems China is facing in dealing with its national minorities. Mette Halskov Hansenpoints out that relations between the Han and the ethnic minorities are often based on accommodationrather than conflict. Based on her fieldwork among Han settlersin minority areasin China sheclaims that Han migrantsdo not share any strong common feelings of being united as Han in the minority areas. They are rather divided along lines of social position and class. Moreover, the local minorities, also belonging to different social strata, also have different relationshipsto the Han. In other words, relations between the minorities and the dominantHan do not form a uniform pattern. So while one should not uncritically acceptthe official Chinesediscourseportraying the Han settlersin minority areasas a group of "civilisers" that has brought opportunitiesfor developmentand changeto the backwardareas,one should also not uncritically accept the dominant Western discourse which characterises the Han settlersas a homogeneousgroup representinga regime benton oppressionand control. Stig Th0gersendeals with the tensions in the countryside. His general perspectiveis that the challengesto the ChineseParty-statedo not primarily stemfrom a rising middle classor other advantagedsocial groups,but rather from the losers in the reform process,i.e., the unemployed,the peasantsin

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

the inland provinces, the outcasts, the poor. He supports his claim by looking at the cultural and ideological challengesfacing the Party in a county in Yunnan province. In this county the Party tries to win back its power over the families and the community by way of introducing a "Ten Stars of Civilisation" scheme.The aim is to control the moral performance and quality (suzhi) of eachindividual householdand its members.TIwgersen concludes that this is an example of the Party-statetrying to regain the cultural and moral territory it lost during the 1980sand 1990sas a result of the demiseof the old collectivestructure. Shen Mingming and Samuel Eldersveld also look at the local level in order to analysepopular responseto regime initiatives. Using survey data they wish to find out whether there is a successfulmobilisation of support for political reform at the local level in China and whether there is a correlation betweensupport for economicreform and support for political reform. Their fmdings show considerablemasssupportfor political reform with up to 95 percent of the sample approving of the idea of village elections.They also fmd strong cadre supportfor political reform and that cadres supporting economic reform are likely to support political reform. Thesefmdings by Mingming and Eldersveldseemto indicate that although there are strong social, political and economicpressuresfacing the Partystateat this juncture of the reform processthere is also considerablesupport for the reforms already introduced.This support not only comes from the cadres'corps,but also from broadsegmentsof the population.

12

Part I

International Challenges

Chapter 2

East Asian Security and Japan-US-China Relations

Ryosei Kokubun

INTRODUCTION The 20th century cameto an end. Volumes of books and articles attempting to describethe world of the 21st centuryinundateus. However,it is not as if the onsetof a new century will suddenlytrigger sweepingchanges.Just as legacies- both positive and negative- spilled over from the 19th into the 20th century,problemsand advantagesof our time will continueon into the next century. Considerthe nation-state.Firmly establishedin Europe by the end of the 19th century, the institution of nation-stateswas spreadingto other areasof the world as the 20th century began. But even now, after the end of that century, functional nation-statesremain limited in scope as witnessedby outbreaksof ethnic conflict The establishmentof nation-stateseverywhere remainsunfinishedbusinessthat mustbe carriedover into the next century. At the sametime, a new challengedoes confront our times - globalism. Indeed,globalism directly challengesthe nation-stateitself, as the spreadof the market economy, democracy,and information acrossnational borders pervadesevery comer of the globe. At the beginning of the 21st century, indications suggesta coming world defined by the struggle between the inward-orientednation-stateandoutward-orientedglobalism. EastAsia is no exception.Following the outbreakof Asian fmancial crisis in 1997 and the subsequenteconomic confusion in every region of East Asia, the countriesof the region were compelledto tum all their energyand 15

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attention to the task of rebuilding their nations. In the event, each country underwentfluctuations in its political system of some sort. For instance, turmoil in Indonesiaeventuallyled to the realisationof an independentEast Timor. Numerous challenges stretch ahead accompanying East Timor's transition,not leastof which being fundamentalnation-buildingitself. Even if we turn our attentionto thosecountriesnearerto us, we seeflux. By transforming its economyto a market-orientation,China accomplished radical growth, but is now coming underthe threat of the wave of recession partly due to the Asian economiccrisis. At the sametime, China, burning with a tenaciouspursuit of perfecting its nation-state,welcomeda reverted Macau in December1999. Its greatestunfulfilled ambition, Taiwan, remains elusive. Korea, despite being completely tossed on the rough seasof the Asian economic crisis, somehowmanagesto be revitalising its economy. The experience,however, has begun to exert a subtle influence on its policies. Specifically, South Korea indicates it will revamp its program for reunification with the North, recastingultimate unification as a more longterm objective. Throughoutthis overall process,America'srole is a decidedly important factor. Whether the American administration is republican or democratic, America cannot forfeit its interest in the region. No matter how often the isolationisttradition rearsits head,a completeand true withdrawal cannotbe imagined,consideringthe tremendousvital political, security and economic intereststhe US has in the region.When pressed,all the nationsin EastAsia today would lean strongly towards a supportive stance on the issue of continued US presence, though certainly subtle differences mark the individual nation'spositions. The role of the world's numbertwo economy,Japan,also looms large. In spite of the recession,its economic interdependencedeepensconsiderably with all the countriesin EastAsia, and Japancontinuesto rank as the largest contributor nation to Official DevelopmentAssistance(ODA). Moreover, strengtheningof its alliance with the US should cause an expansionof Japan'spolitical role in the region. The recently agreedupon revised USJapan security guidelines symbolise this. But, with the ongoing effort to restructure domesticindustries,worseninggovernmentfmancial deficit, and an ageingsociety,doubtsnaturally arise concerningwhetherJapan'snational strength can permit continued maintenance of growing international contributions. Nonetheless,in terms of the course of security relations in EastAsia, this stageof the endof the 20th centurybearssignificance. To narrow down the discussion,then undoubtedly the key nations to discussinclude the US, China and Japan.We choosethem not simply from

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the perspectiveof an internationalrelations view of key powers, but also considering historicaland currentrealities.Thus, as we live in the final stage of the 20th century, I would like to revisit the trilateral relations among Japan,China, and the US from the viewpoint of EastAsian security.1 Before closing, I would like to add somefinal remarkson the increasingimportance to Japanof strengtheningits co-operativeties with both ChinaandKorea.

JAPAN, THE US AND CHINA IN THE 20TH CENTURY A Historical View of Relations Between Japan, the US and China A historical review of 20th century internationalrelationsin the Asia Pacific region reaffirms the significanceof trilateral relationsamongJapan,the US andChinain the regionalstructureandorder. About one hundred years ago, American Secretaryof State John Hay announcedthe so-called Open Door policy. This declaration exemplified America's position as a latecomer to the community of global powers, lagging behind European powers with already established interests facilitating access to the Chinese market. It stated that "equality of opportunity" should derme relations with China. America's Open Door policy engendereddeep contradictionswith Japan,a rising power that had recentlydefeatedthe Qing Dynastyin a war andwas thus beginningto make reneweddemandsfor concessionsfrom China. Further,JapaninvadedChina in the 1930's, extending its demandsbeyond Manchuria to the entirety of China'smainland.Military expansionismdid not stop with China, but spread as far as the South Pacific and South East Asia, ultimately bringing Japan into direct conflict with America With the attack on Pearl Harbor, Japan plungedinto an all-out war in the Pacific. Only with the total defeatof Japan in August 1945 did the war finally end. In this way, Japan-US-China relationsthe first half of the 20th centurysuggesta two-against-onestructure, with ChinaandAmericaunitedin their oppositionto the Japanese invasion. In 1949, ChineseestablishedCommunistrule on the mainland. Against 1 For more on Japan-US-Chinatrilateral relations,seeRyosei Kokubun (ed.), Challenges/or China-Japan-US.Cooperation (Tokyo: JapanCenter for International Exchange(JCIE), 1998); JCIE (ed.), New Dimensions0/ China-Japan-US.Relations (Tokyo: JCIE, 1999); Tatsumi Okabe, Seiichiro Takagi and Ryosei Kokubun (eds.), Nichibeichu Anzenhosho Kyoryoku0 Motomete(SeekingSecurityCooperationamongJapan,US and China) (Tokyo: Keiso Shobo, 1991); and Zhang Yunling (ed.), ZhongbianzhongdeZhong, Mei Ri guanxi (China-US-JapanRelationship in Change) (Beijing: Zhongguo shehui kexue chubanshe, 1997).

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the backdropof the emergingcold war structure,this new People'sRepublic of China (PRC) concludedan alliance relationship with the Soviet Union. Japan,for its part, signeda bilateral security treaty to enter into an alliance with the United States. America at the time ascribed to a "containment policy" againstCommunism;in Asia this equated,in essence,to opposition to China. This generalstate of affairs continued until 1971-1972,and the suddenshock of US-Chinesereconciliation. In this way, Japan-US-China relationsin the third quarterof the 20th centurycan also be outlinedas a twoagainst-onestructure,this time with U.S. andJapanopposingChina. After 1972, China-US relations dramatically improved despite existing under the cold war structure. Enabling this strategic shift was the shared perceptionof the utility of a "marriage of convenience"betweenthe two powers.America neededto use the so-calledChina card in its oppositionto the Soviet Union; China similarly integratedits US ties into its deepening oppositionto the Soviet Union. This Sino-US rapprochementservedas the decisive turning point in the establishmentof Japan-Chinadiplomatic relations. Specifically, China fmally granted heretofore-withheld acquiescenceon the US-Japan Security Treaty, a key prerequisite for normalisation. As China worked towards normalisation, it clarified its intention on this issue for the Japanesegovernment stating, "Once normalisedties are restored,the US-Japansecurity treaty no longer has any efficacy towards China.,,2 Without this tacit acceptance,Japanwould not have been able to move normalisation.This Chinesetoleranceof the USJapan Security Treaty of course derived from its confrontation with the Soviet Union. This formulation of US-Japan-Chinarelations into a combined opposition to the Soviet Union (three-against-outsider) endured until Sino-Sovietnormalisationin 1989,andthe endof the cold war. Japan-US-China Relations and the "China Factor" since the end of the Cold War

Since entering the 1990's, Japan-US-Chinarelations have reacheda new stage.However, the overarchingstructureof this new relationshipremains elusive.During and sincethe 1990's,China continuedto rise as an important focus for internationalrelationswithin the Asian-Pacificregion. In 1990,the Soviet Communists abandonedone-party dictatorship and by 1991 the Soviet Union itself completely disintegrated. Events culminated with democratisationin EasternEuropeand the Soviet Union. In contrast,China 2 Nitchu KankeiKihon Shryoshu1949-1979(BasicMaterialson Sino-Japanese Relations19491979)(Tokyo: Kazankai,1998),p. 413.

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descendedinto international isolation following its handling of the 1989 TiananmenSquareIncident, and defensivelyattackedwhat it called attempts at peacefulevolution (heping yanbian). With the fall of the Soviet Union and the end of the cold war, the world inevitable turned its attentionto the actionsof the socialistpowerof China. In this environment,Deng Xiaoping pursuedpolicies to revive China in 1992. To inauguratethis movement, Deng gave a series of speechesto accompanyhis "southern tour" of China that further institutionalisedhis concept of the socialist market economy. His formula envisions advances towardsthe goal of reform and openingthroughthe introductionof a market economy,conductedunder the premiseof continuing socialism.As a result of this turn of policy, not only did Chinaredirectits economyonto the path of growth, but also the increasingly isolated China re-emergedon the international stage and China even subduedits criticisms of the dreaded "peacefulevolution." In due time however, due to economic revival, China experienced exceedinglysuddeneconomic growth. Disputes surfaced over the Spratly Islands, a trend towards quickly escalatingdefenceexpendituresemerged, and a crisis eruptedacrossthe Taiwan Strait. As a result, the "China threat" argumentcameto the fore in SoutheastAsia, the US and Japanfor a period. But in 1997, ChineseleaderJiang Zemin visited America and in 1998, US PresidentClinton reciprocatedwith a state visit to China. Through these events, Sino-US relations shifted significantly towards co-operative relations, as symbolisedby the buzzword "strategic partnership"replacing the fading "China threat" argument.Then, argumentsthat the 21st century will usherin ''the era of China and the US" intensified while Japan,fuelled by the deepeningeconomicrecession,suffered from a pervading senseof gloom, andlamented"Japanpassing." But this state of affairs did not endurefor very long either. Since late 1998, indicationsof a total changein dynamicsonce again emerged.China faces tough predicaments,both at home and in the international arena. Tasting the effects of the Asian currency crisis, China witnesses the dampening of its once vigorous economic growth. Stagnant domestic demand, surplus of supplies, and growing unemployment move the economy towards deflation and depression. Internationally, China was engagedin a battle with the US over Chineseaccessionto the WTO, and the ideological divide between them recurred and worsened over NATO bombings of Kosovo in Yugoslavia. Amidst all this, the tragic incident occurredwhen the US military mistakenlybombedthe Chineseembassyin Belgrade. Following that, the releaseof the Cox report, which surfaced

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accusationsof Chinesemilitary spying in America, as well as the public pronouncementby Taiwan's fonner PresidentLee Tenghui of his "special state-to-state"theory initiated further disputesbetweenChinaand the United States. Sino-US ties once again thoroughly spiralled downward, and the once-touted "strategic partnership" quickly devolved into a crisis. Nonetheless,in November 1999 both sides negotiateda Chineseaccession to the WTO, providing the bilateralrelationshipwith a respite. Sino-Japanese relations also fluctuated. The communicationgap between China and Japan,apparentduring Jiang Zemin's fall 1998 visit to Japan, symbolisesthis.3 Certainly notable"firsts" resultedfrom the visit, including useof the tenn shinryaku,which translatesas "invasion," to describeJapan's past actions, and China's public expressionof appreciationfor Japanese economicassistance.But throughoutthe visit, the centralissueremainedthe problems of history, specifically concerningwhether or not Japanwould insert owabi or "apology" into the statement.As thesetwo nationsheadinto the 21st century, clearly the problem of history remains insufficiently resolved;even this statevisit left a bitter tasteand negativeimpressionwith both sides. Around this time, mutual images between China and Japan bottomedout, which implies that the negativeimpact of this visit will not soonbe simply erased. Despite these contrary trends, the "China threat" argument has not necessarilyreturned to its original prevalencein mainstreamdiscussion. Nonetheless,China remains the focal point of debateas the Asia Pacific region heads to the 21st century. Essentially, the backdrop for recurring controversiesamongJapan,the US and China is the dynamicsof the rise of China, a supremely unique and enonnousnation-state,in post-cold war Asia. Thus Japanand America must considerthe very real needto facilitate co-operativeties with China. US policy vacillates between"containment" and "engagement"with shifts in domestic politics. Japan experiences emotional swings between ikei or "reverence"and iwakan or "a senseof incompatibility," even as its policy has remained consistent,even during Japan's handling of the TiananmenIncident. The policy follows a line resembling "engagement,"that may also be described as a policy of "bringing Chinainto internationalsociety."

3 For more on particulars and complicationsconcerningthis matter, see Ryosei Kokubun's "Sino-Japanese Relationsin a Trial Era: A Historical RecordofJiangZemin'sVisit to Japan," HogakuKenkyu,Vol. 73, No.1 (January2000),pp. 65-81.

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EAST ASIAN SECURITY AND JAPAN-US-CHINA

What exactly are the relevant points of contention in the security realm among Japan,the US and China in post-coldwar Asia? Consideringrecent political and security problems,North Korea, the RevisedGuidelines,TMD, as well as Taiwan first come to mind. Next, I will explore in turn the specificsof eachof these. The Revised Guidelines and TMD

Updated "Guidelines for US-Japan Defence Co-operation" (Revised Guidelines) were crafted in line with the U.S.-JapanJoint Declaration on Security, agreed upon at talks between Prime Minister Hashimoto and PresidentClinton in April 1996. During the cold war the US-JapanSecurity Treaty was consciouslyapplied againstthe Soviet Union, but after the cold war, such a meaningclearly becamediluted. Meanwhile, after the cold war regional conflicts eruptedacrossthe globe and the future shapeof the AsiaPacific region remainsas uncertainas ever. Also, the intensefriction of the 1980's between the US and Japan,primarily in economics,persistedas a distinct memory, leading to calls in various fora throughoutthe 1990'sfor a necessarystrengtheningof US-Japanrelations.As a result, Japanand the US choseto bolster the security treaty, specifically by revising the Guidelines. The US-JapanJoint SecurityDeclaration,derived from thesevarious factors, followed closely behind the March 1996 Taiwan Presidentialelection and associatedtensions due to China's missile exercisesnear the strait. This timing permits some to oversimplify the situation and interpret the act as a measureagainstChina. Laws implementingthe RevisedGuidelinespassedthe Diet this pastMay. Despite some differences, the Jiminto (LDP), Jiyuto (Liberal Party), Komeito (Clean GovernmentParty), and Minshuto (DemocraticParty) each basically approved the legislation, while the Socialist and Communist parties stood opposed.4 Such extensive support implies public opinion basicallyacceptedthe guidelines.The RevisedGuidelinesfurther clarify and strengthenexisting systemsof co-operationfor Japanesesupportto the US in an emergency. China warned severely that "These are significant measuresby which militant elementsin Japanwill strengthen co-operation 4 For the policy stancesof eachparty, seethe 1999 SpecialEdition of the journal Gaiko Forum titled "Japanese Diplomacyat the Crossroadsof the 21stCentury" (Tokyo: Toshi Shuppansha, November1999),pp. 166-173.

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with the US military, and Japanwill expand its military role in the AsiaPacific region."s Due to the timing, just after the accidentalbombing of the Chinese embassy in Belgrade by NATO troops, China saw eastward expansionof NATO and the RevisedGuidelinesas both linked to America's "strategyof global dominance.,,6 But the Chinesedescription of a Japanheading to becomea "military superpower"is premature.Various domestic brakes exist, not least being constitutionallimitations. Therefore,fundamentalstrict limits on the actions Japan'sforces can take for rear areasupportand supplementalassistanceto the United Statesapply evenin a war or emergency;Japanin no way will be engagedin direct military action on the front lines. In fact, seen from the opposite perspective,the legislation could be viewed as regulations that ensurecontinuedrestrictionson Japan.In this sense,Japancan be described as even more restrainedthan evenGermany,which hasdirectly participated in military actionoutsideits bordersby joining NATO's military. China's real frustration stemsfrom fears about the so-calledsituationsin areassurroundingJapan(conditionsthat if not dealt with may lead to armed attackon Japan,or concernsnearbyin the region that could severelyimpact on Japanesepeace or security).7 The Japanesegovernmentinterprets this concept as "situational" versus "geographic." China fears this applies to Taiwan and continuesto demandJapandelineatethat ''neighbouringareas" exclude Taiwan. To date, Japaneseofficials are not yielding to Chinese demands. I suggest that in the unexpectedcase of Taiwan suddenly declaring independence,leading a determinedChina to turn to force, irrespectiveof what action America takes,an official Japanesedeclarationof a "situation in areassurroundingJapan" will be somewhatdifficult. Alternatively, should China suddenly use force against Taiwan without provocation, then a possibility arisesthat Japanwill initiate acts consistentwith those approved for "situations in areas surrounding Japan," and correspondingto actions takenby the United States.Japan'suseof the "natureof the situation" rather thanspecifYinga fixed geographicareastemsfrom this kind oflogic. Japan's increasingly proactive involvement to participate in Theater Missile Defense(TMD) stemsfrom its reactionto North Korea'sAugust31st 1998 test launch of the Taepo Dong missile. Already, joint US-Japan S "Quanguozhengxiewaiweihui fuzerenfabiao tanhua(Spokesman's Statementof the Foreign

Affairs Committeeof the NationalConsultativeConference),RenminRibao,May 2711> 1999. 6 "Lun Meiguo baquan zhuyi de xin fazhan" (On the New Development of the U.s. Hegemonism),RenminRibao,May 2711> 1999. 7 "Shuhenjitai anzenhoshoho"(Legislation on Security in Neighboring Situations), Galka Forum (November1999),p. 136.

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researchis underway.China strongly objectsthat TMD somehowconceives of China as the target, or may be diverted for the defence of Taiwan. Actually, TMD itself fits into America'sglobal defenceconcept.Even in the US, commentatorsand experts exchangeargumentsfor and against the concept, including disputes over the viability of the technology. Public debateon lMD in Japan,however,can not be describedas sophisticatedor sufficiently developed.As it stands,with the lack of transparencyas to the situation in North Korea and "exclusive defence" nature of Japanese strategy,movesto continueforward with TMD will dominate. Conceptually,TMD doesnot fix China as its target. But China proclaims a new arms race will start in Asia triggered by TMD. Should TMD developmentcontinue to advance, then it must do so in parallel with trilateral confidence-building measures (CBM's) incorporating China. Above al~ a concomitanteffort must be exertedto fmd a way to halt the very North Koreanmissile developmentthat causesconcern. TMD developmentwill consumeenormousresources,a problem under Japan'scurrentfmancial difficulties. In its origin, TMD was meantas a type of insurance; by having it, its use becomesunnecessary,achieving the system'sgoal. But opinionsdiffer as to whetherthis is a ''wasteof resources" or a ''profitable investment."The key point then, as I will discusslater, lies in the primacy of normalising diplomatic relations, while TMD exists merely as a supplementalmeasuredesigned to reduce exposure to risk shoulddiplomaticnegotiationsfail. The Taiwan Problem

Over the pastyearsChina, partiCUlarly Jiang Zemin, has consideredan early resolution to the Taiwan problem as against its own interests.Once again China appearedto be groping towards the path of dialogue that had been blocked ever since Lee's visit to America and the fallout from military exercisesconductedby China off of Taiwan on the occasionof the island's 1996 presidentialelection.Chinaemploysvariousmethodsto lure Taiwan to the table for dialogue, relying on indirect assistancefrom America to this end through the 1997-1998 improved Sino-US ties. In one such success, China elicited from a visiting PresidentClinton the "Three No's" statement (no supportfor Taiwaneseindependence,no supportfor two-China or "one China, one Taiwan," and no support for the entry of Taiwan into any organisationsfor which sovereignnation statusis a prerequisite).As such pressurefrom America, repeatedat many levels in many fora, accumulated,

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CHINA'S PLACE IN GLOBAL GEOPOLITICS 8 Taiwanresolvedto also re-establishdirect discussions. But into 1999, Sino-US relations worsened over such issues as the conflict over Kosovo and accusationsof nuclear spying. In such an environment,Lee TenghuidescribedrelationsbetweenChina and Taiwan as "a relationship betweena special state and a state, and at this stageof the game,there is no needto declareindependence.,,9 China commencedstrong attacks on him for what it took as substantially a ''two state theory." SpeculationascribesLee's motives to such things as staking his position to maintain his influence after retirement,or counteringthe effect of Clinton's "three no's." But it seemsLee's main motivation likely lay in his belief that if Taiwan entersinto direct talks with China under the guise of the People's Republic of China, such a formulation would allow it to meet China in a relationshipof parity of a sort.1O In return, China assertedit would not meet Taiwan for talks until it withdrew the ''two statetheory." For a time, forceful calls for use of force came from the military, primarily from the Vice-Chairmanof the Central Military Commission, Zhang Wannian. The Peoples Liberation Army's mouthpiececarried an article on Septembernth called "Why We Will Not Acquiesceand Renouncethe Use of Weapons",a vitriolic editorial, which capturedthe atmospherein the military. However, when the September21st earthquakedevastatedTaiwan, ChairmanJiangZemin called for the rhetoric to halt.!! Meanwhile, Taiwanesepublic opinion polls showed that the "special two state theory" receivedsupport from the majority of residents. Hopeful presidential candidates Lien Chan (KMT) and Chen Shuibian (DPP) supportedit, while even the other viable candidate,James Soong (expelledfrom the KMT in November1999)thendid not openlyopposeit. On the 18th of March 2000, the TaiwanesepeopleelectedChen Shuibian as next new presidentof the island, which resultedin a completechangeof the political structurefrom KMT to DPP rule. In Chen'sinaugural address on the 20th of May, he by taking China's harsh reaction into consideration expressedthat unlessChina has no intention to use military forces against Taiwan, he would never declare independence,changethe country's name and revise the constitutionto include the "special two-statetheory". China neverthelesskept criticising him becauseChen did not make clear statement about the one-China principle in his speech.Ultimately both China and

~

My private interviewswith Taiwanesepolicy authorities(November1999).

Sankei Shimbun, Tokyo, July 14th 1999. Further, following on this, Lee published "UnderstandingTaiwan: Bridging the PerceptionGap," Foreign Affairs, Vol. 78, No.6

(NovemberlDecember 1999),p. 12. 10 My private interviewswith Taiwanesepolicy authorities(November1999). 11 My private interviewswith Chinesepolicy authorities(OctoberandDecember1999).

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Taiwan becameoverexcited.The bottom line is that the previously adhered to course of "maintain the status quo" or "freeze the situation", held by commonwisdom to be the bestalternativefor currentrelationshad suddenly grown more complex becauseboth sideshave "face" at stakein the current standoff. As for the substanceof the Taiwan problem, China has consistently emphasisedit constitutesa "domestic problem". Certainly this has some validity from the historical perspective.But viewed differently, the Taiwan problem already registers as an "international problem". The issue of Taiwan historically servedas a point of contentionbetweenChina and the United States, and as already described, is handled as essentially an "internationalproblem"betweenChinaandAmerica. Current "international relations" are not necessarily limited to only nation-statesas key players. NGO and other citizen groups, international organisations,multinationalcorporationsand so forth join the ranksof major players in international relations in today's globalism. Many countries, including Japan, maintain relations with Taiwan in terms of people-topeopleand economicties and despitenot having official diplomatic ties. For such countries,economicties continue to expandand becomeincreasingly complex, creatingmutual interdependencies that can be hugely profitable. In light of suchties, the existenceof a type of internationalrelationshipcannot be refuted. Accordingly, even while respectingChina'sposition that Taiwan remains a "domestic issue", there coexists a sensein which the Taiwan questionalso containselementsof an "internationalproblem". The Problem of North Korea

Japan,America, China, and South Korea are reaching a basically unified position on the problem of North Korea that calls for an end to the developmentof nuclearweaponsand missiles,and seeksto promotepolicies of reform and opening.However, when it comesto specific implementation measures,the individual nationsdo not necessarilyproceedin lockstep.The test launch of the Taepo Dong missile pointed this out clearly. Japan responded with a strong backlash and an announcementof sanction measures. South Korea, perhapsbecausethe Taepo Dong did not directly target its territory, did not seem overly concerned. America's anxiety appearedsomewherein between.As a result, the push for the development of TMD was energisedin Japan,as already described.China expresseda negativeview of missile development,but out of considerationfor its ties with North Korea,took no further concreteactions.

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The core of the regionalsystemdealingwith North Korea is the US-North Korea relationship.Since the fall of 1999, this relationshiphas exhibited a numberof developments.In September1999, having securedfrom the US assurancesit would soften sanctions against it, North Korea pledged to freezemissile test launcheson the condition the two nationsremainengaged in discussions.In October,Policy Co-ordinatorPerry releasedhis report on US policy optionstowardsthe North. The report endorsedthe policy course of "comprehensiveapproach"as the meansto bestdeal with the threatfrom North Korea, an effort that primarily relies on diplomatic negotiatingtools.12 In this changing environment,Japanalso initiated measurestowards talks and negotiationsfor normalisation,spearheaded by Former Prime Minister Tomiichi Murayama'snon-partisandelegationvisit to North Korea. Japan's "stick and carrot" approachis consistentwith the spirit of the Perry report, as Japan stipulates it will not abandonefforts to develop regional TMD againsta potentialNorth Korean threateven as it movestowardsdiplomatic negotiations. While China acts as a key "friendly nation" for North Korea and provides vital assistancein basic commodities, it does not necessarilyhave the requisite leverageto propel the North towards policies of basic reform and opening.That said, we could safely assumethat the two nationsenjoy secret ties beyondthe scenes,including links in the military sector.For this reason, China's responseand behaviouron the North Korea problem bears great significance for Japan,the US and Korea. In fact Kim Jong-iI, prior to the summit talk of South and North Korea in June 2000, visited China for the first time since1983. Subtle differencesshapethe interestsof Japan,China, the US, and South Korea concerningreunification of the peninsula. Distracted with its own economicproblems,SouthKorea promotesthe "Sunshinepolicy" and urges Japan and the US to normalise ties with the North, revealing a realistic approachto reunificationas a long-termissue.An objective observercan see that ultimate reunification will undoubtedlyoccur under the leadershipof South Korea Indeed, reunification of the peninsulaimplies the possibility that the entire peninsula will necessitateoccupation by some kind of transitory (American) administrationor, what's more, the stationing of US troops up to the peninsula'scommon border with China. For this reason, China's true agendamay be consideredmaintenanceof the status quo.13 Both the US and Japancertainly fear chaosaccompanyingreunification,but consideran even more severeproblem to be the continuanceof a closed :; Yomiuri Shimbun,October16th 1999. My private interviewswith Chinesepolicy authorities(OctoberaodDecember1999).

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political system, possibly nuclear armed. For this reason, both nations ultimately preferreunificationto the statusquo, premisedof courseon South Koreanleadership. In its essence,the problem of North Korea is history repeating itself. Current efforts do not necessarilystrike at a resolution of the sourceof the problem,as China, Japan,the US and Korea employ approachesat times out of synch. The situationrequiresredoubledefforts for closer communication andmoreco-ordinatedapproaches. LOOKING AHEAD TO 21 ST CENTURY JAPAN-US-CHINA RELATIONS

Debate concerning Japan-US-China Relations

Due to the complex and importantpoints of disputein the region discussed thus far, we see the requirementto constructa basis from which the three nations can develop smooth ties as they head into the 21st century. JapanUS-Chinatrilateral ties are not even at a stagewherethey could easily move forward to a trilateral summit meeting. Their interests are intricately balancedin a complex set of links and cross-purposes, and the time is not yet ripe for the three nations to settle down to pursuetalks on confidence building. Yet, on the civilian level, a numberof fora for dialogueon politics, security or economicswere attemptedin recentyears. Additionally, a subgovernmentallevel trilateral meetingaffiliated with the JapaneseMinistry of Foreign Affairs, Chinese Foreign Ministry, and US State Department originated with a preparatory meeting in 1998 and formally started in January of 1999. These can be consideredpreliminaries for an eventual trilateral meetingamongthe governmentsthat will move them into rangeof a trilateral summitof headsof statein the future. Ideally, Japan-US-Chinarelationswould be such that if two of the three nationsunited, they did not do so in oppositionto the remainingnation, or if the threeactedin concert,they did not do so in terms of a sharedenemy.But as 20th century international relations showed, these sentiments,though beautiful sentiments,prove immenselydifficult to realise.China often enters debateswith a related argument,claiming "While the US and Japanare allies, China lacks such a relationship with either the US or Japan.If we entertalks with the two, then undoubtedlythey will teamup and bashus. As a consequence,we must take the current trilateral relations that are in the

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

form of an isoscelestriangleandcreatean equilateraltriangle.,,14 In this argumenthides a critical trap. The US-Japanalliancederivesfrom the US-JapanSecurity Treaty. Thus, transformingtrilateral relationsinto an equilateraltriangle implies downgradingthe US-Japanalliance to the lower standardsof Sino-US and Sino-Japanese relations. This would sacrifice the strong alliance we have today, the product of many years. Demoting a relationshipthat has attainedthe high level of the US-Japanalliance would not prove easy. Nor would it be appropriate.The suitability of the alliance constitutesone of the conclusionsreachedby Japanesepost-wardiplomacy, and, in truth, the alliance continuesto enjoy a high level of public support from the Japanese. The crux of the problem lies not in the natureof US-Japanties, but in the immature Sino-Japaneseand Sino-US relations. By speakingof elevating both Sino-Japanese and Sino-US ties to embodythe US-Japanrelationship in spirit and actions,a discussionon making trilateral relationsan equilateral trianglecan finally havemeaning. In the event of trilateral talks, the concern that Japanand the US will necessarily conspire to attack China oversimplifies the situation. For instance,after the 1989 TiananmenIncident, the Europeannations and the US, without exception,repeatedlylevied all sorts of sanctionson China and criticised the government.At the G7 Summit, it was Japanthat lobbied to persuadeothers to refrain from isolating China and Japan first restored economicaid to China Also considereventsconcerningChineseaccession to WTO, when the US resisted Chinese entrance, but the Japanese governmentquickly formally approved Chinese accessionin conjunction with Prime Minister Obuchi's July 1999 visit to China. Japaneven had to absorb complaints from the US over this.15 Moreover, the December1999 WTO Ministerial meeting never reachedagreement,in part becauseJapan did not give in to US demandson such issuesas anti-dumping.Clearly then Japandoes not necessarilyalways "conspire" with the US. We can expect thesedynamicsto recur in the future, particularly in the realm of economic security. Nonetheless,China's complaint does contain some truth. Some in Japan complain of "Japan passing" in reaction to suddenprogressin US-China 14

There are many articles concerningthis. Seefor example,Yang Bojiang, "QianghuaRi-mei longmeng:Ribenmianxiang21 shiji de zhanlueqitiaoban?"(Reinforcementof!he U.S.-Japan Alliance: Is Japanon !he LaunchingPad for !he 21" Century?),Xiandai guoji guanxi, No.6 (1999); Jin Linpo, "Mei-ri longmeng zaidingyide beijing, guocheng,jiqi yingxiang" (The Background,Processand its Influence of Re-definition of US-JapanAlliance), Guoji Wenti Yanqiu,No.1 (1999),p. 35-39. IS My privale Inlerviewswi!h Americanpolicy authorities(July 1999).

28

EAST ASIAN SECURITYAND JAPAN-US-CHINA RELATIONS

relations. Some in America harbour an instinct to prevent scenariosthat would permit Japanand China, acting in concert, to team up against the United States.Creating an organisingmodel that enablesco-operativeties between the three countries will not be easy; it not only faces practical problemsbasedon reality, but alsohistoricalandpsychologicalconstraints. The Significance of Japan-US-China Relations

Why do we emphasiseJapan-US-Chinarelations?At this point I would like to re-examinethis point. First, in very real terms, Japan,the US and China hold the most importancein shapingthe regional order. America'seconomy ranks first in the world; its voice and influence dominateboth political and security issues.Japanfollows only the US in the size of its economy,and servesas a key donor nation, maintainingan enormouseconomicinfluence in the Asian Pacific. China'seconomicstrengthis still developing,but China rates great power status by virtue of its vast territory and population of almost 1.3 billion people,not to mentionits permanentSecurityCouncil seat at the United Nations, granting it veto authority. In sum, Japan,the US and China constitutethe "responsiblenations" that will drive the region'sfuture to one direction or the other. It necessarilyfollows that their mutual relations will provecritical to the region. Secondly,as seenfrom other nations within the region as well as other regions, the Japan-US-Chinatrilateral as well as the componentcountries themselvespossessidiosyncrasiesand presenta heterogeneousmix. The region faces constraintsdue to a gamut of "Japanissues,""US issues"and "China issues". Should these three countries forge co-operativeties, they would contribute to the confidenceto the region. In this context, "Japan issues" refers mainly to problemsover history, lack of political leadership and closedmarkets."US issues"implies coercion by "American standards" and supremacyof its unrivalled military forces. "China issues"speaksto a lack of transparencyin political decision-making and military affairs, inconsistentimplementationof the marketeconomyand inadequaciesof the legal system.The goal of keepingthesevariousproblemsfrom intruding on the region necessitates a framework for trilateral ties that actsas a systemof checksandbalances. Third, the weaknessof cross-regionaland multinational regional fora within Asia Pacific lends significance to Japan-US-Chinatrilateral ties. Comparedto the more advancedexamplesin Europe,whether considering politics, security or economics,an overarchingsenseof regional solidarity suffers greatly. Diversity defines Asia-Pacific and the resultantweak sense

29

CHINA'S PLACE IN GLOBAL GEOPOLITICS

of homogeneity hinders significant impetus toward considering multinationalframeworks.In diversity lies strengths,but also weakness. Of coursethis region claims fora such as Associationof SoutheastAsian Nations (A SEAN) and its derivative ASEAN Regional Forum, as well as economic organisations that span the Asia Pacific like Asia-Pacific Economic Cooperation(APEC). Also, a new framework recently came into being, "ASEAN Plus Japan, Korea and China." Still, these suffer considerableflaws in termsof the territory encompassed, spanof the region, extent of institutionalisation, degree of commitment and interest of the variousplayers. To move beyond existing fora, momentum toward multinational cooperativebodiesthat are more sophisticatedin extentand impoft requiresan accumulationof dialoguesin a variety of settingsand at a numberof levels that explorebeyondmere bilaterals.To such an end, the regionalpowersof Japan,the US and China should look aheadto the 21st century and actively pursue talks, dialogue, and exchangesof opinions at all levels, with all nations of the region and with other regions,to the exclusionof none. Such an effort would truly be significant. CONCLUDING REMARKS: THE NEW POTENTIAL OF JAPANCHINA-KOREA TIES

Aside from Japan-China-USrelations, the multilateral system recelVlng attention lately is the Japan-China-Koreaframework. Reportedly, this concept originated with Prime Minister Obuchi, who put out feelers informally during summit talks with China and with South Korea. Such a structurematerialisedat the end of last Novemberduring the ASEAN Plus Japan,China and Korea meetingconvenedin Manila. The trilateral meeting transpiredunder the pretext of dining togetherover breakfast,significant as the fIrst ever trilateral summit attendedby Japan(prime Minister Obuchi), China (Premier Zhu Rongji) and Korea (PresidentKim Daejong). Kim Daejong receivesthe credit for bringing the meetingto fruition, as he used his goodties with both ChinaandJapanto facilitate its realisation. Certainly convening such meetingsrequires careful consideration.Japan and Korea must take America into account; indeed, some type of liaison with America reportedly precededthe event. China, for its part, remains concerned above all with North Korea and likely experiencedserious reservationsbefore proceedingto meet with the leadershipof Japan and South Korea Also, Premier Zhu Rongji representedChina in the meeting. Since Jiang Zemin holds pivotal responsibility for foreign relations, while

30

EAST ASIAN SECURITY AND JAPAN-US-CHINA RELATIONS

Zhu basically bears responsibility only for economic policy, we can infer Chinese domestic considerationsmeant some misgivings about involving Jiangin the trilateral summit. Perhapsfor the samereasons,China presentsa considerably prudent posture concerning engaging Japan and Korea in discussionson security issueswithin a trilateral framework and concerning efforts to establishthe Manila meeting as a precedentfor further trilateral talks. Overall, relations amongthe neighbouringcountriesof Japan,China and Korea (referredto here in the broadersenseof the whole peninsula)during the 20th century displayed a regrettable lack of mature development. Certainly Japanbearsthe brunt of responsibilityfor eventsin the region the fIrst part of the century. If Japaneseduly reflect on this past, then we must seek to foster co-operativerelations and confIdenceamong Japan,China, and Korea. Clearly this effort should not take a shapethat excludesother nationsor regions,including America andNorth Korea With that in mind, it is vital that an appropriateframework be conceivedto securepeace and stability in the region. Naturally this chapterfocused on Japan-China-USrelations. But paying attention only to this primary trilateral relationship is insufficient. In addition, we should strive to envisionalternateframeworksthat complement China-Japan-USties. A skilled player of the strategygamego (weiqi) knows how to work in spacesoutside of the main areaunder contest,building up areasthroughoutthe board in preparationfor a fmal link up that leads to victory. Alternateframeworkssuchas a Japan-China-Korea forum shouldbe understoodas similarly strategicallyplacedefforts for ultimately developing enduringmultinationalframeworksthat encompassthe entireregion.

31

Chapter 3

Does the Chinese Economy Matter?

Robert Ash

INTRODUCTION

Seenthrough the eyesof a Chinesefanner or factory worker, let alonethose of a surplus agricultural labourer, a migrant, a chronically impoverished fann householdor one of the increasingnumberof urban unemployed,l the stateof the Chineseeconomyis self-evidentlya matterof direct and pressing concern. Less pressing,but nonethelessimportant, are the aspirationsfor Quantifying the numberof peoplewho fall into eachof thesecategoriesis extremelydifficult The numberofswplusrural labourers(mainly fanners)is certainly not less than 150 million, it may well be 200 million (e.g. see Du Runsheng,quoted in Zhongguogaige (Chinese Refonns),October 1311> 2000, cited in British BroadcastingCorporation,Summaryof World Broadcasts,Part 3: Asia Pacific, hereafterSWB, FE/4014, December411> 2000}, and one estimatehas even given a figure as high as 400-500million (Zhongguojingji shibao (China Economic Times), November 2201 2000, cited in SWB, FEl4008, November 2711> 2000}. Quantifying the numberof migrantsis evenmore difficult, althoughofficial data,taken from the SampleSurveyon Population Change(J 999) indicatethat in 1999,over63 million people (more than 5 percentof the total population)had left their original place of registration(60 million of them for more than 6 months) (State Statistical Bureau [SSB], Zhongguotongji nianjian (China Statistical Yearbook),hereafterTJNJ (Beijing: Zhongguotongji chubanshe, 2000), pp. 100-01}. The official figure of 5.75 million registeredurban unemployed(3.1 percentof the total) (TJNJ, 1999,p. 115) grosslyunderstatesreality by excludingunemployed migrantwoIkers andstate-ownedenterprise(SOE)employeesno longerin receiptof their due wages(note too that in 1995-99,SOE employmentfell by 26.89million, largely as a resultof lay-offs (ibid.}). As for the numberof impoverishedfanners,a recentsamplesurvey (TJNJ, 2000,p. 330) indicatesthat 12.99percentof rural householdswere in receiptofan annualnet income of 1000 yuan or less (accordingto Xinhua News Agency [XHNA], the minimum neededto provide for basic food and clothing (XHNA, September2711> 2000 in SWB(Weekly EconomicReport), FEW/0660}. This figure would suggestthat well over 10 million rural residents- no doubt, overwhelminglyfannersliving in far westernprovinces- experienced conditionsof severepoverty in 1999.

32

DOESTHE CHINESE ECONOMY MATTER?

further quantitative and qualitative improvementsin living standardsfor those who have benefited most from post-1978 economic reforms. Meanwhile, in the face of demandsfor improved living standardsby both groups- the advantagedand the disadvantaged- the economicimperativeis a critical touchstonefor the centralauthoritiesin Beijing, the maintenanceof economicgrowth with stabilitr having becomea yardstick of the Chinese CommunistParty's ability to retain its authority and legitimacy. In short, economicand welfare preoccupationsleaveno room for doubt that, from an internalperspective,the performanceof China'seconomymattersgreatly. True or false, the externalperceptionof the Chineseeconomyis also that it "matters".The regional financial crisis of 1997-98may have damagedthe widely held notion of an 'EastAsian miracle',3 as well as dealing a blow to the thesis of the 21st century as the 'Asian Century', or the 'Asia-Pacific Century'.But there remainsa presumptionthat it could yet turn out to be the 'China Century' - one that will see the emergenceof China as a global superpower,capableof competingwith the United Statesas an international political, military and economicforce. Even in the face of falling confidence in its ability to realiseits potentialas a marketfor goodsand services,or as a profitable destination for financial capital, China has, since the 1980s, remained the second-largestrecipient of overseascapital (above all, of foreign direct investment).4National and multinational corporatebusinesses meanwhilecompetewith one anotherin establishingan economicpresence there. China's admission to the World Trade Organisationwill no doubt servemerelyto intensify suchcompetition. To ask whetherthe Chineseeconomy"matters" is doubtlessprovocative. But framed in such bald terms, the question is excessively crude and simplistic. More useful may be to ask whetherit mattersquite as much as is often merely assumed.For example, from the current perspective,is the Chinese economy of sufficient consequenceto justify current and future projected levels of foreign investment and other forms of economic

2 I take it that growth with stability - the twin goalsimplicit in the refonnistthrustof the post1978 Dengist economicstrategy(including Deng's advocacyof "taking the lead in getting rich") - still takesprecedence,for the time being, over the pursuit of growth with equity. To what extentwideningeconomicand socialdifferentialswill seeincreasingemphasisplacedon equity issues,it remainsto be seen. 3 E.g., see The World Bank, The East Asian Miracle: EconomicGrowth and Public Policy (New York: Oxford University Press, 1993); but for a dissenting voice, see also Paul Krugman, "The Myth of Asia's Miracle," Foreign Affairs, Vol. 73, No. 6 (NovemberDecember1994),pp. 62-78. 4 Between 1979 and 1999, China absorbed US$305.9 billion of FDI (92 percentof it since 1992,whenDengXiaoping undertookhis 'southerntour') (TJNJ, 2000,p. 604).

33

CHINA'S PLACE IN GLOBAL GEOPOLITICS

involvement, or might other destinationsbecome more attractive?5 Is it likely that the reformist thrust of prevailing governmentpolicy will generate sufficient growth to overcome serious domestic economic and social problems?In short, do China'seconomicfundamentalssupportthe view of it as an emerging economic superpower?Or is there room for a greater degree of scepticismin assessingChina's current economic situation and future potential?6Theseare the broad questions,which shapethe following discussion. HISTORICAL RESONANCES

China's history offers an interesting and instructive backcloth to recent developments.Until the mid-18th century,China seemedto many Europeans a model of cultural and moral enlightenment,characterisedby progressive social, economicand political institutions.7 But by the beginningof the 19th century, a more sceptical view had begun to emerge, which found its apotheosisin the Hegelian perception of China as a despotic "Asiatic Society", immune to outsideinfluences.8 Since 1840, involvementin China 5 From time to time, suggestionsare madethat India could seriouslycompetewith China for foreign capital (especially foreign direct investment).Economic liberalisation facilitated a dramaticrise in FDI into India in the first half of the 1990sfrom US$ 150 million, 1991 to US$2 billion, 1995 (quoted in The Economist, February 22nd 1997, "India's Economy Survey," p. 13). But even after this sharp increase, India's FDI receipts paled into insignificance,comparedwith the US$37.5billion, receivedby China in 1995 (TJNJ, 2000,p. 604). The potentialattractionsofIndia for foreign investorsremainconsiderable,evenif they 6 areunlikely to be realisedin the foreseeablefuture. The most provocativerecent expressionof such scepticismis Gerald Segal, "Does China Matter?" Foreign Affairs, Vol. 78, No.5 (September/October 1999),pp. 1-13. Seealso two commentsby JohnLloyd: "The ChinaSyndrome,"Financial Times Weekend,January8'" _9'" 2000,and "Will This be the ChineseCentury?"New Statesman,January10'" 2000,pp. 15-16. 7 This interpretationderived from the writings of Jesuitmissionaries,suchas Fatherdu Halde and Father de Mailla. It was reinforced by other prominent Europeanthinkers, such as Leibniz, Voltaire and Quesnay. The mid-18th century European vogue of chinoiserie highlights the extentto which intellectual appreciationof China was matchedby aesthetic fashion (Catherinethe Greatwent as far asto create"an entire imitation Chinesetownship"). SeeJonathanSpence,The Chan's Great Continent: China in WesternMinds (London: Allen Lane,The PenguinPress,1999),p. 56. 8 Adam Smith's commentthat "a country which neglectsor despisesforeign commerce,and which admitsthe vesselsof foreign nationsinto one or two of its ports only, cannottransact the businesswhich it might do with different laws and institutions" (The Wealth ofNations [1776]) is one of the earliestwarnings of the consequences of China's isolation from the internationaleconomy.Half a centurylater, Hegel (in The PhilosophyofHistory) highlighted the samedangerevenmore strikingly: " ... this stretchingout of the seabeyondthe limitations of the land, is wanting to the splendid political edifices of Asiatic States,although they themselvesborder on the sea- as for example,China.For them, the seais only the limit, the ceasingof the land; they haveno positive relation to it" (both thesepassagesare quotedby JonathanD. Spence,The SearchforModern China (London: Hutchinson,1990),pp. 135-36).

34

DOES THE CHINESE ECONOMY MATTER?

has increasinglybeenmotivatedless by intellectualand moral concernsthan by the promiseof materialwealth offeredby its commercialpotential. The tension between an inward-looking China, seeking to maximise economic se1f-sufficiency,9and outside forces, determinedto encourageor compel China's greater involvement in the international economy, is a recurring theme in the history of Sino-foreign relations during the last two centuries.1O During this period, the lure of the Chinese market has continuouslynourishedthe self-interestof foreign tradersand investors.Yet even now, as a hundredand fifty yearsago, on any rational criteria, it is the potential, as much as the reality of that market that persuadesoverseas companiesandbusinessmen to seekclosereconomicengagement. The signing, in August 1842, of the Treaty of Nanking is rightly viewed as a watershedin China's modern political development.To what extent it was also an economic watershedis the subject of a debate that is still unresolved.That, during the secondhalf of the 19th century, international economic forces exerted a growing influence on local rural Chinese economies, especially in eastern and coastal regions, is now widely accepted.11 The importance of these influences, as well as others such as 9 The size factor - i.e., China'scontinentalscope- traditionally encouragedan inward-looking stance,famously andmagnificentlyexemplifiedby EmperorQianlong'sedictto King George III, following Lord Macartney'saudiencewith the ChineseEmperorin 1793: "we havenever valued ingeniousarticles,nor do we have the slightestneedof your country'smanufactures ..." (quotedin Spence,The Search/orModern China, p. 122). The view ofa China isolated from all outside influenceswas also capturedby Karl Marx in his analogy of China as "a mummy carefully kept in a sealedcoffin." SeeLiu Foding, "Foreign Capitalismand China's Traditional Economy" in Tim Wright (ed.), The ChineseEconomyin the Early Twentieth Century: RecentChineseStudies(London: The Macmillan Press,1992),p. 157. 10The tensioncanbe followed throughthe collectionof translatedChinesedocuments,collected and edited by Ssu Yu-teng and John K. Fairbank, China's Responseto the West: A Documentary Survey, 1839-1923 (New Yorlc Atheneum, 1963). Although China's first overseasdiplomatic mission was establishedas late as 1877 (in London), notice that its lateimperial inward looking, evenxenophobic,stancecontrastswith a more openoutlook in preMing times, when"Chinesejunks wentto Japan,the Hindu kingdomof Champaon the coast of Annam, Malaya, the coastsof South India and of Bengal, and the coastof Africa. See JacquesGemet,Daily Life in China on the Eve o/theMongolInvasion, 1250-1276(Stanford, 11 Cal.: StanfordUniversity Press,1970),p. 83. E.g., see Ramon H. Myers, The ChinesePeasantEconomy: Agricultural Developmentin Hopei and Shantung,1890-1949(Cambridge,Mass: HarvardUniversity Press,1970); Loren Brandt, CommercialisationandAgricultural Development:Central andEasternChina, 18701937 (Cambridge:CambridgeUniversity Press,1989); David Faure,The Rural Economy0/ Pre-Liberation China: Trade Increaseand PeasantLivelihood in Jiangsu and Guangdong, 1870-1937(Hong Kong: Oxford University Press,1989); Seealso Philip C.c. Huang, The PeasantFamily and Rural Developmentin the Yangzi Delta, 1350-1988(Stanford, Cal.: Stanford University Press, 1990), esp. ch. 7; and, for an interesting and characteristically provocativeanalysisof the parametersof Sino-foreigneconomicrelationsin the late Qing and early Republicanperiods,seePeterNolan, "China andthe World Economy,1840s-1940s"in Nolan, Stateand Market in the ChineseEconomy:Essayson ControversialIssues(London:

35

CHINA'S PLACE IN GLOBAL GEOPOLITICS

nascentmodemindustrialisationand associatedinfrastructuraldevelopments - thesealso heavily dependenton foreign involvement- lay essentiallyin the exposure to modern industrial technology and capitalist methods of organisation that they provided.12 The economic implications were profound, although domestic and international political and military constraintspreventedtheir translationinto 'moderneconomicgrowth'13 for domestic ends until after 1949. In the interim, the Chinese economy remained dominatedby a farm sector whose technology and institutional framework owed most to developmentsthat had occurredcenturiesearlier.14 By contrast,the more immediateimpactof the new influenceswas mitigated by the dualistic and enclavenatureof most foreign-ledmodernisation. The delayedattainmentof modern economicgrowth in China has been capturedin a memorablephrase,which characterisesthe patternof national economicdevelopmentin the secondhalf of the Ming and the whole of the Qing dynasties as that of "quantitative growth, qualitative standstill.,,15 Measuring the extent of such growth is, however, extremely difficult. One source suggeststhat for the entire Qing period (1644-1911),the rate of growth of per capita income may have been of the order of 0.3 percent p.a.,16althoughduring much of the 19th centuryinternal and externalfactors are likely to have significantly reduced even this low figureY The most direct effect of the growing foreign presencein China after 1840 is likely to The Macmillan Press,1993),pp. 27-55. 12Matk Elvin long ago demonstratedthat indigenousscienceand technologyduring the late Qing remainedrootedin the pastandthat Chinawas far from being on the vergeof generating major breakthroughs(seehis ThePattern ofthe ChinesePast(London: Eyre Methuen,1973), esp.Part3). Following Elvin, Perkinsnotesthat ''therewerefew changesin technologyof any kind in the five centuriesprior to the Opium Wars, andthosethat did occurwere of marginal significance.Thus China'seconomyexpandedin sizeaspopulationgrew, but expansiontook place within a stagnant technology, and hence per capita income rose little if at all" ("Introduction: The Persistenceof the Past" in Dwight H. Perlcins (ed.), China's Modern Economyin Modern Historical Perspective(Stanford,Cal.: StanfordUniversity Press,1975), p.2). 131 use the term here in the sensein which it has been analysedby Simon Kuznets (see his Modern Economic Growth: Rate, Structure and Spread (New Haven and London: Yale University Press,1966». 14As late as 1933, about two-thirds of China's net domesticproduct originated in the farm sector,and around 95 percentof the population lived in the countryside(including market towns). See Ta-ChungLiu and Kung-Chia Yeh, The Economyof the ChineseMainland: National Incomeand EconomicDevelopment,1933-1959(Princeton,New Jersey:Princeton University Press,1965). IS Elvin, ThePatternofthe ChinesePast,ch.l7. 16RamonH. Myers, The ChineseEconomy:Past andPresent(Belmont, Cal.: WadsworthInc, 171980),pp.5-6. SeealsoDwight H. Perkins,Agricultural Developmentin China, 1368-1968(Chicago:Aldine Publishing Company, 1969), p. 27, which cites data showing a consistenttrend of negative farm yield growth during the decadesbetween1821-1820(index=100)and 1901-1910(= 78).

36

DOES THE CHINESE ECONOMY MATTER?

have beenin the foreign sectoritself, and data indicatethat during 1868-90, Chinese exports rose by 1.0 percent p.a., and imports by 3.6 percent (between 1895 and 1931, the correspondingfigures were 2.9 and 2.0 percent).18 Implicit in theseestimatesis the fmding that the shareof foreign trade in China'sGDP rosesharply after 1840. Again, only approximateestimatesare available,but they point to a rise in the trade ratio from 5.1 percent(187184) to 16.7 percent (1920-29).19 Even allowing for much more rapid economicgrowth after 1949 than during the previouscentury,it is a salutary fmding that only in the mid-1980swas the latter figure re-attained(seeTable 1).

Throughoutthe Mao era (1949-76),the trade ratio remainedsignificantly lower than the estimatedaveragefor the 1920s.Even in the frrst half of the 1970s, when China's foreign trade growth surged at a rate unprecedented since 1949, the rise in the trade ratio was merely by way of recovery from the depressedlevel of the late 1960s. The same picture characterisesthe exportperformance. In addition, following its legalisation in the mid-1890s, foreign direct investmentin China (as well as other forms of capital inflows) rose sharply in the first decadesof the 20th century. Relevant statistics are far from reliable, but they suggestthat in nominal terms, direct investmentsin China rose from US$503.2million (1902) to US$2.68billion (1936) - an average rate of growth of about5 percentp.a over almostthreeand a half decades,z°

18Calculatedfrom a quantum index (1913=100) in Alexander Eckstein, "The Economic Heritage" in A. Eckstein, Walter Galensonand Ta-ChungLiu (eds.), EconomicTrends in CommunistChina (Edinburgh:EdinburghUniversity Press,1968),pp. 56 and 70. Demberger cites data showing that China'saverageannual merchandisetrade (exports+ imports) rose from US$ 208.7million (1871-84)to US$ 253.7million (1885-1900),but thereafterincreased to US$I,418.6 million (1920-29) (Robert F. Demberger,'The Role of the Foreigner in China's Economic Development" in Perkins, China's Modern Economy in Historical Perspective,p. 27). Note that the accelerationof China'sforeign tradegrowth after the 1890s is mirrored in quantitativeindicatorsof nationalincomeandmodernindustrial growth during 19the sameperiod. Derived from datain Demberger,'The Role of the Foreigner,"p. 27. Feuerwerkersuggestsa traderatio of 7 percentof GDP (1933). This lower figure is not necessarilyinconsistentwith the estimatesgiven above,bearingin mind that underthe impactof global recession,China's foreign tradefell sharply after 1931 (cf. merchandisetrade growth of -27 percentp.a., 193133). See Albert Feuerwerker,"Economic trends, 1912-49" in John K. Fairbank (ed.), The CambridgeHistory ofChina. Volume 12: RepublicanChina 1912-1949,Part I (Cambridge: CambridgeUniversity Press,1983),pp. 121-22. 20Datafrom Feuerwerker,"Economictrends,"p. 117. Dembergernotesthatevenallowing for a low investmentrate in China, "foreign investmentrepresentedabout 20 percent of total investment in China at the end of the 1920s" (Le., even before Japan'soccupation of Manchuria)('TheRole of the Foreigner,"p. 30).

37

CHINA'S PLACE IN GLOBAL GEOPOLITICS

T abl e 1 The R e 1· anonsh·IP BetweenForelgnTra d e andGDp·In Ch·Ina Exportsandimportsas Exportsaspercentof percentofGDP GDP 1871 - 84 (Average) 5.1 2.5 16.7 7.3 1920- 29 (Average) 1952 1957 1965 1978 1985 1990 1999

9.5 9.8 6.9 9.8 23.1 30.0 36.'5

4.0 5.1 3.7 4.6 9.0 16.1 19.7

Sources: 1871-74and 1920-29estunatesfrom Dernberger,"The Role of the ForeIgner",p. 27, Table 1; datafor 1952-99from StateStatisticalBureau(SSB),Zhongguotongji nianjian, pp. 53 and 588, and SSB,Zhongguoshangyewayjing tongjiziliao 1952-1988(StatisticalMaterialson China's Trade and Foreign Economic Relations 1952-1988) (Beijing: Zhongguo tongji chubanshe,1990),p. 429.

Differences in China's political and geo-strategic circumstancesmake detailedcomparisonswith post-1978trendssuspect,if not specious.But the argumentthat in the late 19th century, "China neededan exogenousshockto induce modernisation,,21is perhapsanalogousto Deng Xiaoping's belief, in 1978, that China's door must be opened, if technological catch-up and further modernisationwere to be achieved. In anticipation of much later developments,it deservesnote too that early foreign direct investmentwas geographicallyhighly concentratedin favour of eastern(including northeastern)China;22 that linkages with the interior were limited; and that the return on foreign investmentwas relatively low - no higher, for example, thanthe profit rate of indigenousChinesefirms.23 What of China's historical performancefrom a comparativeinternational perspective?The finding that between 1800 and 1900, its share of global manufactllring output declined from 33 to 6.2 percent24 is a dramatic one. Concealedin such figures are contrastingnational fomInes, highlighted in Chinesefailure to moderniseits economic institutions and technology at a time when Western Europe, the United Statesand Japanhad successfully

21Dernberger,'''TheRole of the Foreigner,"p. 40. 22Almost half of all foreign investmentwas locatedin the foreign concessionsof Shanghai,and a further third in Manchuria(Dernberger,'''TheRole of the Foreigner,"p. 37). ~3 Dernberger,'''TheRole of the Foreigner,"pp. 45-46. 4Segal,"DoesChinaMatter?"p. 2.

3&

DOES THE CHINESEECONOMY MATTER?

embarkedupon modemeconomicgrowth?5 No less striking is the fact that evenwhen China led the world in manufacturing,the associatedoutputwas overwhelmingly directed towards meeting domestic, not foreign market demand.Prior to 1949, China'speakshareof world tradewas reachedin the late 1920s, when it accountedfor a mere 2.2 percentof the tota1?6 This figure was not subsequentlyre-attaineduntil 1993, and even today it is no morethan4 or 5 percent. Even allowing for a significant margin of error, the estimatespresented above are instructive and lend perspectiveto the fmding that by the mid1990s,China had - in terms of its level of GDP - becomeone of the two or three largesteconomiesin the world?7 To haveincreasedits shareof global GDP from 5 to around 11 percentsince 1978 is a remarkableachievement. But reflected in this rise is the finding that in so doing, China's global positionhad merely returnedto that of the beginningof the 20th century.The significanceof the 170 percentrise in real averageper capita GDP during 1978-95is no lessremarkable- all the more so, againstthe backgroundof an increasethat mayhave beenas small as 63 percentduring the previous 160 years.28 Meanwhile,however,China'sper capitaincomein 1995 was a mere 11 percentof that of the United States,20 percentof that of Taiwan and less thanhalf that of Thailand.29 Inherent in gaps such as theseis of coursethe potential for rapid 'catch up' and acceleratedgrowth. Under the impact of post-1978reforms, China has already demonstratedits ability to take advantage of its relative backwardnessin order to generaterapid growth. But it remains an open questionwhetherthe momentumof eventhe slowing growth of recentyears can be maintained.30 In both urban and rural sectors, China confronts 25 From this perspective,it is all the more sutprising that China's share of global GDP is

estimatedto have beenas high as 13.2 percentin 1890, and 9.1 percentin 1913. SeeAngus Maddison, Chinese Economic Performance in the Long Run (Paris: Organisation for Cooperationand Development[OECD], 1998), p. 56 - the latter figure being only slightly below that of 1995, basedon purchasing-powerparity calculations.Maddisonalso suggests that China'sper capitaGDP in 1890,expressedasa shareof the global average(50.3 percent) 26 was almostthe sameasin 1995 (51.1 percent). NicholasR. Lardy, China in the World Economy(Washington,DC: Institute for International 27 Economics,1994),p. 1. World Bank estimates,basedon the UN SystemofNational Accounts(SNA) definition and convertedto US dollars on the basis of official exchangerates,give a lesserrole to China. Thus, the 1996 World DevelopmentReport(New YOlk: Oxford University Press,1996, pp. 28 21O-ll) showChina'sGDP in 1994to havebeenthe 8th-largesteconomyin the world. Maddison'sestimatesof per capita GDP (in 1990 internationaldollars) are 600 (1820), 637 (1978) and 2,653 (1995) (Maddison,ChineseEconomicPerformancein the LongRun,p. 158, TableCA). ;~lbid., p. 95. Official Chineseestimatespoint to an averagerate of GDP growth of 10.51 percentp.a.

39

CHINA'S PLACE IN GLOBAL GEOPOLITICS

mountingeconomicdifficulties, many of which reflect domesticresourceand policy constraints.Someof thesehave seriousnon-economicimplications.31 The result is that at the beginning of the 21st century, the scale of the economicchallengesfacing the Chinesegovernmentis probablygreaterthan ever before.The absenceof more substantialprogresstowardsstateenterprise and associatedfinancial reforms is often seen as the central problem. But difficulties associatedwith farming, rural industry, employment and the environmentare also sourcesof seriousconcern.It is an impressivelist and one that demandsurgentattentionpreciselyat a time when growth is slowing and economic and social differentials are widening. In the short term, accessionto the World Trade Organisation(WTO) is likely to add to such strains.32 THE IDEOLOGICAL DIMENSION OF ECONOMIC DEBATE IN CHINA

In China, the ideological context of economic change remains critically important The leadershipis still committed to the goal of establishinga 'socialist market economy'-a hybrid system,intendedto offer the benefits of a competitive free market environment in a setting in which the government retains a significant residual degree of socialist planning authority. There is an inherent ambiguity in the concept, which, without doubtingthe leadership'scommitmentto the reform process,leavesroom for (l980-99)(incomparableprices).But between1992 and 1999,GDP growthwashalved(from 14.2 percentto 7.1 percent)(see TJNJ, 2000, p. 55). There is a strong consensusthat such official estimatesexaggeratereality, partly as a resultof datadeficiencies,(e.g. seeThe World Bank, China 2020: DevelopmentChallengesin the New Century(Washington,DC: World Bank, 1997), p. 106) and partly, especiallyin recentyears, becauseof the absOlption of a significant part of output into stocksof unsaleablegoods. A recentexpressionof scepticism towards Chinesestatistics is that of Thomas G. Rawski, who has revised 1997-98 GDP growthfrom 7.8 percent(the official revisedfigure) to 5.7 percent.SeeRawski, "Chinaby the Numbers:How Reform Has Affected China'sEconomicStatistics,"China Perspectives,No. 33 (January-February 2001),pp. 25-33. 31An article in a Hong Kong source(ChengMing, April 1" 1999, pp. 10-13, quotedin SWB, FE/3513) referred to a potentially explosive crisis facing China. It quoted a report by the ChineseAcademyof Social Sciencesto the effect that during the first 9 monthsof 1998,there had been 2,500 incidents involving explosions and more than 5,000 demonstrationsand proteststhroughoutthe country.Most of thesewere attributedto populardiscontentin the face of prevailingsocial,economicandpolitical conditions. 32 Cf Kye Woo Lee: " ... China'saccessionto the WTO will be a tremendouschallenge... The Chineseeconomywill haveto pay considerableadjustmentcostsin termsof rationalizationof its enterprises... and relatively high incidences of unemployment...Undoubtedly, the Chineseleaderswill be facing a big economicand political gamble ... [It] may payoff: but it is likely to be at considerablecost." See his "China's Accessionto the WTO: Effects and SocialChallenges,"China Perspectives, No. 33 (January-February 2001),pp. 13-24.

40

DOESTHE CHINESEECONOMY MATTER?

uncertaintyaboutits final outcome.No governmentin the world can hopeto secure universal support for its policies. In China, however, the recent erosion of Party authority in a context in which no individual any longer commands the status of a Mao Zedong or Deng Xiaoping lends the ideologicalovertonesof policy debatesa specialsignificance. Arguments about the rationale of state-ownedenterprise(SOE) reform and Party officials' complaintsthat continuing contractionof the SOE sector is tantamountto "yielding to capitalism" and threatensChina'ssocialistbase highlight this significance.33 So, evenmore revealingly, do the commentsof Deng Liqun, made at a propagandasymposium in June 1999?4 His condemnation of the negative consequencesof Mao's theory of class struggle was unexceptional,35and no more than a restatementof what has become official orthodoxy. More surprising were his outspokenremarks aboutthe implicationsof morerecentDengistinitiatives, to the effect that Deng Xiaoping's 'central theory of centring everything around the economyandplacing moneyabovepolitics' hasbroughtaboutdisaster to our countryandour communistparty. According to Deng Liqun, growing social dislocation causedby corruption and degeneracywithin Party ranks had offset the material benefits of post1979 reforms. The outcome,he said, was that exceptin name, the Chinese CommunistParty (CCP) had ceasedto exist as a Marxist political party and the CCP's leadershiphad come close to collapse.In an apparentattack on the notion of the 'socialist market economy',he also referred disparagingly to the logical outcome of Deng Xiaoping as a system that promised to embody "a combinationof an Asian capitalist social and economicentity with the political entity of the Soviet Union in the late 1970s." Significantly, Deng Liqun's plaudits for the current leader, Jiang Zemin, were prompted not by governmenteconomicsuccesses, but by a recentideologicalinitiative - the "three stresses"campaign - designedto strengthenParty members' political ideology and "spiritual outlook". The implication was that the political imperative must remain in place and that economic growth and 33 SeeHong Kong, ChingPao, No. 265 (August 1" 1999),pp. 24-26,citedin SWB,FE/3605. 34Deng,s remarks were reported in Hong Kong, Cheng Ming, August 1" 1999, pp. 18-19

(quotedin SWB,FE/3617).A revealingcritique of Deng Xiaoping's refonnsis containedin remarksattributedto variousseniorPPCmembers,including Hu Qiaomu,FangYi and Wu Xiuquan,in the wake of the 'Tiananmenmassacre'in 1989. SeeAndrew 1. NathanandPerry Link (ed.), The TiananmenPapers(London: Little, Brown and Company(UK), 2001), pp. 433-35. 35According to Deng, such emphasishad precipitatedeconomic collapse and perpetuated backwardness andpovertyin China.

41

CHINA'S PLACE IN GLOBAL GEOPOLITICS

modernisationshould not be allowed to jeopardiseChina's moral, ethical and spiritual integrity?6 A celebratory article in People's Daily on the occasion of the 79th anniversaryof the founding of the ChineseCommunistParty (July 15t 2000) took up the same theme in its insistence that Jiang's pursuit of the simultaneousdevelopmentof China's "material and spiritual civilisations" was taking place at a critical reform watershedand againstthe background of "ideological and market infiltration [by] hostile foreign forces ... [and when] ... decadent,ignorant, backwardthoughtsand ideas ... have created certain negative influences on the masses.,,37 Jiang's ''three representations,,38 were intendedto combatsuchproblemsand to inculcatea proper attitude towards current development goals and policies. But an unconfirmedreport from a normally reliable Hong Kong source spoke of inner-Partyscepticismtowards these"new ideas", which some regardedas an attempt to createa personalitycult around Jiang - something,which, if true, carriedovertonesof "an act full of feudal colour and a retrogressionin ideological theory." Even Party elders, such as Wan Li, Bo Yibo, Yang Baibing, Wang Enmao and Wang Hanbin, were said to be dismayedby the 39 fulsomepraisereceivedby Jiangfor his supposedmajor achievements. Deng Liqun's influence in China may now be limited, but his remarks,as well as more recent reports serve to highlight the tension that remains betweenthe ideological and pragmaticdictatesof policy. Given that China's economyremainsin a transitional stage,they also underline the uncertainty that surrounds the eventual form that its institutional and economic transformationwill assume.If anything, such uncertainty is likely to have been exacerbatedby the recent Asian financial crisis40 and China's impendingaccessionto the World Trade Organisation(WTO), as well as by persistentSino-UStensions. 36As

ChristopherHowe observesof Jiang Zemin's preferencefor stability over accelerated reform, "stability hasbeenreflectedin emphasison the Party, on ideology and suppressionof all forms of dissent."SeeChristopherHowe, YY. Kueh and RobertAsh, China's Economic 37Rejorm:A Studywith Documents(Richmond,Surrey:CurzonPress, forthcoming). Renminribao (people'sDaily), July 1" 2000. 38The ''three representations"embodythe idea that the CCP should be representativeof ''the developmentrequirementsof China'sadvancedproductiveforces, the progressivecourseof China's advancedculture, and the fundamental interests of the Chinese people" (SWB,

39FE139l6).

40 This accountis basedon Hong Kong, ChengMing, July 1" 2000,quotedinSWB, FE/3916. One of the lessonsthat the Chinesegovernmentclaimsto have learnedfrom the crisis is that its decision not to integrate more closely in international capital markets was absolutely correct. More generally,the crisis seemsto have led some to questionthe applicability to Chinaof the 'Wall StreetModel'. SeeChristopherHowe in RobertAsh (ed.), China'sRole in Asia: EconomicSecurityandGeo-StrategicIssues(Richmond:CurzonPress,2001).

42

DOES THE CHINESE ECONOMY MATTER?

CHINA'S SIZE FACTOR AND THE REGIONAL PERSPECTIVE

The size factor has always been an important element in outsiders' preoccupationwith China. It is a truism, but also an important truth that China'shuge size - whethermeasuredby the continentalextentof its surface areaor the size of its population- has shapedits modemeconomic,social and political development through the challenges it has posed to all governmentsin their efforts to rule, administer, plan and manage the country. The reluctance,at leastuntil recently,of thosesamegovernmentsto pursue a maritime role can be seen as a reflection of land-based preoccupations that havederivedfrom the samesource. But size on its own is not a sufficient, nor, as the casesof Taiwan, South Korea, Hong Kong and Singaporedemonstrate,a necessarycondition of large-scale external economic involvement in any country. A buoyant economicenvironment,underlinedby governmentcommitmentto sustained and equitable growth and the ability to fulfil this goal through the formulation and implementation of appropriate policies, are obvious requirements.So is the fulfilment of non-economiccriteria, such as social and political stability, and the provision of transparentadministrativeand legal procedures,basedon internationalnorms. China's continental size highlights the critical need to view its developmentfrom a regional perspective.Considerationof the regional dimensionsof economicperformanceis important not only for its insights into the purely domestic implications of on-going reforms, but also for its elucidationof the wider significanceof China'scurrent economiccondition and future trajectory. Aggregate estimatesof GDP growth conceal large regional variations, the result of which has been to exacerbateinterprovincial economicdisparities.In the 1980s,for example,arounda national averageof 9.3 percentGDP growth, provincial rates of expansionranged from a low of 7.2 percent p.a. (Guangxi) to a high of 12.5 percent (Guangdong). Subsequently,the gap further widened: during 1990-98, GuangdongachievedaverageGDP growth of 15.8 percent,comparedwith only 8.1 percentin Qinghai.41 As the following figures show, such differing growth experienceshave been reflected in changesin the regional contributions to national GDP (Table2):42 41 TJNJ, variousissues. 42The regional breakdown used here is as follows: northeast (NE): Liaoning, Jilin, Heilongjiang; north (N): Hebei, Henan, Shandong,Shanxi, Beijing, Tianjin; northwest (NW): Inner Mongolia, Shaanxi, Ningxia, Gansu, Qinghai, Xinjiang; central-east(CE): Hunan, Hubei, Jiangxi, Jiangsu,Anhui, Zhejiang, Shanghai;south(S): Fujian, Guangdong,

43

CHINA'S PLACE IN GLOBAL GEOPOLITICS

T abl e 2: Changm~

Northeast North Northwest Central-East South Southwest

IteglOn . alShares0 fN' at:J.onaIGDP GDP of eachregionasshareof nationalGDP (percent) 1980 13.89 24.57 7.07 33.99 12.39 10.56

1990 11.73 24.83 7.39 31.45 14.04 10.57

1999 10.27 24.96 6.27 34.28 16.98 9.48

Sources:Data for 1990 and 1998 from TJNJ, 1994, p. 35; and 2000, p. 61; estimatesfor 1980 are for nationalincome(guominshouru)andexcludeTibet. They aretakenfrom SSB, Quanguo geshengzizhiqu zhixiashi lishi tongji ziliao huibian, 1949-89 (A Compendiumof Historical StatisticalMaterials for EvelY Province,Centrally-AdministeredMunicipality and Autonomous Region)(Beijing: Guoji tongji chubanshe,1990),pp., 65, 93,125,187,216,247,280,312,344, 376,408,436,467,495,526,558,620,645,693,724,754,800,832,862,888,920.

The figures confirm that reform-led economic growth has been disproportionatelyreflected in the performanceof the South (above all, Guangdong)at the expenseof a quite sharpdecline in the economicweight of the Northeast The positions of other regions have changedmuch less, althoughin the 1990s,it is significant that the sharesof the Northwestand Southwestin national GDP have fallen slightly.43 Given that theseregions contain the poorestareasof the country, we may supposethat the impact of recentgrowth has beento have causeda widening, not narrowing of social and economic differentials. Meanwhile, viewed in terms of a coast-interior dichotomy, the provincial datashow that between1990 and 1999, the share of coastalprovinces (including Beijing, Tianjin and Shanghai)in national GDP rosefrom 53.8 to 60.6 percent. Detailed analysisof the regional estimatesrevealsthat as by 1999, more than a quarterof economicactivity was concentratedin just threeprovincesGuangdong (10.0 percent of national GDP), Jiangsu (9.1 percent) and Shandong (9.0 percent). Eight other provinces (induding Chongqing) accountedfor a further 37.3 percent.44 By contrast,excluding Sichuan,the whole of the Southwestand Northwest togetheraccountedfor a mere 9.35 percentof aggregateGDP in 1998. It is true that regional aggregateGDP differencesare reflected to some 43 Guangxi,Hainan;southwest(SW): Sichuan,Guizhou, Yunnan,Tibet.

The marginfor error that needsto be allowedfor in thesestatisticsis suggestedby the fact that GDP for 1998 as summedfrom provincial datais more than4 percenthigherthanthe official 44aggregatenationalfigure given elsewherein the samesource(cf. TJNJ, 1999,pp. 55 and63). Ranked in order of importance,they were Zhejiang, Henan and Hebei (almost identical), Liaoning, Shanghai,Hubei, SichuanandChongqing.

44

DOESTHE CHINESEECONOMY MATTER?

extent in the distribution of total population. But this does not materially alter the picture that emergesfrom Table 2, estimatesof per capita GDP differentials serving further to highlight regional differentials that have widened in the last decade.In particular, although during the 1990s,more regions attainedper capita incomesabove the national average,such gains were not sharedby westernChina, whoserelative position in 1999 was not materiallybetterthan it hadbeenin 1980. From the perspectiveof this chapter,such fmdings are important. They point to the different implications associatedwith differing regional records of economicgrowth and structuralchange,one key expressionof which has been the geographicaldistribution of foreign investmentin China since the mid-1980s.Between1991 and 1999, for example,the 11 coastalprovinces (including Beijing, Tianjin and Shanghai)absorbed86 percentof cumulative foreign direct investment(FDI), and about the sameproportion of foreign capital inflows of all kinds.45 Despite a sharp decline between 1991 and 1993, Guangdong'sshareof total FDI has since remainedvery stable,and for the entire 1991-99 period, 28 percentof all FDI (more than US$80 billion) was directed towards this single province.46 When set against provincial estimates of GDP growth, these figures underline the huge contributionmadeby foreign investorsto economicmodernisationin coastal China. But they also highlight the spatial limits of their involvement in China. Moreover, since the 1980s,provincial FDI and GDP performances have reinforced each other as cause and effect, high-income coastal provinces offering the opportunity, inducement and wherewithal for profitable investment,whether directed towards production for exports or local markets.Neither the changein the central government'sFDI policy,47 nor recourse to central redistributive mechanisms,seemsto have had a significantimpacton this profile. Regional differences in per capita income have also been reflected in changesin patterns of consumerdemand.In 1999, 21 out of 31 Chinese provincial-levelunits had a level of householdconsumptionthat was below the national average.48 Without referenceto absolutelevels of suchspending and estimatesof income demandelasticities for relevant domestically and 45 I.e., US$ 249.1 billion out ofUS$ 285.3billion. Relevantdatacanbe found in TJNJ, 1993,p. 46650; 1995,p.557;1996,p.200;1997,p.608;1999,p.599;and2000,p.609. 4 Guangdong'ssharefell from 44 percentto 34 percentbetween1991 and 1993. 7Since the early 1990s, Beijing has tried to mtionalise the geogmphical and functional 48 distribution of foreign investment. TJNJ, 2000, p. 70. Among agricultuml households,only nine provinces(excludingBeijing, Tianjin and Shanghai)enjoyed an above-avemgeconsumptionlevel, only two of which (Anhui andHunan)werenon-coastal.

45

CHINA'S PLACE IN GLOBAL GEOPOLITICS

foreign-producedgoods,assessingChina'spotentialas a consumermarketis difficult. But it is a salutary reminder of market limitations that in many parts of the countryside,w4ere at least 70 percentof the total population live, consumptionis still dominated by spending on food, clothing and relatively simple householditems.49 Consumerdurables,whose possession is takenfor grantedin cities and peri-urbanareas,are in much scarcersupply in the rural sector.50 It is true that between1990 and 1995,villagers bought 24.2 million colour TV setsand 8.3 million motorcycles:but in 1995 alone, domestic production of these items was 20.5 and 8.25 million, respectively.51Such figures are a salutary reminder that China remains a predominantlypoor and rural society. Its accessionto WTO promisesto provide improved accessto rural markets, although the displacementof domesticfarm productsby foreign imports may serveto exacerbateexisting agricultural unemployment.Bearing in mind the huge reservoir of surplus farm labour that already exists, the depressedlevel of farm incomes and declining rural consumption growth, such considerationshighlight the challenge that foreign companies face in their efforts to penetratethe Chineseconsumergoodsmarket,especiallyin rural areasof the interior. One estimatesuggeststhat as of the mid-1990s,no more than 30 percent of inflows of foreign capital had been directed towards penetrationof the domestic Chinese market.52 In general, inflows of investment into China have tended to be used primarily to support export-orientatedproduction, rather than to facilitate penetrationof the domesticmarket. In recenttimes, the dominance of outward-processingin economic relations between Guangdong- easily the largest beneficiary of inflows of foreign capital within China - and its overseaspartners(aboveall, Hong Kong) is the most instructive example of the external orientation of inward foreign direct investment.More generally,the gains that have accruedto foreign business through their economicinvolvementwith China have largely derived from activities that have taken advantageof cheap land and labour in order to make China a 'global factory' for certain categoriesof labour-intensive 49Kye Woo Lee pointsout that in contrastto conditionsin developedcountries,the level of rural consumptionin China matchesthat of the urban sector.See his "China's Accessionto the WTO,"p.20. 5°In 1998, I in 3 rural householdsowned a radio cassetteplayer and lessthan 1 in 4, a colour TV (almosttwo-thirds owned a black and white set). About a quarterpossesseda washing machine,but fewer than II percentowneda refrigerator(TJNJ, 2000, p. 339). Possessionof 51 suchitemshasfor someyearsbeenuniversalamongurbanresidents.

2TJNJ,1996,p.442.

5 NobuoMaruyama,"GreaterCompetitivenessandInterdependence in the EastAsian Regional Economy" (paper presentedat a conferenceon China: A New Growth Centre in the World Economy?University ofDuisburg,Gennany,1994).

46

DOESTHE CHINESEECONOMY MATTER?

manufactured products. By contrast, the long looked-for inroads into Chineseconsumermarketshaveyet to be made. Given the geographicalconcentrationand the export orientation of FDI inflows, it would be surprising if their regionalprofile were not reflectedin estimatesshowingthe direction of China'sforeign trade. Such figures show, in fact, that in 1999,coastalprovincesaccountedfor 91.5 percentof the total (national) value of exports and imports (90 percent for exports alone).53 Guangdongaloneaccountedfor 40 percentof all China'smerchandisetrade, and the same proportion of total exports.54 In recent years, China's merchandisetrade has increasinglybeendriven by the activities of foreignfunded enterprises(FFEs). In 1999, coastal provinces accountedfor an astonishing 96.5 percent of the gross value-output of all FFEs, and 97 percentof the total value of their exports.55 Guangdongalone generated31 percentof FFEs' value added,and 45 percentof associatedexport value.56 The extent to which WesternChina remainslargely untouchedby foreign trade developmentsis dramaticallyhighlighted in the fmding that in 1999, with 25 percent of China's population, the provinces of the Southwest (including Sichuan and Chongqing) and Northwest collectively accounted for lessthan4 percentof its merchandisetrade.57 A high degree of geographicalconcentrationis also reflected in the composition of China's foreign trade and foreign investment partners. Throughoutthe 1980s and 1990s, China's Asian partnersdominatedboth export and import trade, with the United States and European Union accountingfor significant, but much smallersharesof both categories.Even after the Asian fmancial crisis, it is telling that in 1998, China's Asian partners accounted for 53 percentof its total trade,comparedwith 17 and 19 percent,respectivelyfor the USA and all Europe.58 No less striking is the 53

54 TJNJ,2000,p. 602. Just6 provinces(Shanghai,Jiangsu,Zhejiang,Fujian, Shandong and Guangdong)accounted 55 for 76 percentof China'smerchandisetrade,and77 percentof exports,in 1998 (ibid.). TJNJ,2000,p. 603. 56 TJNJ, 2000,pp. 440 and 603. An indication of the evengreatergeographicalconcentrationof FFE activity is revealedin the finding that in 1999,4provinces(Shanghai,Jiangsu,Fujian and Guangdong)contnbuted65 percentof FFE production,and 73 percentof FFE trade (ibid.). Notice that Guangdongaccountedfor 47 percentof the output of enterprisesfunded from Hong Kong, Macaoand Taiwan,but only 19 percentof output from otherFFEs(TJNJ, 2000, p.412). 57 TJNJ, 2000, pp. 97 and 602. The sameprovincesaccountedfor less than 1 percentof FFE merchandisetrade. 58 TJNJ, 2000, pp. 593-95. China suffered a serious contraction in its trade with major Asia partners,including Hong Kong, Japan,South Korea and ASEAN, in the wake of the Asian crisis. Such declineswere partly offset by rises in its trade with North America, Europeand Russia.

47

CHINA'S PLACE IN GLOBAL GEOPOLITICS

dominanceof Asia - above all, of the Asian ChineseDiaspora - in FDI inflows. In 1999, for example,official Chineseestimatesshow 67 percentof all utilised FDI to have originated in Asia.59 By contrast,the United States and all European countries contributed 10.5 percent and 11.9 percent, respectively,to total FDI inflows into China.60 Table 3: The Importance to the United States and Selected European Countriesof Chinaasa TradeandInvestmentDestination, 1998

United States France Gennany Italy Netherlands UK

Shareof Chinain Total Valueof EachCategory(percent) All trade Exports Imports 2.9 4.4 3.8 1.2 l.l 1.0

1.7

1.6

1.5

1.2

l.l

1.4

1.7 1.3

0.5

2.9 1.5

l.l

Sources: TJNJ, 2000, pp. 594-95; Republic of Chma, Council for Economic Planmng and Development,Taiwan StatisticalData Book2000(Taipei, 2000),p. 343.

The combinedUS and Europeanshareof China'strade (36 percent)and of its total utilised FDI (over 20 percent) is of course not to be underestimated. From China's perspective, these are substantial contributions. But, as Table 3 suggests,in the context of the totalities of trade and foreign investmentflows from the USA and Europeancountries themselves,they aremuch lesssignificant.61 The contrast betweenthese estimatesand the correspondingfigures for China'smajor Asian trading partnersis very apparent.For example,China's share in Japan'stotal merchandisetrade in 1998 was 10 percent, and for TaiwanandSouthKorea, 11 percent.

5961 percent of Asian FDI came from Hong Kong. and a further 31 percent from Japan, Singaporeand Taiwan (TJNJ, 2000, p. 606). Such figures do not, however,take accountof significant distortionsassociatedwith the role of Hong Kong as an intennediaryfor flows of capital from other destinations- including mainland China itself (the phenomenonof 'roundtripping').Nor do they take into accountthe use of the CaymanIslands and Virgin Islandsaccordingto official Chinesestatistics,the sourceof overUS$3 billion ofFDI in 1999 - exceedingflows from Japan, Singaporeor Taiwan itself by Taiwaneseentrepreneurs 60 investingin themainland. Ibid. 61 For similar estimatesrelating to these countries' export sharesto China, see Segal, "Does ChinaMatter?"p. 4.

48

DOESTHE CHINESEECONOMY MATTER?

ECONOMIC SECURITY ISSUES AND CHINA'S INVOLVEMENT IN GLOBAL MARKETS 62

Its physicaland demographicsize notwithstanding,China'sglobal economic status remains quite small. As the earlier analysis suggests, mere comparisonsof aggregateGDP figures are an insufficient guide to countries' real economic influence -a fact that warns againstexaggeratedclaims of emergingsuperpowerstatus,basedon extrapolationsof suchdata. The mere mathematicsof projecting high (low) growth scenariosfrom low (high) per capita GDP baseline figures is more indicative of the huge catch-up challenge facing China. From this latter perspective,even on optimistic assumptions,caution is counselledin projecting China's emergenceas a global economicplayerin the foreseeablefuture. From the more specific perspective of trade theorists, who define a country's size factor in terms of the impact of their actions on world prices,63the foregoing analysisalso counselscaution in making exaggerated claims from the basisof China'ssize. Even in thoseeconomicsectors,such as food grains, energy and minerals,where someanalystshave projecteda global impact on international prices as a result of China's growing involvementin world markets,the reality may tum out to be lessdramatic. Take, for example,the grain sectorand the associatedquestionof China's food security. Lester Brown's apocalyptic scenario, according to which China's increasing and ultimately massive involvement in world grain markets threatenedto precipitate widespread starvation in Sub-Saharan Africa and other poverty-strickenregionsof the world is one that has largely been laid to rest. The more pressing question now is to what extent conditions in its domestic grain sector may yet force China to becomea major importer of grain. Answeringthis questionis not easy.Predictionsand eventhe quantificationof increasesin food demandas a result of population growth and rising incomescan be made with a degreeof confidence.64 But 62 Robert Ash (ed.), China's Role in Asia: Economic Security and Geo-StrategicIssues

(Richmond: Curzon Press,2001). Also relevant is, Werner Draguhnand Robert Ash (eds.), China's&onomicSecurity(Richmond:CurzonPress,1999). 63 Cf RichardPomfret,Is Chinaa 'Large Country'? China'sInfluenceon World Markets(Paris: OECD,1997),p.ll. 64 A recentauthoritativesourcesuggeststhatbetween1995 and2020,Chinawill haveaccounted for a quarterof the global rise in demandfor cereals,and two-thirds of that for meat.It also predictsthat during the sameperiod,Chinawill haveexperiencedthe largestrise in per capita calorie availability (to 3,119 calories per day by 2020) throughoutthe developingworld. Interestingly,the samesourcenotesthat despitemuch fasterpopulationgrowth in India than in China,India'sshareof global incrementaldemandfor cereals(meat)will be only half (one-

49

CHINA'S PLACE IN GLOBAL GEOPOLITICS

projectingthe likely domesticsupplyresponseis muchmore difficult. In the early and mid-1990s,analystssoughtto predict the level of China's net grain imports at the tum of the century.65 Comparison of these predictionswith the reality of China'sdomesticgrain performancein recent years suggeststhat even quite conservativeestimatesof likely net imports have turned out to be wide of the mark. For example, on the basis of productionestimatesfor 2000, varying from 420 to 500 million tonnes,and projectedaggregategrain demandof between450 and 547.2 million tonnes, predictionsof net grain imports rangedfrom 11 to 90 million tonnes.These estimatescan be comparedwith the following figures (Table 4), which show total productionandnet imports (in million tonnes)of all grainssince1995. These figures show that far from China's claims on international grain markets having strengthenedin the most recent past, they have in fact weakened.Indeed,since 1995, China has shifted from being a net importer

Table4: China'sGrain OutputandInternationalGrain Trade(1995-2000) Net imports(-) / exports(+) Total output (million tonnes) (million tonnes) 1995 1996 1997 1998 1999 2000

466.6 504.5 494.2 512.3 508.4 462.5

- 18.7 -10.3 +4.2 +5.0 +4.0

-

Sources:TJNJ, 1997,pp. 383, 597 and 600; 1999,pp.395, 589 and591; 2000,pp. 387, 596 and 599.

to being a modestnet exporter of food grains.66 This outcome is likely to have reflected not less-than-expected rises in aggregategrain demand,but higher-than-expectedincreasesin domestic grain production. In tum, the improved performance probably reflects the impact of the Chinese government's'grain bag' policy, designedto halt a declining grain sown areabaseand reverse,or mitigate negativegrain output growth in a number of southern coastal provinces, where pressures of urbanisation, tenth)that of China.SeePerPinstrup-Andersen, Rajul Pandya-LorchandMark W. Rosegrant, World Food Prospects:Critical Issuesfor the Early Twenty1zrstCentury (Washington,DC: 65 InternationalFoodPolicy ResearchInstitute, 1999),pp. 9-10 and 17. E.g., seeHany X. Wu and ChristopherFindlay, "China'sGrain Demandand Supply: Trade Implications," in OECD, Agricultural Policies in China (Paris: OECD, 1997), p. 280, Table 7l. 66Between1995 and 1999,China'sbalanceon its grain trading accountmovedfrom a deficit of US$ -3.1 billion to a surplusofUS$662.5million.

50

DOESTHE CHINESEECONOMY MATTER?

industrialisation and agricultural restructuring had previously eroded the grain base.67 A critical question is to what extent China's recent grain performancerepresentsthe beginning of a new phaseof sustainedoutput growth. That the Chinese governmentis capable of formulating sensible policy packagesfor the farm sectoris not in doubt; nor is the hugepotential that exists for future agricultural growth (including that of the grain sector) basedon the application of modem scienceand technology. At the same time, past experiencedoes highlight a dichotomy betweenformulation and implementationthat has often characterisedfarm policy in China.68 It is an awarenessof such constraintsthat counselsagainstextrapolatingtoo readily from the grain sector'smostrecentperformance.It is salutaryto recall that a run of fme harvestsin the early 1980s generatedexpectationsabout future growth that remainedunfulfilled for more than a decade.69 The performance of the grain sectorin 2000 is also instructive:not only did total outputfall by 9 percent;in addition, averageper capitaproductionwas reducedto 366 kg. - well below the 400 kg. level that Chineseagricultural plannershave taken as a benchmarkand 12-17 percentbelow per capita targetsset for 2000 in the mid-1980s.7o In short, it is still prematureto suggestthat China'sgrain farmers have embarked on a new and more fmnly based trend-line of sustainedgrowth. In any case, grain is not a homogeneousentity and output projections 67 Evidenceof the positive impact of the 'grain bag' policy can be found from data showing regional contributionsto incrementalnational grain output during theseyears.Betweenthe secondhalf of the 1980sand first half of the 1990s,a major regional shift in the centre of gravity, in terms of the regionaldistribution of grain production,occurredin China in favour of the northemhalf of the country (especiallythe Northeast).The elimination, as a result of output stagnation,of the previous large grain (especiallyrice) surplus of China's Centraleastemprovincesand the emergenceof increasinglyseriousgrain deficits in the South and Southwestwere the most serious manifestationsof this shift. Preliminary analysis of the regionalorigins of recentharvestshighlights the extentto which this processhasbeenhalted, with the southernhalf of the country once more making a more positive contribution to 68 incrementalgrain production. E.g., stateinvestmentin agricultureremainsseverelydepressed.In addition, the use of what can only be describedas exploitative devices- most notoriously, the imposition by local cadresof illegal or, at best, quasi-legallevies - has causedseverediscontentamong farmers 69 (not least,grain farmers- grain havinglong beenregardedasa low-retnmoccupation). The record 1984 grain harvestwas not subsequentlyre-attaineduntil 1989, and although a bumperharvesttook grain productionto a new peakin 1990, not until the secondhalf of the 1990swasa consistentupwardtrendre-established. 70per capitagrain output in 2000 was also below targetssetfor 1990! The targetscanbe derived from projectionscontainedin ChineseAcademyof Agricultnral Sciences,ResearchGroup for the Developmentof Food Grainsand EconomicCrops,"Woguo liangshi he jingji zuowu de fazhan"(A stndy of the developmentoffood grainsand economiccropsin China),Zhongguo nongcunJazhan zhanlue wenti (Strategic IssuesRelating to China's Rural Development) (Beijing: Zhongguonongyekeji chubanshe,1985),pp. 379 and433.

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

need to be disaggregatedby major product categories.In the recent past, China has tendedto export rice, and import wheat (and from time to time, maize too). This is a patternthat seemslikely to continuein the foreseeable future: with self-sufficiency in rice probably assured,the principal import requirementwill be for wheat.7I Wheatis a northerncrop and future output increaseswill dependon growth in regionsthat face someof the most severe economic and environmentalobstaclesto such growth. It has yet to be demonstratedthat China can overcometheseconstraints,the most seriousof which is undoubtedlythe shortageof water for irrigation.72 China'simpact on world grain marketswill also dependon its feed grain requirements.In this respect,it is noteworthythat sizeableimport needsof maize in the mid1990shave given way to the emergenceof China as a significant sourceof exports.73 Whetherthis more recentpatternwill persistdepends,in part, on the government'swillingnessto entertainmajor imports of meat,74although other variables,suchas poor domestictransportationand storage(especially refrigerated)facilities will also affectthe scaleof future meatimports. The impactof WTO membershipis anotherimportantdimension.In areas specialisingin the production of wheat, maize and soybeans,especiallyin the North and Northeast,the effect of rising imports may be significant. For example,regionsthat are unableto meettheir animal feed requirementsmay increasingly engage in direct imports of maize through international markets, rather than trying to transport such produce from the Northeast (especiallyHeilongjiang). It would be idle to underestimatethe potentially serious regional consequencesof such distributional changesupon farm 71 Note that between1995 and 1999,wheatimports fell from 11.6 to 0.5 million tonnes(TJNJ, 1998, p. 632; 2000, p. 599). The highest-everlevel of wheat imports was in 1992 (12.5 72million tonnes). China'sper capita availability of waterresourcesis a mere 25 percentof the world average and shortagesare expectedto worsenin the next 30 yearsto the point at which, by 2030,per capita availability falls close to what internationally is regardedas a critical level - 1,760 cu.m. (Xinhua September26th and 27th 2000, cited in, SWB,FE/3958andFE/3959).The farm sectoruses70 percentof nationalwaterresources,but inefficiency in water useis suchthat 2 to 2.5 times as much water as in developedcountriesis neededto producea tonneof grain) (Jingji cankaobaa) (EconomicInformationDaily), June9th 2000). 73 Cf net imports of 6.2 and 5.2 million tons (1994 and 1995) with net exportsof 4.4 and 4.2 million tonnes (1998 and 1999) (TJNJ, 1996, p. 592; 2000, pp. 596 and 599). PinstrupAndersenet al. predict that demandfor maize will increaseby 2.7 percentp. a. (1995-2020), comparedwith an annual rise of only 0.6 percentin that of rice Pinstrup-Andersenet al., 74 World FoodProspects:Critical Issues/ortheEarly Twenty-jU"stCentury,(p. 14). The recent IFPRI report seemsto assumethat China will becomea major sourceof meat imports: "East Asia is projected [1995-2020] to increase its net meat imports 28-fol 200I). "ChinaandAsia: EnergySecurityConcerns." 8 Ogii~ii, ?Ibid. 88 Pomfretnotesthat the Karamayand Tarim Basinscould containup to 140 billion barrelsof oil, or the equivalentof "60 years of Saudi Arabian production at current rates". The key constraintto realisingthis potential,as well as securinglarge-scalesuppliesfrom CentralAsia and Siberia, is likely to be infrastructural, the cost of building a pipeline between the northwesternoilfields and easternseaboardprovincesbeing estimatedat as much as US$ 10 billion (pomfret,Is China a 'Large Country7, p. 28).

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

It is a valid generalisationthat China's primary and mineral resource endowmentis potentially large and comprehensiveenough to generatea modern, self-sufficient industrial capacity, ultimately comparablein size with that of the former SovietUnion or eventhe United States.For the time being, however,Chineseactions are unlikely to causesignificant disruption of associatedworld markets,exceptfor a few individual items, suchas steel, aluminium and bauxite. It is noteworthy that steel imports, having risen to 30 million tonnesin 1993, thereafterfeel back sharply before beginning to rise again quite steeply in and after 1997. But in 1999, at 14.9 million tonnes,imports of rolled steelwere still lessthan half the peak 1993 level.89 Even allowing for the implementation of large-scale, steel-intensive infrastructural construction projects, an extrapolation of recent trends suggeststhat domesticsupplies will be capableof meeting a large part of any future short-termrise in demand.9o It is true that recentyearshaveseena steady increase in imports of aluminium, aluminium alloys and rolled aluminium. But there is reason to believe that future supplies of such products will increasingly be secured from exploitation, with foreign assistance, of rich domesticsourcesin southwesternChina.

SUMMARY AND CONCLUSION

History rarely proceedsin a linear fashion. But a glanceat China'seconomic developmentand internationaleconomicrelations in the hundredyearsafter 1840 cannot fail to suggestinteresting parallels between foreign attitudes towards China then and in the more recent past. Common to both periods have beentendenciesfor foreigners' aspirationstowardsChina to run ahead of reality, and for the promise inherent in China's economic potential to exceed the pace of its fulfilment. In part, such frustration reflects the unpredictability of Chinese history. In the three decadesafter 1949, the erratic course of China's political, social and economic developmentwas largely attributableto the unchallengeableprimacy of a single figure - Mao Zedong - and to the two disastrousexperiments(the Great Leap Forward and the Cultural Revolution) to which his innate impatienceand restlessness gaverise. Deng Xiaoping'ssubsequentrepudiationof ideologicalmotivation and class struggle in favour of an economic imperative that sought simultaneouslyto satisfy national and personalaspirationspromisedgreater 89

9 TJNJ, 1994,p. 519; 2000,p. 600. °Between1990 and 1999,steelproductionroseby almost58 million tonnesto apeaklevel of 124.3 million tonnes.The correspondingfigures for steel productswere 70 and 121 million tonnes(TJNJ, 2000, p. 457). Reportsfrom recentyears highlight a major problem of huge stocksof steellying unusedin China.

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DOESTHE CHINESE ECONOMY MATTER?

stability and unity than China had enjoyed since the early 1950s.91 China's post-I978 growth record and associated improvements in material consumptionreflect obvious successesin both directions. But such success has not beenunqualified, and China'seconomicsecurity and social stability are still susceptible to severe tensions, most obviously manifested in increasingregionaland sectoraldifferentials. This chapter does not deny the importanceof the Chineseeconomy. It does, however, suggestthat China's economicpotential is, as yet, far from being fulfilled. China's position in the global economiccommunity is, and seemslikely to remain, for the time being, quite small. By the sametoken, its international economic role is unlikely to match its regional impact. Other things being equal, a large country is inherently inclined towards a greater degree of economic self-sufficiency than smaller countries. In China's case,the self-sufficiency imperative is underlinedby political and ideological preoccupations.For all thesereasons,even in the wake of WTO accession,China's further integration into the global economymay still be seriously constrained by Beijing's insistence on preserving ideological shibbolethsas essentialelementsof a 'socialistmarketeconomy'. It is also argued that China has now completed the 'easy' economic reforms, leaving it to face more severechallenges,such as restructuringthe state-ownedenterprises and fmancial sector, and enhancing the central government'sfiscal capacity. Successin implementingsuch reforms has, to date, been halting. To highlight the contribution of unresolved similar problems to the economic collapse of the former Soviet Union is not to suggestthat China faces a similar economic fate, although the parallels do underline the urgency of the challengefacing the governmentin Beijing. That stateenterpriserestructuringhas beeninsufficiently market driven, that the governmentremains determinedto retain control of strategic 'pillar' industries,and that developmentof property rights is still in its infancy - all reinforce the slow pace of progressin critical areas. These are all major issues that require urgent attention at a time when slowing growth, increasingurban and rural unemployment,deflationary tendenciesand the likely emergence of a less benign external environment make the government'seconomictaskevenmore difficult. China's successfulintegration in internationalmarkets dependscritically on its ability to enhance its industrial competitiveness.No doubt the potential for accelerated catch-up, associatedwith the "advantagesof 91 But even in the post-Mao world, the unpredictability of China's developmenttrajectory remainedin evidence,asthe political upheavalsof 1989testifY. Whethera similar randomness couldalso characterisepost-DengChinais opento debate.

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

backwardness"- many of which, as a low-income,low-productivity country, China still enjoys - remains.92 But given China'swish to competewith the United Stateson equalterms, a more pertinentquestion,arising out the pace of technological progress and recent international mergers, concerns the extent to which China could becometrappedin pursuit of an ever-receding target.93 To date, China's efforts to establish an independent global corporatepresencedo not encouragesanguineexpectationsof its ability to create national champions that can compete with "global oligopolistic capitalism".94Itis a situation unlikely to be improved, in the short run, by China'saccessionto the WTO.

. l'm ComparanvePerspecnve 'Potenna Tabl e 5: Ch'masEconomlC China'spercapitaGDP aspercentof eachregion (country) 7 DynamicAsia 31 advancedcapitalist World USA Japan India FormerSovietUnion

The implied US dollar gap

1995 42.5 15.8

2015 51.6 28.9

1995 -3,603 -14,157

51.6 11.3

-2,492 -20,724

13.5

68.9 21.1 25.1

169.2 73.9

205.1 108.8

-17,067 +1,085 -937

2015 -6,010 -15,801 -2,894 -23,870 -19,135 +3,278 +516

Source:Maddison,ChineseEconomicPerformancein the LongRun,p. 97, Tables4.1. and 4.2.

Revisedprojectionsof world economicperformanceand potentialto 2015 offer anotherinteresting perspectivefrom which to view China's growing economicstrength.They suggestthat side by side with China'srise, on the basis of GDP measures,to fIrst place,95the relative improvementin its per capitarankingwill be lessimpressive(Table 5). It would of coursebe foolish to suggestthat the economyof a countrythat presentlycontainsone-fIfth of humanityand accountsfor just over one-tenth of global economicactivity doesnot ''matter''.Nor, looking ahead15 years, 92 SeePeterNolan and RobertAsh, "China on the Eve ofRefonn" in Andrew G. Walder (ed.), China's TransitionalEconomy(Oxford: ClarendonPress,1996),pp. 24-26. 93 Cf Nolan: "the paceof progressin the businesscapabilitiesof the world's leadingfrrms is so greatthat it is hard to imagine any strategythat could lead to a successfulcatch-up"(quoted 94by JohnLloyd in Financial Times,January8th _9th 2000). PeterNolan in NewStatesman,January10th 2000. 95 China's shareof global GDP is projectedto rise from 10.9 percent(1995) to 17.4 percent (2015)(Maddison,ChineseEconomicPerformancein theLongRun,p. 96).

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DOES THE CHINESE ECONOMY MATTER?

could one deny the consequenceof an economy that may then comprise more than 17 percent of global GDP, on which not much less than 20 percentof the world's populationwill still be dependent.At the sametime, associated per capita income projections and underlying regional and sectoral differentials highlight the overwhelming domestic preoccupations that will exercisethe Chinesegovernmentleadersin the foreseeablefuture. Three conclusions suggestthemselves:that for some time to come, the Chineseeconomywill mattermuchmore to China than to any other country; that from a global perspective,it will matter considerably less than is suggestedby China'sgeographic.)iemographic and economicsize; and that to the extent that it does eventually establish an international economic presence, China will most likely do so as one of several economic protagonists- but not as an unrivalledeconomicsuperpower.

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Chapter 4

China as a Global Power

Stephen A. Schlaikjer

INTRODUCTION

I would like fIrst to addressthis question from an historical perspective, offering an American view of how China reachedits presentposition and what that has meantfor the thinking of its leadersand its peopleand for the relative influenceof the People'sRepublic on the world stage.This will be a reminder of China's past as a power of some real significance in modern history. Then I will sketchsomethoughtson China'spresent-dayimpact as an economic,political and military actor. Then I will concludewith a look to the future and how China's influence in a globalising and interdependent economicsystemwill be enhancedby greaterintegrationand openness- an interesting reinforcing mechanismfor further reform of China's political system. Despite the spread of commercial culture, especially along the coast, Chinese culture and politics were highly resistant to the forces of industrialisation that were transforming Europe and North America and Japan.The central theme of nearly the entire century betweenthe Opium War and the founding of the People'sRepublic of China (PRC) was that internal political conflict kept China weak; inconsistentpolicies were unable to sustain an effective responseto the challengesof industrialisation and global military conflict. China's size, complexity and history mitigated againsteffectiveresponses. Unlike Japan- which by mid-centurywas beginninga creativeadaptation modern industrial and social developments- external shocks to China produced sporadic, inconsistent responses.China's hide-bound imperial

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system was unable to make the changesnecessaryto truly accommodate modern methods of organisation, management,finance and law. The ChineseEmpire'sfirst responseto a seriesof military defeatsat the handsof British and Frenchnaval forces was to cedebits of coastalterritory and try to restrict foreign influencesto the Treaty Ports. In the north, an assertive Russian Empire - already having been concededlarge swathsof Chineseclaimedterritory in what is now the RussianFar East- was seekingaccessto the resourcesof Manchuriaand the ice-free port at the tip of the Liaodong Peninsula. A swift and crushing naval defeatat the handsof a rapidly modernising Japanwas a seminaleventnearcentury'send. The loss to Japandrove home to many Chinesethe importanceof the modern basesof military power economicdevelopment andtechnology.That defeatdid more than result in the Chinese Empire's loss of Taiwan and set off a general grab for concessionsby Europeancolonial empires- it sowedthe seedsof China's brief reform period and of the RepublicanRevolution that gave the coup de grace to the disgracedand decaying imperial system. But Sun Yat-sen's dreamof a unified state under a republicanform of governmentwas fairly quickly dashedby the power politics of the warlord era. Chiang Kai-shek fought local militarism with Leninist discipline. The Northern Expedition's success led to a semblanceof national unity but did not lead to the establishmentof Sun's vision. Instead the imperative of unchallenged political powerjustified to Chiangthe Kuomintang's(KMT) turning on their Communistallies in Shanghaiin 1927 and subsequentlyencircling the rural revolutionary bases that, following a series of failed urban uprisings, nurturedmanyof the PRC'sfirst generationofleaders. The Long March that followed and Mao's retreatto his Shaanxiredoubt becamepart of the dynamic of the Sino-Japanese War and the global antiFasciststruggle.Wartime China, underChiang,was cultivatedby Roosevelt as one of the Powersthat would inherit a new post-warorder. That statusas one of the victors in World War II was reflectedin the agreedrepatriationof Chinesefrom their Diasporain the JapaneseEmpire to their native Chinese places - and the restoration to Nationalist China of the territories lost to Japan,notably Taiwan. But soon after the internationalconflict ended old enmitiesresurfacedbetweenthe two great contendersfor political authority in China,the NationalistsandCommunists. The post-war successof Mao and his military commandersin defeating Chiang'sarmiescan not be divorced from the end-gameof World War II in the Pacific, with the Soviet Union's late entry into the conflict through Manchuria.And the birth of the PRC in 1949, as the battle lines were being

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

drawn in the Cold War, was likewise infusedwith GreatPowersignificance. THE PEOPLES REPUBLIC OF CHINA: A FORCE TO BE RECKONED WITH

When Mao said the Chinesepeoplehad finally stoodup, it was one of those momentsin history when the world seemedto shift in its path. China'snewfound cohesivenessand weight was apparentin the massiveassaultacross the Yalu River in late 1950, bringing the new People'sRepublicdirectly into battle with the United Statesand the United Nations - challengingthe new post-warstructureand fighting to a standstillon the KoreanPeninsula. Thus the China that emergedfrom a hundredyears of internal strife and external predations very quickly establishedthat it was a force to be reckonedwith. This despitean economydisruptedby near-constantfighting since the mid-1930s,hyper-inflation in the post-war period, and economic boycotts after the outbreak of the Korean War. PRC military power and political centralisationfor the first time in a century allowed China to exert itself as a force to be reckonedwith -a force soon politically allied with the Soviets. So in the midst of present-daydebateover how much China matters,and over whetherChina is or is soon to becomea GreatPowerwith a capital G and a capital P it is useful to recall that from its inception the People's Republic of China - for all its material and spiritual weaknessesand limitations - was able to consolidatepower internally more completelythan at any time in China's previous 100 years. By simply exercisingeffective military and police control over Chinese territory -a mission the PLA carried out throughout the 1950s, including to the detriment of Tibet's autonomy - the PRC denied easy foreign accessto the greater part of continentalAsia. From behind the thick walls of its proud sovereignty,the PRC proved quite able to strike out militarily when it has perceiveda threat from the periphery.This was obvious in the caseof Korea in 1950, and also subsequentlyinside India's northeastfrontier in 1962, along the Sino-Soviet border in 1969, and acrossChina'ssouthernborder with Vietnam in 1979. These latter excursionswere not unqualified military triumphs, but they were dramatic displays of resolve and the end result was that battles were fought on the neighbour'ssoil, not China's. In the early years of the PRC ideology was a strong resourcefor this domestic unity and external influence. In the 1950s China's evident landbasedconventionalmilitary power was marriedto Sino-Sovietindustrial cooperationand a "Two Camps" view of internationalrelations, the Socialist

62

CHINA AS A GLOBAL POWER

and the Capitalist. In the 1960s,after the Sino-Sovietsplit, China preached the causeof world revolution and armedstruggle.This Maoist line offered a certain appealto revolutionariesin Africa and Latin America; China even supported freedom fighters in East Africa in the cause of Zimbabwe. China's independentdevelopmentof nuclear weaponsin the mid-1960s and later developmentof ballistic missilesto carry them - increasedChina's dangerquotientin the eyesof potentialadversaries,including the USSRand the USA. This deterrentelement, though limited then and now, was and continuesto be real. In the 1970s China moderatedits stancein Mao's declining years. The limits of its autarkic military-industrial strengthhad beenreached.To grow economically,antagonismswith the West neededto be toned down. While remaining anti-Soviet it sought co-operationwith the United States and softenedits line on armedstrugglein the Third World. Its co-operationwith the US in seekingto underminethe Soviet advanceinto Afghanistanin the late 1970swasperhapsthe ultimate expressionof this securityconstruct. In the Deng Xiaoping eraof openingand reform - which I seeas a natural and necessaryreaction to the twin disruptions of the Great Leap Forward and the Cultural Revolution and to the positive and nearby exampleof the Asian Economic Miracle - the ChineseGovernmenthas put a premium on economicrecoveryand modernisation.With this camea foreign policy that espoused"peaceand development".Since the early 1980s China seemsto have beenengagedin a campaignto make friends with all of its neighbours at once. The collapseof the Soviet Union in the early 1990s only addeda senseof urgency to China'sneedto shoreup relations with its neighbours, including the new Central Asian Republics,three of whom havejoined the RussianFederationandChinain a group calledthe ShanghaiFive. Now China facesno seriousdirect threatanywhereon its land periphery, in marked contrast to the days of Sino-Soviet rivalry. The former Soviet client state, Mongolia, is non-threateningand preoccupiedwith reform and development.Russia and China have essentiallysettled their longstanding border disputes.To be sure, North Korea is a potential sourceof instability. And it is not clear whetherIndia and China havereacheda completelystable mutual accommodation- the subcontinent'snuclear demonstrationsand Kashmir conflict continue to presentpotential problems that should be in China's interest to contain. Still, in the current environment, China can afford to cut back drastically the numbersof its ground troops - now less than 2.5 million - and seekto sharpenthe point of its spearthrough military modernisation.And at the same time China can see it to be in its own interestto co-operatewith the United Statesand othersto try to managethe

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

situationson the KoreanPeninsulaand SouthAsia. We have reason to hope, in this relatively peaceful, non-threatening environment,that China would also see that continuedrestraint in dealing with the situation on Taiwan - and a resumption of dialogue to resolve differences- would be the bestpath to follow. The disruptionsof cross-strait dialogue brought on by the mainland leadership'sreaction to Taiwan PresidentLee's 1995 visit to his US alma mater, and to Lee's July, 1999 statement that described cross-strait relations as "special state-to-state relations" are serious.But in light of China's overall continuedneed for a peacefulenvironmentin which to pursueeconomicdevelopment,even the Taiwan question, with wise managementon both sides of the strait, is a matter that can be handledwithout a breach of the peacein the Western Pacific. A NEW CONCEPTION OF SECURITY

China's recent military modernisation,acceleratingin the post-Tiananmen years of rapid economic growth, is based on new conceptions of comprehensivesecurity. Accessto resources,including oil from the Middle East, is part of the picture. Military modernisationhas beencharacterisedby an emphasison building a strongerpower projectioncapability into its naval and air forces. Chinese-produced weaponryis benefiting from applicationof advances in solid state electronics, and modern communications and information technology.Purchasesof advancedweaponry,including fighter planesand destroyers- principally from the USSRand its successorRussian state,have filled certain critical mission requirements.PerhapsChina'smost advanced area of military science is ballistic missile development. Improvement of the missile force - for both nuclear and conventional warheads, from short to long-range - has been a key element of the modernisation program. Overall, this modernisation program, by most accounts,doesnot yet translateinto major powerprojection capabilitywith a worrisomeoffensivethreatto Japanor the West. On the other hand,it marks an obvious changein strategy,away from land-basedforces. The strategyboth statedand implied - behindthis shift in military resourceallocationhas been first to be able to parry any foreign challenge to China's coastal peripheryand then to establisha more extensivedefensivezone out from its coastline.This shift also is designedto bring a hoped-forancillary benefitof strengtheningChina's claims to South China Sea islands and maritime economiczones that, in many instances,it has not been able to assertin morethantheory.

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CHINA AS A GLOBAL POWER

China clearly intends Taiwan to be included in this zone of potential influence. Doesthis meanthat China'smilitary advanceis going to begin to brushup againstthe forces of the United Statesand its allies in the Western Pacific?Possibly.But this doesnot meanconflict or accidentsare inevitable. On the contrary, with appropriateplanning and foresight we can work to avoid potential misunderstandingsand accidents by such measuresas agreementson military maritime encounters.All statesconcernedhave an interestin seekingto reducethe risk of conflict in the South China Seaor in disputed waters between China and Japan and Korea. So even as China advancesout from its shore,the potentialfor co-operationon securityissues is at leastaspossibleasthat of conflict. BALLISTIC MISSILES DEFENCE SYSTEMS

In the years to come, new technologiesand strategieswill continueto have an impact on China'sview of its own security and its own power. Defences againstballistic missiles,now in their infancy, are likely to be developedin the future. The US is researching anational ballistic missile defencesystem. Designedto defend against new statesthat have been developing missile capabilitiesalong with weaponsof massdestruction,NMD is not designed against or directed at China Yet China will have its own views on the implications of NMD for US security and the security of other nuclearweapons states and third countries. In this regard, maintaining a serious, high-level dialogue on strategicmatters,as well as an appropriatelevel of military-to-military exchange,is somethingwhich China appearsinterested in with not only the United Statesbut with other powerful states,including Russiaand Japan. Theater Missile Defense - designedto protect an area where military forces are deployed - is another system on the drawing board. China's interest in the potential effect of TMD deploymentin the WesternPacific centreson whetherthis technologywill be providedto Taiwan. The US has said it hasmadea commitmentto developTMD only with respectto its own theatremilitary forces. While the US it has not ruled out providing TMD to Taiwan or Japan,it has madeno decisionsin this regard.We remind China that it has been the PRC's own deployment of missile and other conventional forces on the ground opposite Taiwan that has enhanced interest, both in Taiwan and in the US, in consideringan effective missile defence. There is evidencein defenceliterature that China'smilitary strategistsare intrigued by the conceptof the Revolution in Military Affairs and in high-

65

CHINA'S PLACE IN GLOBAL GEOPOLITICS

tech, experimental weapons systems. The concept of "asymmetrical warfare", employing an unbalancedattack heavily weighted towards a particular technology (such as missiles) has also gained currency in mainland circles. In both cases,China seemsinterestedin "leapfrogging" developedmilitaries by gaining the advantageof a singular technologyor system. Whether the search for such "magic bullets" will become an organisingprinciple of Chinesemilitary researchis not yet known; but it seems unlikely that "magic bullets" will substitute for discipline, organisation,training and logistics. Even with a major modernisationprogram and developmentof certain very cabable weaponssystems,China is not today seenby the US as posing a major threat to the forces of the US or its allies in Asia. But China's military poweris significantandmodernisingsteadily. ECONOMIC GROWTH AND WTO ACCESSION

Nonetheless,the greatestsource of China's global influence has been its truly remarkableeconomic growth. In the last 20 years of its reform and opening policy, China has establisheda record of nominally double-digit GDP and income growth. In the initial stage of reform, agricultural productionblossomedand so did farmers' incomesandassets(althoughthey are hitting against some hard constraints now). China's growing rural economy has probably lifted more than 100 million people out of abject poverty and createdundreamed-ofwealth for millions more. Letting markets distribute goods is what really did the trick here and made manifest the demand that stimulated the supply. Thousandsof township and village enterprisesbenefiting from new accessto foreign and domestic markets, have createdemploymentfor millions of peoplewho otherwisewould have represented a very low value-added in traditional rural industry or agriculture. China has attracted tens of billions of dollars of inward investmentfrom overseasChineseand westerners.The central government has amassed a large amount of foreign exchange reserves in the neighbourhoodof $100 billion as exports have soared and foreign trade surplusespiled up. Yet growth and the distributionof wealth havebeenvery uneven.Lack of clear ownership and control rights is a critical reason for this. The close connectionbetweenparty and governmentand enterpriseand state-owned bank has created artificial profits and real waste and inefficiency. With decentralisationand halfway industrial reform, local political-economic fiefdoms havesprungup all over the country,with very mixed results.These

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included spectacularfailures like the GuangdongInternational Trust and InvestmentCorporation,which will payoutwell less than 20 cents on the dollar to its foreign creditors. Reform of the state enterprisesector, which still accounts for over half of urban employment and an overwhelming percentageof the banking system'sbad debt, is an imperativefor China to get on the path of more rational,balancedgrowth. The party and government apparatusthat continuesto supportloss-makingstateenterprisesis resistant to change. Furthermore, the perceived risks of allowing wholesale bankruptcy - including a potential collapse of the state banking system, massiveunemploymentandsocialunrest- areconsideredtoo high. What many observersinside and outsidethe systemhope for, is a gradual transformationof state enterprisesunder the joint pressureof fair internal and external competition and ownership reform and restructuring. Such conditionsare much more likely to developunder the kind of international competition and accessthat will be stimulatedby China'saccessionto the WTO and its implementation of WTO commitments. Competition and opening up of fmancial serviceswill spur allocation of savingsto the more promisingprojectsratherthan, as is the casenow, to stateenterprisesalready saddledwith unpaiddebts. There are reasonsto be optimistic about China's eventualtransformation into a more liberal societythat will be more likely to use its growing power judiciously. One is that for China to succeedin the next stageof reform it probably will simply have to embrace the application of information technology that has been transforming manufacturing and services elsewhere.This requiresa more educatedworkforce and one more in tune with global trends. Pockets of educatedprofessionalswith such global orientations are proliferating in China's big cities now. And it seems inevitable that the methodsof doing businessthat will succeedin the new global economy will not be compatible with the old structure of bureaucratic-industrialChina. Freedomof accessto information, freedomof thought, freedom of associationare all essentialelementsin the kind of enterprisesthat China will needto develop to stay globally competitiveand to reach the goal of "great power" status economically, politically and culturally. The fact that the ChineseGovernmentwas able to come to agreement,in November1999, on a wide-rangingMarket AccessAgreementwith the US is a tremendouslyimportant development.It suggestsa commitment to thorough-goingchangein the way China does business.Recognisingthat implementationof thesecommitmentswill not happenovernight (although many elementsof the agreement,including tariff reductions,are effective

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immediately upon China's WTO accession), it is still breathtaking to considera China whoseinternal distribution system,for example,is opento all - Chinese and foreigners alike. New laws and regulations will make explicit in China'sinternal systemthe WTO commitmentsit hasmade.This could have a truly remarkableeffect on not just the protectionof foreigners' trading and property rights in China, but on fair dealing among Chinese economicactors.The stimulusto private ownership,entrepreneurship, and a morerobustcivil societycould be quite stunning. I my opinion there is an interestingfeedbackmechanismat work in the relationship betweenChina's global power and its economicdevelopment. This could be an impetus to China changinginto a statusquo power - and not seek a return to its revolutionary past - in order to in fact attain its nationalgoals of influence and prosperity.For Chinato truly take advantage of the opportunitiespresentedby global economicinterdependence, it surely is going to have to adopt and adaptto the rules of the internationalsystem. Theserules are not set in concrete.They change,and China can be part of the community that decides how to changethem. These rules are set to facilitate exchange,to make standardscompatible,and to further other goals that are agreed to be universal and, furthermore, beneficial to the internationalsystemof commerce,investmentand information exchange.In many ways China has signedon to a numberof rules-basedregimesalready, in areas like customs, meteorology, posts, aviation, telecommunications paymentsand standards;but theseare generallyrules set for transactionsat the port of entry and no further inward. The WTO, on the other hand - like human rights and labour rights covenantsand internationalenvironmental agreements- effectively mandatesadaptationof a country'sinternal system to agreedstandardsof doing business. CONCLUSION

The, more China brings itself in line with internationalstandards- in trade, non-proliferation, human rights, law enforcement co-operation, environmentalprotection- the more susceptibleits economywill be to longterm balancedgrowth. This will makeChinaa strongerpower, a powerto be reckonedwith. But it will also contribute to the greater compatibility of China'ssystemwith that of the other leadingeconomiesof the world, and, if that pattern holds, to greater compatibility of interestsand a reduction of military contention. It is possible that China could become, later in this century, a stabilising rather than a destabilisinggreat power, one of several

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poles in an increasinglyintegrated,but multipolar, world where competition of ideasand successof economiesreplacemilitary might as the main criteria of powerand progress.

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Chapter 5

The EU and China: Economic Giants

Angelos Pangratis

INTRODUCTION

I will start my presentationtoday with a brief referenceto the historical backgroundto formal EU-Chinarelationsandthe ED's Chinapolicy. A broadpolitical dialoguewith China was establishedin 1994 through an official exchangeof letters, in recognition of China's statusas an emerging player on the internationalscene.Two follow-up documentshave set down the ED's overall strategyin its relationswith China: • In 1995,"A Long-TermPolicy for China-EuropeRelations"and; • In 1998,"Building a Comprehensive Partnershipwith China" The latter documentsetsout the ED's aimsto: • EngageChina further in the internationalcommunity,through an updated political dialogue. • SupportChina'stransitionto an open society,basedupon the rule of law andrespectfor humanrights. • IntegrateChina further in the world economyby bringing it more fully into the world trading system,and by supportingthe ongoing processof economicand socialreform within China. Together,thesedocumentsmark particularmilestonesin the way EU-China relationshave developedto the stagewhere today we have a well-structured series of meetings at several levels: Heads of Government, Foreign

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Ministers, Ambassadorsand Regional Directors. The fIrst ever ED-China Summit was held in London in 1998, the secondin Beijing in 1999,and we look forward to the third Summit,againin Beijing, in October2000. The experienceof the implementationof the 1998 Communicationwas presentedin somedetail by the Commissionin its generalreport adoptedas a Communicationon the 8th of September2000. Possibledirectionsfor the future ED policy towards China are also presented in the latter Communication. The ED is now exploring the possibilities to broadenthe scope of its political dialoguewith China to addresssuch issuesas the fIght againstdrug trafficking, money laundering, organised crime and illegal immigration. These are all areas where the European Commission was granted new responsibilities under the Amsterdam Treaty, 1999. More importantly, perhaps, these are all areas, which the Chinese authorities will become increasinglyconcernedabout, as they are beginningto impactupon China. I believe,therefore,that we will be knocking on an open door when we try to engageChina on theseissues.The Chinesepositive interestto increasecooperationwith the ED particularly in the areasof illegal immigration and organisedcrime was highlighted during Prime Minister Zhu Rongji's visit to the Commissionin July 2000. Both the ED and China are, to someextent,still looking for their rightful placein the world.

EU In the past the ED has been rather timid in punching its own weight at internationalmeetings.It is obviously oneof the major challengesthe ED is facing to ensurethat it is not taken for granted,but is given due recognition as the world's largest trading block and as a wide-ranging political and economicentity - in the internationalarena. The single markethasboostedinternal cross-bordertrade enormouslyand has createdpositive economicbenefIts for all concerned.A new challenge will be to ensure this growth continues and that ED trade continues to expand, particularly as the ED faces the challengeof gradual enlargement. As will be ensuring that the single currency, the Euro, gains its rightful strength. The recently formulated ED's Common EuropeanSecurity and Defence Policy is a key priority. The ED must be ready to act in a much more coherent and co-ordinatedway in the future. Particularly in responseto rapidly developing crises and challenges,wherever they may arise in the

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world. In the past, the EU has all too often failed to meet the challengeof internationalcrises. This was becausepolitical will was insufficient to make the requiredaction possible.15 Member States,eachwith a different foreign policy tradition and perceptionsof their internationalinterests,made it very difficult to achievea coherent,Europeanpolicy. The lessonsof Kosovo and the historical achievementsat the Helsinki Summit, December1999, have set clear parametersfor improved combinedEU action in whatevermilitary or civilian challengesthe future may hold. CHINA

China has alreadyundergoneenormouschangeover the past20 years,since modernreform began.The new challengeChina faceswill be as difficult as a modem version of the Long March. The new, more-confident,forwardlooking China will require the co-operation of the rest of the world, including the EU, to develop long-term vision, maintain constructive engagementand ensureinternationalrelationsarekept on an evenkeel. Within China, the enormous tasks of reforming the State Owned Enterprises (SOEs) and opening-up the economy have faced serious setbacksbecauseof deceleratinggrowth and fast-rising unemployment.The need for restructuringand modernisationhas been evident for some time. But the pace and magnitudeof the required socio-economicreforms have become controversial issues, involving the highest levels of the Chinese leadership. The successfulconclusion of WTO accessionnegotiations is extremely significant. China's leaders place great importance on the enormous task of economic reform combined with political and social stability. They will focus primarily on theseissuesin the next few yearsand this is somethingwe should take into consideration,as we try to engage Chinaon othermatters. This does not mean Chinawill be absentfrom the international stage having decidedto playa leading role, China will not now settle for a minor part. China will continue to promote a peaceful international environment for her domesticreforms, and will continueto participatein global affairs in ways it perceivesas advancing her interests. China regards herself as a major power in the making, and is seeking to acquire the international attributes that are commensuratewith her perceived size and power. In recentyears she has been forging a more coherent,assertiveforeign policy to match her growing weight. This has been particularly noticeablein the way China handledthe negotiatingprocesswhich should allow her to join the WTO - andother internationalfora.

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THE EU AND CHINA

The EU, and others, should build upon this desire for global legitimacy by encouraging Chinato build deepercommitmentin the world affairs and to develop a more active and consistentrole in global issues,in a way that reinforcesthe benefitsfor the global community.At the sametime, this will promote China'sown internal reform processand gradualopeningup to the outside world. The EU's primary objective, therefore, should remain to encourage,on a constructivebasis,China'scommitmentto the emerging21 st CenturyGlobal Order. This will be a challengefor the EU, China and the rest of the world. We also shouldnot underestimatethe importanceof allowing for the very steep learning curve that China's socio-economicreform will require. Many Chinese- at all levels - remain to be convincedthat only rapid integration into the internationalcommunitywill allow the continuationof the rapid and sustainableeconomicgrowth that they want and China needsto maintain, in order to preserveinternal stability and pursueincreasedprosperity for her population. From the point of view of the global community, the more China can be integratedinto the internationalsystem,the more incentivesshe will have to abideby the rules of the game. However, it also seemsto me that the way we deal with China during this period of increasingassertiveness will be critical to how China behavesas a global partner in future. The habits and reflexes developed during this processare very likely to endure.Furthermore,it is equally important that the integrity and key objectivesof the individual internationalorganisation, to which China is seekingto adhere,shouldnot be undermined.But we will all needto be flexible - to someextent As China grows in confidenceand strength,the EU should give early considerationto ways in which China might be brought into a more formal dialoguewith internationalorganisationssuch as the OECD. It is my feeling that China's involvement in some other global processesmight raise more problems, at least in the short to medium term, as some kind of global conditionalityshouldbe appliedto membershipof certainorganisations. Dialogue with China should also be upgradedin the context of the EU's broader strategy towards Asia, as embodiedin the Asia-EuropeMeeting (ASEM). The EU should aim to encourageChina's continuedcommitment to taking an active part in the ASEM process. Most major countries,including EU Member States,have now takentheir own versionof constructiveengagementwith China, as hasbeenreflectedin the unprecedentedseriesof high-level bilateral visits and summits in recent

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years. China's status as a nuclear power also gives particular importanceto its disarmament and non-proliferation policy. Continued support and encouragementshould be given to China's participation in multilateral negotiationson theseissues. WTO

One of the greatestchallengesto our relationswith China, and anotherkey test of China's readinessto abide by mutually acceptedinternationalrules, will be China'saccessionto the WTO. WTO accessionhas becomea highly contentiousissue for the Chinese leadership,but the signing of the USChina and EU-China Trade Agreementshave clearly paved the way for China'searly entry to the WTO, after 14 arduousyearsof negotiations. The EU has consistentlyadvocateda rapid entry to the WTO for China. China'saccessionwill bring addedpressureto the needfor urgentreform in many sectors. It will also underpin the reform processitself and bolster China's position as a global trading partner.However, the challengewill be to get the reform processright, to help China push through short-term disruptionsto generatelong-termgains,andnot tum Chinainto turmoil. EU CO-OPERATION WITH CHINA

In addition to the EU co-operationprogrammewith China, which has been in place for many years now, the Commissionhas identified various areas where EU expertisecan help China meet her WTO commitments.Someof these projects have already begun, in preparation for China's entry, for examplepersonneltraining in the banking and insurancesectors,but we are also looking at further waysto assist. The Commissionis currently updating the objectives of its overall cooperationprogrammewith China. The pasttwo yearshave seena deliberate move away from the more traditional developmentaid assistanceto projects more fully in phasewith China's economic reform agenda.However, the alleviation of poverty, especiallyin those less well advancedprovinces,will continueto be an overall priority. In addition, people-to-peopleexchangesshouldbecomea key component of our co-operation.The Commissionwould like to see greaterdepth and frequencyof exchangesbetweenyoung Europeansand youngChinese.It is very remarkablethat for every Chinesestudenttrained in Europe, four are trained in the US. For this reason,this year will see the launch of a very

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ambitious "Scholarship 2000" initiative. This will bring 2000 Chinese studentsto study in Europeover the next five years. There is also a need for Europeanbusinessmento be able to understand china and to do businessin the Chineselanguage.A new programme,the "EU-China Junior Managers'Programme"was launchedin 1999 and aims to send, every year, young Europeanprofessionalsto undertakeinternship periodswith Europeancompaniesin China. The China-EuropeInternational BusinessSchoolin Shanghai(CEIBS) is now internationallyfamous andwe are assistingit in expandingits work in the years to come. I believe these investmentsin the young are the bestinitiatives we can make for the future of the overall EU-Chinarelations. We will also give new impetus to our environmentalco-operationwith China, as China has becomeincreasinglyawareof the environmentalcost of her former industrial policies, and its impact on the global environment. China is now seekingto reconcilerapid growth with sustainableproduction andconsumptionpatterns. HUMAN RIGHTS AND RULE OF LAW

The humanrights situation in China has overall improved in the last twenty years. Economic reform and some liberalisation have introduced an increaseddegreeof freedomand self-determinationfor the individual. There have also been, since 1997, positive developmentswith regard to China's participation in internationalhuman rights mechanisms,such as the signing of the UN Covenantson Economic,Social and Cultural Rights, and on Civil and Political Rights. But thesehave yet to be ratified by China. Furthermore, progressin areassuchas freedomof expression,religious andpolitical rights haveclearly beeninsufficient. The EU has establisheda formal EU-China human rights dialogue and regular meetings are held to try to make progressin a number of areas. There have been someminor improvementsas a result, but a challengethe EU does face is to not let the dialoguebecomean empty shell or diplomatic fig leaf. We still strive constantly for concreteresults and the Council of Ministers made it clear last Februaryto the Chineseauthoritiesthat we will identify benchmarksby which progress in the dialogue will be judged. Examplesof the type of benchmarkswe will be looking for, as indicatedby the ministers,include: • Progress towards the ratification and full implementation of the UN Covenantssignedby China;

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• Full respect for the cultural, religious and linguistic identity of ethnic minorities in China,including in Tibet; • Progressin the areaof deathpenalty; • Restrictions on fundamental freedoms (assembly, expression, association); • Others. As part of our overall co-operationprogrammewith China, we believe we can help the socio-economicreform processby sharing experiencesand providing training, particularly in the legal sector. We therefore have an "EU-China Legal and Judicial Co-operationProgramme",which supports efforts to strengthenthe rule of law. This commencedin March 2000 and comprisestraining and awarenessactivities for Chineselegal practitioners. By helping to develop a sound,transparent,predictablelegal systemand an accessible,modern and fair judiciary, this programmewill underpin moves towardsa societymore ftrmly basedon respectfor humanrights. It will also improve the climate for Europeanbusinessand investmentin China. In addition, there is the "EU-China Village GovernanceProgramme",an importantinitiative aimedat promotingexperimentalgrassroots democracy. I believe there is considerablepotential to reach,through such initiatives, a significant number of decision-makersin the Chinese Administration, Judiciary and Civil Society. Furthermore,we also developeda number of smaller projects in areas such as women's rights, handicappedpeople's rights and others.We will continueto expandareasof co-operationin these fields. The centralrole of the rule of law can also be stressedin termsof Chinese interest in sustainableeconomicgrowth. Chineseleadersrecognisethat the rule of law in the commercialsphereis vital if China'seconomyis to grow and continueattractingForeign Direct Investment.A sound,transparentand predictablelegal systemand a modemand fair judiciary improve the climate for businessand investmentin China. HONG KONG, MACAU AND TAIWAN

The Commission has devoted much time and effort over the past years studying issues related to Hong Kong and Macau. The question was whether, following the hand-overto China of frrst Hong Kong and then Macau,the Chineseauthoritieshaveallowed eachterritory to adherefully to ~ts own Basic Law. The Commission has reported its fmdings on Hong Kong and Macau, noting that the rule of law is being upheld and that the

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distinct identitiesof the two territoriesarebeingpreserved. Another challengesChina faces is related to her key policy objective of re-unification with Taiwan, which would certainly be greatly advancedif basichumanrights and freedomswere fully ensuredon the Mainland. THE INTERNET

This is one challengeall nationsface and nonehas yet met it fully. China is now realising what its influence will be. I meanof course,the World-WideWeb and how that will affect all our dealingsin future. We in the West have only begunto scratchthe surfaceof what this technologycan do to help us. Some people in China have, until very recently, attemptedto keep the Internetand the World-Wide-Webat bay. In 1999 China had an estimated 2-4 million Internet users. By the beginningof 2000 that numberhas soaredto 8 million. The new userstend to come from the so-called "Yellow Generation":those aged between 18 and 35 - the educatedand the practical that aspire to be sophisticatedand international. This generationwill not take lightly attemptsto restrict their accessto informationthat is freely availableto their counterpartselsewhere. The Chineseleadershipwill have to handlethis challengewith Confucian wisdom, skill and adroitness, or risk alienating the entire younger generation. CONCLUSION

JeanMonnet, one of the founding fathersof Europe,wrote that whereChina was concerned,one had to hold back and take nothing for granted. It is tempting for me, but also very difficult, to makeany far-reachingpredictions about the future of China. Only a few years ago, it was fashionablein the pressto predict that the Tiger Economiesof the Asia-Pacific region would be the dominanteconomicpowers of the 21st century. That prediction may still come true, but it looks now less probableas nearly nobody foresawthe Asian Financial Crisis. For China, there are so many uncertainties,both politically and economically,that even the wisestof men would not pretend to know what will happenas China strugglesto reform and take her placeon the world stage.However, it is already clearernow than it was only a few years ago that in Asia, next to the Tiger Economiesthere is a formidably dynamic "Chinese Dragon", who will inescapablybe one of the major playerson the world sceneduring the 21st century. The EU hasprofound interestsin a stable,prosperousand openChinathat

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embracesdemocracy,free marketprinciples,the rule of law and that is ready to join the EU in helpingto build a secureinternationalorder. The EU's relationshipwith China is now a full andvaried one, with much potential for growth. The challengeof developinga comprehensive,robust and enduring relationship with China, is one of the great geostrategic challengesfor the 21st century. A lot remainsto be done. It is howevermy belief that we have already laid solid foundationsto allow the EU and the ChineseDragonto meetthis crucial challengeof the 21st century.

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Part II

Regional Challenges

Chapter 6

Development and International Economic Integration

Christopher Howe

INTRODUCTION

China now standson the brink of WTO membership,but at the sametime the impending retirementof Jiang Zemin makesthis an important point in China'spolitical development.The purposeof this chapteris not to discuss the details of the WTO issue,but to considermore generallywhetherChina is yet ready for the quality of internationaleconomicintegrationthat a WTO basedworld economycan provide. The conclusion,in brief, is that China is probably not yet ready, but that entry into the WTO and further integration involves risks for all partiesthat are worth taking if China is to move to the next stageof its reforms. I shall considertheseissuesfrom three viewpoints. First is the extent of ideological preparedness. Second,is the stateof China'seconomichealth in terms of competitiveness,and of industrial and technologicalcapabilities. And third, is the regional perspectivein the senseof key Asian neighbours being able to assist China's further developmentand integration into the global economy. GROWTH AND DEVELOPMENT: SUCCESSFUL MODELS

Let me start with a few words about the developmentprocess and its indicators. Successfuldevelopmentis measuredby sustainedand stable growth of national product and consumption per head, which must be 81

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underpinnedby productivity improvement and structural change. To be stable, growth will needto take a form in which the distribution of income and wealth is perceivedto be reasonablyfair and functionally necessaryby all participantsin the economy.Above and beyondthis, welfare in its wider sensecalls for other ingredientsof life quality, including personalsecurity, freedomfrom environmentalcatastropheandhumanrights of variouskinds. The mechanismsneededto securethe economicobjectivesaboveinclude institutions that allocate resources in responseto household needs and properly justified requirementsfor public goods. These mechanismsmust work in ways that put pressure on producers to minimise costs and encourageinnovation in its widest sense.The latter implies decentralisation of power of a kind that allows individuals, groupsand corporatebodiesof all kinds to experiment,diffuse andbenefitfrom change. For developingcountriessuch as China that are essentiallyengagedin a catchingup process,institutions for growth will needto addressthe special problemsof ignorance,risk aversion and other deficienciesthat hinder the transfer and adaptationof knowledge. Experience shows that calls for a delicate balancebetweenpublic intervention and private initiative and the nurture of inter-personaland inter-firm relationshipsthat facilitate learning and diffusion of knowledgeat all levels of society. Underpinning all these policy and institutional arrangementsmust be mechanismsthat facilitate the complex bargains needed to accumulate capital and secureits proper returns over long periods of time. These are neededwhethercapital takesthe form of physical or humanresources.This package of institutions and political conditions must include civil peace, transport and communicationsinfrastructure, systemsof law and dispute resolution and an environment of good bureaucraticpractice. Legal and bureaucraticrequirementsare particularly importantsince,without these,the managementof large scale, capital intensive and complex businesseswill not be possible.! Opennessto the outside world is both a challenge and a support to developing economies.It is a challenge in the sensethat the gains from opennessthrough trade and Foreign Direct Investment(FDI) can only be obtained after institutional mechanismsof certain standardsare in place. (The huge gap between the returns to capital in developed,capital rich economiessuch as Japan, and those available in capital poor economies showshow far short the developingcountriesare in generalfrom achieving A notably clear statementof this issueis, Alan Sica,"Rationalizationand culture" in Stephen Turner(ed.), The CambridgeCompanionto Weber(Cambridge:CambridgeUniversity Press, 2000),pp. 54-56.

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nearto optimum standardsin this respect)?Opennesson the other hand is a great support in that the gains from trade, capital, and knowledgeflows in the contemporaryworld are simply enormouswhile external competitive pressuresare also oneof the bestspursto domesticefficiency improvement. We must not of coursebe too idealistic aboutthe real world and the paths to improvement.In all economies,advancedand developing,the processes of growth are imperfect, problematic,and often short lived in terms of their best phases.Even the richest economieshave their dark sidesand the most successfuldevelopersseem only to maintain balanced,high-speedgrowth for limited periods of times. One thinks of Japan in the Meiji era and the 1960s;Swedenand Francein the mid- 19th centuryand again in the decades after 1945; and Germany at the tum of the 20th century and again in the 1960sandthe 1980s.All GoldenAges thatran into trouble. Also, valuableas opennesscan be, we needto rememberthat gains from trade are much more accessibleto some than to other economies.The "natural" tradersare usually smaller countriesphysically adjacentto larger, generally dominant ones. Holland is a good example as an economywith limited natural resources,which developedfITst by virtue of its position at the mouth of the German river systems and its intermediary position between the Baltic and Mediterranean economies, and later as the beneficiary of a world wide trading empire encircling the globe from Latin America to East Asia. This trajectory of skill baseddevelopmenthas been sustainedthroughmanyvicissitudesto the presentday. THE CHINESE EXPERIENCE OF SYSTEMIC CHANGE AND GROWTH

If we turn now to the Chinesecase,it is worth recalling that from the lOth to the 15th centuries China was the world's largest and technically most sophisticatedeconomy; an economy that in many respectsmaintainedan Asian supremacyuntil the end of the 18th century. Prior to this, there were periods of strong "openness"notably in the Tang when the Silk Road and the easternseaboardboth flourished, and in the early Ming when Zheng Ho undertookhis remarkable voyages to Africa andthe Middle East. China's economic weaknesseswere only displayed in the 19th century 2 MancurOlson,"Big Bills Left on the Sidewalk:Why SomeNationsAre Rich, andOthersAre Poor" in Mancur Olson andSatuKahkonen(eds.),A Not-Sa-DismalScience.A Broader View of Economicsand Societies(Oxford: Oxford University Press,2000), pp. 37-60. On the paramount importance of institutions for economic developmentsee also, Randall G. Holcombe, "Public Choice and Economic Growth" in William F. Shugart II and Laura Razzolini,The Elgar Companionto Public Choice(Cheltenham:EdwardElgar, 2001).

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when, unlike Japan,it failed to meet the challengesof westernimperialism, fIrmly based as these were on a technological revolution in metallurgy, machine-building, and steam and a developing revolution in corporate organisationand fmance. China's 20th century spurts were frustrated by a variable internationalenvironment,by Japan,and by its failure to establisha unifIed nationalmarketandpolity. To understandthe evolution of the Chinese economy since 1949 it is useful to distinguish betweenelite (the ChineseCommunistParty (CCP» and masseconomicaspirations.During the First Five Year Plan (1953-57), the CCP adopteda version of the socialist systemof economicplanning in order to achieve the goals of a heavy industry basedindustrialisation-a strategy designedmainly to serve strategic ambitions. Although the high (forced) investment rates required by this strategy limited consumption gains,the welfare benefItsof the resumptionof civil peaceand other aspects of the Plan ensured a workable congruence between Party and mass objectives.In the latter half of the 1950s,however,as achievementsbeganto fall short of elite (and especially Mao's) aspirations, the economy was launchedon an extreme socialist trajectory that endedin disasterin 19601961. From the mid 1960sonward a new complication appeared.This was the growing division between those who increasingly valued socialist institutions as ends in themselvesand men such as Zhou Enlai, Liu Shaoqi and Deng Xiaoping, who remainedcommitted to economic modernisation and were willing to be more pragmaticabout the meansto achieving this. For much of the period 1966-76 the radicals held sway and so powerfully did they routinise their authority, that in the processthey largely destroyed the very meansof rational planning, including both statisticalwork and the up-dating of the basic building blocks of the plannedeconomy- physical input-outputnorms.3 THE DENG ECONOMY AND ITS RATIONALE

By the late 1970sthe economy'sperformancewas demonstrablyfailing to meet either elite or mass aspirations. Technological levels were falling decadesbehind best world practice and hence could not meet minimal national security requirements,while consumptionlevels were at best static and for many,falling. This interpretationis basedon many sources,but especiallyon: Gu Longsheng,Zhongguo gongchandangjingji sixiang Jazhanshi(A History of the Developmentof the Economic Thoughtof The ChineseCommunistParty)(Taiyuan,1996).

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But although there was consensusof interest on the need for change, managementof the processthat detachedChina from the Maoist syndrome was extraordinarily difficult and there was only limited thinking and agreement about the substanceof reform. There were some obvious problems including major sectoral imbalances and bottlenecks; lack of material incentives in agriculture and industry of kinds that had worked before; and the millions of graduates"lost" as a result of educational disruptionsof the Cultural Revolution. Thesewere all points emphasisedby the "old" planners and specialistssuch as Bo Yibo, Chen Yun and Xue Muqiao. However,remedyingobvious absurditiessuch as thesecould be achieved by the restorationof a planning systemreformed along lines discussedas long ago as the 1950s, and then adopting policies of "balanced development"with appropriateattentionto the "Law of Value". There was no initial commitmentbeyondthesemeasures,which were promisedin the wake of the famous Third Plenum of the Eleventh Central Committee (December1978). Within a few years, however, Deng had developed a revolutionary approachto the ideology and practiceof development.The startingpoint for this was a new judgementon Mao at the Sixth Plenum, who was seento have beencorrect in the pre-1949period and correct again in the post-war recovery and the formulation of the strategy of the First Five Year Plan. Thereafterhe was seento err in his preferencefor "disequilibrium" methods of planning and his eventualobsessionwith socialistinstitutions and values as over-riding endsin themselves. Deng eventually reversedMao's approachto socialism by defining the goal of socialism as economicdevelopmentand by a willingness to adopt any means to that end. Thus markets, western managerial methods and foreign technology,were all to be consideredas politically neutral. In 1984, the marketwas defined as the legitimate supplementarymeansof allocating resources.This was the PlannedCommodityEconomywhich, by 1992, was given an even wider role as the Socialist Market Economy. Subsequent developmentsin the 1990s gave the private sector formal legal statusand equalityof tax treatmentis also in the formal arrangements. From the earlieststages,the political implications of this evolution filled many comradeswith alarm to which Deng respondedwith what might be describedas his three "guarantees".Namely, that economic development would take forms that strengthenedthe Party-led state; maintained a preponderant role for the public sector; and achieved a "common

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prosperity".4The currentleadershiphassustainedthis approach. The outside world played a crucial role in Deng's thinking. First, he identified the world scenein the late 1970s as essentiallypeaceful- with major disputessuch as those relating to Korea and Vietnam now settled. Second, Deng observed the acceleration of world trade and increasing mobility of capital. Third, Deng and colleagues(especially Hu Yaobang), were deeply concerned about the technology issue and believed that international integrationthrough trade and FDI were indispensableparts of the answer.Finally, looking to history, Deng observedthat China'speriod of conspicuousdecline had coincided with anti-foreign policies of seclusion. He also arguedthat the failures of the Soviet form of socialismreflectedthe shortcomingsof Stalin'scloseddoor attitudes.5 In espousing openness,Deng was reversing a twenty-year phase of China'sdevelopmentand he met much opposition from critics who argued that the Capitalism would walk in by the Open Door. Deng, however, assuredthem that his guaranteeswould apply to externalas well as internal policy, a point to which we shall return. The implementation of reform has proceededin surges over the past twenty years. Immediatemeasureswere taken to open the door to foreign capital and to decentralisedand unconventionalforms of foreign trade. Profit and Forex retentions, the establishmentof Township and Village Enterprises,and fiscal reform have each made important contributions to increasing the external orientation of the economy. Internally, long term contracting and market development have improved agriculture, while through profit retention, contracting and the beginnings of a unified tax framework,the non-agriculturalcorporatesectorhasbegunto emerge. Hong Kong and Taiwan both played important roles in this opening processes,as both relocatedindustry to the mainland and as Hong Kong expanded and diversified its service skills in the interests of mainland enterprisesandjoint ventures.

4 These comments on Deng are based on his SelectedWorks, Vol. 3; The Economics Departmentof the Party School,DengXiaopingshichangjingjide gouxiangyu shifian (Deng Xiaoping's, Conceptand Practiceof the Market Economy)(Beijing, 1994); and materialsin the series,Deng Xiaoping lilun yanjiu, (Deng Xiaoping TheoreticalResearch)publishedby The PeoplesUniversity, Beijing. The economist'sversionof The SocialistMarket Economy andits guaranteesis spelledout in, Liu Guoguang,"SomeProblemsRelatingto the Theory of 5 The SocialistMarket Economy,"Jingji yanjiu, No.10 (1992). For a recent account of Deng's views on this subject see, Chen Qian, "Deng Xiaoping's Theory of the Opening [of the Economy1 and the Road to a Common Prosperity,"Nankai daxuexuebao,No.6 (1998).

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A BALANCE SHEET OF REFORM

The question now to be asked is how far this has all got in terms of the developmentparadigmsoutlined at the beginning of the chapter,and how preparedis the Chineseeconomy for the implications of further economic integration? First, on the positive side, there are strong indicators of GDP, GDP per capita and aggregateconsumption.In addition, the economyhas achieved export growth rates and degreesof nominal opennessthat no one would have predictedtwenty years ago. In terms of FDI, during the 1990s,China becamethe preferreddestinationamongall developingeconomies. Second,on the systemicfront, during the 1990s we have seena "soft" landing from high growth and high inflation and, more recently, the capability to resist the impact of the Asian Crisis and even to offer help to the bureaucratsin Hong Kong. Third, the Chineseare reasonablyoptimistic about the outcome of any entry into the WTO: Favourable impacts are foreseen from external pressuresfor internal reform and efficiency gains. Secondentry is seenas likely to lower trade frictions, especially with the United States. Thirdly, adherenceto WTO norms is seenas likely to improve the image of China's investmentenvironmentandhenceto increaseinward flows ofFDI. Within sectors,favourableimpactsare foreseenin textiles, electricalsand labour intensive export branches, but serious problems are feared in agriculture, pharmaceuticals, vehicles and the services sectors. In agriculture,grain self sufficiency is predictedto fall from 95 percentto 85 percentby 2005, and over one million jobs in planting are going to be lost by workerswho countamongthe poorestin the economy. On balance,however, a once for all gain of nearly 2.84 percentin GDP andonemillion new jobs arepredicted. This scenarioneedsto be examinedquite carefully. The startingpoint has to be the current employmentsituation. During 1999-2001the increasein the urban population of working age is 9.14 millions annually, rising to 12.46 millions in 2002-2005. Participation rates are estimatedto remain constantgiving rise to a net demandfor jobs of over 7 millions per annum. In addition, up to 75 million of the 120 million estimated"surplus" rural labour force is estimatedto be potentialmigrantsin the nearfuture and these would join the 40 million "mobile" labour force alreadyin the cities. Reform of the SOEsis estimatedto add a further 12.8 millions to the job seekersby 2001 and further numberswill comefrom reform of the bureaucracyand the state education system. Thus, even assumingcontinuanceof growth at 7 percentper annum,20-30 million unsatisfiedjob seekerscould be addedto

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urbanpopulationsin the nearfuture and this must maketransitionalchanges associatedwith rapid integrationdifficult. 6 Let us now turn to the questionof the industrial sectorsand their readiness for any real impact from trade liberalisation. Steel has been a constantof Chineseindustrial policy since the 1950s,and although somewhatdemoted in recentyears,has increasedoutput from 31.78 million tonnesto over 100 million tonnesduring reform. China has huge demandsfor steel and is the world's largestmarketplacefor rolled steel. As the economyhas reformed and opened,however,Chineseconsumers(enterpriseswhich are themselves under fmancial pressures)increasingly turn to overseassources,some of which have become intensely competitive partly becauseof world over capacity,and partly becauseof exchangerate gainsafter the Asian Crisis. It is therefore crucial for Chinese steel producers to increasingly match overseasproductivity levels and to pay attention to market requirementsin termsof typesandqualitiesas well asprices. At present the industry is in weak shape to handle further shocks, especiallyin the absenceof a significant devaluation.Although the industry as a whole was just profitable in the mid-1990s,the margin was small and 26 major enterpriseswere loss makers, reporting costs higher (often far higher) than current market prices for their products. Further, the output structureof the industry is quite unbalancedwith huge excesscapacity of some low value addedproducts,combinedwith seriousshortfall of special and high quality steels.The technicalstandardsof capital equipmentare low while energyandpollution costsare high. To improve this situation, industry sources are seeking dramatic improvementsin productivity, with output per man approaching"advanced economy" levels by 2010. The scale of the problem may be judged by the fact that it is estimatedthat if employment in the steel sector could be reducedfrom 2.8 to 0.8 millions in the near future, output per man would rise to 140 tons per man. This would comparewith a world standardof about 800 tons per man, and with the 1000 tons per man achieved by Japanesesteel companiesafter their own restructuring in the 1980s. For 2010 China'starget is 500 tons per man. This would leave the industry with 300,000men and an outputof 150 million tonnes. Achieving such targets, however, is far more than a technological problem, daunting though this is. It will also involve a major corporate restructuringof the industry into a proposedfour groups,eachwith defmed

6 A typical survey of the problem is, State Council DevelopmentCentre, "Our Country's EmploymentSituationandProspects,"Jingji gongzuozhe xuexicailiao, No. 49 (1998).

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areas activity, yet each competing at home and against imports'? These groups will have to demonstratemanagerialcapabilitiescredible enoughto persuadeboth foreign and domestic capital marketsthat they can compete successfullyin the world industry. Now let us consideranotherindustrial case:textiles and clothing, a sector in which China is clearly a world leader.This is a naturalindustry for China since it has large labour intensive branches,notably clothing. In 1995 the industry accountedfor 13 percentof China'sGrossValue Industrial Output (GVIO) and 14.5 percentof industrial employment.Between 1980 and the mid-1990sChina's shareof the world clothing export market rose from 4 percentto 17 percent.A very positiveside of the opendoor. But an analysisof the industry'sstructurebrings to light worrying facts. First, approximately65 percentof all clothing exportsinvolve someform of foreign capital participation.8 The networks of this involvement are extremely complex, but are undeniablycentral to the industry with major roles played by Hong Kong, Taiwan and Japan. Japan is particularly importantto China becausenot only does it supply the industry with many of the inputs and other service elementsnecessaryto its success,but Japan itself has becomethe key market for Chinesesales, which are of course largely handledby Japanesetrading and textile conglomerates.The result in aggregateis that China takes only a very modestshareof the value added chain in this industry. Overall, it is estimatedthat the entire manufacturing segmentof the industry accountsonly for 17 percentof value added,and in many casesChina doesnot evensucceedin capturingthe whole of this, with foreign partners taking much of the share attributable to production managementYFurthermore,becauseof the dominant role now played by external suppliers in providing basic materials, China's own mainstream branches (spinning and weaving) are stagnating, are seriously underdeveloped,and certainly quite unableto withstandfurther foreign pressures. The fmancial position of the textile State Owned Enterprises(SOEs)are so serious that quite recently they accountedfor 10 percent of the Chinese budget deficit. The industry has already made some 800,000 workers .

7 Jin Lin, "Some Problemsin the Developmentof Our Country's Iron and Steel Industry," Jingji yanjiu cankao. No. 74 (1998); and Ministry of Metallurgy DevelopmentPlanning Department,"TentativeSuggestionsfor StructuralRe-adjustments in the SteelIndustry," Yejin 8 jingjiyanjiu, Nos. 1-2(1998). Overall data quotedin 1999 are that foreign capital (including overseasChinese)accounted for 55.8 percentof all China'sexports.The shareof exportsin the outputof overseasChinese 9 venturesis 86 percent- no interestin local marketshere. ChristopherHowe, Japan and China's Changing EconomicEnvironment: With Particular Referenceto Foreign Direct Investmentand Industrial Restructuring(CeFIMS Discussion Paper,Schoolof Oriental andAfrican Studies,October1999).

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redundantand continuing job lossesare creating serious social and public orderproblems.IO The disturbing patternseenin the fmancial progressof severalsectorsis that SOEs have their good assetshived off by dubious means,leaving the profitability and net worth in a stateof continuousdecline. Thus while new incentives have increased output and strengthened China's external orientation, the mechanismshave also produced a progressive state of bankruptcyin the rump statesector.In textiles, this processhas gone so far that by 1997 the non-statesectoraccountedfor 77 percentof the industry's value added, most of it in the profitable clothing branch.II Providing officials with opportunitiesto effectively loot the state sector in casessuch as this, seemsto have beenthe only way to securebureaucratic compliance to the abolition of old style planning. Much of China's industrial weaknessstems from failures of technology transfer and innovation. The pre-reform systemwas exceptionallyweak in this respect and two problems were especially noteworthy. One was the divorce of R and D from industrial activity at the enterpriselevel. The other was the tendency to think that the solution to up-grading lay in new techniquesembodiedin new, often turnkey plants.The result of this bias has been a duality between new enterprisesand the old stock of capital in enterprisesthat have neither incentive nor means to make technological advance. Reformshave certainly donesomethingto increasedomesticincentivesto scientific and technologicaladvanceand to bring technologyin from abroad by the wholly new meansof FDI, combinedwith technology licensesand other modesof internationaltransfer.Nonetheless,it is hard to be sanguine about what has been achievedalthoughJiang Zemin remainsvery active in campaignsbasedfor technologicaladvance.12 One basic illustration of the problem emergesfrom an enquiry by the State Statistical Bureau which found that only 26 percent of China capital stock approachedadvanced economy standards,and that of this, most was imported. In other words, China's domestic capabilities in machine making capability remain extremelyweak.13 lOIn Wuxi, for example,the loss of 14,000textile jobs, triggeredby a bank foreclosure,led to a violent rampagethrough the streets in protest. "Matters to Pay Attention to in [Textile] SpindleReduction,"Gaigeneican,No.9 (1998). :; Seematerialsin, ZhongguoJangzhijingji,No. 141 (1988). See"JiangZemin at the Tenth Congressof the ChineseAcademyof Science,"Renminribao, June6th 2000. 13 WangChunzheng,"Concerningthe PresentEconomicSituation,"Zhonggongzhongyangyang dangxiao baogao xuan (Selected Reports from the Chinese Communist Party Central CommitteeSchool),No.5 (1998).

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Two problems are particularly important here. One is the education bottleneck.Partial marketisationof the economy has greatly increasedthe -demandfor skills and knowledge.But the educationsystemremainslargely a bureaucratic, fmancially capped structure that cannot expand supply adequately.The flight abroad of young Chineseboth for study and work speaksfor itself.14 The other issue is even more fundamental. Innovation cannot be bureaucraticallyor centrally controlled. It requires true decentralisationof power, a high quality of personal and corporate interaction, as well as rewardsthat form part of a coherentcareersystem.This is true both at the researchend of the spectrumwhere basic investigationis done, and also at the applications end where firms convert knowledge into products and productionprocessesfor the market.Networks,freedomof associationand a culture of change are especially required. These do not of themselves guarantee progressbut, without them, the innovative economy cannot be constructed. 15 In the early part of this chapter it was suggestedthat the successful economy needednot only growth, structural changeand technologicalup grading, but also a distribution of income and wealth perceivedto be just and functionally justified. Deng's theory of reform explicitly al19wed for initial gains from reform to be captured by the "winners" - whether individuals, organisationsor places.But clearly there needsto be limits to this processof differentiationif a "commonprosperity"is to be achieved. Theremay actually have beenan initial improvementin equality as severe problems between regions were alleviated by the initial application of reform, but since the 1980s, the situation is reported to have been deteriorating. For example for urban areas it is reported that the gini coefficient doubledbetween1981 and 1990 to 0.30 and that incomesof the top 20 percentof the populationare now 4.5 times those of the bottom 20 percent. Rural inequality was reported as higher than urban and a new dimensionof inequality now reportedto be giving anxiety is the widening gap betweenthose in work and those who have retired.16 Some forms of inequality in contemporaryChina are clearly and disturbingly linked to the 14 Ceng Zhaoning, "Converting Vertical into Horizontal control; the Refonn of Higher IS EducationGoesRoundAgain," Gaigeneican,No. 14 (1999). Joel Mokyr, The Lever ofRiches.TechnolOgicalCreativity andEconomicProgress(Oxford: Oxford University Press,1990);Bruno Latour, Sciencein Action. How to follow Scientistsand Engineers Through Society (Cambridge Mass.: Harvard University Press, 1987); Patrice Flichy, L'innovation Technique.Recentsdeveloppments en sciencesocialesversune nouvelle theoriede {'innovation (Paris:EditionsLa Decouverte,1995). 16 "Our Country'sIncomeDifferentials are GettingProgressivelyLarger," Gaigeneican,No. 16 (1999).

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reform processitself. In particular,the largely visible processesby which the public sector loses assetsthrough corruption and malpracticeto effective private ownershipandrights of exploitation.17 The other striking dimension to inequality generatedby reform is the regional one. In terms of the three broad regions: eastern, central and western, the changeshave been as shown below in Table 1. This table simply shows the basic per capita income data. Thesedata suggesta clear increaseof inequality in the 1990s. A wealth of other welfare indicators, including literacy and life expectancyconfirms the enormity of China's inter-regionalinequalitiesandthe tendencyof someof theseto worsen. Table 1: RegionalInequality, 1978-1998(Per CapitaIncome in Centraland W esternAreasWith EasternIncome= 100)'18 Central

Westem Eastem

.

.

1978 67 54 100

1990 65 54 100

..

1998 55 43 100

Source: State StatistIcalBureau:Zhongguotongji nianjian (Chma statIstIcalyearbook)vanous years as quoted in JElRO, Instirute of Developing Economies,SummerSymposium,July 6th 2000.

PUBLIC GOODS AND THE ENVIRONMENT

The argumentto this point, therefore,is that despitelarge gains the Chinese economyretainsseriousstructuralweaknesses, both industrial and fmancial, and that the reformedsystemstill lacks mechanismsthat ensurean efficient accumulation of capital and that can deliver reform gains on a basis perceivedto be equitable.The sharp decline in the state'sshareof national income severely limits its ability to help institutional reform by making transitional assistance available. This decline has another serious consequencesince it limits the ability of the stateto provide public goods, 17 This problem is analysedin detail by the economistHe Qinglian in, Xiandaihuade xianjing (The Pitfall of Modernisation)(Beijing:Jinri Zhongguochubanshe,1998).For a Partyview of corruption the report by the Fujian Provincial Party Secretary is very helpful, "A Reconsiderationof the Problem of Opposing Corruption in the Primary Stageof Socialist Society,n SelectedReportsfrom the ChineseCommunistParty Central CommitteeSchool,No. 18 3 (1998).Furthermaterialson the samesubjectappearin the samepublication,No. 12 (1999). Definitions: Central Region comprises Shanxi, Nei Menggu, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei, Hunan; WesternRegion comprisesZhongqing, Sichuan,Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang; Eastern Region comprises Beijing, Tianjin, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong,Guangdong, Guangxi,Hunan.

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notably in agricultureand especiallyin the form of measuresto control and compensatefor the impact of natural and environmentaldisasters.These disasters(especiallyfloods) have becomemeasurablyworse sincethe 1950s and annuallossesof up to 3-4 percentof nationalincomeare estimatedto be occurring,with the burdensbeingborneby thoseleastableto afford them.19 THE ASIA CRISIS AND ASIA AS MODEL FOR CHANGE

CurrentChinesethinking abouttheseissuesis doubtlessinfluencedby many of the considerationsoutlined above. It is also influenced by the recent Asian Crisis. As is well known, the trigger to this was a hugereverseflow of private capital out of Asia. The five key economiesi.e. the Philippines, Indonesia, Korea, Malaysia and Thailand, are estimated to have lost approximately$130 billion during 1996-98,much of it in the form of bank credits. The interplay betweentheseoutflows, exchangerate crisesand asset prices had profound implications first for domesticfmancial institutions and then for the realeconomies. The crisis was a serious problem for China. In particular, it lost competitiveness because of regional devaluations and also because reverberationsof the crisis in Hong Kong. The loss of price competitiveness is very serious for China since most Chinese products only exhibit competitive strength in price, with relatively few Chinese manufactures being bought becausethey embodyquality or innovation.2o China therefore followed the crisis eventsclosely, and JiangZemin orderedanalyststo study the lessons,paying particular attention to errors and lessonsmade in Hong Kong. The main conclusionsdrawn to datein the literaturethat I have seenmay be summedup as follows. First, it is worth bearing in mind that Chinese analystsare very well informed on current world economictrends and the buzzwords of contemporary discourse. Terms such as "Globalisation", "Knowledgeeconomies",the new "American Paradigm",spring from every page.Theseanalystsare also well awareof the argumentsfor further reform in China and of China's continuing needs for foreign capital and technology?1Nonethelessthey are not generallyconfidentin the stability of the world financial systemor in its capacityto improve itself. They also, in 19 Hu Angang, 'The impact of Inundation Disastersand Our Country's Strategyto Lessen Them,"Renminribao neibucanyue,No. 37 (1998).

20 "The Huge Impact of the Asian FinancialCrisis on Shandong'sExternal Economy,"Duiwai

jingmaoyanjiu, No.3 (1998). 21 Li Ping, "The Use and Necessityof the Private Economy in the Age of the Knowledge Economy,"Jingji gongzuozhe xuexicailiao, No. 74 (1998).

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the aftermath of the crisis, identify two weaknessesin "Asian Models" of development.One is excessivedependenceon the externaltrade sectoras a sourceof growth; the other is excessiverelianceon foreign capita1.22 They therefore regard capital controls as important, not only for reasons of domesticfmancial stability, but also to enablenational authoritiesto retain control over industrial policy. In fact many are critical of China's FDI practicesin the 1990s,which they seeas too laissezfaire and too driven by 23 the sectionalinterestsoflocal governmentsand enterprises. Against this background, it is worth returning to Deng Xiaoping's thinking about the Open Door and current glosseson it. Basically, it is not difficult to use Deng'sthought to supportthe post-AsianCrisis thinking of the kind indicated above. For while Deng was insistent on the Open Door and the need for a long term commitmentto it (fifty to one hundredyears), his approach was also profoundly opportunistic and mindful of China's national interests. The gains from international integration were indeed potentially immense,but shouldbe obtainedthrougha framework controlled by China. Internationalintegration was indeed the trend of the age without which there was "no way ahead" [for China]. Nonetheless,Deng also describedthe world market as the " ...the tool by which capitalist countries consolidatetheir monopoly positions". He therefore emphasisedthat "our country'ssovereigntyand national securitymust, from first to last, take first place". All this suggeststhat China'sapproachto the world economywill remain very cautious,will not embracemuch further capital liberalisation,and that any commitmentswill be hedgedabout with administrativepracticesand otherdevicesthat ensurethat Chinacanmaintaincontrol over key sectors?4 This caution in the internationalsphererelatesto the problemsat home. As argued earlier, the theory of reform supported institutional change subject to the three guarantees.But these are now looking problematic. Political behaviour in the 1990s confirms that the Party is facing unprecedentedchallengesas the social and economicstructureexpandsand diversifies. In the old system, occupationalcharacteristicsand the political histories of individuals made clear a person's status. But rising 22 Du Fangli, "The East Asian Financial Crisis and The East Asian Model of Development," Shijiejingji, No.2 (1999). 23 "Researchinto the South East Asian Financial Crisis," Jingji kexue, No.2. (1998); "Ten revelationsfor China from the South EastAsian Financial Typhoon,"Jishujingji yu guanli yanjiu, No.3 (1998). 24 The battlesamongofficials over WTO werereportedin the Hong Kong press,"Zlm battlesto convert WTO Sceptics,"South China Moming Post, April 23n1 1999. A careful, cautious analysisof the problem is, Guan Ganget aI., "An Analysis of China'sEntry Into the WTO Looking at the IssueofWbat is China'sLong Term Interest,"Gaigeneican,No.9 (1999).

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unemployment, new powers for enterprises managers, constitutional provision for the private sector,the arrival of foreign owned capital and the decline of the Party sponsoredTrade Union systemhave all complicatedthe old systembeyondintelligibility. As a recentPeoplesDaily article put it: In developing the Socialist Market Economy, the work of moral education facesmany new problems,,?5Hencedefensiveness as much as the promised strengtheningof the Party-led Statehas beenthe prominentpolitical feature of the 1990s. Evidence of the "common prosperity" is also at best patchy and as at presentoperatingthe reform mechanismis visibly underminingthe public sector, the supposedbedrock to prevent the onslaughtof capitalism. The leadershipis struggling with these issues,especially the last one. But the intractability of the problem is underlined by evidence of demoralisation among cadreswho have lost faith in the future of the public sector and of similar difficulties inside public sector enterpriseswhere managers are poorly paid and the most dissatisfiedof all the eight categoriesof manager analysedin a recentsurveyundertakenon behalfof the StateCouncil.26 ASIA AS A RESOURCE AND PRESSURE FOR SYSTEMIC IMPROVEMENT

In conclusionI should like to commentfurther on the regionaldimensionin the sense of asking what role Hong Kong and China's key economic neighboursmight play in ensuring China's passagethrough these current dilemmas.We are especiallyinterestedin the capacitiesof theseeconomies not simply to extendbut to deepeneconomiclinkages,but to do so in ways that improve Chinese capabilities and institutional quality. In looking at current developmentsof former Bloc economiesin EasternEurope one is struckby the importanceto their reforms of the physicaljuxtapositionof EU countries.Theseneighboursare important sourcesof investmentand major marketsfor the successfulreformers.Further,their vibrant - althoughvaried - forms of marketorganisationexert direct pressurefor institutional change. Successful institutional configurations have a contagious power and reformersalso have the carrotof possibleentry into the EU with all the gains entailed thereby. Such entry, however, is conditional on a wide range of institutional, political and human rights preconditions. Can China's 25 "Moral EducationWork Must not Slackenin Any Respect,"Renminribao, May 12th2000. 26 Zhang Yunting, "Why we must continue down the socialist road," Renmin ribao neibu canyue,No.6 (1999). The survey of managerperceptionsandmoralewas reportedin, "The Situation and Problemsof Managersin ChineseEnterprises,"Ni-Chu keikyojournal, No. 72 (December1999).

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neighboursplayaremotelysimilar role? The key economiesto China are the reintegratedHong Kong, together with Taiwan and Japan.It is of courseno accidentthat thesehave all been pivotal in the internationalisationof China during the past two decades. Hong Kong and Taiwan are partnerschosenby China for political reasons, but are also economieswith clear competitiveadvantagesin China business of all kinds based on cultura~ linguistic and particularistic ties. SinoJapaneserelations have been more paradoxical and difficult, but the two economieshavebecomeinvolved in a denseweb of mutualrelationships. In the longer run, the underlying forces of regional integration will work through in various forms, but in the immediate future there are several questionmarksover the role of theseneighbours. Let us take Japanfirst. Japan'srush to Asia and China in particular since 1986 is well documented.This has had profound importance for China already, notably in textiles as discussedearlier. Future gains to China from but are now somewhatin question, the relationshipcould also be substantia~ partly becauseof Japan'sproblems,and partly becauseof changingattitudes to China. Japan'soverall FDI in Asia peakedin 1997, then droppedby more than half in 1998. However, the flow to China actually peakedin 1995 and China's shareof Asian FDI from Japanin 1998 was considerablyless than half its share in 1995. Recenttrends and surveys of investmentintentions still show China as strong, but as weakeningcomparedto other destinations. The reasonsgiven by Japanesebusinessmenfor this cooling are largely systemic i.e., lack of an acceptable legal system, inequitable taxation arrangementsand a general absenceof transparencyand predictability in everythingaffecting their operationsin China. India, in contrast,is a strongly rising partnerfor Japan.27 What about Taiwan and Hong Kong? In Taiwan's case,commitmentto the mainland will undoubtedlyremain substantial.However, two points are worth remembering. First, Taiwanese businessmencannot afford to be uncompetitive in their FDI and other overseasrelationships,hence China will find that non-Chinese destinations will remain as serious rivals. especially at the current exchangerates. Even more important is the point that conditions of political hostility are highly detrimentalto the up-grading of Sino-Taiwaneseindustrial linkages. The kinds of businessarrangements neededfor simple Original EquipmentManufacturing(OEM) operationsare well known, routinised,and not too vulnerableto political shocks.However, 27 Shujiro Urata, 'The EastAsian EconomicCrisis and JapaneseForeign Direct Investmentin Asia" (mimeo), September1999. Full accountsof Japaneseattitudes to Asian FDI appear annuallyin, The EXIM Bank ofJapan,EXIMReview.

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large scale and more complex inter-company arrangementsinvolving transfersof technology and intangiblesare entirely anothermatter. Neither the private sectornor the Taiwan governmentwill be able to engageeasily in this kind of operationwhile missile threatsand other problemscloud the political relationship. Hong Kong's future role is not easyto predict. Hong Kong will clearly continue to be a major source of investment, export related services, information and possibly technology resources- although there is already active competition to Hong Kong from Singaporeand in the longer run, competitionmay also come from Shanghai,favoured as it is by the Beijing administration. Hong Kong's traditional strengths will not of course disappear, but the Special Administration Region (SAR) does have difficulties. First, it inherited a jumble of administrative and political arrangementsas a result of British rule and the strangesequenceof handover agreements.These remain in need of considerable rationalisation and improvement.Second,while much of Hong Kong's competitive advantage reflects underlying realities of geographical position, harbour quality, cultural overlap with South China etc., anotherelementof its strengthis the ability to work the imperfect and easily corruptible mainland systemto its advantage.Improvementof the mainlandbusinessenvironmentin the forms of greatertransparencyand improved legal and bureaucraticinstitutions is not thereforein the shortrun interestsof all Hong Kong businessmen.In the long run it would be, since Hong Kong's very closenessto China with its attendantsusceptibilitiesto mainlandpressuresmay eventuallyduplicatefor Hong King exactly the negativeconnotationsthat now limits the interestof many international investors in China generally and have, on some estimates,turnedthe economyinto a net capitalexporter.28 One other problem is that Hong Kong's domesticeconomy is arguably less of a model than it was at one time. The reasonfor this is that from the 1950s to the 1980s Hong Kong's growth was based on manufacturing. During theseyears,the very smallnessof the domesticmarketmadesuccess in highly competitive western retail markets an inescapablecondition for growth and corporatesuccess.However, since the economyhas evolved in the direction of being more servicebased,somekey domesticmarketssuch 28 According to the Global Competitiveness rankings,in 1997 on a scaleofl-IO, Hong Kong's corruption rating was a favourable 2.17 - worse than Singapore,but a lot better than the Philippines(7.94) or China, (5.86). The evidenceshowsthat FDI behaviourcorrelatesquite closely with theserankings and the concernwill be that Hong Kong convergeson China rather than the other way around. See discussionin, Jun Fu, Institutions and Investments; Foreign Direct Investmentin China During an Era ofReforms(Ann Arbor: The University of Michigan Press,2000),p. 236.

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as thosefor banking,property, constructionand retailing (all of which enjoy an elementof "protection" by virtue of their specialisedlocal advantages) have becomeless competitive.Without strongregulationand a much clearer separationof businessand governmentspheres,this is almost bound to be the casein sucha small economy.Thus while Hong Kong may well havean important role to play in the longer run, it is not equippedto play a major role as an institutional model and sourceof pressurefor systemicchangein Chinain the immediatefuture. This argumentleads therefore to the view that while Hong Kong and China's close Asian neighboursremain deeply committed to its economic stability and development,they have only limited capabilitiesto provide a robustenvironmentfor its institutionalimprovementin the shortterm. CONCLUSIONS

China's progress towards institutional development and substantial economicand technologicalprogresshas, during the pastcenturyand a half, beenarduousand fitful. A major obstacleto progresshas beenthe difficulty of securingbeneficialrelationshipswith the world economy.This is scarcely surprisingsinceChina'sphysicalconfigurationsand the richnessand variety of its resourcesin the pre-industrial age were not conducive to being a "natural" trading nation. Indeed,it is only since the 1920sthat China could be regardedas a ''national''economicunit at all. Traditional (i.e. pre Opium War) China was basically a decentralisedsocial and economic system, unified by culture and by a loose allegianceto distant, paramountimperial authority. This authority did not itself recognisethe legitimate independence of foreign political entities and had only limited knowledge of the world beyondChina'svastdomains. China's responseto the challengeof national economicdevelopmentin the last half century has been a resort to extreme solutions. First, was a packagethat included the adaptationof Soviet type institutions and almost total dependenceon one source of trade and foreign technology transfer. When this proved unsustainable,the leadershipfell back on to a solution in which politics and anti-foreignismplayedpreponderantroles. The processof dislodgingfrom this trajectorybeganin the late 1970sand has moved forward, at times strongly, since then. The essenceof the new systemhas been an increasingemphasison decentralisationand incentives that have enabled producersto escapefrom mandatory planning and to respondmore flexibly to domesticand overseasdemand.This processhas been most successful inagricultureand in smaller scale enterprises.So far,

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however, the new system has shown only limited ability to nurture larger scale enterprisesin either "old" or ''new'' industries, or capabilities to innovateand diffuse new knowledge.The new systemhasalso, as discussed earlier, producedsharp inequalitiesand has failed to deliver public goodsor an adequatesafetynet for thosedisadvantaged by the reform process. Part of the problem in my view is an old one - namely the intrinsic difficulties of unifying the potentially huge domesticmarket, fragmentedas it is by China's size and lack of physical communicationsand by long traditions of cultural and political localism. This localism has of coursebeen engenderedprecisely by these physical circumstances,but is has been further enhancedby economicand especiallyfiscal reforms since 1978. It is now a major impediment to the achievementof economiesof scale and competitivenessin the domestic economy. Of particular concern is the growth in the number of local officials who draw incomes, profits and corruption benefits from the newly decentralisedarrangements.It might be imagined that the decline of planning had resultedin a decline in officials. The reversehas been the case.Between40 and 50 million employeesare estimatedto be currently on payrolls funded by taxes and miscellaneous impositionsandthis numberhasmore than doubledsince 1978.29 Data on transport, growth and income throw light on these issues.For example,if we revert to the three broadly defmedregions: east,central and western China whose income difference were shown in Table 1, we can comparetheseeconomiesin terms of the densitiesof their communications networks.This is donebelow (Table2). We seeherethat transportdensityin the richer Easternregion is five and a half time that in the poorest, western region and nearly three time the national average.The links betweenreform, growth and transportationare clearandentirely predictable. The other major issue remains political. Here, further reflection on the Sino-Soviet comparison is worthwhile. The Soviet system, for all its shortcomings,was remarkablystableand lastedfor more than seventyyears (1918-1990),when it collapsedin a heap.A major factor in its stability was the congruencebetweenthe centralisedsystemof economicadministration and the centralisedsystemof political control. From time to time, ''region'' orientedreforms were attempted,but they nevermadeseriousprogress.30 In China, physical conditions allied to backwardnessin many forms made an 29 In 1978 the Governmentinitiated ambitioustargetsto retire millions of theseemployeesi;rcia gang) but the resultsof this remainto be seen. 30 The author who best combines knowledge with wisdom in this field is Alexander Gerschenkron.See especially articles in his, Continuity in History and other Essays (CambridgeMass.:The BelknapPress,1968).

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Table 2: TransportRoute Densitiesby Region, 1998 (Kilometres of Routes

p er 100 SquareKilometresof Area)

West 0.25

Central 0.93

East 1.32

0.6

35.54

13.31

Water

6.97 0.23

15.32 1.29

4.47

1.15

Total

7.46

17.55

41.38

15.06

50

117

275

100

Rail Road

Regionaldensitiesaspercent of nationalaverage

National

Source: JE1RO,Institute ofDevelopmgEconomies,SummerSymposium,p.10

early departurefrom Soviet economic centralisationessential.From there on, the lack of congruencebetweeneconomicsand politics explainsthe lack of stability and the endlessexperimentation.From 1963 to the late 1970s (the SocialistEducationCampaignto the beginningsof reform), this conflict was broadly resolvedin favour of political and ideological dominance.The essenceof the break made by Deng, and supportedby the political and intellectualsstrengthsof Hu Yaobangand Zhao Ziyang, was to reversethis priority. The tension,however,remainsand underliesthe political dilemmas of the 1990sandthe debatesin the postZhaotransition. THE WAY AHEAD

This analysissuggeststhe following. First, a huge investmentprogrammein transport and infrastructure is called for if China's internal market is to perform the function that it might in facilitating reform and development. The government'scurrent plans for the Ten Great Projects in the western regions are clearly in the right direction.3! One might remember,in this context, that railroad developmentand the consequentialcapture of scale economieswas one of the keys to American productivity superiority in the late 19th century.32 However, in order for the potential of marketunification to be obtaineda 3! Four out of the ten are transport,projects.See"In the WesternPart Ten HugeProjectsWill be Started,"Renminribao, April 12 2000. 32 In 1890, cumulative investInent in railroads was larger than that in all non-agricultural industriescombined.Seedatain Alfred D. ChandlerJr., FrancoAmatori andTakashiHikino (eds.1 Big Businessand the Wealth of Nations (Cambridge:CambridgeUniversity Press, 1997) p. 38. For scale and the productivity gap, Moses Abramovi1z and Paul David, "ConvergenceandDeferredCatch-up:ProductivityLeadershipandthe Waning of American Exceptionalism" in Ralph Landau, Timothy Taylor and Gavin Wright, The Mosaic of EconomicGrowth (Stanford:StanfordUniversity Press,1996),pp.21-62.

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further major step forward in the reform needsto be made so that Chinese institutional structuresare capable of meeting the challengesposed. It is highly questionablewhether "evolutionary" pressureswill do the job. The problem is to identify what factors might shift the presentreform impasse, supportedas this is by conservativesin the political hierarchy, by a large number of local officials and by other the winners in the rent seekingand corruption competitions. Clearly, reform has already taken China well beyond the near catastrophiceconomicand technological"floors" touched in the 1970swhich, togetherwith a generationalchange,triggered the first round of reform. In this context, WTO entry might well have consequences, probably unintendedand unpredictable,that move the systemfirmly in the right direction. Nothing too miraculousshould, however,be expected.Even after more than a centuryof successfuldevelopment,the integrationof Japan into a world system dominatedby western societiesremains problematic, and the historical and political factors discussedin this essayare likely to makethe processof accommodatingChinain the world equallyprolonged.

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Chapter 7

China and Regional Co-operation

Michael Yahuda

INTRODUCTION It was only with the end of the Cold War that Asian-Pacific regional

organisationswere establishedby the resident states. Reflecting Asian realities and following the exampleof the Associationof South-EastAsian Nations (ASEAN), these have essentially operated on the basis of voluntarism and consensus,rather than the executive rule-basedand lawmaking bodies of Europeanbodies. Hence the depth of inter-governmental co-operationrequiredby the Asian-Pacificorganisationshas beenrelatively limited. Neverthelessthey have inductedthe People'sRepublic of China for the frrst time into patternsof diplomacythat requirecontinuousco-operation betweengovernmentson a multilateral basis. This essayseeksto evaluate the extentto which China has adaptedto this new diplomatic challengeand to assessthe extentto which Chinamay be said to have embracedthe norms of regionalco-operation. CHINA'S LIMITED EXPERIENCE WITH INTERNATIONAL COOPERATION It should be appreciatedthat it is only in modem times that China has cooperatedwith other stateson a formal basis.It is only some 150 yearssince

the West openedup China by force. Prior to that China was at the centreof its own universein which co-operationwith otherswas inconceivableexcept in a hierarchicalform. Since undergoingwhat is officially describedas a 'century of shame and humiliation', a re-invigorated China is still in the

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processof establishingits identity in the modemworld after severalattempts 1 Thus it has variously chosento be an that have been less than successful. ally of the Soviet Union and member of the socialist camp; a self-reliant revolutionary socialist country opposedto both the Soviet Union and the United States; a socialist country aligned to the US in opposition to the USSR; and an avowedly socialist state 'with Chinese characteristics'that pursuesmarketreforms at home and engageswith the internationalcapitalist economy abroad. Not surprisingly, such divergent identities have involved frequent changesof partnersand militated againstenduringpatternsof cooperation. Arguably these changesmasked certain important continuities, notably the searchfor a meansto attain the wealth and power that would enablethe country to resume what most Chinese regard as the country's rightful historical role at the apex of world power. Minimally that would require the attainment of equality with any other great power. However, such aspirationshave made co-operationdifficult not only with powersregarded as more advancedand more powerful than itself, but also with powers regardedas less advancedor weakerthan itself. Thus one of the reasonsfor the break-up of the Sino-Soviet alliance in the 1950s was the disparity betweenthe two and Mao's continual fear that China's interestswere being subordinatedto the Soviet 'elder brother'. Similarly one of the difficulties in consolidating Sino-American partnership stems from Chinese sensitivities about their country not being treated as an equal despite the disparities between them. China's other partnershipshave been with lesser powers 2 Since which have been treated with varying degreesof condescension. resumingthe China seatat the United Nations in 1971, China seemsto have treatedits position more as a matter of entitlementas befits a country of its size and statusthan as a platform for action. Despiteits long self-proclainled championshipof third world issues,China refrained from joining any third world grouping at the UN. Indeedone scholarfamously describedChina as a "Group of one".3 China's leadershave preferredto conducttheir serious foreign relationsin bilateral ratherthan multilateral frameworks.Thus it was only in 1996 (47 years after the establishmentof the PeoplesRepublic of China (PRe)) that China signed its first multilateral security agreement. For further discussion,see my, "Hong Kong: A New Beginning for China?" in Judith M. Brown and Rosemary Foot (eds.), Hong Kong's Transitions, 1842-1997 (Basingstoke: 2 Macmillan Press,1997),pp.192-2l0. Harry Harding, "China's Co-operativeBehaviour" in Thomas W. Robinson and David 3 Shambaugh(eds.),ChineseForeign Policy (Oxford: ClarendonPress,1994),pp. 375-400. Samuel S. Kim, China, the United Nations and World Order (princeton, NJ: Princeton University Press,1979),p. 258 -literally, "a 'group'of her own."

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Interestingly, even this arose out of what were previously bilateral agreementsabout the disputed border with the Soviet Union and the establishmentof confidence building measuresthat followed. Upon the dissolution of the Soviet Union these negotiationswere resumedwith the successorbordering states,namely, Russiaand the three new Central Asian states. Neverthelessit is not difficult to point to many examplesof Chinesecooperative behaviour, but at issue is the characteror quality of that cooperation.If it can be seento result from realist calculationsor simply from the emergenceof parallel interests in mutually beneficial outcomes at minimal cost, the resulting co-operation is unlikely to be robust and enduring. One explanation of what constitutes the more enduring kind claims that "co-operationoccurs when actors adjust their behaviourto the actual or anticipatedpreferencesof others, through a processof policy coordination.Policy co-ordinationin turn implies that the policies of eachstate have been adjustedto reducetheir negativeconsequences for other states.,,4 A similar point is made differently in the observation that "intergovernmentalco-operationtakes place when the policies actually followed by one governmentare regardedby its partnersas facilitating the realisation of their own objectives,as the result of a processof policy co-ordination."s It will be suggestedhere that China's co-operativebehaviouris not of this characteras there are few signs of a willingness by Beijing to co-ordinate policieswith others. In this regard it should be recognisedthat it is not only the weight of history that must be taken into account,but due considerationmust also be given to the significanceof the communistcharacterof the Chinesepolitical system. Domestically, the system still entails the secrecy and regulatory habits of communistparty rule. Moreoverit is a systemthat is threatenedby the consequences of the economicreforms and opennessthat it by now has no alternative but to continue. Communist ideology has eroded and continuedengagementwith the outsideworld underminesit still further. Yet communistparty leaderscannotjettison the ideology without sacrificing the basis for their legitimacy. That LeninistlMaoist ideology also determines habits and forms of organisation that allow no participation by others. Consequentlythere are huge obstacles that militate against policy coordination with others,which is regardedelsewhereas the key to successful 4 Helen Milner, "International Theories of Cooperation among Nations: Strengths and Weaknesses,"WorldPolitics, Vol. 44, No. 3 (ApriI1992),p.467. 5 Robert O. Keohane,After Hegemony: Cooperation and Discord in the World Economy (PrincetonNJ.: PrincetonUniversity Press,1984),pp. 51-52.

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co-operation. However, since embarking on the road of reform and opennesssome twenty years ago China has becomea significant, if uncertainparticipant,in the patterns of co-operation that have emerged within the Asia-Pacific region. Indeedit can be arguedthat it is only sincebeginningthe processof reform that China has evolved what might be regarded as distinctive regionalpolicies as opposedto treating the region only within the contextof 6 Even so it is important to China's relations with the two superpowers. recogniseat the outset that China's rulers do not think of their country in merely regional terms and there remains a tension between China's significance as a regional power and its global ambitions. In support of China'sglobal orientationit can be arguedthat in economicterms the most important markets for China's exports are those of the advancedindustrial countries such as the US, the EU and Japan (albeit the latter may be describedas within China's region). It can also be argued that it is the economic relationship with these countries that is most significant for the modernisationof China as they are the source of advancedtechnologies. More generally such internationaleconomicnorms and practicesthat have been adopted by the Chinese have been mediated primarily through international organisationssuch as the World Bank, the IMF and more recentlythe WTO, ratherthanthroughregionalassociations. NeverthelessChina's economyhas becomedeeply enmeshedwithin the Asian region. According to IMF statisticsfor 1997, Asia (excluding Japan) accountedfor nearly 40 percentof the value of China'sexportsand provided over 36 percent of its imports. Japan accountedfor 17 and 20 percent respectively. Moreover some 70-80 percent of foreign direct investment (FDI) into China came from Asia and in particular the Chinesebusiness communitiesin the region. It is a measureof China's growing economic interdependence with its neighboursthat its economyfell into the doldrums as a result of the collapse of the Asian markets that followed the Asian fmancia1crisis that beganin July 1997; and that it only beganto recoverits economic momentum in 2000 after the economic recovery of those neighboursandthe consequentdemandfor Chineseexports. As China has becomemore deeply engagedin the economicrelationsof the Asian region it has also begun to develop more co-operativesecurity relations within the region. However the depth and characterof China's participation in regional political and security patterns of co-operation 6 Seethe argumentby StephenI. Levine, "China in Asia: the PRC as a RegionalPower" in Harry Harding(ed.), China's Foreign Relationsin the 1980s(New Haven: Yale University Press,1984).

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

remain uncertain.China is one of the region's great powers with a regime that in the reform period has deliberatelyeschewedentanglingalliancesand that has also attempted to limit external influences that threaten the establishment of a system it describes as "socialism with Chinese characteristics."Both China's size and its commitmentto maintain a high degreeof autonomyfor its domesticpolitical systemnecessarilylimits the nature of the co-operationit is preparedto undertakeeven within its own region. For the purposesof this essayI shall consider China's experienceof regional co-operation primarily within the context of two regional organisations,Asia Pacific Economic Cooperation(APEC) and the ASEAN RegionalForum (ARF). The first is an avowedly economicin focus and the latter seeksto addresssecurity issues.However it is importantto recognise that these two bodies only encompassa limited dimension of China's regionalco-operativebehaviour. CHINA'S DIVERSE INTERNATIONAL REGIONS

As a vast continentalcountry with an extensivecoastlineChina has many neighboursthat span what are usually regardedas different regions and China has different patternsof co-operationwith each of them. The pattern is further complicatedby the mixture of conflict and co-operationattendant upon relationswith the other greatregionalpowersJapan,Russiaand India. Moreover given the global characterof American power and influence China's complex relations with the United States and the latter's impact upon China'sneighboursgreatly complicatesmatters.China'sregionalismis also affectedby the domesticimperativeof generatingeconomicgrowth and developmentnot only for the economyas a whole but also for the provinces and particularsectionsof them that borderneighbouringcountries.Thus the differential level and pace of developmentof China's regions have been affected by the characterof the adjoining neighbours.The coastalbelt has benefiteddisproportionatelycomparedto other regionsnot only becauseof easier accessto international trade and development,but also becauseof sub-regionalties of a more informal kind. The coastal part of Liaoning Province in the Northeasthas particular links with South Korea and Japan. Shanghaiandthe southerlyprovincesof GuangdongandFujian are linked to Taiwan, Hong Kong and other ethnic Chinese communities in Southeast Asia in social and other ways that have provided a basis for building economicties. Theseinformal networksof co-operationhave beencrucial to the development of the Chinese economy whereas more formal

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ClllNAAND REGIONAL CO-OPERATION

governmentalattempts to foster regional economic developmentthrough intergovernmentalactivities have so far proved less successful.The UNDP led schemeto develop a new economic zone centred on the Turnen River involving six neighbouringcountries has little to show for years of effort. Similarly the idea of a governmentsponsoreddevelopmentof the region of the Mekong river involving five adjacent states has similarly generated much paper, but little real activity. Undaunted,the Chinesegovemmentis also infusedwith the idea of building a "land bridge" to Europethroughrail links from Xinjiang via centralAsia. Similarly despitethe avowedintentions of both sides, Sino-Russiantrade seems mired in the range of about $5 billion a year without any chanceof reachingthe $20 billion figure by the year2000 as pledgedby their two presidentsfive yearsearlier. In economics it seemsthat the market and the informal processesyield more substantive resultsthan governmentled forms of co-operation. Political and strategic relationshipscan only be handled at the level of governments.Here the situation may be said to be reversedwith regard to the maritime and continental geographicdivisions of China. Beijing is far more satisfiedwith the nature of the co-operativerelations it has developed with its continentalas opposedto its maritime neighbours.The improvement of relationswith Moscow that beganin the 1980shasdevelopedapacein the 1990s. The long disputed border has been virtually settled, military deploymentson both sides of the border have been substantially scaled down and various confidencebuilding measureshavebeeninitiated. In 1996 China's leaderswere delightedto sign their first multilateral security-related treaty with Russia and the three neighbouringCentral Asian Republics. It confirmed the normalisation of relations and enshrined a continued commitmentto go in for confidencebuilding measures.The characterof the agreementwas transformed,however,as the Sino-Russianrelationshipwas described as a strategic partnership. Although both share concerns over American 'hegemony' there was no question of adopting a common approach.In fact in many respectstheir interests do not converge?The unstated dimension of the agreementwas that China acknowledged a Russian interest in Central Asia and that Russia in turn recognisedthe Chineseinterestin the stability of the region. China'sleadersmeanwhilehad impressedupon their Central Asian neighboursa sharedinterestin limiting the activities of Muslim fighters. Meanwhile immediately after the collapse of the Soviet Union in 1991, China's leaderswent out of their way to confirm the independenceof the 7 Jennifer Anderson, The Limits of Sino-RussianPartnership (Adelphi Papers No. 315, InternationalInstitutefor StrategicStudies,1997).

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

Mongolian Republic, even though the country had lost its only protector againstChineselong standingclaims that its secessionupon the fall of the Qing (Manchu) Dynasty 80 years earlier was illegitimate. Interestingly, Chinese textbooks on "patriotism" continued to repeat China's historical claims to Mongolia in ways to suggestthat Mongolia's independencewas illegitimate. Thus despitethe formal policies of the Chinesegovernmentand its concertedattemptsto co-operatein economicand social exchanges,deep suspicionsremain on the Mongolian side. Neverthelessfrom the perspective of the Chinesegovernmentrelations have been stabilised and once again Chinahasbehavedwith magnanimitytowardsa smallerneighbour. The attempt to stabilise its land borders was also evident in Chinese approachesto India and Pakistan. Although China continued secretly to supply Pakistanwith the meansto develop nuclearweapons,it also sought to amelioraterelationswith India. Beijing took a more neutralposition over Kashmir and simultaneouslysought to reduce tensionsover the disputed Sino-Indian border through the pursuit of confidencebuilding measures. Despite some initial difficulties in the wake of the Indian nuclear test, the trend towards a more balanced relationship was soon restored, so that Pakistan did not find support from Beijing in the course of the Kargil incursion into Indian held Kashmir. Pakistan thus found that notwithstandingits claims to being the closestand most enduring ally of Beijing, there was little sign of policy co-ordinationas Beijing re-adjusted its policies towardsIndia. Judgedas a whole, China's co-operativepolicies towards its continental neighboursshowed considerableflexibility on mattersof sovereigntyand security. If there were disappointmentit stemmedfrom the relatively slow developmentof economicrelations even though for all sidesthesewere the least economically developed territories and in which the necessary infrastructurewas the least advanced.In the maritime regions by contrast, economicrelations developedrapidly and becamethe motor force driving the growth of the Chinese economy. But on matters of security and sovereigntythe Chineseproved to be far less flexible. This may well be because,as seen by China's communist rulers, relations with maritime partnershave a dual characterin that they not only hold out the promiseof contributing to the modernisationof China as a prosperousand strong country, but they also constitutea threatto the survival of communistparty rule and an obstacleto the country'srise to the greatnessto which its people aspire.That is particularly true of the relationshipwith the United Statesand even Japan.That may explain why China's leadershave found it far more difficult to display the kind of flexibility in their claims to Taiwan that they

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CHINA AND REGIONAL CO-OPERATION

have shown with regardto Mongolia. However rather than survey China's relations with each of its maritime neighbours I shall focus on China's performancein regional multilateral institutions. The two that involve the formal representativesof governmentswere not formed until the end of the Cold War and one of the important objectives of their formation was to encourageChinesemembership.

CHINA AND APEC Chinajoined the Asia-PacificEconomicCooperationforum (APEC) in 1991 two yearsafter it was first formed. APEC'smembership(and hencethe view of the region that it expresses)is extensive as it includes not only the countriesof Pacific Asia, but also thoseof North America and even someof the Latin American countriesalong the Pacific Rim. Depth may have been sacrificedfor width, but that would not havebeenseenas a disadvantageby the PRC. Interestingly,the PRC joined alongsideHong Kong and Taiwan. By joining a purely consultativebody that operatesby consensuswhose principal aim is to promote trade and investmentin the region China had little to lose and much to gain. APEC lacks a significant secretariatand much of its key work is performed through various technical workshops devotedto improving humanresources,etc. Perhapsthe most notable event associatedwith APEC is the annual meeting that takes place in a different country eachyear wherethe host governmenttakesresponsibilityfor setting the agendaand organising the meeting. The relatively easy simultaneous accessionof Taiwan can be explained by China's concern to return to international respectability after the Tiananmen massacre and by the argumentthat as this was a meeting about economicsits membershipwas not limited to sovereignstates.In many respectsit can be seenas having built upon the unofficial Pacific Economic Co-operationCouncil in which businesspeople,academicsand officials in their personalcapacitiesoperated as teams from the different economiesor custom territories of the region. However, some APEC membersand the Americans in particular saw the organisation as the potential embodiment of a kind of rule-making community. That troubled most of the Asian countries, but particularly China. The Chinesegovernmentdid not want its independencechallenged by some kind of supranationalbody, especiallynot one in which the United Statesand its allies might exercisea dominant voice. But above all it was concernedabout the implications this might have for the statusof Taiwan. When PresidentClinton inauguratedan informal summit meeting of APEC membersat the meeting in Seattlein 1993, China insistedthat the Taiwan

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

representativeshould be an economicsofficial rather than the head of the government. A similar demand was made regarding Hong Kong when GovernorChris Pattenled it. Interestingly,oncethe territory had returnedto Chinese sovereignty the Chinese side had no objections to its Chief Executiveattendanceat summitmeetings. After the APEC meeting at Bogor in Indonesiain 1994 agreedto set a deadline for the elimination of tariff barriers for the year 2010 for the developedeconomiesand 2020 for the developingeconomies,the question arose as to how binding was the declaration on member countries. China took the lead in insisting that this shouldbe done on a voluntary basis as far as the less developed countries were concerned. The Chinese side was relieved when the Japanesegovernmenttook the lead in quietly but fIrmly bring to an end the attempt to transform APEC along the community lines initiated by PresidentClinton in Seattle two years earlier. Clearly China's rulers preferred consultativearrangementsand the consensualapproachto decision-making.That ensuredthat China could obtain such benefIts that membershipof APEC offered without incurring any obligations that might have limited the country's room for independentmanoeuvre.The ASEAN countries too were suspicious of attempts by the developed countries to imposetheir free tradeagendaupon them. As it happens,China'srulers and Jiang Zemin in particular has benefIted from the opportunitiesprovided by the annualsummitsto meetother leaders and especiallyBill Clinton at times when Sino-Americanrelations were in difficulty. Membershipof APEC has also helpedChina'sleadersto promote their country's image as a responsiblememberof the region. But since the costs of participation and co-operationhave been minimal, membershipof APEC cannotbe taken as a signifIcant exampleof a pattern of regional cooperation.

CHINA AND THE ASEAN REGIONAL FORUM (ARF) The ARF is a forum for multilateral security dialogue designedto address the uncertainties of the post Cold War period and in particular it was conceivedwith the purposeof drawing in China. It was formed in 1973 at the initiative of the ASEAN countries and it is basedto a large extent on their pattern of co-operative security which is consultative, consensus oriented and basedon non-interference.The ASEAN modus operandi has been widely described as "conflict avoidance" rather than "conflict resolution". In some respectsthe ARF has a membershipof even wider geographicalreach than APEC as it includes India as well as PacifIc Asia,

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CHINA AND REGIONAL CO-OPERATION

North and South America. One of the distinctive characteristicsof the ARF is that the smaller ASEAN countriesostensiblytake the lead in managing the forum and co-chair its various meetings.It is an arrangementthat has suited the great powers such as China, the United States and Japan who would havegravemisgivingsaboutallowing eachothera managerialrole. Although the Chinesemay be said to have beenactive participantsin the proceedingsof ARF, it would not be unfair to describetheir contribution so far as having the effect of limiting the forum's capacityto addressactively the key security issues in the East Asian region. At the ARF's second working sessionin 1995 the Chinesewere instrumentalin weakeningthe proposed evolution of the body towards the assumptionof a problemsolving role. A ''route-map'' was suggestedby which the forum would proceedby stagesfrom confidence-buildingto preventive diplomacy and ultimately to conflict resolution. But at Chinese insistencethe latter was replacedby the "elaborationof approachesto conflict". Since 1997 despite agreementthat the ARF should addressaspectsof preventivediplomacythat overlap confidence-building,''the outcome has been a cosmetic exercise without substantiveprogress along the institutional route-map" that was formally agreedin 1975. Moreover such confidence-buildingmeasuresthat have been agreedand implementedhave been of a "limited kind, such as meetings of heads of colleges of defence studies and a seminar on the production of defence-policydocuments.Such measuresare not without merit, but they addressthe generalclimate of regional relations,rather than any specificproblems.',s The Chinesegovernmenthas not sought to addressany of the regional conflicts to which it is party within the framework of the ARF. Since Taiwan is regardedofficially as an internal Chineseaffair, not only is the issuenot a subjectfor discussion,but the Chinesegovernmentwill not even entertainthe idea of separateTaiwanesemembershipof the ARF. Taiwanese are allowed to participate in the second track Council for Security Cooperationin the Asia-Pacific (CSCAP) but only as individual experts.In so far as the Chinesegovernmentdoesraise security issuesaffecting Taiwan it does so bilaterally, principally with the United Statesand sometimeswith others, but defmitely not within the ARF. Although the ARF has issued statementson Korea and indeedNorth Korea hasevenjoined the Forum,the significant Korean issues are addressedbilaterally (since June 1990) or betweenWashingtonand Pyongyangand in the four party talks including 8 The quotations are from Michael Leifer, "Regional Solutions to Regional Problems?"in Gerald Segaland David S.G. Goodman(eds.), TowardsRecoveryin Pacific Asia (London: Routledge,2000),p. 113.

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

Beijing and Seoul as well. The territorial disputesin the South China Sea havebeenof concernwithin the ARF, but it hasnot beenable to addressthe core problem of contestedsovereignjurisdiction. It has insteadsought like ASEAN to promote a code of conduct by which contestingstateswould abjure the use of force and the unilateralbuilding of structureson islandsin prosecuting their respective claims. But China has been instrumental in putting-off endorsementof the code and it has arguedstrongly that matters of contestedsovereigntycanonly be settledbilaterally. If the United States and others see the ARF as encouragingChina to accept the co-operative embrace of multilateralism and to deepen its integration into what they conceiveof as internationalsociety, the Chinese governmentappearsto see the ARF as yet anotherforum within which to promote the idea of multipolarity as a meansto constrain what is seenas American hegemonicpower.9 India and Russia as fellow membersof the ARF share the Chinese view, but do not appear to promote it as energetically.The Chinesegovernmenthas also promoted the idea of cooperativesecurity as a substitutefor the American military alliances.Even though,as we haveseen,the Chinesehavetendedto emasculateor dilute the more substantiveaspectsof the concept,the ChineseForeign Ministry put it forward to an inter-sessionalmeeting in Beijing in March 1997 adding, for good measure,that the American allianceswere an outmodedrelic from the Cold War. In a visit to Singaporein November1998 the ChineseDefence Minister Chi Haotian repeatedthe samemessage,adding that the American alliancesystemwas aimedat containingandweakeningChina. Not surprisingly, the majority of the ASEAN countries seek both to engageChina and at the sametime to balanceAmericanpower againsther. As a result while the governmentsof Thailand, Malaysia and Singaporefor example, formally emphasisetheir good neighbourly relations with China and speakabout economicinterdependence and partnership,they have also quietly madearrangementsfor the Americannavy to have various kinds of accessto facilities in and aroundkey ports. CONCLUSION

I have arguedthat China falls short from what might be regardedas good models of co-operativebehaviour.Yet China's leadersrecognisethat they needto pursueboth stability and economicgrowth at home and that thesein 9 For an argumentand supportingevidenceto this effect see,Michael Yahuda,"China'sForeign Relations:The Long March, Future Uncertain," The China Quarterly, No. 159 (September 1999),pp. 650-659.

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ClllNAAND REGIONAL CO-OPERATION

turn require the continuedpromotion of a peacefulenvironmentwithin its region. Although China's leaders are also subject to the forces of nationalism that in part they also promote, they have not allowed these forces to obstructthe country'sengagementwith the region. Thus Chinahas no alternative,but to co-operatewithin its own region, but it is an activity that does not come easily or naturally to China's communist leaders. Arguably it is easierfor China'sleadersto developeconomicpatternsof cooperationwith the countriesof the EU as theseare neither as intrusive and less problematicfrom the security point of view than those with countries nearerto home.

113

Chapter 8

Popular Sovereignty in Taiwan and Cross-Strait Relations

Fram;oise Mengin

This chapterintendsto stressthe impactand implications of democratisation in Taiwan on cross-straitrelations. The Chineseauthoritieshave striven in their proposalsto clearly separatedomestic issuesand internationalissues. While allowing Taiwan to maintain its own political system, they are adamantat not letting Taiwan become a sovereign political entity on the internationalarena. However, is such a dichotomy possible?The complex relationship betweendomesticpolitical changein Taiwan and the issue of sovereigntysuggeststhat there is no clear-cut answer. No democratisation process could have been initiated without a redefmition of the country's claim to sovereignty, even if it is just symbolic. Notwithstanding open standsin favour of independence,or evenvarious manoeuvresto delay any type of reunification, implementingdemocracyin Taiwan cannotbut lead to a redefinition of Taipei's foreign policy and the re-charteringof its relations with the Mainland. Besides,the fact that a democraticregime is accountable to the electoratecannotbut bring new constraintsto the governmentas far as cross-straitrelationsare concerned. The March 2000 presidentialelection was a turning point in Taiwan's political history as the Guomindang(Kuomintang)that was in power at the central level for more than fifty yearswas peacefullyreplacedby a party that had been legalised only thirteen years before - the Minjindang (hereafter DPP). As far as cross-straitrelations are concerned,this transition of power takes on an additional significance. One cannot but put forward the hypothesisthat the first handoverof power had beendelayedbecauseof the People'sRepublic of China's(hereafterPRe) irredentistpolicy and military 114

POPULAR SOVEREIGNTY IN TAIWAN AND CROSS-S1RAITRELATIONS

threat. In particular, Beijing's 1995-1996military manoeuvresboostedthe statusquo line put forward by Lee Teng-hui (Li Denghui) who got almost 54 percentof the votes at the March 1996 Presidentialelection. Admittedly, Beijing's military threatwas aimedat checkingthe DPP'sadvance;however, it must be pointed out that Chen Shui-bian's election should not be interpretedas a vote in favour of independence.Quite the contrary, Chen's victory was aboveall the result of domesticpolitical developments.What is significant though is that, for the frrst time, Taiwan voters refused to considerBeijing's military threatas an impedimentfor changeat the central (zhongyang) level. Chen Shui-bian's election cannot but lead the PRC authoritiesto adjust their Taiwan policy. Indeed, prior to the election, the PRC Ambassadorto the United States,Li Zhaoxing, had statedthat all the candidateswere acceptableto Beijing "exceptthe one who supportsTaiwan independence. ,,1 Certainly, more than ever, one could raise the "democracycard" in the Taipei-Beijing dispute. Notwithstanding the fact that the criteria of effectivenessis fulfilled in the case of Taiwan, to what extent can the democratisationprocessin Taiwan enhanceits leverageon the international arena,and thus indirectly affect cross-straitrelations?More specifically, can the principle of self-determinationapply to Taiwan?The "democracycard", that is, seeking international support by highlighting Taiwan's record on human rights, should then be Taipei's main tool to gain an international status.As de Lisle points out, "an entity's claim to statehoodor relatively high nonstate status is enhancedif its internal order is democratic and protects human rights, while establishedstates that fare poorly on these indices canlose benefitsand privileges ordinarily accordedto states.,,2Since the constitutionalreforms were passed,the Republic of China's (hereafter ROC) currentjurisdiction is limited to the territory controlled by the Taipei government,and the central institutions are freely elected by the Taiwan electorate.The DPP has implicitly referredto this principle when, in 1991, it stated in its charter that the future of Taiwan should be decided by the peopleon Taiwanthrougha plebiscite. But becauseof the PRC'sadamantstanceand the fact that Taiwan enjoys de facto independence,asking whether a right to self-determinationshould be recognisedto Taiwan partakes either to a law debate,3 either to an ideological debate. Moreover, when relations betweenTaipei and Beijing ShelleyRigger, "Taiwan Ridesthe DemocraticDragon," The WashingtonQuarterly, Vol. 23, 2 No.2 (Spring2000),p. 116. JacquesdeLisle, "The ChinesePuzzle of Taiwan's Status," Orbis Vol. 44, No.1 (Winter 2000),p. 58. For a recentaccounton this issue,seeibid., pp. 55-57.

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are seen from the perspectiveof a zero-sum game, democratisationon Taiwan is unlikely to enhanceTaipei's leveragein internationalrelations as much as the Mainland's potential power of destabilisation enhances Beijing's leverage. For the time being, the influence of Taiwan's democratisationon the country's internationalleveragecannot but be very low. Certainly the political reform in the 1990splayed a role similar to that of economicreforms in the 1950s- in particular the land reform - that is, to securethe existing commitmentof foreign countriesto the Taipei regime, though this commitment has dropped from official to non-official recognition.In other words, were the ROC regime still an authoritarianone, the commitmentof the United Statesto ensurethat Taiwan is not reunified to the Mainland China on the PRC's terms would be lower. As a fullyfledged democracy, Taiwan can also claim to be a 'model' for other countries.Indeed,the ROC authoritieshave often emphasisedthat Taiwan is the first Chinese democracy.4The Taipei governmentcould also actively take part in democratisationaround the world. In fact, up to now, there is little evidenceto suggestthat Taipei has contributedto democratisationand human rights protection in other countries, even among those of its diplomatic partnerswho have witnesseddramatic democratisationover the sameperiod.5 In fact, as long as Taipei is seekingfor diplomatic recognition, it cannot but conform to the principle of non-interferencein the domestic affairs of otherstates.6 Therefore, the "democratic card" per se is of little help to increase Taiwan's leveragevis-a-vis the PRC. Likewise, Taiwan's lack of statehood 7 distorts any questioningabout the need for confidence-buildingmeasures. The Sino-Taiwanesedispute is certainly unique among major conflicting parties around the world as no form of preventive diplomacy has been 4 Among many examples,one can quote Lee Teng-hui: "The situation in the mainlandnow leadsme to believethat Taiwan is the oneto provide a model for all China in the future. [ ...J the bestmodel for the social, economic,andpolitical reformsin Chinesesocietycanbe found in none other than Taiwan [ ...J". See his, The Road to Democracy, Taiwan's Pursuit of Identity (Tokyo: PHP Institute, 1999),p. 53. Likewise, in his nationalday speech,ChenShuibian said that Taiwan's democracywas a "new paradigm of democracyfor all Chinese societies" . See Chen Jie, "The Influences of Democracy on Taiwan's Foreign Policy," Issues and 6 Studies,Vol. 36 No.4 (July/August2000),pp. 4-10. See FranyoiseMengin, "Freezing or Stalling the Status Quo in the Taiwan Strait?" China Information, Vol. XIV, No 1 (2000), p. 88; and FrancoiseMengin, Trajectoires chinoises, 7 Taiwan, Hong Kong et Pekin(Paris:Karthala,1998),pp. 115-118. The needfor the institution of confidence-buildingmeasuresin the Sino-Taiwanesedisputeis increasinglybeing debatedin academiccircles.Among many others,seethe paperspresented by Jean-PierreCabestanandCheng-yiLin on "Crisis Managementin the Taiwan Strait" at the 2000 Roundtableof the Asia-Pacific Security Forum on Coriflict and Crisis Managementin the Asia-PacificAreaofthe New Century(Paris:IFRl, September7th_8th 2000).

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instituted.But the very contentof the dispute- Taiwan'slack of (or claim to) statehood- is also the most outstandingfeature of this dispute comparedto 8 thosethat havedevisedconfidence-buildingmeasures. Yet, this chapterintendsto stressthe very processof democratisationas it bearsclose relationshipto cross-straitrelations. The issue at stakeis not so much Taiwan's leverage vis-a-vis Beijing, but how political change in Taiwan brings new constraints to the government as far as cross-strait relationsareconcerned. THE TERRITORIAL DIMENSION OF POLITICS: A NEW FOREIGN POLICY THAT COMMENSURATES WITH THE DEMOCRATISATION PROCESS

Ever since the normalisationof Sino-Americanties, the PRC has statedthat a move toward independencein Taiwan would be considereda casusbelli. However consistentBeijing's Taiwan policy is, ambiguity remains.De jure independence can easily be defined. But, what is a move toward independence?In fact, one can argue that the democratisationprocessin Taiwan can be labelled as such becauseit has made Taipei institutions representative of the island's popUlation only. In addition, the aggiornamentoof Taipei's Mainland policy was the logical consequence of thesechanges:it went hand in hand with the democratisationprocess,and was displayedas early as 1991. For more than forty years, the Republic of China's central assemblies were meantto be representatives of the entire Chineseterritory, althoughthe governmentin Taipei only held control over Taiwan and some offshore islands. Yet, implementing the representationprinciple implies that the claimed sovereigntymust fit into the limits of the territory occupiedby the representedpopulation. In other words, democracyis closely linked to the territorial dimension of politics.9 As a matter of fact, the core of Taiwan's democratisationhas been the replacementof the representativeselectedon the Mainland before 1949 by those elected exclusively by the Taiwan electorate.In this respect,a decisivestep was takenon the 21st of June 1990 when the Council of GrandJusticeorderedall membersof the representative assemblieselected before 1949 to give up their seats - in return for compensation- so that theserepresentativeinstitutions could be completely :

This is the casefor the India-Pakistanor the two Koreasdispute. On this point, seeJuanJoseLinz andAlfred Stepan,ProblemsofDemocraticTransition and Consolidation: SouthernEurope, South America, and Post-CommunistEurope (Baltimore: The JohnHopkinsUniversity Press,1996),pp. 16-37.

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renewed.This decision endedthe myth of a regime representingthe whole of China. Likewise, allowing for the free creation and participation of political parties (first in an implicit way in 1986 when the DPP was not forbidden, next in a legal way with the lifting of the martial law in 1987) was a factor in implementing a competitive regime, but also in the refocusing of the latter on the island of Taiwan. As a matter of fact, the political oppositionto the Guomindanghad developedin two ways: calls for democracy,on the one hand, and calls for Taiwan's independence,on the other hand,1O and up to a few years ago, the DPP openly advocated independence. In short, one of the most distinctive featuresof Taiwan'sdemocratisation processhas beenthe symbolic redefinition of its borders.It is symbolic, as thesenew bordersare not recognisedby the interstatecommunity. Yet, the latter have beenredefmedas they encompassthe territory controlled by the Taipei governmentand no longer the whole of China Drawing new borders could not be without consequences for Taipei's foreign policy at large, and its Mainland policy in particular. Beyond principles, and with an eye on partisanpolitics, the governmenthad to show its determinationto initiate the country'sreturn to the world scenein order to retain part of the voters who could be tempted by the independenceoption. Du Tai (that is, an independentpolicy for Taiwan) was a direct answerto the Taidu movement (that is, the movementfor Taiwan's independence)YSince the end of the 1980s,Taipei'sforeign policy can be viewed as a two-Chinapolicy aimedat bringing the Republic of China on Taiwan alongsidethe People'sRepublic of China in the interstatearena,even if it is at the expenseof being called "Chinese-Taipei".In other words, Taipei's external policy has two facets: the acceptanceof dual recognition and the developmentof a normalisation policy towardsthe PRC. At the bilateral level, Taipei's external policy has led to various albeit unsuccessfulattemptsto implementdual recognition.In July 1989,Grenada, which was preparedto normaliserelationswith the Republic of China, was not askedby Taipei to severdiplomatic ties with the PRC as a precondition. By doing so, the Taiwaneseauthoritieswere acceptingthe conceptof dual 10 The issueof whetherthe DPPwas foundedin orderto supportTaiwan'sindependence is very tricky. In fact, the DPP, and previously the dangwai, first and foremost supportedthe democratisationof the ROC, but this meant that the institutions had to be reformed to representthe island'spopulationonly. 11 The issueof Taiwan'sreturnto the UN wasone of the numerousexamplesof the opposition's influence in this field. When pro-independencegroups in 1991 initiated a campaignto promote UN membership,the governmentdid insist on the necessitynot to antagonise Beijing. But, in 1993, a participation of Taiwan in the UN was openly advocatedby the Minister of ForeignAffairs, ChienFu, andevenby PresidentLee Teng-huihimself.

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recognition,as alreadypractisedby the two Germaniesand subsequentlyby the two Koreas. However, dual recognition did not become a reality as Beijing systematicallyopposedits implementation.12 Beyond the difficulties to implement dual recognition, the intention to becomea full memberof the internationalsystem,by meansof a two-China policy, meantthat Taiwan'srelationswith the Mainland had to be redefmed. Following the liberalisationof exchangesbetweenthe two sidesof the Strait that began in 1987, the Taipei governmentdevelopeda comprehensive Mainland policy in order to chart its relationswith the PRC. The Guidelines for National Unification (Guojia tongyi gangling)13 set a gradualprocessto unify China that did not forecastany defmedtimetable,althoughit provided short-, medium-, and long-term goals. For Taipei, it was a question of carrying on with growing exchangesbetweenthe two sidesof the Strait (fIrst phase)and to allow official ties (secondphase)on the basis of two equal political entities. Therefore, as early as 1991, normalisedrelations (that is state-to-staterelations) betweenthe two sides of the Strait appearedas a prerequisite,though it was not openly said, to any talks on unifIcation (third phaseof the Guidelines).And at that time, Taipei put forward "one country, two areas,two political entities" (yiguo, liangge diqu, lianggezhengzhishiti) as opposed to Beijing's formula "one country, two systems" (yiguo, liangzhi). The ROC madethe fIrst move when the Period of National Mobilisation (dongyuanpanluan shiqi) was completedon the 30th of April 1991. This move was equivalent to a de facto recognition of the PRC. And, while waiting for a reciprocalmove, Taipei has, up to now, refusedto lift the ban on direct trade(tongshang),direct postal(tongyou),and direct transportation (tongzhuan)links acrossthe Strait in spite of heavy pressuresfrom Beijing 14 Yet, unofficial ties has been actively and from Taiwanesebusinessmen. deepenedand, to handle daily problems raised by growing cross-strait exchanges,Beijing set up a semi-governmentalinstitution in late 1991, the Associationfor Relationsacrossthe Taiwan Straits (hereafterARATS), as a counterpart to Taiwan's Straits Exchange Foundation (hereafter SEF) establishedearlierthe sameyear. Taipei's National UnifIcation Policy has given coherenceto the whole of 12 With Grenada,the PRC took the initiative in the severanceof diplomatic ties, and the same occurredon all similar occasions.Converselyin July 1990, SaudiArabia normalisedrelations with the PRC:thoughTaipei did not takethe initiative in breakingoff ties Beijing successfully 13 requestedthat Riyadhdo so. The sameoccurredafterwardson all similar occasions. They were adoptedby the Presidenton the 5th of March 1991. 14 On January1" 2001, direct sea links betweenthe Mainland and the islands of Jinmen and Mazu were instituted.

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Taiwan'sexternalrelationsinsofar as it was both a token and a model for its pragmaticdiplomacy. First of all, as it did not rule out a future reunification of China, Taipei's Mainland policy opened the way to any move to implementthe two-Chinaprinciple, whethersuch a move should have been madeby Beijing - though it is clear that Beijing will never proposethis - or by any foreign countries that have recognisedthe PRC's sovereigntyover Taiwan. Next, Taipei's Mainland policy confirmed that Taiwan's external relations becameone, in as much as they becameall part of a processthat aims at reinstatingTaiwan in the interstatecommunity (as far as cross-strait relations are concerned, it corresponds to the second phase of the Guidelines,that dealswith the normalisationof relationsbetweenTaipei and Beijing), but meanwhileit must adopt,exceptwith the minority of statesthat recognises the Republic of China, the scheme of non-officia~ though substantia~ ties (as far as cross-straitrelationsare concerned,it corresponds to the fIrst phaseof the Guidelines). A few months after the Guidelines were released,the SEF-ARATS nascentdialogueculminatedin the meetingof both chairmen- Koo Chen-fu and his ChinesecounterpartWang Daohan- in Singaporeon the 27th_29th of April 1993. At the meeting, three agreementswere signed.But, even more important than the practical arrangementsthat had been found concerning lost mail or SEF-ARATS' communication channelsl 5 was the form of consensusreachedon the one-Chinaissueprior to the Singapore"summit": the two non-official agencies"agreedto disagree"in order to leaveasidethe sovereigntydispute. However, this compromisewas left aside during the subsequentARATS-SEF meetings,16which were more or less suspended after 1995, exceptfor a shortepisodein 1998 when Koo Chen-fuvisited the Mainland. Yet, it is within the democratisationprocess,and the re-charteringof Taipei's external policy that PresidentLee Teng-hui'sfamous statementon cross-straitrelations should be analysed.In an interview with the German BroadcastingcompanyDeutscheWelle on the 9th of July 1999, Lee Tenghui describedthe situation betweenTaiwan and the Mainland as "special state-to-staterelationship" (teshudeguo yu guo guanxi). Such a statement can be differently interpreted.Certainly it is the frrst time that statehoodis openly (in this casethrough internationalmedia) mentionedby top Taiwan 15 The three agreements coveredthe notorisationof documents;tracing of andcompensationfor

16

lost registeredmail; and the establishmentof systematiccommunicationchannelsbetween SEF andARATS. Prior to the March 18'" 2000 election,the MainlandAffairs Council stressedthe compromise: MAC NewsBriefing, August9'" 1999,p. 1. On the disputeover the contentof this consensus, seebelow.

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leader.On the otherhand,Lee'sremarkcan be seenwithin the frameworkof Taipei's Mainland policy that, since the end of the 1980s, has been essentiallya two-Chinapolicy. Furthermore,in the context of the interview, the "special state-to-state" formula was mentionedas part of the constitutionalreform, in particularthe 1991 amendments: The 1991 constitutionalamendmentshave placedcross-straitrelations as a state-to-staterelationship or at least a special state-to-state relationship,rather than an internal relationshipbetweena legitimate governmentand a renegadegroup, or betweena central government and a local government.Thus, the Beijing authorities'characterisation of Taiwan as a "renegade province" is historically and legally untrue.17 That Taipei's Mainland policy has been chartered as a compromise susceptible to release the largest possible consensusamong political formations,which are positionedon the political spectrumin relation to the sovereignty issue, cannot be denied. But when assessingthis policy one should make a clear distinction between its wording and its foundations, which are both linked to the democratisationprocess,and have not been alteredsincethe beginningof the 1990s. Lee Teng-hui's statementmay just be plain rhetoric (becauseit was alreadyhinted at in the 1991 Guidelines);nevertheless,it helpedredefmethe borders of the state, at least symbolically. Lee Teng-hui's statementhad been viewed by foreign governmentsas a provocativerevision of Taipei's long-standingcommitmentto one-China,leading to PresidentBill Clinton telephoning President Jiang Zemin to reatImn the United States commitmentto the statusquo, and dispatchingsenior American officials to Taipei to pressfor clarification or revision of Lee's statement.18 Also, after Lee's interview, Beijing hardenedits policy. Wang Dao-han'svisit to Taipei was cancelledsine die, and the sovereignty dispute brought to the fore. Beijing's reaction in the wake of the September 21st 1999 Taiwan earthquakewas significant in this respect.For instance,the PRC requiredall UN aid to be fIrSt approvedby the PRC's authorities,and planescarrying Russianrescuerswererefusedpermissionto fly throughChineseairspace.

:~

Third paragraphof the answerto the first question. See,in particular,deLisle,"The ChinesePuzzleof Taiwan'sStatus,"p. 35.

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FORMING A DOMESTIC CONSENSUS ON CROSS-STRAIT RELATIONS

Although the aggiornamentoof Taipei's Mainland policy was the logical consequenceof the democratisationprocess,and was displayedas early as 1991, Taiwan's political scenehas been shapedaccording to the various stancesthat could be made on cross-straitrelations. It was not until the March 2000 presidentialelection that the sovereigntyissue was no longer the main criteria to differentiate political parties and factions. The election apparentlymarked a turning point in Taiwan's history in as much as the "political supply" has been,if not completelyat least greatly, liberatedfrom Beijing's irredentism. From the forming of the DPP in 1986 to that of the Jianguodang(Taiwan IndependenceParty) in 1996, partisancleavageshad been set accordingto the issueof China'sunity or division. In fact, since the Guomindangset up its regime in the island in 1949, the whole of Taiwan's politics has been imprinted with the one-Chinaprinciple. This principle had resulted in the Guomindang'sde facto power monopoly and dormantpolitical institutions. Once a multiparty systemwas instituted, it was no longer Chineseunity but the two-China option that was at the core of partisancleavages.After some initial wavering, the DPP clearly marked its independenceoption when the party adopted,on 13 October 1991, a platform amendmentadvocatingthe establishmentof a "Republic of Taiwan" through a plebiscite of Taiwan residents. Immediately, the binomial unity/division of China became prominentat the party level: within both the Guomindangand the DPP, the majority adopted,for electoralpurposes,a more conciliatory stance,i.e., to uphold the status quo in the Taiwan Strait. This, in turn, triggered the formation of radical factions (unionists on the one side, independentistson the other) that, after some time, founded new parties: the Xindang (New Party) in 1993, on the one hand, and the Taiwan IndependenceParty in 1996,19 on the other hand. In short, it is not according to rightwing vs. leftwing (or conservativesvs. social-democrats)ideology that Taiwan's major political parties have positionedthemselves,but rather according to the sovereigntyissue. The very processof democratisationat the beginningof the 1990swas the outcome of a factional struggle on this very issue. Up to 1996, the Guomindangwas able to monitor the whole reform processas it held the 19

This party put an endto its existenceafter the March 2000presidentialelectionto which it had not presentedany candidate.

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majority of seats in the National Assembly in charge of passing the constitutional amendments.The constitutional reform was therefore the result of a bargain betweenthe two main factions of the ruling party, and centredaroundthe reunificationversusstatusquo issue.From 1990 to 1995, the minority faction (or non-mainstreamfaction, fei zhuliu pal) accelerated the inner democratisationof the ruling party,20 while at the same time delayed some constitutional reforms, such as the direct election of the president, since these changeswere calling into question the principle of China's unity. Still, in this confrontation,the majority faction (mainstream faction zhuliu pai), could take argumentof the DPP's independencestance and active pressure- throughstreetdemonstrationsfor instance- in ordernot to delay the redefinition of national sovereignty.The electoralresultsclearly show that this threat has been an important political resource for the Guomindang.21 Yet, the oppositionpartieshave played an indirect role that has been twofold: not only did they fully support the reform processby participating in the electoral process, but the reformulation of the constitutionalcompromisecameout of a debatebetweenparties' factions in which the sovereigntyissue was central, though on a implicit way. Yet, at the end of Lee Teng-hui's era a consensuswas reachedamong the main political forces on this issueas nonewas advocatingdejure independencein the shortrun, nor rapid reunificationwith the Mainland. A comparisonof the 1996 electoralcampaignto that of 2000 is significant to this respect.The issue of cross-straitrelations played a key-role in the configuration of the political scene on the eve of the fITst popular presidential election in 1996. The election pressuredthe Guomindangto sideline its old nationalist guards defendingthe principle of China's unity, and its gatheringtogetherin the New Party, after Lin Yang-kangand Hau Pei-tsun had decided to competewith the incumbentpresidentLee Tenghui. At the other end of the political spectrum,the independencestanceof the DPP was strengthenedwhen Peng Ming-min was chosenas the party's candidate. Thus Peng was, fITst and foremost, a symbolic figure of the independencemovement,rather than a party veteran (as a matter of fact, Penghadjust joined the DPP). Although the stancesof the three candidates 20 For instance,in 1990,it put pressureso thatthe secretballot procedurewould be usedto elect

the presidentand the membersof the central committeeof the Guomindang,as well as to 21 nominatethe candidatesof the party for the presidentialelection. For instance,the DPP gained only 23.2 percentof the votes at the eJectionof the second National Assemblyin December1991 (comparedto 28.2 percentat the Legislative Yuan in 1989) after it had included, two months earlier, in the party charter the so-called independentistclause(the organisationof a plebisciteon the proclamationof a "Republic of Taiwan").

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(Lee Teng-hui,Lin Yang-kangand PengMing-min) on cross-straitrelations were alreadyblurred,their rhetoric clearly differed onefrom the other. In the 2000 presidentialelection,the candidates'proposalsdid not depart very far from that of the outgoing government.In fact, all three major candidates (Lien Chan, Soong Chu-yu and Chen Shui-bian) proposed formulae intendedto serveas frameworksfor cross-straitrelationsthat were rather close to the 1993 Singaporecompromise.Lien was logically sticking to Lee Teng-hui's- "specialstate-to-staterelations" formula (teshude guo yu guo guanxi). For his part, the independentpresidential candidate, Soong Chu-yu, describingcross-straitrelationsas "quasi-internationalrelations with relative sovereignty"(zhun guoji guanxi), presenteda three stageplan that was not far from the 1991 Guidelines.He proposed:stage 1: signing a thirty-year cross-straitmutual non-aggression treaty following after the EuropeanUnion model;22 stage2: having a further twenty-yearperiod to promote relations similar to thoseof the EU; stage3: having the 22 million peopleof Taiwan to decide cross-strait relations. Chen Shui-bian took up again Lee Teng-hui's formula although he changedthe order of the words to "state-to-statespecialrelations" (guo yu guo de teshu guanxi) instead of "special state-to-staterelations", placing more emphasison the term "state-to-state"than on the term "special". Lu Hsiu-lien, Chen Shui-bian'srunning mate, told CNA that as a leaderof the "new generation",Chen would cast aside as outdatedideology the ideas of 23 Chen both reunification with mainland China and Taiwan independence. Shui-bianhimselfmadeclear, prior to the election, that his party would not unilaterally seek Taiwan independence,hold a plebiscite on the issue, changethe national title, or make mention of cross-strait"special state-tostaterelations" in the constitution,24and that negotiationon any issueshould be conductedon the premiseof equalfooting?5 In fact, the campaignclearly showedthat, as far as the sovereigntyissue was concerned,the DPP candidatewas striving to occupya centristposition, 22 23 24 25

Among others,see Lianhe Bao cited by Summaryof World Broadcast, Far East (hereafter SWBFE)13749,January28th 2000,FI2. TaiwaneseCentralNewsAgencyweb site cited by ChinaRadio Internationalon January29th 2000.SeeSWBFEI3750, January29th 2000,F/l. CentralNews Agency on China Radio Internationalon January29th 2000. SeeSWBFEI3751, January31" 2000,F/4. More precisely,andprobablyin orderto satisfythe radical faction of the DPP andthe Taiwan IndependenceParty's electorate,Chen told CNN that he would not make a decision on Taiwan'sfuture ties with Beijing, but would give the peoplethe fmal say on any changein Taiwan'spolitical statusquo. SeeTaiwaneseCentralNews Agency web site cited by China RadioInternationalon January29th 2000,in SWBFE13750,January29th 2000,F/1).

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while driving back the Guomindangto the edgeof the political spectrum.If elected,Chen Shui-biansaid that he would be willing to ''unilaterally allow Taiwan firms to operatedirect cross-straitshipping services",26a standclose to that of Soong Chu-yu's. However, and notwithstanding electoral manoeuvres,the issueof allowing the three direct links did not feature in the sovereignty debate per se, but in the strategic debate arising from the necessityto protect Taiwan's de facto independence.All three candidates agreed that a kind of agreementshould be reachedbetween Taipei and Beijing: Lien and Chen were in favour of a peacetreaty, and Soong put forward the idea of the thirty-year non-aggressionpact. The forming of this consensuswas easedby Lee Teng-hui's July 9th 1999 interview where he exemptedthe candidatesfrom havingto createa surprisein this field. Despite this relative consensuson cross-strait relations, the Chinese authoritieskept on equatingthe possibleelection of the DPP candidatewith the proclamation of independence.In any case, in the latter presidential campaign, the Chinese military did not conduct military manoeuvres comparable to that of the 1996 campaign, though one should not underestimatethe strong pressure the Beijing government had put on Taiwan'selectorate.Vice-PremierQian Qichen'sJanuary28th 2000 speech, marking the fifth anniversaryof Jiang Zemin's eight-point proposa~ was significant. Qian clearly stated that Taiwaneseindependencecould "only mean war" and, while mentioning the possibility of equal-footing consultations,he stressedthat they should be carried under the premiseof upholding the one-Chinaprinciple, meaningthat the Chineseterritory and sovereigntyshould not be divided.27 At the end of the annualsessionof the National People'sCongresson March the 15th 2000, Prime Minister Zhu Rongji warned Taiwan electorate during a press conference that there "[would] be no further occasionsfor regret" (yimian houhui mOjl)28 if a proindependence candidatewas elected.

26 Among many other sources:TaiwaneseCentral News Agency web site, in SWBFE/3743, January21 ~ 2000,FI2.

27 "We will exertour utmostand do everythingwe canto settlethe Taiwan issuepeacefully.Of

course,peacefulreunificationand "one country,two systems"mustbeachievedandinstituted underthe premiseof upholding the principle of one China. Upholding the principle means that, although the two sides of the Taiwan Strait have yet to be reunified, they both acknowledgethat there is but one China, that the Chineseterritory and sovereigntyshall not be divided, and that the two sides of the strait can achievepeacefulreunification through equal-footing consultationsand finding a way to settle their differences." Xinhua news agency,citedby SWBFEl3751,January31" 2000,FI2. 28 SeeJean-PierreCabestan,"Chen Shui-bian'sVictory Rulesout Detentein the Taiwan Strait," China Perspectives,No. 29 (May-June2000),p. 43.

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

TRANSFORMING THE CONSENSUS ON CROSS-STRAIT RELATIONS INTO A COHERENT AND CONSENSUAL MAINLAND POLICY

Certainly ChenShui-bian'selectionwas a vote in favour of domesticchange rather than a vote in favour of independence.Yet, cross-straitrelations are still on the top of Taiwan'spolitical agenda,less becauseof pressuresfrom the PRC than becauseof the difficulty in transforming the consensus reachedby the three major candidateson the eve of the 2000 presidential electioninto a consensualMainlandpolicy. Beijing is adoptinga wait-and-seeattitude. Just after Chen Shui-bianwas elected,the motto was "listening to what the new leader [of Taiwan] says, and watching what he does" (tingqiyan guanqixing).29 Up to now, the PRC authoritieshave not releaseda new Taiwan policy and seemto be tackling the problemin threeways. First, the CCP leadershipappearsto be seekingto deal directly with other Taiwan political parties, the Guomindang in particular, in order to weakenthe DPP and to contributeto its failure in the coming elections, be it at the legislative level (end of 2001) or at the presidentialone (in 2004). In this respectone must bear in mind that Chen Shui-bianwas electedPresidentwith only 39.1 percentof the vote from the Taiwaneseelectorate,even though the Guomindang'sresult was far behind (just over 23 percent).More than ever, the PRC's authoritiesare striving to attract Taiwan'spolitical and economicelite. For instance,for the frrst time since 1949, a meeting of high-ranking members of the CCP and the Guomindangwas held in Beijing in November2000; the vice-chairmanof the Guomindang,Wu Poh-hsiung,visited China and met, amongothers,the Vice-PremierQian Qichen.Visits by the chairmanof the Guomindang,Lien Chan, or that of the People'sFirst Party (Qinmindang), Soong Chu-yu, cannotbe ruled out in the nearfuture. Second, the Chinese authorities do not rule out the possibility of negotiating with the new Taiwan leadership. To this end, Beijing has indicated that it is willing to return to the mutual agreement(gongshi) reachedprior to the 1993 summit. However, this is problematic.While the consensusis instrumental, the two sides have openly referred to two different interpretations.Beijing and Taipei do not agree on the point on which they had agreedto disagree.For the Chineseside, the agreementlies in the fact that the representativesof the two sides would uphold the oneChina principle while not giving it a precisepolitical definition (zhengzhi hanyi). The Taiwan side, for its part, considersthat the compromisewas that 29 Ibid., p. 46.

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there is one China but differently interpretedby each side (yige Zhongguo, gezebaioshu). Third, Beijing is also trying to garner internationalsupport, in particular from the US against Taipei, or calling overseasChinese communitiesto supportunification. At the sametime, the PRC leadershiphas not ruled out the use of force against Taiwan. Though the People'sLiberation Army (hereafterPLA) has not repeatedthe firing of missiles into the waters off Taiwan since the 1995-1996 Presidential election campaign that had triggeredthe United Statesto sendthe SeventhFleet, its military pressureis far from having vanished.In particular,the PLA is settinggrowing numbers of short-andmedium-rangemissilesaimedat Taiwan?O Currentlythe PRC leadershipis unlikely to easeits pressureon Taiwan as it is now leadersin China - more than in Taiwan - who can gain short-term domestic political benefits from cross-straittensions. In other words, the probability of the Chinese leadership using the Taiwan issue to solve domesticissuessuch as labour unrestcannotbe ruled out. Besides,shoulda confederation(bang/ian) be acceptedas a solution to the Taipei-Beijing dispute, it could well trigger off some autonomistclaims from Hong Kong andMacao,aswell as from provincessuchas Guangdongor Xinjiang. For Taiwan, its domesticconstraintsare no fewer, but they are now of a different nature.Certainly, a consensuswas reached- thoughnot explicitly among the main political parties prior to the 18th of March 2000 election. But almost immediately, this consensushas creatednew domesticpolitical dynamics that cannot but progressivelyforce Chen Shui-bian to alter Lee Teng-hui'sline. In his inauguralspeechon the 20th of May 2000, Chenwas about to ensure the continuation of the outgoing president's Mainland policy. As long as the CCP regime has no intention to use military force againstTaiwan (wuyi dui Tai dongwu), I pledgethat during my term in office, I will not declare independence,I will not change the nationaltitle, I will not push for the inclusion of the so-called'state-tostate' description in the Constitution, and I will not promote a referendumto change the status quo in regard to the question of independenceor unification. Furthermore, there is no question of abolishing the Guidelines for National Unification (Guojia tongyi gangling) and the National Unification Council (Guojia tongyi 30 Jean-PierreCabestanestimatesthey currentlynumberaround200 andprobablywill reach600 by 2005: SeeCabestan,"ChenShui-bian'sVictory Rulesout Detentein the Taiwan Strait," p. 37.

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weiyuanhui).

He also expressedthe hopethat leaderson both sidesof the Strait will be creative enough to settle the one-Chinaissue in the future (gongtong lai chuli weilai "yige Zhongguo " de wenti). In orderto institutionalisea processof consensus-building, ChenShuibian has attemptedto separateTaipei's Mainland policy from party politics. First of all, he created the President'sAdvisory Group on Mainland Affairs headedby a prominentfigure, the former chairmanof AcademiaSinica and Nobel laureate,Lee Yuan-tseh. The forming of this ''Trans-partisantask force" (Kua dangpai xiaozu) was aimed at achieving a kind of consensus that can surpass partisan cleavages in the decision-making process concerningMainland policy. Next, Chen Shuibianappointeda Guomindang Premier,(generaland former defenceminister) Tang Fei to form the cabinet in orderto promotestability andto give someassuranceto Beijing. But it seems highly unlikely that political parties will collaborate in forming a coherent and consensual Mainland policy. Indeed, Chen Shuibian's bid to build an "all people government" was a short-lived episode.After the first appointedPremierresignedin October 2000, Chen Shuibian was unable to form a cabinet that was answerable to the Legislative Yuan, and he had to return to old-fashionedparty politics. The newly-appointedPremier, Chang Chun-hsiung,is a DPP veteranpolitician. As the DPP remainsa minority in the Legislative Yuan, Chen Shuibianand his cabinetwill be forced to govern without majority support,and they can face a stalledlegislature,until the end of2001 at least. Taiwan's legislative process is not fitted to solving the problems encountered.Ho Szu-yin arguesthat ChenShuibianis poorly equippedfrom an institutional standpointto handle any negotiationswith the PRC because of a lack of proper legislativeprocesses:legislatorsare motivatedby interest group politics, and thus often exhibit collectively destructivetendencies.To make his point, Ho reminds that in the American system, becauseof the ReciprocalTrade AgreementAct (R11\A) passedin 1934, responsibilityfor setting the main trade policy was given to the President, a position answerableonly to one constituency,that is, the whole country.3! Still, the Presidenthas to seek authorisation from Congressbefore he enters into negotiationwith foreign countries.Therefore,as Ho argues,what is lacking 3!

Ho Szu-yin,"Institutional Constraintson the New Presidentof the Republicof China," paper presentedat a workshopThePost-LeeTeng-huiYears: Towardsa NormalizationofTaiwan's Political Lifo organisedby CERI (Centre d'Etudeset de RecherchesIntemationaies),Paris, May 4'" 2000.

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in Taiwan'snegotiationwith the PRC is a legislative processcomparableto that of the R1AA. Indeed,on cross-straitissues,the distribution of Taiwan's public opinion is more or less reflected in the Legislative Yuan's own cleavagesin these issues, and no agreementhas any chance of being endorsedby legislators. And yet, the government in Taiwan will increasingly face a twofold dilemma. One is sharedby all democracies:the principle of public scrutiny of diplomatic practicesbeing balancedby the need for secret diplomacy. Another is properto Taiwan: giving priority to nationalsecurityat the risk of slowing down economicgrowth, or enhancingthe latter at the expenseof the former. This dilemma extends far beyond party politics, to the whole nationaladministration. On the economicfront, the Taiwan businesscommunity is likely to step up pressureon the Taipei governmentto further liberaliseinvestmentson the Mainland - in particular to revise the ''no haste,be patient" (jieji yongren) policy - or to even go to the negotiation table with the PRC. Taiwanese investmenton the Mainland for the ten first monthsof 2000 doubledthat of the sameperiod in the previousyear.32So as long as the sovereigntyissueis not settled, the dilemma of national security versus economic growth will remain at the core of any decision-makingprocess.In other words, crossstrait relations and Beijing irredentist policy will continue to politicise not only domesticpolitics but also the whole realm of economics. CONCLUDING REMARKS

Whateverthe future of Taiwan, its externalrelationswill be closely linked to the PRC. For the time being and for lack of a settlementof the sovereignty issue, Taipei's foreign policy is almost completely devoted to managing cross-straitrelations and to check, if possible,Taiwan's loss of leveragein the interstatearena.Moreover, on someimportantissuesthat do not involve the sovereigntyissueper se, such as human rights, Taipei is forced to adopt a low-profile attitudevis-a-vis Beijing in order not to jeopardisethe future of Taiwan. In the long run, becauseof the increasing economic integration betweenboth sides of the straits, one can hardly imagine that any form of settlementof the sovereigntyissue will mean further separationof Taiwan from Mainland China. Paradoxically, though Taiwan is already a fullfledged democracyand as such should be free to determineits own internal affairs, political developmentsin the PRC will continue to impinge upon Taiwan'sdomesticpartisancleavagesand decision-makingprocesses. 32 MainlandAffairs Council (Taipei).

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Chapter 9

China and Central Asia

Peter Ferdinand

INTRODUCTION

Between1962 and 1991 China'snorthernand westernboundarieswere both fraught and frozen. The deepeningdispute betweenthe USSR and China was exacerbatedby the aftermath of the Great Leap Forward. In 1961 severalthousandKazakhsand Uighurs fled acrossthe Xinjiang frontier into Kazakhstanto escapefrom persecutionand hunger.From then on, the SinoSoviet frontier was turned into a serious obstructionto the nomadic herds that had previously roamedrelatively free. In 1969 bloody borderclashesat its easternend nearly provoked nuclear war, or at any rate a pre-emptive strike by the USSR againstChina's own nuclear test facilities in Xinjiang. After that, until detentebeganin the mid-1980s,the borderswere guaranteed with nuclear missiles. As a result some of the nationalities who lived in Soviet Central Asia were separatedfrom their kin in Xinjiang, chiefly the Kazakhsandthe Uighurs. The Sino-Indian War of 1962 similarly froze (in the Himalayasliterally) the Sino-Indian border, though India maintainedher claim to the relatively small expanseof territory that China had won. Here communities were much lessdivided by the frontier. Neverthelessthesetwo wars led the USSR and India to make common causeagainstChina so as to prevent Chinese 'expansionism' . In tum this led China to strengthenits ties with Pakistanand with someof the Islamic world, so as to counterbalancethe Soviet-Indianaxis. So China, for instance,becamea staunchsupporterof Pakistanin its disputewith India over Kashmir. This patternof alliancesbeganto weakenin the later yearsof perestroika, as both the Soviet Union and India tried to improve their relations with

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China. But this processacceleratedin the 1990s with the collapse of the USSR. In time, as we shall seelater, this underminedIndian security and it pushedIndia along the path of self-reliance,which in this casemeantnuclear testing. This major reverse for China, which found that it had been freed from the nuclear threat from the north only to be put under nuclear threat from the west, paradoxicallycreateda set of circumstanceswhere China and India beganto reassesstheir relationsand it encouragedthem to explore the possibilities of co-operation.And in part becauseof this, China gradually turned away from its supportfor Pakistanand for its position over Kashmir. This was reinforced by greaterwarinessin Beijing about its relations with Islamic movements. Later we shall return to this bigger picture of internationalrelationson the continentof Asia, for China'srelationswith CentralAsia cannotproperly be understoodoutside it. Neverthelesswe shall fIrst turn to China and Central Asia. THE PROBLEMS

When the Soviet Union collapsed, the Central Asian states found independenceeffectively thrust upon them. Though by far the poorest republicsof the Former Soviet Union (FSU), they had relied upon Moscow to redistribute resourcesto them from the rest of the country, rather than their own efforts. When the leaders of Russia, Belarus and Ukraine met secretively at Be1aia Pushcha in December 1991 to found the Commonwealth of IndependentStates (CIS), none of the Central Asian leaderswere invited - to their intenseannoyance.After they protested,they were formally invited to become 'founding members' of the CIS. Neverthelessthey were not treatedas equals.Ever sincethen theserepublics have beenforced increasinglyto rely upon their own efforts and to develop asbestthey could. At the outsetconditions for this were not very propitious. Initial problems included: a) uncertain boundaries straddled by ethnic communities; b) economicbackwardness;c) their geographicposition - all land-lockedon the continentof Asia, with Russiato the north andChinato the south. The Ethnic and Religious Dimension

As soon as thesestateswere created,an immediateissuewas their borders. Thesehad been delimited in the 1920s in a fairly arbitrary way when the Soviet regime's knowledge of the historic homelandsof all the different

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ethnic groupswas sketchy.In any case,the needfor ethnic boundarieswas regarded as a purely transient phenomenon,to be supersededby the internationalism of communism. Various ethnic groups contested large swathesof territory, but as long as the Soviet Union existedwith the power to maintain such boundaries, disputes were suppressed.Independence, however,broughtnew challenges.This was not only a matterfor the CIS. It also potentially affected China, since the principle of ethnic selfdeterminationthat was raised by independencealso affected the Kazakhs, Uighurs and others in Xinjiang. In 1933, for instance, a short-lived East TurkestanRepublicwas setup in Xinjiang with someSovietsupport. Thus as soon as thesestatesdeclaredindependencein 1991, this alarmed both Moscow and Beijing. So from the very outset Beijing was extremely sensitiveto the new kind of challengeacrossits northernborders.Civil war broke out in Tajikistan almost immediately.This servedas a warning for the whole region about where ethnic conflict and demands might lead. Fortunately,the leadersof the other statessoon agreedthat they would not support territorial claims againsteach other. So, although there have since been outbursts of inter-ethnic violence in various places, especially the FerganaValley, thesehavenot provokedmajor inter-stateviolence. Nevertheless China has remained concerned about the potential vulnerability of Xinjiang. In the early 1990s its main significance was strategicrather than economic. With a total areaof 1.67 million sq. km, it occupiesroughly one sixth of the total territory of China. It has 5400 km of land frontier, i.e. roughly one quarterof all of China'sland borders.It also containsChina'snucleartest sites. Yet with a populationof over 16 million, its population density is extremelythin. Only 37 percentof the population are Han Chinese (although that is a considerableincrease compared to 1949), and seven out of the largest thirteen minorities are Muslims. Including those who have come from Qinghai and Gansuto teachIslam in Xinjiang, it sumsup to over 9 million Muslims, i.e. 54.5 percent.) The collapse of the Soviet Union provided suddenhope for the chief minorities in the region - the Kazakhsand the Uighurs - that they might also fmd independencethrust upon them, or even that they might be able to win it for themselves.Certainly there were a number of issues that fuelled discontent. There was the memory of ill-treatment during the Great Leap Forward and the Cultural Revolution, and even of the suppressionof the short-livedEastTurkestanRepublicin 1933. Therewas also incitementfrom abroad,chiefly from Turkey and the East Yang Faren,"Gongguhe fazhanZhongguoge minzudeda tuanjie," (ConsolidateandDevelop the Unity of All China'sMinorities),Xinjiang shehuijingji,No.5 (1995),p. 63.

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Turkestanmovementin exile. The collapseof the Soviet Union awakened hopes in Turkey that it might recreate a Turkish speaking peoples' community stretching as far as Kyrgyzstan. The government created a ministry for Turks living abroad,and their efforts in this respectwereechoed by appealsfrom the East Turkestanmovementin exile, which is at least partly run from Germany.2 Lastly there was the dramatic increasein open religious belief in the region, especially Islam. Where in 1989 there were only 760 mosques throughoutCentral Asia in the FSU, by 1994 the figure had risen to over 7,800.3 Almost all of them were financed from abroad. Even though the statesthemselvesremainedsecular and crackeddown hard on those who wanted to tum them into Islamic ones, this rise in religious feeling raised fearsof similar attemptsin Xinjiang. The sensitivity of the issue was emphasisedby a series of terrorist bombingsthat took place in Xinjiang and evenin Beijing in the early 1990s. Already in 1990 an uprising took place in Baren near Kashgar, and its suppressioncaused heavy casualties. Then in 1997 a demonstrationin Yining, close to the border with Kazakhstan,turned into open proteststhat provokeda crackdownfrom the authorities.A numberof peopledied during the demonstrations,and afterwardsover a hundredpeoplewere reportedas having beensummarily executedfor their involvement.And againJuneand July 2000 saw announcementsof executions of handfuls of alleged secessionists. The Economic Dimension

As will be seenfrom Table 1, all of the Central Asian stateshave seenfalls in estimatedGDP since 1991, and, with the exceptionof Uzbekistan(and the statisticsthereare suspect)theseare severe. The initial fall causedby the collapseof the SovietUnion was then further magnified by hyperinflation in 1992/3, and then by the suddendecision of Russia to end the rouble zone without any prior warning. This made economicmanagementmuch more difficult in those states(such as Central Asia) that did not havetheir own currencyreadyto replaceit.

2

See the web site for the World Uyghur Network News (formerly Eastern Turkestan Information Bulletin) at: wysiwyg://19/http://geocities.comlCapitoiHiUJI730/wunn6.htrnl. It doesnot, however,seemto havebeenupdatedsince 1997. Qi Wenl~ "Dui "Xinjiangde zhuyaoweixian lai zi minzu fenliezhuyi" zhei kexuelunduande zai renshi," (Rethinking the AcademicThesisthat "The GreatestDangerto Xinjiang Comes From Ethnic Splittism"), Xinjiang shehuijjngj~ No.2 (2000),p. 73.

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Table 1: Growth in Real GDP in SelectedStatesof the FormerSoviet Union Cm percent) (1989= 100)

Kazakhstan Kyrgyzstan Russia Tajikistan Turkmenistan Uzbekistan

1992 -2.9 -19 -14.5 -29 -5.3 -8.2 -11.1

1995 -8.2 -5.4 -4.1 -12.5 -0.9

1998 1 4 -5 3.4 5 2

Estimated level of real GDP in 1997 63 57 58 40 42 87

Source:Economicso/Transition,Vol. 6, No.2 (1998),p. 544.

Yet althoughthis would havebeena good opportunityfor China(PRC) to offer economic assistancewith the hope of diplomatic gratitude, the PRC was not able to do anything significant. The country was still recovering from the sanctionsin the aftermath of the massacresaround Tiananmen Square,and Xinjiang itself could not offer anything exceptbordertrade. The only 'assistance'camethrough private enterprise.Large numbersof Chinese traders crossedthe frontiers of the Central Asian states,since at that time they did not need any visas. Several hundred thousand crossed into Kazakhstan and Kyrgyzstan, and a significant proportion stayed there, creating new Chinese communities and arousing fears of stealthy colonisation. But in general Xinjiang itself needed support for developing its own agricultureand heavy industry and was not really able to offer significantcooperation. The Geographical Dimension

But not only were the Central Asian states suffering from economic backwardness,they suffered from anothermajor obstacle.They were landlocked, and becauseof their history in the 20th century,all of the main transit routes for their output ran northeastand northwest, i.e. into Russia. Thus even though they were politically independent,they were still economically dependentupon Russia.Therewas no easyor quick escapefrom this. In addition therewere very few options.One of the most importantwas to encouragealternative transport routes to and through China. It took some time for the two sidesto begin to trust eachother. It was only in the middle of the decadethat Kazakhstanand China agreedto complete the last few lines of the railway line that had originally beenconstructedin the 1950sto

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link Chinawith the SovietUnion, but that had then beenabandonedbecause of the Sino-Sovietdispute. Once inaugurated,it revived talk of a new 'Silk Road', a land bridge betweenEastAsia and Europe.It would be a cheaperand quicker alternative for manufacturersin East Asia who did not want to send their productsto Europe by ship. In practice such hopes were over-optimistic. Russian railways were far too often subject to attacks by criminal gangs for manufacturers to want to commit large amounts of sophisticated merchandiseto them. Neverthelessthis project did encouragethoughts of further long-term co-operationbetweenChina and the Central Asian states. Plansfor additionalrailway lines have beenannouncedin subsequentyears and two additional border-crossingpoints havebeenopened.Direct air links have been introduced. The closest economic links have been established with Kazakhstan.The Chinese National Oil Corporation has taken a 60 percentshare in a large oilfield in NW Kazakhstan,as well as a share in another one. Kazakhstanhas also offered to supply electricity to Xinjiang. Nor are the contacts limited to the exploitation of natural resources.The ChangchunCar Factory has establisheda joint venture in Alma-Ata, the Chinese Ministry of Construction will play a very active part in the constructionof Kazakhstan'snew capital in Akmola, and the Ministry of Foreign Trade has signed an agreementoffering US $100 million to small 4 Even if CentralAsia remains and medium-sizedenterprisesin Kazakstahn. apprehensiveaboutthe shadowof the big brotherto the south,they cameto recognisethat they had no alternative to collaborating with China if they wanted to escapefrom permanentdependenceupon Russia. Now they are seekingto useandprofit from it. Yet with the exceptionof this railway line, further transportlinks would not be cheap.Neither China nor the Central Asian stateswere enthusiastic about putting up the investmentsthemselves.Therewas the hope that Japan might be persuadedto put up the money for a pipeline that would carry oil from WesternSiberia, picking up more from Xinjiang, and taking it to the eastcoastof China for shipping to Japan.The Mitsubishi Oil Companywas commissionedto carry out a feasibility study and cameup with an estimated cost of US $10 billion. This was far too expensivefor a Japanrecovering from the collapseof its bubble economy,at a time when world oil prices were closeto an all-time low. Neither China nor the Central Asian statesfelt that they hadthe resourcesto committo a projectof this magnitude. 4 Hu Hongping, "Zhongya wu guo dui waijingmao fazhandejiben geju," (Basic Patternsof Foreign Trade Developmentin the Five Central Asian States),Xinjiang shehuijingji, No.6 (1999),pp. 78-79.

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In the end two things forced their hand. Ironically the first was a 'push' factor: the political needfor Russiaand China to find someway of living up to their very ambitious plans for US $20 billion in trade per year which PresidentsYeltsin and Jiang Zemin had signed up to as part of their 'StrategicPartnership'.The only way that they could come even remotely near to achievingit would be if Russiasuppliedlarge quantitiesof oil or gas to China. This could only come from Western Siberia, and would have to travel through Central Asia to reach China. The secondfactor was a 'pull' factor: the increasing shortfall between China's own domestic production and her energyneeds.5 The combinedeffect of thesefactors was to makethe two countries invest much more money in pipelines for supplying gas to China,which would run throughCentralAsia. THE SOLUTION

Overall the government'sstrategyfor dealing with the problemsof Xinjiang has evolved in three directions: diplomatic efforts directed at neighbouring states,economicdevelopment,anda crackdownon dissidents. Diplomacy

For the fIrst part of the 1990sthe governmentin Beijing focusedits attention towards the northwestprimarily on its relations with the new Central Asian states.So from 1994 onwardsthe Chineseleadersbegana seriesof official visits to each of the statesin Central Asia to reassurethemselvesabout the intentions of the various governments and also to exercise a positive influenceover the region. On thesevisits Li Pengregularly stressedChina's interestsin security and stability. Since at the time Russiawas paying much less attention to the region as it turned westwards,this diplomatic initiative made an important contribution to mutual trust. But what the Chinese leaders were particularly keen to emphasisewas that none of the Central Asian republics should provide refuge for, let alone actively encourage oppositionto Chineserule in Xinjiang. And the Chinesegovernmentproved surprisingly successfulat winning co-operation,given that all of the leaders of the new states based part of their new legitimacy on appeals of nationalismand that thesemight be underminedby failures to supporttheir kin living inside China. Recently there have been reports that the 5 For example, see Kent E. Calder, Asia's Deadly Triangle (London and Sonoma:Brealey, 1996), pp. 49-61; Robert A. Manning, "The Asian Energy Predicament,"Survival, Vol. 42, No.3 (Autumn 2000),pp. 73-88.

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governmentof Kazakhstanhas startedto send back Uighur guerrillas who hadescapedfrom Xinjiang.6 Economic Development

Xinjiang, like the whole westernregion of China, has sufferedfrom relative neglectcomparedwith the easternseaboardsince the beginningof economic reforms in 1978. Indeed even before that Xinjiang had been excludedfrom the massive'third line' industrial investmentsof the late 1960sand 1970s, intendedto constructan industrial reservebasein caseof foreign invasion, becauseit had been regardedas too vulnerable to attack from the Soviet Union. Since 1978 the disparity betweenthe economicoutput of the easternand westernregions of China has grown wider. Although over the period 197891 the ratio of per capitaoutput of eastto west fell from 385 to 316 percent, by 1995 it had risen againto 454 percentand is still rising? And the average annual growth rate for China, as a whole over both periods combinedwas 9.8 percent, for the easternregion 12.8 percent,but for the westernregion only 8.7 percent.8 Xinjiang itself improved its economicposition over the reform period. Its economic growth rate since 1978 was above the national averageat 10.8 percentand well abovethe averagefor the westernregion.9 It becameable to support 60 percent of its fiscal expenditurefrom its own resourcesin 1998, where the figure in 1978 was 41.9 percent.1O Furthermoreby the late 1990s it was 'exporting' two and a half times more goods to the rest of China than it 'imported',where in 1978 it 'imported' three and a halftimes more than it 'exported'.So it had becomea more importantfactor in China's economicdevelopment. A large part of the improvement could be attributed to its 'black and white' strategy,i.e. concentratingupon oil and cotton production.By 1997 it 6 http://dailynews.muzi.comlcgillatelineinews.cgi?p=41217&I=English 7 Liu Yuan, "Zhongxibu kaifa ying chongxin shenshidejige wenti" (We must Profoundly Rethink the Openingof the Centraland WesternRegions),Zhongguoguoqingguoli, No. 12 8 (1999),p.14. Yang Huolin and Yang Yingtian, "Cong jihua pinghengdao da kaifa, jianxi xin zhongguo xibu fazhan zhanluedeyangbian" (From PlannedEquilibrium to Great Opening: A Brief Analysis of the Evolution of the Strategyto Developthe WesternRegion in the New China), 9 Zhonggongdangshiyanjiu,Vol. 4 (2000),p. 16. HuangJun, "Gaigekaifang ershinianXinjiangjingjide fazhan" (The EconomicDevelopment of Xinjiang During Twenty Years of Reform and Opening),Xinjiang shehuijingji, No.6 (1998),p. 36. 10 Li Xuejun, "Xinjiang caizhengkunnandeyuanyinji huanjieduici" (The Causesof Xinjiang's FinancialDifficulties andthe Way to SolveThem),Xinjiang shehuijingji,No.2 (1999),p. 28.

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was producing9 percentof China'soil, 22 percentof its cotton, 21 percent of its sugarbeetand 19 percentof its wool, as well as 7 percentof its natural gas.11 Yet in the early 1990sXinjiang was reporting annualincreasesin output of around 6 percent,i.e. near the bottom of all the regions of China, when the national averagewas around 13 percentand Guangdongwas reporting around20 percent.Per capita incomeswere still considerablylower than in easternparts of China. This was particularly true of farmers and herdsmen, whose per capita income in 1997 was only 60 percent of the national averageand only roughly 20 percentof that in Guangdong.In 1985 it was in 14th place among provincial-level authorities and in 1997 it was in 25th place. Still 520,000peoplewere below the official poverty line of 625 RMB per year (at roughly us $75 much lower than the World Bank figure of US $1000 per year), with a disproportionate number among the ethnic minorities. And while its fmancial dependenceupon the central government had fallen comparedwith 1978, it had begunrising again during the 1990s, with no apparentendin sight.12 It is only in the secondhalf of the 1990sthat anxietiesover the growing gap betweenthe developmentrates of easternand western China became more common among central policy-makers.Since the central government was feeling itself increasinglyshort of funds of its own, someadvocatedthe general solution of attracting more foreign direct investment,if necessary through long-term leasing of resources to foreigners.13 This kind of approach won increasing acceptability. It led the Chinese authorities to allow foreign oil companiesto engagefor the first time in on-shoreoilexploration in Xinjiang, not least becausethesecompanieswere thought to have technologiesthat would enable them to discover oil that otherwise would havebeeneither unknown or unrecoverable.Neverthelessthe various agenciesinvolved in the oil industry in China were not easily persuadedof the need for foreign participation in a national strategicassetand allegedly the foreign companieswere only grantedconcessionsin the most intractable regions. More recently, however, Beijing has seemedto conclude that it would need more positive measuresto develop the economy of the region. And 11 HuangJun,"GaigekaifangershinianXinjiangjingjide fazhan,"pp. 37,39.

12 Qi Wenli, "Dui "Xinjiangde zhuyaoweixian lai zi minzu fenliezhuyi" zhei kexuelunduande zairenshi" p. 74; Li Xuejun, "Pinkun diqu caizheng wenti yanjiu," (Researchinto the 13 Financial Problems ofImpoverishedRegions),Xinjiang shehuijingji,No.5 (1999),p. 43. Ah Siqi, "Zhongguoxibu jingji tengfeizhi lu," (The Way for China's WesternRegionsto Soar),in Zhongguoredian (Hot Issuesin China)(Beijing: Zhongguotongji chubanshe,1999), p.184.

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provided it was sure that it could retain control of the political situation, the new investmentswould not be put at risk. In November 1999 the central governmentand the CCP Central Committeeheld a central economicwork conferencethat launcheda strategyfor speedingup the developmentof the whole of the westernregion. And in March 2000 the StateCouncil set up a leading small group to direct this process.14 The government of the Autonomous Region responded by concluding that without massive developmentof the oil and gas industry there,the Regionwould nevermake dramaticprogress.15 And in January2000 the centralgovernmentannounced that it was going to invest US $8.45 billion in Xinjiang to build up the infrastructurethere over the next five years. Around $3.5 billion would go on road and railway projects, $2.5 billion on a hydro-powerproject, $1.2 billion on a natural gas pipeline linking the Tarim Basin and Shanghai,and $1.2 billion on environmentalprojects.16 Yet there remain many problems and uncertainties. The Autonomous Region (AR) continuesto face difficulties with water shortages,so it has decided to reduce cotton production. There is still much less small-scale industry and private enterprisecomparedto other parts of the country, which somethink will restrict the region'scompetitivity. Thereis too much income inequality within the AR. And both the AR- and county-levelgovernments are still too dependent upon financial subsidies from Beijing - an increasingly important national issue, as 24 out of 31 provincial-level administrationsnow need subsidiesfrom the centre.There is relatively little FDI in the region, certainly with the exceptionof the oil and gas industry. All of this posesquestion marks over the region's ability to eradicateits poverty.17 14 15 16 17

Yang Huolin and Yang Yingtian, "Cong jihua pinghengdao da kaifa, jianxi xin zhongguo xibu fazhanzhanluedeyangbian,"pp. 17,36. Xu Xifa, "Jiakuai shiyou kaifa, cujin Xinjiangde fazhan yu wending" (Expedite Oil Extraction, Promote Xinjiang's Developmentand Stability), Xinjiang shehuijingji, No.5 (1999),p. 67. http://dailynews.muzi.com/cgi/lateline/news.cgi?p=56281 Ablat Abdurashit, "Zai zhongyangxibu da kaifa zhanlue zhidaoxiajiakuai Xinjiang kaifa jianshi bufade silu yujucuo" (Acceleratethe Constructionof Xinjiang's OpeningUp Under the Direction of the Centre'sStrategy for Opening the WesternRegion: The Thinking and Motives Behind the Measures),Xinjiang shehuijingji, No.2 (2000), pp. 1-5; Yang Lixing, "Xinjiang ke chixu da kaifazhongshuilijianshidezhanluegouxiang"(The StrategicRationale for the SustainableExpansionof Xinjiang's HydroelectricPower),Xinjiang shehuijingji No. 2 (2000), pp. 9-13; ShengMengxiong,"Shei lai kaifaxibu?" (Who Will Come to Open the West?),Zhongguoguoqingguoli, Vol. 7 (2000), pp. 7-9; Song Ling, "Xinjiang quyu jingji fazhanzhongde jige zhongyaowentizhi wojian," (An Assesmentof SeveralImportantIssues in the Economic Developmentof the Xinjiang Regional Economy),Xinjiang shehuijingji, Vol. 6 (1999),pp. 13-21;"Xinjiang caizhengpingheng wenti fenxi" (An analysisof Problems in the FinancialEquilibrium of Xinjiang), Xinjiang shehuijingji, No.3 (1999), pp. 15-22; Li

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

Suppression of Secessionism

Finally, the government has continued to crack down on dissidents in Xinjiang too. In the spring 1999 Amnesty Internationalpublisheda report that recorded210 death sentencesand 190 actual executionsin Xinjiang, mostly Uighursaccusedof subversionor terrorism.18 THE BIGGER PICTURE IN CONTINENTAL ASIA

As was indicated in the introduction to this chapter, the pattern of internationalrelationson the continentof Asia haschangedfundamentallyin the 1990s. The result has been increasingwarmth in Beijing towards its former antagonists,Russia and India, accompaniedby a greater coolness towardsPakistan. The threemain catalystshave beenthe collapseof the Union; the victory of the Talibanin Afghanistan;the nucleartestsin India andPakistan. The Impact of the Collapse of the Soviet Union

We have alreadyoutlined the impact of the collapseon CentralAsia and its relations with China. What is also important to note here is that it also fundamentallyalteredthe dynamicsof relationsbetweenRussiaand China. Where Russia/theUSSR had been a genuine superpower,now it was diminished and declining. By contrastChina was a strengtheningpower. It was true that they had many common interests.Whilst both now wanted enhancedtrade with the West, they also wantedto roll back the overweening influence of the US (as they perceivedit). So in 1996 PresidentsYeltsin and Jiang Zemin held a summit at which they declareda 'StrategicPartnership'. Then, and on subsequentoccasions,the two governmentshave repeatedthe declarationthat they were opposedto governmentsthat wished to impose their will on others. A recent reflection of this has been the suspicion in both Moscow and Beijing about NATO's long-term ambitions. This beganwith the plans for NATO enlargementeastwards,but it was further heightenedby NATO intervention in Kosovo. According to one Chinese commentator,the real Xuejun, "Pinkun diqu caizhengwenti yanjiu" (ResearchInto the Financial Problems of ImpoverishedAreas), Xinjiang shehuijingji, No.5 (1999), pp. 43-6; Xiang Huaicheng, "Guanyu1999nian zhongyanghe difang yusuanzhixing qingkuangji 2000 nian zhongyang he difang yusuancaoandebaogao"(A Reporton The Implementationof the CentralandLocal Budgetsfor 1999and on the Draft CentralandLocal Budgetsfor 2000),Zhongguocaizheng Vol. 4 (2000),p.5. 18 The&onomist,May 1~ 1999,p. 83.

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CmNAANDCEN~AS~

reasonsfor NATO's actions were fIrstly, to contain Russianinfluence in the Balkans,but secondly,in the long term to extendNATO forces throughout the Balkans and ultimately into Central Asia.19 Another analystproclaimed the enormous strategic signifIcance to China of Eurasia, arguing that the United States believed in the old adage of Mackinder that whoever controlled Central Asia also controlled the world. NATO's actions in Kosovo, even if undertaken for humanitarian reasons, had heartened secessionistsin Xinjiang. Hence China would need to challengethe gradual expansionof American or US-backedpower over it. 2o On the Russianside ex-PrimeMinister Primakov declaredin Politique Internationalethat NATO intervention in Kosovo has endedthe chancesof its security co-operation with Russia,21 although subsequentlyacting PresidentPutin raised again the possibility of Russiaultimatelyjoining it. Of coursethis does not necessarilymean thatRussiaand China will be able to tum this marriage of convenienceinto one of passion. There still remainsa considerableamountof warinessin Moscow about the long-term implications of a China that is steadily growing more powerful, perhapsin the second decade of the 21st century.22 And NATO has been mending bridges with Russiasince the conflict in Kosovo. Nevertheless,the interests of the Russian and Chinese states may coincide sufficiently to sustain concerteddiplomatic actionboth globally andregionally. The Victory of the Taliban

This has profoundly shakenthe balanceof power in the middle of Asia, if not yet in Central Asia itself. Where in the 1980sChina had been happy to co-operate with the US and Pakistan in supporting Muslim rebels in Afghanistan, so as to undermine the Soviet-backedregime in Kabul and ultimately weakenthe SovietUnion itself, China now finds itself much more ambivalent, if not hostile, to the Taliban regime. In part that is because Afghanistan sharesa tiny frontier with Xinjiang, so that there is a smal~ 19 Yang Naichu, "Lun 21 shijichu woguode junshi anquan ji xiangguan wenti"

(On Our Country'sMilitary Security at the Beginning of the 2I~ Century and SomeRelatedIssues), Xinjiang shehuijingji, No.4 (1999),p. 11. 20 Meng Xiangqing, "Woguo anquanhuanjingbu rong guofen leguan" (It Is Not Easy To Be Over-OptimisticAbout Our Security Environment),Zhongguoguoqingguoli, No.8 (1999), pp. 29-31. The sameargumentis madeaboutthe implicationsof the independence movement on Taiwan; Qi Wenl~ "Dui "Xinjiangde zhuyaoweixian lai zi minzu fenliezhuyi" zhei kexue 21 lunduandezairenshi,"p. 74 22 Cited in The Times,February7th 2000,p. 16. See, for example, Dmitrii Trenin, Kitaiskaya problema Rossii (Russia'SChina problem) (Moscow:Moskovskii TsentrKamegi, 1998).

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albeit unlikely, dangerof the civil war therespilling over into China. A secondcauseof concernhas beenthe Taliban'sopen toleration of the cultivation of opium, and the clandestineexport of drugs. Even though most of the users are found in the West, China has become one of the major channels for exporting the drug. The money that it produces has also increasedthe corruption inside China. So Beijing has definite reasonto be unhappywith Afghanistanon thesegroundstoo. But most importantly of all, however,the rise of a fundamentalistIslamic state in Afghanistan has created a much more serious threat for China, especiallyas the Taliban have shown themselvesto be eagerproselytisersin other countries. Even though there is not the same possibility of ethnic solidarity reinforcing religious solidarity (the majority of the Taliban are Pathan,not Kazakh or Uighur), neverthelessthe fact of individual supporters of the Talibantrying to win over convertsis a defmiteworry to China. In fact in 1997 Russiaand China joined with Kazakhstan,Turkmenistan and Kyrgyzstan in signing a declaration in Shanghai that pledged cooperationin foreign policy. One of the main purposesof this agreementwas to prevent separatistsfrom one country mounting their campaign inside another. All of the governmentsagreedthat they would not allow that, a declarationmade all the easierto repeatat the 1999 summit in Bishkek, as only one weekpreviously,an allegedlyMuslim group had kidnappedseveral people,including four Japanese geologists,there. But in addition to building mutual confidencein the region so that no one would embarkupon territorial expansionat the expenseof a neighbour,this group also showedthat it sharedcommonviews of the dangerof the current regime in Afghanistanfor all of them. Whetheror not they were willing to become involved in Afghanistan militarily, they were all prepared to collaboratediplomaticallyto isolatethe Taliban as far aspossible. Nuclear Tests in India and Pakistan

The competitiveround of nucleartests carried out by India and Pakistanin May 1998, followed soon afterwards by ostentatioustests of delivery missiles, was a major setbackfor Chineseforeign policy. China had long beenthe only nuclearpower in Asia and, whilst it enjoyedthat status,it also had declareda no-first-use policy of nuclear weaponsagainstnon-nuclear countries. Thus, in Chineseeyes, it was not a nuclear threat to any of its neighbours,exceptRussia. The Indian and Pakistanitests underminedthat status.More importantly and more worryingly, the Indian DefenceMinister, GeorgeFernandes,openly declaredthat one of the chief reasonsfor India's

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CHINA AND CENTRAL ASIA

decision was uncertainty about China's future intentions. At its most extreme,this could be taken as doubting China's word on no-frrst-use.But once India had carried out thesetests,Pakistancould no longer dependupon China'sunconditionalsupport,for China was not obliged to threatennuclear war for the sakeof defendingPakistanagainstIndia, indeedit would not do so. So, in addition to the nationalistoutragein the Pakistanimilitary against India and the immediate demandsthat Pakistan follows suit, there was a rational calculation of the risks which also pointed in this direction. But in turn too, once Pakistan had begun its own tests, it was no longer so dependentupon China for support. Then China no longer neededto be so committedto Pakistan.It increasedboth the risks of nuclearwar in Asia and also China'sfreedomof manoeuvre. Events in Afghanistanwere also important in the rebalancingof China's relations. The victory of the Taliban was largely attributable to the active supportof the Pakistangovernment,or at least sectionsof the military. From the Chinesepoint of view, the result was the almost completevictory of a fundamentalistMuslim movementfor the first time on China'sborders.This heightenedfears about the contagionof such views spreadinginside China, especiallyXinjiang. It wasnot the action of an ally. The consequenceof this could be seen in spring 1999 when Pakistan launchedits surpriseattack on Kargil in Kashmir. Not only did this provoke strong condemnationfrom the US, it also provedtoo provocativefor China. So when then Prime Minister Sharifwent to Beijing on an official visit to try to drum up supportwith effusive praisefor pastSino-Pakistanico-operation, he was given a dusty responseand had to cut short the visit. Subsequent Chinese statementswere less than completely supportive of the Pakistani line on Kashmir. Of course, China cannot afford to cut all of its links with Pakistan.For reasons of continuity and the sense of the need to maintain long-term friendships, China would not wish this. Equally important was a realist consideration.An isolated Pakistanwould have nowhere to tum except to the Islamic world for support, and possibly North Korea for missile technology. That might make the danger of fundamentalistIslam rolling eastwardstowards China more real, at a time when it seemsto be on the wane in Iran. So China will seek to retain some ties with Pakistanand to play moreof a balancingrole in SouthAsia. But that also means that China now has new opportunities to explore collaboration with India over a range of common interests. Chief among these is the international economic order. Already we have seen similar speechesfrom Indian and Chinese leaders condemningthe WTO for its

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neglect of concernsof Third World countries.23 Once again the possibility opensup of China and India working togetheras spokesmen,and possibly leaders,of the Third World in dealingswith the 'West',just as they did in the secondhalf of the 1950s,until the borderwar froze their relationship. CONCLUSION

This chapter has highlighted changesin China's relations with Xinjiang, with Central Asia and with continentalAsia, as they have evolved in the 1990s. It is of course too early to say that any of these changesare irreversible. If the nationalist opposition in Xinjiang grows, then that could still put a questionmark over Beijing's willingness to invest huge sums of money developingoil reservesthere and the meansof transportingit to the rest of the country.And a crackdowntheremight sourChina'srelationswith Middle EasternIslamic states. In CentralAsia, there is a currentpolitical stability in all of the countries, and Beijing has takengreatpains to cultivate good relationswith the current leaders. But there is still disappointment over the lack of economic developmentand that too puts a questionmark over the future. None of the leaders there has been open about their succession,nor do they seem in danger of imminent disappearance.But if the statesthere fail to achieve significant economic developmentover the next few years, then the next generationof political leadersmay well demandmore radical changes.That could put in jeopardythe cosy relationshipthat Beijing has built up with the current leaders.And the spreadof Islamic armedoppositionin the south of CentralAsia, highlightedby the kidnappingsin Kyrgyzstanin summer1999 with perhapsa hundredpeoplebeingheld, is a worrying trend. China's own generalplace and role in the wider Asian regional context will still be strongly influenced by developments in the three key neighbours:Russia,India andJapan. And in continentalAsia more generally,thereare only the first attemptsat collaboration betweenChina and India. There are still a lot of challenges that needto be overcomebefore a fuller reconciliationtakesplace, not least the difficult issue of the territory that India claims China took at the end of the 1962 war. It will require a lot of confidence-buildingmeasuresbefore that problem can be resolved- althoughthe successof Russiaand China in coming to agreementssince the mid-1980safter the vitriolic mutual verbal attacks in the 1970s is an encouragement.Relations between Russia and China now, as mentionedabove, have a superficial warmth and cordiality, 23 http://www.stratfor.comi(l1January2000).

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but still no fundamentaltrust. The nationalism thatperiodically rearsits head in Russiandomesticpolitics may at some pointturn againstChina if it seems as though the balanceof forces in northern Asia is tipping too strongly in favour of China. And Afghanistanremainsthe joker in any conceivablepack of cards in middle Asia. However successfulChina may have been in its diplomatic efforts to pressurethe CentralAsian statesto refuseassistancefor secessionistsfrom Xinjiang, that could be nullified if Afghanistanprovides support for them instead. And a few reports have suggestedthat China attempteddiplomatic contactsvia Pakistanwith the Taliban regime in early 1999 in an attemptto achieveco-operation.24 So far, though,the resultshave been inconclusive. Further attacks by bands of Muslim guerrillas on Kyrgy:zstan and Uzbekistan in the summer of 2000 have causedfurther anxiety. On the other hand, the Chinese authorities have now concluded that, whateverthe risks, there is no alternativeto committing large resourcesto developXinjiang. The country is too much in needof the resourcesthat the region can bring, as well as of enhancedtransportlinks with its neighbours to the north andwest,for it to keeppostponingdecisions. If in generalChina continuesto grow economicallymore powerfu~ then its sphereof influence will also expand.This will not just be limited to the eastof China - the Pacific, SE andNE Asia. It will also include China'swest and north. In part that will be built upon whateveroil and gascan be found in the region.But it also is a consequence of the endof the Cold War and the looseningof security relationshipsthat has taken longer to show up than in Europe.It will meanthat Chinacan becomenot merely an ocean-goingstate again,but also aspiregenuinelyto be the 'middle kingdom' of Asia. And if all goeswell, the surprisingpredictionsthat have beenmadeabout the future of Xinjiang may be closer to reality than we currently tend to expect.For example,it has beensuggestedthat in the 21st centurythe North West, and especially Xinjiang, might become the 'commercial tower' of Asia.25 In that caseXinjiang will likely becomethe richest region in China basedupon the exploitation of its natural resourcesand agriculture.26 If that happens,then the rest of CentralAsia will sharein it. It is unlikely to occur, however,muchbeforethe middle of the 21 st century. 24 Far EasternEconomicReview,March 11th 1999,pp. 21-2. 25 Hua Shan, Yao Yize and Huang Tao (eds.), Da yuce: 21 shijide Zhongguo(The Great Forecast:China in the 21~ Century)(Beijing: ZhongyangMinzu Daxuechubanshe,1994),p. 59. 26 Xu Xiaochun, "Zhongguo zai weilaide 50 niannei jiang chengwei shijieshangzui fadade guojia" (In the Next 50 Years China Will Becomethe World's Most AdvancedNation), Weilaiyu Fazhan,No.3 (1999),p. 47.

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Part III

Domestic Challenges

Chapter 10

Ethnic Conflict and Accommodation in China 1

Mette Halskov Hansen

INTRODUCTION

In the agitated atmosphereafter NATO in 1999 dropped a bomb on the Chineseembassyin Belgradesomeyoung Mongols, Han and Tibetan - in a Tibetan area in China painted anti-American slogans and skulls on their walls. In line with the central news they praisedSlobodanMilosovic as a strong man -a man who would hold on to his country and fight againsta division of it. A few days later I realisedthat severalother TibetansI knew in the sameregion - scholars,cadresand tradesmen- were scepticaltowards the presentationof Milosovic as they saw him on TV. They had heard rumours of ethnic cleansing through people capable of receiving and understandingnews from abroad. They expressedconcernand worry that similar situationsmight develop in China. Someexpressedsurprisethat the Americanswould take action againstthe Serbsin Kosovo but support the Turks againstthe Curds. And how, they wondered,would the United States reactin caseof an outburstof ethnic conflicts in China?One could fmd a lot more examplesillustrating the fact that many people belonging to ethnic minorities in China today are engagedin and try to follow news of ethnic conflicts in the rest of the world. They follow the Chinesenews where the This is a slightly revisedversionof a paperpresentedat the conferenceChina in the Regional and Global Post-KosovoGeopolitics, Copenhagen,February2000. A different versionof the paperwas presentedat a World Bank seminar,Nov. 1999.

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

governmentseeksto promote Chinesenationalismfor all ethnic groups in unity, partly through the condemnationof all so-called "splittist elements" from the presidentof Taiwan to the Dalai Lama. Nevertheless,with the developmentof electronic communicationand the possibilitiesof engaging in international relations, the government is no longer capable of maintaining a monopoly on how to representethnic relations and conflicts taking place outside or inside China. The governmentfocuseson peaceful relations between ethnic groups to the degree that it suppressesnews of conflicts inside China. At the same time, the topic of ethnic relations in China (and elsewhere)tend to reach the global news and Western media only when they have turned into conflicts. Long-term seemingly stable relationships between different ethnic groups without great outbursts of violenceor othertypesof direct expressionsof conflicts do not makenews. The reality for mostpeoplebelongingto ethnic minorities in China is that they live in areastogetherwith often large numbersof recently immigrated members of the ethnic majority, the Han. Large-scale Han Chinese migrations since the 1950s to the Western regions, mainly inhabited by ethnic minorities, havebeena major sourceof conflict and discontent.But at the sametime, most of China's approximately100 million minority people live togetherwith Han immigrantsand engagein different kinds of relations with them that are mostly not characterisedby violent conflicts. Due to the lack of qualitative researchon the Han living in minority areaswe have a very limited knowledge of these Han settlers' current ways of life, their relationsamongeachother, relationsto the stateand government,and to the minorities among whom they live. 2 This essay discussessome initial fmdings from a fieldwork basedresearchproject concerningHan settlers since the 1950sin two minority areasin China: The Tai AutonomousArea of Sipsong Panna in Yunnan Province and the Tibetan Autonomous Prefectureof Gannanin GansuProvince.3 2 Literature concerning HanChinesemigrationsto minority areasinclude for instanceBurton Pasternakand Janetw. Salaff, Cowboysand Cultivators: The Chineseof Inner Mongolia, (Boulder, SanFrancisco,Oxford: WestviewPress,1993); Li Xiaofang, Neidi ren zai (Lhasa: Xizang renmin chubanshe,1996); Ma Rong, "Economic Patterns,Migration, and Ethnic Relationshipin the Tibet AutonomousRegion,China" in C. Goldschneider(ed.),Population, Ethnicity and Nation-Building (Boulder, San Francisco,Oxford: Westview Press, 1993); Henry G. Schwarz,"ChineseMigration to North-WestChina and Inner Mongolia, 1949-59," The China Quarterly, No. 16 (November-December,1963), pp. 62-75; GrahamE. Clarke, "The Movementof Populationto the West of China: Tibet and Qinghai" in J. M. Brown and R. Foot (eds.),Migration: The AsianExperience,(Basingstoke:Macmillan, 1994). The fieldwork was carriedout mainly between1996 and 1999,but a large amountof dataand interviews were also collected in connection with my previous fieldwork on minority education(Mette Halskov Hansen,Lessonsin Being Chinese.StateEducation and Ethnic Identity in SouthwestChina (Seattle:University of WashingtonPress,1999)).

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ETHNIC CONFLICT AND ACCOMMODATION IN CHINA

HAN CHINESE MIGRATIONS TO MINORITY AREAS

Chinesecolonisation of areasin the periphery of the Chineseempire has beenorganisedby the Chinesestateat leastsincethe Qin Dynastyfrom 221 Be. Migrants were recruitedfor military units and provided with new land to open up for agriculture. The Qin emperorin 221 BC orderedmore than 500,000military coloniststo settle in the south, and during the Han Dynasty (206 BC-220 AD) the northernbordersof Chinawere colonisedthroughthe resettlementof more than one and a half million Chinese,provided with housing,food, clothing and sometimeseven travel allowances.4 Throughout Chinesehistory resettlementhas beenseenas a tool for curbing unrestand easing the population pressure on Chinese land. In addition to the governmentsupportedresettlementsof Chinesein non-Chineseareas,largescale individual migrations have also taken place as a result of overpopulationof areas,wars, famines,epidemics,natural catastrophes,etc. According to JamesLee, private migration appearsto have been larger in scalethan governmentorganisedresettlementsafter year 1000 and until the late 19th century. After 1949 the Communistgovernmentof the People'sRepublic of China (PRC) continued the historical tradition of transferring Chinese from the centralparts of the country to borderareasto establishpolitical, cultural and economic control, and to develop these regions according to the central planning. The tables below suggestthe scope of Han migration to some major minority areassince 1949. They are for a large part madeon basisof official Chinese statistics, and they exclude the often large groups of unregisteredmigrants,seasonalmigrantsandtroopsstationedin the areas. One of the minority regions that has experiencedvery substantialHan immigration since 1949 is Xinjiang Uygur Autonomous Region, largely inhabited by different Muslim groups. In 1948 the population of Xinjiang was about four million with approximately6 percentHan.5 Mainly due to large immigrationsof Han this figure has increased,so that the Han in 1991 made up almost 40 percent of the total population of 15,280,300people (Table 1).6 Someof the negativeresultsof this large-scaleimmigration have beentensionsand at times violent strugglesover accessto resources,control of marketsand political decisionmaking. Today, a secondgenerationof Han 4 JamesLee, "Migration andExpansionin ChineseHistory" in W. H. McNeill and R. S. Adams (eds.), Human Migration: Patterns and Policies (Bloomington: Indiana University Press, 1978),p. 22. 5 Doak A. Bamett, China's far West: Four Decadesof Change (Boulder, San Francisco, 6 Oxford: WestviewPress,1993),pp. 343-44. Economy Departmentof National Minzu Commissionet al. (eds.), Zhongguominzu tongji (Statisticsof China'sMinzu) (Beijing: Zhonggguotongji chubanshe,1992),p. 60.

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settlers has grown in Xinjiang and this again creates new kinds of relationshipsbetweenthe Muslims and the Han. Table 1: Proportionof Han Chinesein Xinjiang 7 100 80 60 40 20 0 leNon-HID

III H""

1948 94 6

I

I I

1991 62 38

In Inner Mongolia heavy immigration of Han took off especially after 1911 when the rulers of the Republic specifically encouragedHan peopleto settle there. In 1991 the total population of Inner Mongolia was 21,647,900 people of which nearly 20 percentwere minorities, most of them Mongols, and 80 percentwere Han.s The Han populationgrew from about5 million to over 17 million between 1949 and 1991, but the proportion of Han as comparedto Mongols and other non-Han, fell from about 85 percent to about 80 percent. The increaseof the Han population was mainly due to immigrationof farmers. Though Han immigration has taken place to all minority areasof China since 1949, most debateshave centred on those to Tibet. According to official Chinesestatistics the population of Tibet AutonomousRegion was 2,217,800 in 1991 of which only 2,9 percentwere Han.9 Again, this figure excludesmilitary troops and the large numberof unregisteredand temporary settlers.The ChinesesociologistMa Rong has collecteda numberof figures from China on Han immigration to the autonomousregion of Tibet. His figures suggestthat the Han population increasedfrom less than 20,000 before the mid-1950s to more than 120,000 in 1980 when the Han are supposedto have madeup about6 percentof the population.Since then the 7 Sources:Barnett, China'sfar West: Four Decadesof Change; and Commissionfor Editing Historical Annals in Xiahe County GansuProvince (ed.), Xiahe Xian zhi (Annals of Xiahe 8 County), (Xiahe: Unpublished,1997). Economy Departmentof National Minzu Commissionet aI., (eds.),Zongguo minzu tongji 9 (Statisticson China'sNationalMinorities), Beijing: Zhongguotongjii chubanshe,1992),p. 60. Ibid., p. 60.

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number has decreasedand Ma Rong arguesthat there were about 65,000 civilian Han in Tibet in the mid-1990s,or less than 3 percent.1O Contrary to what is sometimesassumed,the heaviestmigration of Han to Tibetan areas has not been to the area officially recognised(since 1965) as the Tibetan Autonomous Region (TAR). The largest Han immigrations have been to Tibetan areasoutside the TAR - areasthat historically were part of Tibet. Table 2: Proportionof Han Chinesein 6 Tibetanautonomousprefecturesin Qinghai11 100

80

60 40 20 0 la Nm.H", I" Han

1953

92 8

1990

I I

63 37

Most of theseTibetan areasoutsidethe TAR are today grantedstatusas local autonomousareas(prefecturesor counties) within other provinces such as the provinces of Qinghai, Gansu, Yunnan and Sichuan. Proportionally the largest Han migration has been to Tibetan areas in the present Qinghai province,the former Amdo region of Tibet. As shown in Table 2, there has beenan increasefrom 8 percentHan in 1953 to 37 percentin 1990, mainly due to large-scaleimmigrations.12 These figures only give an idea about the scope of Han migration to minority areassince 1949. In all minority areasit is impossibleto fmd exact and reliable figures concerningChineseimmigration for severalwell-known reasons: There is an on-going spontaneous, individual and largely unregistered migration, figures concerning the number of troops are normally not included in official statistics, and many Han stay for only shorter periods of time or during certain seasons,and are therefore mostly \0 Ma Rong, Xizang de renkou yu shehui (Population and Society in Tibet) (Beijing: Tongxin

chubanshe,1996), p. 67. II Sources: Ma, Xizang de renkou yu shehui; and Commissionfor Editing Historical Annals in 12 Xiahe County GansuProvince(ed.), Xiahe Xian zhi. Basedon a combinationof figures from Ma Rong,Xizangde renkouyu shehui, pp. 61-63; and Economy Departmentof National Min zu Commissionet al. (eds.), Zhongguo minzu tongji, pp. 833-868.

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

excludedfrom statistics.Finally, it is clear that the proportion and increase of Han settlersvaries considerablyfrom areato areaand from town to town within, for instance,autonomousprefecturesand counties.13 Considering the sheer scale of Han immigrations to minority areas in recent time it is no wonder that Chineseresettlementin these areashave become one of the most debated aspects of the Chinese government's approachto non-Hanpeoplesand areaswithin the PRe.It is debatedamong political activist groups, politicians and, to a somewhat lesser extent, scholarsoutside of China. It is describedand evaluatedin many Chinese publications on minorities. And it is an issue discussedand frequently commentedon by many minority and Han people living themselvesin minority areas.However, the topic of Han migrationsto minority areasis so politically sensitive that most discussionsin and outside China tend to be directed by two contradicting discourses.Both discoursesfail to provide basicknowledgeof who the Han settlersare, and how local ethnic relations betweendifferent ethnic groupsin China actually evolve today as a result of Chinesemigration. The fIrst is the official Chinesediscoursewhich has dominatedmost of China's publications and information about Han settlementsin minority areas and ethnic relations in general since the 1950s. This discourse maintainsthat the Han settlersconstitutea group of civilisers that has fIrst of all provided those minority areas,consideredto be backward in terms of economy as well as culture, with opportunities for development. Han migration to minority areasis presentedas a patriotic move to integratethe minorities, developtheir areasand ensurethat all peopleno matterof which ethnic origin would stand together in the socialist state with a common identity as a Chinesenation. This is a discoursewhich regardsgovernment organisedresettlementespecially,as purely beneficial for the minorities and the areas they inhabit, although it is also sometimes admitted that resettlementof Han has createdproblemsrelated to, for instance,accessto resources.By and large though, in the Chineseofficial discoursethe Han settlers are presentedas a relatively homogeneousgroup of beneficial civilisers. The other main discourse on Han settlers in minority areas is almost diametrically opposedto this view and dominatesmuch of the debatein the West. It arguesthat Han settlersrepresenta colonising,undemocratic regime that consciously has transferredmillions of Han into areas traditionally 13 SeealsoTom A. Grunfeld, The Making ofModern Tibet (Annonk, N.T.: M. E. Sharpe,1996), pp. 218-222, for a summmy of the problems concerningofficial statistics on the topic of Chinesemigration.

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occupiedby other groupsfor its own purpose- namelyin order to establish political and economiccontrol. It is arguedthat Han migration to thoseareas is part of a communistand Han schemeto eventuallyeradicateTibetan and other non-Hanculturesin the People'sRepublic, and the settlersthemselves areseenas direct representatives of this policy. Although the rationale behind the governmentsponsoredmigrations to minority areashave been to establishcontrol and promote assimilation of minorities, both views probably overestimatesthe power of the state and governmentto foresee and predict the results of their own actions. Han Chinese immigrants have had different reasonsfor migrating, belong to different social classes andconsequentlyalso have unequal relationships with the stateand government.Many of the migrantstoday come as a result of broader reforms in China that have createdhuge unemployment.The governmentclearly seesadvantagesin the fact that someof thesefind work or land in the minority regionsabundantwith unexploitednaturalresources, but at the sametime it would be extremely difficult, if not impossible,for the governmentto actually stop theseimmigrants from going to the regions where they seepossibilities for improving their own economy.In any case, both of the prevailing discourseson Chineseimmigrantsfail to acknowledge the diversity amongHan settlersand tend to reproducea kind of stereotyped image of what is in fact large and diversegroup of settlers.Therefore,they also fail to improve our understandingof how ethnic relations are actually evolving as a resultof the massivemigrationsof Han to minority areas. SOCIAL STRATIFICATION OF HAN SETTLERS

In the two regionswhere I have concentratedmy fieldwork therehas beena considerableincreasein the proportion of Han Chinese settlers since the 1950smainly. The areaof Gannanis situatedin the mountainswhere most of the Tibetansare herdsmen,but where many have also settled down as peasantsor traders, for instance,in the town and villages around the very important Labrang monastery. This Tibetan monastery was a centre of power and economicactivities from the early 18th century until Communist control was establishedin the early 1950s. There is a mixed population today of Tibetans,Muslim Hui and Han. The Tibetans constituteabout 44 percentand the Han more than 48 percent.In the county of Xiahe where most of my interviews were carried out there are about 62 percentTibetans and 26 percentHan.14 Some Han Chinesepeasantsmoved to this place in 14 Commissionfor Editing Historical Annals in Xiahe County GansuProvince(ed.),XiaheXian zhi, p. 526.

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the 1920sand 30s, but the vast majority cameafter the mid-1950s.Gannan is a rather rough areadue to the altitude and coldness,and it is a relatively poor area with very little industry. The local government is trying to promote tourism and this is now also attracting a growing number of individual migrants who work in construction, as traders, in the service sector,etc. The other area, Sipsong Panna(Xishuangbanna),is a sub-tropicalarea, situated on the borders to Burma and Laos. Since the mid-1980s it has rapidly developed into a very popular destination for Chinese tourists mainly. This region has also experiencedan immenseHan migration since the early 1950s.From constituting about 2 percentin 1949 the Han today make up 26 percentof the entire population(820,000),but in the main city the Han make up as much as 50 percent,not including large amountsof unregisteredimmigrants.15 Through myths, stories, and a few very popular TV series, Sipsong Panna is imagined by many Chinese as a natural, unspoiled scenerywith friendly, hospitable inhabitants and, not the least, beautiful Tai women. In 1995 approximately1.5 million tourists visited the area, creating an interesting market for large number of migrant Han in searchof businessopportunitiesandjobs. When I first startedinterviewing Han Chinesemigrants,I tried to focus on their own narrativesof migration, their ways of making senseof their own migration histories,and their current situation in the minority area.I did this in orderto get an imageof how thesesettlersregardtheir own relationshipto the governmentand to the local minorities, and in order to get an idea of how Han migrants'own narrativesof migration are eventuallyconnected,or in someway relatedto, the official Chinesediscoursethat representsthe Han settlers as a homogenousgroup of civilisers and benefactorsin areas regarded as extremely backwards. During the process of fieldwork, I gradually startedto regard the Han migrants, not only as individuals with eachtheir story to tell, but also as part of very different groupsof migrants. Groups that I identifY as being constitutedon the basis of rather common migration histories, common backgroundsfor resettlement,and common social positions that were partly a result of their resettlement.Groups that had almost strikingly commonways of making senseof and narratingtheir own experiencesas Han settlersin a non-Hanarea. Migration as Flight

Very few Han peoplelived in the two field-areasbeforethe establishmentof 15 Infonnationcopiedfrom local, unpublished,hand-writtengovernmentstatistics.

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the PRC. Today they, and their descendants, make up lessthan 10 percentof the local Han population in both areas.In the Tibetan area the frrst Han settlerscamein the 1920sand 30s as refugeesfrom the neighbouringLinxia (then Hezuo) area where Muslim uprisings causedlarge numbersof Han (and Muslims) to flee. Some of them fled to the Tibetan areasand settled down as peasantsrenting land from the Tibetan monasterythat in practice controlledthe areaat the time. They cameindividually or in small groupsor families, and only one village developedinto a pure Han village. The other migrantssettledamongthe Tibetansand Hui. Most of them becamefarmers openingup new land for agriculture; othersstartedsmall hostelsfor traders who came to the important market in Labrang. The land belongedto the Tibetan monasteryof Labrang,andjust like the Tibetan peasants,the newly immigrated Han peasantsdelivered a certain amount of t1.eir agricultural productionas rent to the monastery.Many of theseold migrantsrecalledthat in the beginningthey sometimesexperiencedhostility from the Tibetans,but gradually they were accepted,partly becausethey were a relatively small numberof peoplespreadamongthe Tibetans. Today, exceptfrom one pure Han village, thesefirst immigrant Han live in mixed Tibetan, Han and Muslim villages. The descendantsof these earliest Han settlers in the Tibetan area still tend to marry other Han, but there are also someHan-Tibetanmarriages.They are the only group of Han settlers in these areaswho have a large number of people who speak the local minority language, and who share a number of customs with the Tibetans.Especiallymany of the men speakTibetan and Chinese,and most of them attend the Tibetan Buddhist monasteryduring important festivals. Unlike the two previous groups,they have to a large extent adaptedto the local Tibetan way of life while maintaining some markersof Han culture. Their economyis not different from the local Tibetanpeasants,and they find the Han cadresin the city just as distant from themselvesin terms of access to powerand socialposition,asthe Tibetanpeasantsdo. Migration as Mission It was only after the Communiststook control over the two minority areasin

question that large-scaleHan immigrations took off, and people startedto settle down together in large groups mostly outside local village life. Between the mid-1950s and 70s large numbers of Han settlers came in groups organised by the government. Even within these groups people belongedto different socialgroupsand hadvery different levels of education and relationshipswith the government.They were cadres,soldiers,teachers,

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party officials but also peasantemployeesin state-ownedfarms and forestry centres.They had in commonthe experienceof being sent or recruited by the governmentto go to minority areasin the West Thesepeople (mainly men in the beginning)were supposedto establishcontrol of the areas,make use of the naturalresourcesthere, and eventuallypromotethe economicand cultural integrationof the non-Han into the ChineseCommunistState.Many later returned home, but a number of them stayed in the region, married other Han (mostly from their own placeof origin) and establishedfamilies in their new home-place. Together with all their family members and descendants,they probably still constitutethe largestgroup of Han-migrants in both areas. For the Han Chinesecadres,party officials, teachersand doctors I talked to, moving to their present area of settlement was "an event" or "an experience" in the sense that it had a beginning and an end, and was articulatedor transformedinto an expression.It stoodout from the ordinary, from the ''temporal flow" of experiencesa person constantlyhas.16 It was something to tell stories about - stories where intervieweesput focus on personal hardships, surprise and shock of the living style of the local minorities, and memoriesof being participant in a then important political mission where the collective goals were high and honourablebecausethe individual migrant was part of a collective movementAlthough nearly all migrantstold that they were shockedwhen realisinghow poor andbackward the areasinhabitedby ethnic minorities were when they fIrst came,the place they went to was in fact full of meaningfor them before they came.It had been given meaning through the political propagandathey had all been exposedto before their resettlement-a propagandathat emphasisedtheir own heroic role as membersof a Communistvanguardand representatives of a more civilised world. This world was eventuallyHan Chinese,and they were in this respectgiven the impressionthat they were "civilising envoys" going to help the more backward,who happenedto be non-Han or ethnic minorities. In fact there was a number of very complex individual motives among them for agreeingto go to a minority area: Quite a few migrantsfelt that the only alternativeto migration was to get a badly paid job at home, or no job at all. A numberof migrantsdid not have a choiceat all, due to the policy of sending people to places where they were needed.Others were zealously engagedin the new politicised movementto developthe poor frontier areas. But for almost all of those I talked to the strong political Chinesediscourse 16 Edward M. Bruner, "Experienceand Expressions"in V. W. Turner and E. M. Bruner (eds.), TheAnthropologyoJExperience(Urbana,Chicago:University of Illinois Press,1986),p. 6.

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on their beneficial mission in the minority areas,playedan importantrole in their recollectionsof their own migration. It seemedto constitutea kind of social or resourcethat made eventualconflicts with local minorities easier, and which in any casehelpedto legitimise their own demandsfor positions and accessto resources.As many of them said: "This place would never havedeveloped withoutus". Unlike the refugeesin the 1930s,the majority of governmentsponsored migrants arrived in big groups, sometimesof severalthousandsof people who then settleddown togetheraround,for instance,a state-farm.Together they constructedtheir own houses,startedtheir own schoolsand hospitals and worked together in for instance new state rubber plantations (as in SipsongPanna)or in forestry (as in Xiahe)P Even today, they rarely have close social contactwith local minorities, they rarely intermarry with them, and they hardly ever learn to talk the local language.They were originally sent there to promote the Communist policy, set up schools based on Chinese languageand history, and make sure that local natural resources were now exploitedto the benefitof the entire country. Therefore,they have never been under any pressureto adapt to local ways of life, and their situation resemblesthat of many Russianswho (during the Soviet Union) were sentto outlying regionsof the country.1S Migration as (Last?) Choice?

While government organised migration to minority areas has been significantly decreasedand practically stopped in many areas since the 1980s,new kinds of individual Han migrationsto minority areashavetaken off. Individuals or small groups of Han people in search of working opportunitiesin minority areasmake up most of the recentmigrations.This new kind of migration to minority areasstartedwhen migration becamean option for many joblesspeasantsfrom the early, and especiallymid-1980s. It has further increasedwith the large number of "laid off' (xiagang) workers from the state sector in the 1990s, and with the developmentof markets,tourism and sometimespossibilitiesfor renting or openingup new land in the minority areas. Somepeopleand organisationsin the Westregardthesemigrationsas part 17 Concerningthe state-fannmigrantsin SipsongPanna,seeMette Halskov Hansen,"The Call of Mao or Money? Han Chinese Settlers on China's SouthwesternBorders," The China 18 Quarterly,No. 158 (June1999),pp. 394-413. See for instanceNeil Melvin, RussiansbeyondRussia (London: The Royal Institute of International Affairs, 1995); and Paul Kolstoe, Russiansin the Former Soviet Republics (London,Bloomington:ChristopherHurst,IndianaUniversity Press,1995).

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of a consciousgovernmentschemeto impose Han rule on all minorities. Whereasthesenew migrations are not organisedby the central government in the way that earlier migrations were, they do find strong supportin the rhetoric of the government,and local governmentssometimesdeliberately recruit Han workers to move in and participatein concreteprojects.For the most part, thesemigrations are a spontaneousresult of the need for many peasantsand laid-off workersto find additional income, and from improved possibilities for making a living in areaswhere constructionworkers are needed,where trade is developing acrossinternationalborders,and where tourism has taken off, or started to develop. At the same time, the governmentexpressivelysupportsthesemigrationsas a partly solutionto the problem of the escalating number of unemployed. In a period where peasants,laid-off workers and other people in practice are free to travel whereverthey like in China, where many lack full time work, and where competitionin the cities is very hard, thoseminority areaswhich are starting to develop economically make up an alternative choice for some of the millions of Chinesewilling to movefor work. Though governmentorganisedmigration to minority areas has largely been taken over by individual and spontaneousmigrations there is still a connection between the two. In Sipsong Panna for instance, the vast majority of governmentsponsoredmigrantsin the 1950s,60s, and 70s came from two specific countiesof Hunan.Today, a large proportionof individual peasantmigrantscomesfrom exactly thesetwo countiesin Hunan. They are often distant relativesto someof the earlier governmentorganisedmigrants, they are neighboursto their relatives,or they havesimply heardstoriesfrom other villagers in Hunan aboutthe possibilitiesin the far-away south-western Yunnan (there is even a direct bus now from Sipsong Pannato the two counties in northern Hunan where most migrants come from). In other words, due to the earlier governmentorganisedmigrations from Hunan to 19 SipsongPannain Yunnan,new migrationspatternstodayareestablished. Although thesenew peasantmigrants are also Han and even speakthe sameHunan dialects as the government-organised migrations, they do not have any special relations with the earlier Han migrants. They are differentiatedfrom theseby their low social statusas peasants,and by the fact that they have migrated spontaneously,not as part of a government programme.The governmentorganisedmigrants find that the recent Han migrantslack education,they live poorly to savemoney,they tendto break rules of birth control and the earlier governmentsponsoredmigrantshave a 19 Hansen, "The Call of Mao or Money? Han Chinese Settlers on China's Southwestern Borders."

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strong tendencyto distancethemselvesfrom them. Nevertheless,they often comparethe Han peasantspositively comparedto the local minorities. Many express support for the newly immigrating Han who they feel are contributing to the local economic development.At the same time, some cadresworry about the increasinginflux of individual migrants and would like to keep control over the amount of people allowed to settle down. So far, this hasprovento be completelyimpossible. Most of the government-organised migrants live quite isolated from the minorities. The new-comingpeasantmigrants, on the other hand, engagein a number of direct relations with the Tai, Tibetans or other groups. They tend to come in small groups, as individuals or as couples, and they often take up work that the locals do not want. Someof them rent land and often cheap rooms from the locals, they trade with them and bring goods from outside the area which the locals buy directly from them. In spite of these relations - or maybe becauseof them - they are sometimeslooked down upon by the local minorities. Often local ordinary people'sfrustrationsof not having the lead in the local economicdevelopmentis directedagainstthese newcomerswho are more visible in daily life than the earlier government sponsoredmigrantsand who to a certainextentcompetein the samemarket and for the samejobs as local minorities. In Sipsong Pannafor instance, many people complain that the local government,state-farmsand outside investorshave the power to determinewhat land and forest areasshould be usedfor. But, the most direct forms of resentmentsof minorities againstHan migrants are neverthelessdirected againstthe large numbersof often very poor Han peasantswho are now living and working in the local prefectureor county capitals. They have in fact just as little political economicpower as local minority peasantsand small scale traders, but at the sametime they seemto have certain advantagesin the local developingmarket in terms of language, education, connections and, not the least reputation as Han workers among Han entrepreneurs.Several Han entrepreneursI talked to would deliberatelyonly recruit Han workers from other poor areas,because they were said to be better workers and much more willing to "eat bitterness"thanminorities. So maybeit is not surprisingthat many of the peasantmigrantsI talked to felt that they were betterreceivedin the minority areasthan in the booming coastalareaswhere most of them had already tried their luck before - and failed. As describedby Dorothy Solinger competition for work in the big cities is hard amongmigrants,and they are often criticised there for creating 2o Interestingly,in the minority areasthe very all kinds of social disturbance. 20 Dorothy J. Solinger,ContestingCitizenshipin Urban China: PeasantMigrants, the State,and

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samemigrants are generally praisedby the local govermnentfor initiating and ensuringthe developmentof trade, production,constructionand not the leasttourism. The minorities deliver the goods in terms of beautiful clothes and women, exotic villages and customs,but the Han migrants ensurethat theselocal characteristicsare exploitedcommercially. CONCLUDING REMARKS

The combinationtoday of 50 yearsof large-scalemigrationsof Han Chinese to minority areasand increasingdifferencesbetweenrich and poor people andregions,is worrying for many peopleand governmentcadresin minority areas. In times of scarce resources, environmental concerns of overexploitation of land and forest, increasingpopulationsand competition for markets,many local govermnentsare understandablyunder pressurefrom higher levels of governmentto prevent escalationof ethnic tensions. The step from resentmentand conflicts over accessto resourcesand control of local markets, to resentmentand conflicts basedon ethnicity is often not large. Poor Han peasantsmay feel very frustrated about the unequal developmentin rural Han China and the large cities, but equally poor minority membersmay direct this frustration into resentmentagainstHan Chinese. This happened, for instance, in connection with the Cultural Revolution when many minorities cameto regardthe cultural suppressionas a generalfault of the Han ratherthan of the CommunistParty. In order to understandwho the Han settlers in minority areasare today, what positionsthey occupy,how they relate to the govermnentand, not the least, how they relate to the local non-Han, it is necessaryto study Han communitiesin their local context and not to regard theseimmigrants as a homogenousgroup with commoninterestsand commonperceptionsof, and relationsto, the minorities. Fieldwork amongHan migrantsin minority areas shows that different groups of Han migrants do not share any strong commonfeelings of being united as Han in a non-Hanarea.They are rather divided along lines of social position and class. And local minorities, also belonging to different social strataof society, engagein very different (and mostly peaceful)relationshipswith theseHan. But especiallyin areaswith large-scalein-migrations during the last 50 years there is a tendencythat conflicts that may arise from disputes over accessto resources,different cultural practices, or disagreementsof govermnent policy are given an ethnic dimension or become completely interwoven with differentiation basedon ethnicity. In such cases,Han migrants with completely different the Logic ofthe Market (Berkeley,Los Angeles:University of California Press,1999).

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social, economic and political positions in the area may be perceivedof locally as onecommongroup of "Han migrantsin power". Tibetansliving among Han for generationsin the samevillages engage, for instance,in social relationshipswith these,and conflicts amongthem are rarely, it seems, based on ethnic affiliation. However, becausethe inmigration of Han in a numberof minority areashasbeenso suddenand of a very large scale in the last 50 years, this has createdamong many local minorities a conceptionof the Han as a large, common group with very strong economic interests and opportunities in their areas. They may themselvesmake use of a Han worker to paint their local monastery,but at the same time complain that the Han migrants in general have too many advantagesin local business.The Han have contactsoutsidethe region, they are maybe more used to doing business,they speak Chinese, and they sometimeshaveskills in modernconstruction,for instance,that the locals do not have. Han immigrants initiate much of the thriving businesslife in both of the areas I have researched,or by the second generation of the governmentorganisedHan immigrants. Most restaurantsare run by Han, most shops are run by Han, Han carries out most constructionwork, and Han occupiesmostservicejobs. The dominant discoursein China (and in fact also outside of China) on Han resettlementsin minority areashave presentedthe Han settlers as one group with more or less the same mission in the minority areas.It has, I believe, also influenced the Han settlers'own view of the Han as a group, and it hashad an impact on local minorities' way of conceivingof the Han as one group. During the time of the PRC, minorities and Han alike have been exposed to a very strong discourse on the minorities as being underdevelopedand in need of help from the Han, and this has also beenusedto legitimise large-scalemigrationsof what was presentedas one homogeneous group of Han Chinese "civilisers" into minority areas. In reality one encounters,in the minority areaswhere Han and minorities live together,a number of attitudes and expressionsconcerningthe relations betweenHan and non-Han - betweenmajority and minority - that point in very different directions,but which neverthelessco-exists.In other words, there is not one simple answer as to how relations are betweenminorities as a group and Han as a group in those areas, partly becausethe Han (just like the minorities) do not at all constitute one homogenousgroup with common interestsand socialpositions.

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Chapter 11

Challenges to the Chinese Party-State

t

Stig ThfJgersen

INTRODUCTION

During the post-Mao period, we in the West have tendedto see the major fault line in Chinesepolitics as going betweenon the one side liberal and democraticreformers,and on the other side "conservatives",picturedas diehard defendersof communist ideology who refuse to loosen their grip of Chinesesociety. According to this image, favoured by both China scholars and the media, the liberals threaten the Chinese Communist Party's monopoly of power by promoting political reforms, and they enjoy the support of the young, the well-educated,and the rising middle classwhose worldview will gradually model itself on our own. The liberals have been the heroesof our story for more than two decades,and the most spectacular manifestationof their potential power, but also of their at least temporary defeat,was of coursethe demonstrationsin the spring of 1989, which ended so tragically on Junethe 4th. The famouspicturesof the young civilian in his white shirt facing a tank on Tiananmensquareand refusing to let it pass epitomise to Westernersbetter than any other image the battle betweena rising civil societyand the raw power of a petrified Marxist-Leninistsystem. Even after June the 4th we have kept investing our hopes in a liberal challenge inside and outside the ChineseCommunist Party coming from dissidentsin China and abroad,or from Chineseleaderssuch as premierZhu Rongji whom the Westernmedia havebeenparticularly fond of. Our image A different versionof this paperwaspublishedas "Cultural Life andCultural Control in Rural China: Where is the Party?" The China Journal, issue 44 (July 2000), pp. 129-141. I am gratefulto the editorsof The China Journal for their support.

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of China is thus still dominatedby the idea that relatively advantagedsocial groups in favour of democratic political reforms represent the main ideologicalchallengeto the Party-state. Events in the last few years, however, seriously questionthe continued validity of this assumption.The most spectacularmanifestationof popular discontentin China around the turn of the 21st century, and the one taken most seriously by the authorities, has been the series of sit-ins, demonstrationsand other types of protestsof the followers of the Falungong movement.2 Theseincidentsclearly fall outsidethe schematicrepresentation of liberal political activists picked against a conservativeestablishment.Li Hongzhi and his motley crowd of followers, apparently mainly elderly women and retired workers and cadres do not have the star quality that appeals to a Western TV audience. And their surprisingly stubborn resistanceto suppressionis far from the type of political dissentwe know from the 1980sandearly 1990s. I will not go further into the case of the Falungong here, but in the following I shall try to show that the Falungongphenomenoncapturesvery well an important aspectof the presentstatusand problemsof the Chinese Communist Party (CCP) in Chinese society. At the moment, the most serious and immediate ideological challenge to the Party does not come from a coherentpolitical reform platform supportedby the intellectual elite and the new middle class.It comesfrom the losersin the reform process:the unemployed,peasantsin the inland provinces, the outcasts,and the poor. Thesegroups have no clear political program,but like the Falungongthey challenge the Party by defying the very logic and basic assumptions underpinning Party rule. Among the disadvantagedsectors of modem Chinesesociety, the CCP seemsto have lost much of its legitimacy. The promiseof the 1980swas that when somewere allowed to get rich first, the rest would follow later, and everybodywould benefit in the end. But in the poor inland provinces,the Party has beenunableto deliver the goods?As a consequence,what we are witnessing in China at the moment is, in my opinion, that state-societyrelations in the different strata of the spatial and social hierarchies are moving in opposite directions. In the cities and 2 For more information on the Falungong affair see Benoit Vermander: "The Law and the Wheel. The SuddenEmergenceof the Falungong:Prophetsof •Spiritual Civilisation'," China Perspectives,No. 24 (July-August1999), pp. 14-21; Heike Holbig: "Falungong.Geneseund 3 alternativeDeutungeinespolitischenKonflikts," CHINA aktuell (Februar2000),pp. 135-147. For a comprehensiveanalysisof the rising income inequality in reform-eraChina seeAzizur RahmanKhan and Carl Riskin, "Income and Inequality in China: Composition,Distribution andGrowth of HouseholdIncome, 1988to 1995," The China Quarterly,No. 154 (June1998), pp.221-253.

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developed coastal areas, academic pluralism is growing, and the urban middle class experiences an increasing diversity in lifestyles and consumptionpatterns. This processhas suffered temporary setbacks,and there is still a long way to go before even theserelatively advantagedsocial groupsenjoy full democraticrights. But the generaltrend seemsquite clear: the Party by and large acceptsthat there are a growing number of social fields and activities that it can no longer define and control. Peopleare thus able to live and plan their lives with less and less interferencefrom the authorities. In the rural backwaters, however, and in relation to the poor, the criminals, and others on the fringes of society, the Party tries to tighten up social and cultural control, as conflicts betweenstateand citizens sharpenin the wake of economicpolarisation.Theseconflicts are often more fuzzy and blurred than those taking place inside the well-known paradigmsof liberals vs. conservativesor democratsvs. autocrats,but they still concernthe basic power to define the rules, norms and values of Chinese society. In such conflicts the CCP presentsitself as a civilising agent trying to maintain social order, defend national interests, and fight reactionary and feudal forces, and in this capacity it draws on a number of civilising discourses dating back at least to social reformers active in the beginning of the 20th century. In the main section of this chapter I will try to illustrate this point by looking at someof the ideologicaland cultural challengesfacing the CCP in Xuanwei County in the northeasternpart of Yunnan province.4 In March 1999 and in January2000 I interviewedcounty, township and village cadres from Xuanwei who were responsible for propagandaand culture; local writers and artists; entrepreneursin the cultural field; lineage leaders; and ordinary people in the county seat and in two rural townships - one industrialisedand comparativelywealthy, the other poor and isolated.In the following, I will particularly look at the ideological role, which the local political elite has defined for itself, and the way it relatesto other elites and social groups in rural society. I shall not claim that Xuanwei is representativefor all of China in this respect, but only draw attention to 4 Xuanwei is a "city at county level" (xian-ji shl) in northeasternYunnan on the borderwith Guizhou province. Its populationof almost 1.3 million is 94 percentHan and 5 percentYi, with a dashof other ethnicpeoples,andit is culturally closerto the CentralPlain than to those parts of Yunnan with large ethnic-minority populations.The economy is diversified, with quite wealthy and industrialized areasaround the county seat as well as more peripheral mountainousdistricts, someof which are officially designatedas townshipsin poverty. Coal andtobaccoplayalargerole in the local economy,andthe county is alsoknown for Xuanwei ham,a local speciality.

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someof the multiple ways in which the authority and legitimacy of the CCP is presentlybeingchallengedat the locallevel.5 OFFICIAL PROPAGANDA AND CULTURE

During the Mao-era, the flow of information, culture and art was closely controlledby the propagandaorgansof the Party-state.Today cultural life in rural China has changedtremendously,and the official propagandamachine has lost much of its direct influence on the production, distribution and consumptionof cultural productsand on villagers' sparetime and cultural activities. Even ramshacklehousesin poor villages now often have satellite dishes on their roofs, and in the eveningsfamilies gather in front of the television to watch Hong Kong soap operasor other types of entertainment that have little overt political content. Political propagandais no longer omnipresent. This diversificationof cultural life has not causedthe Party to abandonits ambition of exercisingcontrol over culture, however.Under the bannersof "building a spiritual civilisation" and "ideological and political work", central and local authorities struggle hard to maintain their commandover the productionof meaning,but they have beenforced to redefmetheir own role and to changetheir methodsof control. Although official propagandais much less pervasive than during the Maoist era, the Party's ideological machine is still at work in Xuanwei. The key word in ideological work is "civilisation" (wenming), a highly flexible term which includes all types of behaviourwhich the Party wants to encourage.Each administrativelevel awardsthe term to selectedpersonsand units underits jurisdiction. In 1997 Xuanwei was appointeda "civilised city" by Qujing district, and inside the county we find civilised work units, civilised streets,civilised households and even a civilised traffic control station. Although public spaces are plasteredwith the symbols of such campaignsthey do not seemto be taken very seriouslyby the generalpublic. However,as demonstratedby the "Ten The researchpresentedin this report is part of a long-tenn,multidisciplinary collaborative project betweena group of Europeanscholarsandthe Yunnan Academyof Social Sciences. The project will analysepost-refonnsocial and cultural changein Xuanwei county, Yunnan, particularly the role of rural elites. My fieldwork was funded by the Aarhus University ResearchFoundationand the Danish Council for DevelopmentResearch.Earlier versionsof this paperwere presentedat the Third ECAN conferencein Copenhagen, February2000, and at the Associationfor Asian Studies52nd Annual Meeting, San Diego, March 2000. I am grateful for the useful commentsI receivedon thoseoccasionsas well as for the suggestions of Anita Chanand JonUnger.Thanksare due,too, to Mette Halskov HansenandFrankPieke for sharing their fieldwork notes and ideas with me, to our partners at the Institute of Minorities Literature,YASS, andto all of the Xuanweiinterviewees.

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Stars of Civilisation" scheme(see below), the state is trying to tighten its grip on the basic levels of society through commendationsand sanctions basedon this type of moral-politicalevaluation. Official propagandaalso permeatesthe local news media, which have remained under the tight control of the county leadership.The Xuanwei News, the only local newspaper,beganpublishing in 1996 and now has a circulation of around 10,000.6 But it is difficult to say how many people actually read it, as its weekly four-pageedition is mainly distributedthrough government offices and other work units, and it has very few private subscribers.The other source of local news is the local television station, which every secondday producesa 15-20 minute local news programthat almostexclusivelyshowsfootageof official speechesand meetings.Both of thesenews mediaare strictly orthodox,untouchedby the trend toward more investigative journalism, such as the exposes that are common on the consumer affairs programs on the provincial and national channels. In contrast,one of the editorsat the Xuanwei televisionstation,which employs few trained journalists, realistically described his own role as that of a mouthpiece (houshe) of the local Party leaders. The newspaperis very careful only to criticise officially designatedtargets.In fact, a main aim of both the Xuanwei county news organsis to write positive stories,which can be placed in the provincial or, even better, national media to bolster the reputation of Xuanwei? Both the newspaper and the television station obviously owe their existenceto official supportand dependupon a lack of competition in the field of local news rather than the abilities of their journalists. While the propagandamachine continues to control the distribution of local news, it is evident that other institutions of official state-sponsored ideology and culture have beenseverelybatteredby the economicreforms. Public funding for culture has becomevery restricted,and the old agentsof official culture now have to live in an environment of commercial competition, which they generally find difficult. For example the distribution of books, used to be monopolised by the official Xinhua Bookstore,which now mainly survivesthrough the sale of schooltextbooks on which it still holds a monopoly.Privatebookstoresnow servemost of the county's book market, and peddlers bring almanacs,popular fiction and 6 The paperwas first called Xuanwei bao, but in 1999 it was turned into a weekly section (Xuanweiban)of the Quifing Daily, as countieswere no longer allowed to print their own newspapers.This was merely a changeof name,however.Editorial control, the staff, and the 7 paperdistribution systemremainedthe same. A bonusis paid to any journalistwho managesto get an article aboutXuanwei acceptedby provincial or nationalnewsmedia.

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copies of traditional novels to the rural market towns. The main library in Xuanwei holds 60,000 books, but its funding has beencut and now barely covers subscriptionsto magazinesand newspapers- practically no new books are bought.Townshipsand somevillages havereadingrooms,but the selectionis very limited andoutdated. The official Xuanwei Film Companyis another typical example of the breakdownof the old propagandasystem. It enjoyed tremendoussuccess immediatelyafter the reforms and madea profit of 2 million yuan as late as 1991.Now, however,it has beenoustedby televisionsand video and Video CD (VCD) machinesin private homes,8and barely escapedbankruptcyby renting out its largest cinema hall to a private departmentstore. Popular films appearin pirated VCD versions only a few weeks after their official releaseand months before the local cinema can screenthem. There is no audiencefor the didactic movies the authorities want shown. A publicly supportedlocal operatroupe still survives,but its 38 members,who are the only officially supported professional artists in Xuanwei, have great difficulties making a living from their meagrewages.The operatroupe can gather an audienceonly when sub-countygovernmentsponsorshipenables them to give away free tickets. At the sametime, the main shoppingstreets are lined with stalls selling tapes and CDs of popular music from China, Taiwan and Hong Kong. The general crisis of the "propagandastate" is clearly felt also at the county level, and the dominant feeling within the official cultural institutionsis oneof resignation.9 CCP AND THE INTELLECTUAL ELITE

The strongestchallengeto Party rule in the 1980s came from disgruntled studentsand intellectuals,but most evidencenow indicate that the present generation of university students is much more politically pragmatic.lO Although Xuanwei has no university it still has its own intellectual elite, a distinct group of people who mostly know each other personallyand often have direct contactswith similar circles in the district seat of Qujing and even in Kunming, the provincial capital. How does this group relate to the 8 Ninety-two percentof all Xuanwei householdsown televisions,accordingto Qujing ribao, Xuanweiban,December29th 1999. 9 For national trends in this crisis, see David Lynch, After the PropagandaState: Media, Politics, and "Thought Work" in ReformedChina (Stanford: Stanford University Press, 1999); and Yuezhi Zhao, Media, Market, and Democracyin China: Betweenthe Party Line lO andthe BottomLine (Urbana:University ofIllinois Press,1998). See,for exampleChe-Po Chan,"The Political Pragmatismof ChineseUniversity Students:10 Years After the 1989 Movement," Journal of Contemporary China, Vol. 8, No. 22 (November1999),pp.381-403.

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ideological dominanceof the Party? As most of them are either cadresin governmentorgans or schoolteachersthey have a close relationshipto the political elite, and their identity is closer to the traditional Chineseeducated elite, the wenren (men of letters) stratum than to modern-type critical intellectuals. This means that they primarily perceive of themselvesas a local civilising elite who represent Chinese high culture and hold a responsibilityfor raisingthe cultural level of the local population. The wenrenelite hasa clear internal hierarchybasedlargely on the degree of recognition each of its membersreceives at the district and provincial levels. But they also have a common identity, which was revealedby the head of Xuanwei's Cultural Bureau, Zhao Jiaren, in a recent article publishedin the main local literary magazineThe Jade Beauty (Yumeiren) under the expressivetitle "Blessedbe Culture".l1 Here Zhao bemoanedhow little appreciationand recognitionlocal society gave to the cultural workers. When a place is backward,he explained,the reasonis not just that it lacks natural resources,but that the quality (suzhi) of its workforce is too low. In his view culture and art hold the key to improving this quality, and cultured people are even more important to society than businesspeopleand officials.12 The elite identity of the local wenrenis partly formulatedin oppositionto trendsin post-reformChinesesociety. Comparedwith the local news media, The Jade Beauty carries many more examplesof critical writing directed againstsuch favourite wenren aversionsas worshipping money, corruption and fashion. Critical essaysoccasionallyexposethe politico-economicelite, and contrast their superficiality and decadenturban lifestyles with the simple, honestand poor peasants,albeit always in a highly generalisedway that neverdirectly points to any specificindividuals.13 Although the wenren often work as cadres, they see themselvesas markedly different from the non-intellectual,waihang political cadreswho have the fmal say in propagandaand cultural work. In one telling incident, 11 ZhaoJiaren,"Hehu wenhua"(Blessedbe Culture), Yumeiren,No.3 (1999),p. 4. 12 In the Chinese modernisationdiscoursethe tenn quality (suzhi) plays a central role. A person'squality is partly a function of his or her educationallevel, but the tenn has other importantconnotationssuchashigh moral standardsandmodemattitudesand behaviour.For a discussionseeB0rgeBakken,The ExemplarySociety.HumanImprovement,SocialControl, and the DangersofModernity in China (Oxford: Oxford University Press,2000),particularly 13 pp. 59-66. of peasantsarediscussedin Yi-tsi Mei Feuerwerker,Ideology, Power, Literary representations Text: SelfRepresentationand the Peasant"Other" in Modern ChineseLiterature (Stanford: Stanford University Press, 1998). It is doubtless correct that peasantsare "loosing their centrality as tropes of literature in the post-Mao era" (p. 240), but I would claim that the peasantis still a defining "other" to manyrural intellectuals.

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officials from the Cultural Bureausentpeopleout to teachlocal villagers of the Yi nationality how to celebratetheir Torch Festival(Huobajie) in a more healthy (jiankang) way, inasmuchas the lyrics of their love songsand some other festival practiceswere seen as vulgar and obsceneby the cadres.I talked to severalwenrenwho found this interventionuncalledfor. The way the Yi and other minorities celebratedtheir festivals was part of their native culture, they argued,and officials should acceptthat. It was evidentthat the intellectualshad a conceptof cultural authenticitywhich was different from that of the bureaucracy,and that they wantedto give culture a higher degree of autonomyand guardit againstdirectpolitical interference. Still, despiteof such differencesin attitude and opinion, the key word for the relations between the wenren elite and the Party is not dissent but dependence.As the local intellectuals practically all work inside the administration,they have very little room to manoeuvre.While top-level urban writers and artists can carve out their own niches in the market economy and fmd outlets for their products without official support, the hinterland wenren face the choice between adaptation and invisibility. Although local entrepreneurshave lately taken to sponsoring"high" culture, such as the publication of The Jade Beauty,the intellectual elite still cannot survive without public money. There are no independentpublishing houses or magazinesin Xuanwei, no salons and no alternative art exhibitions.14 Hencethe local intellectualsgenerally follow the official line and represent no challengeto Partyhegemony. THE CHALLENGE OF THE CULTURAL MARKET

The private market for books, music, videos and entertainmentthat has developedin Xuanwei since the early 1990s expandedenormouslyafter 1995. Banqiao Township, for example, with a population of 68,000, has twelve dancehalls, four entertainmenthalls with karaoke,skating and other activities, five video cinemas,four CDNCD stalls, and one bookshop.Even Yangliu, one of the pooresttownships,boaststwo karaokebarsthat compete for a youthful audience from the surrounding villages. Whereas the "intellectual culture" links Xuanwei to the literati tradition, the cultural marketdraws on the Sinified version of global pop culture. This new type of entertainment and nightlife is brought to Xuanwei from Kunming, 14 For the way the urbancultural elite, in contrast,hasadaptedto marketconditionsseeGeremie R Barme,In the Red: On ContemporaryChineseCulture (New York: Columbia University Press,1999).For the 1980s,seealsoJing Wang,High Culture Fever: Politics, Aesthetics,and Ideologyin Deng'sChina (Berkeley:University of California Press,1996).

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Guangzhou and other large cities by local entrepreneursand returned migrant workers who are now redefining the idea of a night out In this sense,the Party has lost to market forces much of its direct influence on cultural consumption. Two types of entrepreneursdominate the commercial cultural market The first group has mademoney in other fields and are now diversifying into culture and entertainment,while the secondgroup have their roots in the old official culture but are now operatingon a commercialbasis:for example,as managersof night clubs or bookshops.Part of this commercialelite hashigh social statusand is very well connected.The most significant exampleis the owner ofXuanwei'sclassiestentertainmentcentre,a large and eleganthotel containing a nightclub that features live performances,saunas,bowling lanes, severalbars and other types of entertainmentThis man also owns a number of industrial enterprisesand is one of the most successfullocal entrepreneurs.His hotel and entertainmentcentre employs more than 600 people,and severalParty and governmentbig shotsofficiated at the opening ceremonyin 1998, including a provincial vice-minister of culture, several top leaders from Qujing district, and Xuanwei's Party secretary.15To improve the cultural image of his empire, this entrepreneursponsorsthe section on cultural debatein The Jade Beauty. In fact, each section of the magazinehasa commercialsponsorof this sort. How doesthe Party defme its role in relation to the cultural market?The two key words here are taxation and control. The entertainmentindustry has becomean easily accessiblesourceof revenuefor the local government,and it is consideredfair game by several branchesof the bureaucracy.For example, at least nine different government departments show up at Xuanwei dance halls to demand their share of the cake, with or without authorisation,and much to the regret of the owners.16A recentdownturn in Xuanwei's economy, partly due to the crisis in the tobacco industry, has seriously affected local nightlife, however, and with several dance halls closing, the survivors are now given more lenient treatment by tax collectors,simply to keepthem alive. As for control, the Cultural Bureauhas establishedan ll-member strong Cultural Market Inspection Team, which confiscates illegal books, pornographicmovies and pirated copies of CDs and VCDs. With hundreds of young hostesses(xiaojie) working in karaoke bars, dance halls and 15 Xuanwei bao, January23'" 1998, p. 2. Many operatorsin the commercialcultural marketat 16 townshiplevel are alsorelatedto the local political elite in variousways.

There are no reliable statisticsfor the total revenuecollected from the cultural market as severalfees,evenaccordingto the officials, are arbitrary and often madeup on the spot (luan shoufoi),andthusneverenterofficial accounts.

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barbershops,prostitution is widespread,and the team is also expectedto checkthat nothing indecentgoeson in theseplaces.Much publicity is given to raids and campaignsdirected againstitems on the cultural market which are considered illegal or immoral. In early 1999, 2,161 VCDs, 1,039 videotapes and 2,481 books categorisedas pornographic, superstitious, politically deviantor illegally copiedwere destroyedduring a public Destroy Cultural TrashMeeting. The inspectionteam also showedits zeal during the summer 1999 campaign against the Falungong when several raids on bookshopsdiscoveredmore than 500 books and severalvideotapesrelated to the movement. The Party's relationshipto the cultural market is thus quite complicated. On the one hand, the authorities at both county and township levels generallyseemto welcomethe new entertainmentopportunitiesas powerful symbols of modernisation, and several cadres emphasised that they themselvesenjoyedXuanwei'snew nightlife. Quite in line with this positive attitude, the emergenceof the commercialculture is invariably describedby the official media as making rural life richer and more colourful, and the presentsituation is often contrastedto the boredomand monotony of the collective period. On the other hand, the Party wants to position itself as a moral authority and thereforehas to imposesanctionsagainstthe seamyside of Xuanwei nightlife that offends part of the local population, particularly (but not exclusively) membersof the older generation.The Party is also fully awarethat the loss of control over the distribution of cultural products means that commercial agents such as book dealers may distribute antigovernmentmaterials. However, despite the illegal and immoral activities that cling to the commercial culture, the Party-stategenerally appearsto have settled into its own role in relation to it and does not perceiveit as a serious threat. Local policies can be more or less restrictive dependingon central guidelines and national campaigns,but due to the nature of their business,cultural entrepreneursare highly visible on the local scene,and thereforethey are alsorelatively easytargetsof clean-upcampaigns. PROPAGANDA IN THE VILLAGES AND THE CHALLENGE FROM INDIGENOUS CULTURE

The largest cultural-ideologicalquandaryfacing the local political elite is how to relate to the variety of cultural activities, which are neitherorganised from abovenor primarily driven by market forces. This is even reflected in the wide rangeof labels that officials employ for suchphenomena.The term "folk culture" (minjian wenhua)is normally reservedfor activities the Party

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recognisesas "healthy" becausethey reflect the life of the commonpeople. "Traditional culture" is a relatively neutral term, which lends some respectabilityto cultural practicesdue to their link to "our 5,OOO-yearold history", but which also representsa potential obstacle to modernisation. "Feudalculture" or, worse,"feudal superstition"(jengjian mixin) is reserved for "unhealthy" phenomenathat should be controlled, while "self-generated (or spontaneous)culture" (zifade wenhua)is a more technicalterm used by intellectualsworking in the cultural field. The Party-stateprimarily tries to relate to these indigenous types of cultural expression through "regularisation" (guifanhua or zhengguihua) rather than through direct sanctions.This means that they strive to place such activities into a hierarchicaladministrativeframework so as to enable the authoritiesto superviseand control them, and to isolate and strike out againsttheir ''unhealthy''elements.The torch festival of the Yi mentioned above is one example, but religion is generally dealt with in this wayP Templesare expectedto registerand apply for authorisation,and a Buddhist Association (Fojiao xiehui) has been establishedto link Buddhist groups more closely to the state. The Christians in Xuanwei are not as well organised,as they live in quite scatteredlocations and do not have obvious community leaderswhom the authorities can approach.This was clearly a matter of concernto the Committeefor Nationalities and Religious Affairs in Xuanwei. Its cadres preferred the more orderly organisation of the Muslims, who are concentratedin fewer villages and are all registeredas membersof the Hui nationality.18It is not so much the religious practicesas suchwhich provokethe authorities,as it is the idea that significantcollective action may take place outside the reach of the state. This is an obvious parallelto the recentnationalcrackdownagainstthe Falungongmovement. Becausemuch of the emergingvillage culture is difficult to "regularise", it is often seenas underminingthe authority of the Party. A report from one township in Xuanwei gives an idea of how the local Party-stateperceivesits presentcultural crisis in the villages.19 According to this report, the main 17 For an interesting discussionof religious activities as "alternative arenas for telling and perfonningstorieswhich reflect on the corruption,inequality andlack of securityand support seen and experiencedby the subjects of the Chinese People's Republic," see Stephan Feuchtwang:"Religion as resistance"in ElizabethJ. Perry and Mark Selden(eds.):Chinese Society:Change,Conflict andResistance(Routledge:Londonand New York, 2000),pp 161177. 18 In 1999 there were 5,480 Christians and 16,873 Muslims who were officially registered (Qujing ribao, Xuanweiban,July 28th 1999),but it is hardto sayhow well thesefiguresreflect the real numberof believers. 19 ZhonggongYangliu xiang weiyuanhui(The PartyCommittee,Yangliu Township),"Xingxing jin nonghu, liangge wenming qi mai bu" (Stars Enter the Peasants'Homes, the Two

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problem is that the statehas lost its power over families, which it calls "the cells of society". The governmentcan passdown political slogansfor village heads and Party secretariesto propagate,but it is incapable of infusing peasantfamilies with official values, and has no sanctionsor incentivesto make them changetheir behaviour.The problemis rooted in the fact that the processof decollectivisationhas rolled back the power of the Party-stateto intervenenot only in the economy,but also in the realm of culture. As a result, the report suggests,villagers have lost their senseof community and mutual help. Peopleare selfish, the rich show off their wealth, and nobody caresabout their needyneighbours.Too much money is spenton building graves and monumentsfor ancestors,and on lavish wedding and funeral ceremonies.There are practically no political or ideological activities in the villages, the report indicates,as village-level cadresare fully occupiedwith collecting taxes and do not concern themselveswith people's lifestyles. Popular religion, which is referred to as "feudal superstition" is spreading and playing a role in the revival of costly ceremonies,the report warns. Lineagesare said to have"raisedtheir headsagain" and abettedthe return of the "outmodedcustomsand habits" of the pre-revolution period. This has led to a situation where villagers refuse to pay taxes and levies, and do not respectbirth control policies. They also ignore the Party's directions about which crops they should grow, and basic infrastructure is deteriorating becausefarmers refuse to work on public projects. All this "seriously threatensthe stability and developmentof the villages", the report states.It is striking how closely this descriptionof rural China at the beginningof the 21st century resemblessimilar complaintsfrom social reformersof the early half of the 20th century. There is the sameidea of China as a "plate of loose sand", where village communities are perceived as being incapable of organisingthemselvesin a rational andmorally soundway. From the report it appearsthat the Party's main concern in this rural locality is with two types of cultural manifestations:namely, lineagesand popularreligion. Is the local Party overly worried aboutthesephenomena,or are local cultural leadersemerging here who representalternativetypes of social organisation?Certainly, it is obvious that in Xuanwei lineages are playing a growing role in local society. Considerablesums of money are being invested, even in poor villages, in reconstructingand publishing lineage genealogies and building monuments at the gravesites of the forefathersas far back as the Ming Dynasty. Someinformantsalso reported a growing role among lineageheadsin arrangingmarriagesand arbitrating disputes.A distinction should be made,though. In provincessuch as Fujian 1h 1999. Civilizations Walk Hand in Hand),December26

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and Guangdong,somelineageshavegainedin importancebecausethey can create links with overseasinvestors related to the lineages, and the local Party thereforetakesa much more positive interestin them.20 It was not my impressionthough, that lineagesin Xuanwei played any dominant role in economiclife. In fact, someyoungerinformantsreferredto them mainly as a hobby for old men.21 But again, the mere idea of the existenceof alternative organisationsseemsenoughto put the authoritiesin a stateof alarm, insofar as these types of organised social groups cannot be enrolled in the "regularised"world of the Party-state. When such "unregularised"activities in the villages are perceivedas a challengeto the Party's authority it is probably becauseof their potential role in articulating populardiscontentwith presentpolicies and the way they are implementedlocally. Let me give just one examplefrom Xuanwei where a conflict betweenstate and villagers reflects not only diverse interestsbut also different perceptionsof social justice. The case concernsthe use of land, which is one of the tensestissuesat the moment. In spite of rural industrialisation, land is still a central concern for China's farmers, and questions of land rights are often behind clashes between neighbours, betweenvillages, and betweenfarmersand the state.In this case,the county governrnentconfIscatedland belonging to a suburbanvillage in order to build a school. It offered compensationto the farmers touched by the decision,but they were not satisfIedwith the sum they received,and claimed that a recent law, which puts narrow limitations on the transformationof agricultural land to other purposes,meantthat the governmenthad no right to take away their fIelds. What actually happenednext is unclear, but the governrnent claimed that seven villagers had damaged public property during their protestsagainstthe decision, and these farmers were taken to court wherethey were sentencedto pay heavy fmes. The interestingpoint is, however,that evenafter their defeatin the courtroomthe villagers continued their protestsand set up posterson the walls of the city where they claimed that the authoritieshad producedfalse evidencein court, and that the work of their lawyer had beenobstructed.They swore that they would nevergive up, and that they would tell future generationshow the convicted farmers

20 For an exampleof a Singapore-Fujianconnectionof this type, see Kuah Khun Eng, "The ChangingMoral Economy of AncestorWorship in a ChineseEmigrant District," Culture, 21 MedicineandPsychiatry,Vol. 23 (1999),pp.99--132. Xiaolin Guo, for example,found "no activities, economicor social, organizedon a lineage basis"in a suburbanXuanwei village surveyedby her. Xiaolin Guo: "Squabblingover Land. Rural Conflicts in DeepeningReform" (paperpresentedat the AAS Annual Meeting, San Diego, March 2000).

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were martyrsin ajuststruggle.22 Stories like this can be heardall over China, although only a minority of the casesare taken to the streets.Governmentofficials constantlyneedland for what they see as the common good: roads and other infrastructure projects, industrial developmentzones, public facilities of all sorts. The farmers,on the other hand,alreadyface a shortageof land and refuseto give up their fields. One of the reasonsis often that they believe that either the officials involved or their close friends in the businesscircles make huge profits on such land transactions.Conflicts over land as well as over illegal taxes, another major source of peasant-cadreantagonisms,are thus also expressionsof a crisis of legitimacy: the cadres are not recognised as representatives of a commoninterest,but are ratherseenas predatoryagents of exploitation.23 The Party thereforehas ample reasonto look out for any sign of budding organisationalforms, which might give leadership and directionto spontaneous and scatteredlocal protests. The Ten Stars of Civilisation

A key elementin the authorities'responseto the perceivedcultural crisis in the villages has been the "Ten Stars of Civilisation" scheme (Shi xing ji wenminghu).This is a relatively new way of evaluatingand controlling the moral performanceof each individual household and its members. The systemwas not inventedin Xuanwei but arrived therein 1998 from northern China as a core ingredientin promoting "spiritual civilisation" - the official ideological counterweightto the undesirableside effects of the development of "material civilisation" (economic construction). It is used only among peasanthouseholds.People who are registeredin a work unit such as a governmentorganor enterprisearenot exposedto it. 24 Each peasanthome in the parts of Xuanwei County wherethe systemhas been implementednow has a bright red metal plate over the front door. 22 SeeXiaolin Guo (ibid.) for a detaileddiscussionoflandconflicts in Xuanwei. 23 For peasant-cadreconflicts and peasantprotests see for example Kevin J. O'Brien and Lianjiang Li: "The Politics of Lodging Complaintsin Rural China," The China Quarterly, No. 143 (September1995),pp. 756-783;David Zweig: 'The 'Externalitiesof Development':Can new political institutionsmanagerural conflict?" in ElizabethJ. PerryandMark Selden(eds.), ChineseSociety:Change,Conflict andResistance(London and New York: Routledge,2000), pp.120-142. 24 The ten stars can be traced back to the beginning of the 1990s,but the system has been implementedin different ways in different localities. For more generalinformation and some other local examples, see Zhonggong zhongyang xuanchuanbuxuanchuan jiaoyu ju (Propagandaand Education Departmentof the PropagandaBureau of the Party Central Committee)(eds.), Wenmingjin wan jia (Civilization Enters Every Home) (Beijing: Xuexi chubanshe,1997).

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Written on the plate are the names of ten cardinal virtues, and when the householdmeetseachaspectof how a civilised family should behave,a star is attached.The system is being promoted in many places in China with local variations, but in Xuanwei the ten stars represent:I) Respectfor the law - following the Party'spolitical line, directives and policies; 2) Senseof duty - fulfilling all public obligations, paying all taxes and levies, and contributinglabour and moneyto public projects;3) Birth control; 4) Unitya harmoniousfamily, unity with neighbours, respect for parents,supportfor the elderly; 5) Children's upbringing; 6) Animal husbandry - breeding animals in a scientific way, earningsof more than 10,000yuan a year from raising stock; 7) New lifestyle - avoiding feudal superstition,no extravagant weddingsor funerals,a civilised, scientific and healthy lifestyle; 8) Culture respect for teachers and education, sending all children to school, no illiterates among the young and middle-agedfamily members;9) Hygienegreen, clean and beautiful surroundings,good washing and toilet facilities, an orderly and clean houseand courtyard; 10) Wealth - a householdthat is industriousand thrifty, with increasesin the household'sharvestand income eachyear. The stars are rewarded to each householdafter an evaluation process. First, the householdmust give its own estimateof which stars it deservesat a public meeting held in a village neighbourhoodor hamlet. This selfevaluationis discussedby the neighboursand the outcomeof the evaluation meetingis takento the village committeeof the larger administrativevillage. The committee makes the fmal decision about the number of stars and reports this to the township, where the information is retainedin files. It is plannedthat evaluationswill be yearly, so that householdscan win some of the starsmissedin the previousround or lose someif performancehas been inadequate. The ten criteria draw on a long historical tradition of civilising discourses. The starspresentedfor family unity and for children'supbringinguphold the traditional Confucian values of community and family. The three stars for new lifestyle, culture and hygiene could have been taken from any of the social reformers who operatedin the Chinesecountrysideduring the first decadesof the 20th century, be they cultural conservatives,liberals or socialists.25 The first three starsreflect different aspectsof the Party line and thus echo the collective period under Mao, and finally the two stars for 25 See,for example,CharlesW. Hayford, To the People: JamesYen and Village China (New York: ColumbiaUniversity Press,1990); and Guy S. Alitto, The Last Confocian:Liang Shuming and the ChineseDilemma of Modernity (Berkeley: University of California Press,2nd edition, 1986).

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animal breedingand wealth draw on the attemptsof the 1980sand 1990sto tie moral-political propaganda to the Party's new economic and developmentalgoals. The Party thus picks up the thread from a long line of local rural elites who have seenit as their mission to civilise what in their eyes was an uncultured, uneducated,and undisciplined peasantry,and to reshape this peasantry into an image of social harmony and material afl1uence. Do people care about these ten stars?It is difficult to say exactly how seriously the whole exercise is taken, but my feeling was that very few farmers had sleeplessnights over missing a couple of stars. The point lies somewhereelse. The Party-state often expressesits worries over how decollectivisationhas blocked the direct flow of propagandainto individual families, and the searchfor new ways to "carry ideological work into the households"(sixiang gongzuozuo dao hu) has beena dominantfeature in rural political-ideologicalwork in the late 1990s.The strengthof the ten-star systemexactly lies in its potential for penetratingthe sphereof privacy built up aroundfamily and household.Throughthe ten-starsystemand the bright red platesover the doors, the Party marks its moral and political power. At the sametime, it acquiresa detailedknowledgeof the presentstateof mind among all villagers, becauseevery householdis involved, as opposedto earlier campaignssuch as the nomination of "five-good households"where local political activists competedfor the honour. To give an example:when we visited a local fengshuimaster,we noticed that his plate missedthe star for "new lifestyle". This was of coursebecausethe authoritieslooked upon his activities as "feudal superstition". During the evaluation process,this man, as well as his neighbours,had thus been confrontedwith the official evaluation of his and their practices as uncivilised and detrimental to development.In the sameway, thosewho did not use scientific agricultural methods, who gambled, who did not show respect for their parents, or whose toilets were placed too close to their kitchens were registered,and their failure to live up to official standardswas publicly displayed. By defming the criteria by which the villagers are measured,the Party creates an image of itself as the representativeof modernity, science,high moral standards,cleanliness,etc. The ten-star systemis backedup by links to certain social and material benefits. Yangliu, for example,is designatedas a township in poverty, and the Women's Federation runs a program there where micro-loans are grantedto women who want to start up specialisedproduction. One of the conditionsfor getting such a loan is that the householdperformswell in the ten-star evaluation. Reports from other places show that such evaluations

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can also be used when local authorities decide on labour recruitment or changesin householdregistration status.26 For the poor who depend on governmentaid, scoresin the ten-starsystemcanbe quite important. CONCLUDING REMARKS

From the micro perspectiveof cultural life in a rural county in Southwest China this chapterhas looked at the large issuesof cultural and ideological challenges to the CCP. We have seen that while the political elite in Xuanwei no longer directly controls cultural productionand consumption,it has apparentlycome to terms with the new situation and developednew methods of more indirect control with the cultural market. The local intellectuals have also found their place in the new cultural order, partly supportedand encouragedby the government, partly sponsoredby the economicelite. The real Kulturkampf in Xuanwei today stands betweenthe emerging "indigenous"cultural trendsin the villages and a Party-statetrying to regain control through what it presentsas a new civilising project. What we are facing here is clearly not a shrinking state apparatusin the processof withdrawing from rural society. Rather, it is trying to regain the cultural territory that it has lost in the two decadessincethe de facto privatisationof agriculturein the 1980s-a territory, which graduallyhas beentakenover by forces,which the Partyseesas potentiallythreatening. No hasty conclusionsregarding national level trends should be drawn from this local example, of course,but the situation in Xuanwei indicates that many new Falungong-typeconflicts may occur in China in the future. With this term I am thinking of conflicts which do not explicitly concern economic or political demands,but where groups with value systemsand beliefs incompatible with those of the CCP clash with the authorities on issuesconcerningtheir right to organisetheir own activities. Such groups will not necessarilywin the supportof the membersof China'surban elite, who may well tend to sharethe CCP'sview of them as anti-modernforces threatening progress and social stability, and they may not catch the attention of the international media, but the way they are treated by the Chineseauthoritieswill be an indicator of the state of political reform and humanrights in China.

26 Wenmingjinwanjia, p. 23.

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Chapter 12

The Dual Significance of Political Reforms

Shen Mingming & Samuel J. Eldersveld

Startedin 1978, along with economicreform, camelocal political reform in China. The supportfor the latter can be perceivedas linked to supportfor the former. Indeed some would say that the reforms of local government were essentialfor economicgrowth.i How and why this was so, in what way was political reform at the local level so important, is a key part of our inquiry. China in a senseis unique in placing major emphasison the role of local leaders in the transition to an open market economy. Other systems in transition from a planned economy and strong central governmenthave usually neglectedor restrictedthe role of local government,not seeingit as a major actor for successfultransformation?The collapseof the Soviet Union and subsequentdevelopmentsin Russiais a casein point. Even relatively successful East European systems like Poland and Hungary did not encouragelocal autonomyand other local reforms in the early transitional years as part of the developmentprocess. Strongand tight central control was the norm. Indeed in most developing systemsthere has been a slow recognition of the need to involve reformed local governmentsin the processesof change?By 1979 Chinaalreadysaw the needto revitaliselocal SeeShenMingming, A Policy Driven Elite TransformationandIts Outcomes:A CaseStudy 2 ofthe New local Elites in China, (phD. dissertation,University of Michigan, 1994). Betty Jacob, Krzysztof Ostrowski and Henry Teune, Democracyand Local Governance, (Honolulu: MatsunagaInstitute for Peace,1993);and SamuelEldersveld,Lars Strombergand Wim DeIksen, Local Elites in Western Democracies:A ComparativeAnalysis of Urban Political Leaders in the Us., Swedenand The Netherlands(Boulder, CO: Westview Press 3 1995). Philip Oxhom and GracielaDucatenzeiler,The ProblematicRelationshipBetweenEconomic and Political Liberalization. Some Theoretical Considerations(Paper, American Political ScienceAssociationMeeting, 1995).

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CHINA'S PLACE IN GLOBAL GEOPOLITICS

governmentand to give it a major role in the transition process.China's leaders in a sensesaid that to achieve successfuleconomic reform local governmentand local cadreshad to playa key role, and this entailedreform oflocal government.4 Leadershiprejuvenationwas takenas one of the initial reform measures,as Chineseleadersin three generationsall believe that the organisationalline guaranteesthe implementationof the ideological and politicallines.5 The top elite also arguedthat masssupportfor the changed economic system had to be secured- implying that the masseshad to be more meaningfully involved.6 This was an enlightenedset of assumptions, on which they thentook action. A BRIEF OVERVIEW OF THE RECENT LOCAL POLITICAL REFORM

The major push to adopt political reforms began in 1978. The conflicts within the top elite in the ensuing years have been describedby many scholars.7 The reform processebbedand flowed, from proposalsfor genuine innovation to conservativereaction. Yet the net effect was major changesin the local political system. Of the many political reform policies adopted from that time on, we focus hereprimarily on the changesaffecting the local political system. These included the return of agriculture from the communesto family farming from 1979 to 1984. A new program for the recruitmentof more educatedand bettertrained local cadreswas under way by 1983, accompaniedby the mandatoryretirementof old cadres.(This was going on currently at the higher levels of the system).A major changewas in the devolution of much economic decision making by local government leaders, with new incentives to local cadres designed to encouragethe 4 Deng Xiaoping, "On the Structural Refonn of the Party and State Leadership" in Deng 5 Xiaoping, SelectedWorksofDengXiaoping: 1975-1982(Beijing: RenminPublication,1984). Mao Zedong, SelectedWorks of Mao (Beijing: Foreign LanguagesPress, 1964); Deng Xiaoping, "On the Structural Refonn of the Party and State Leadership"; Chen Yun, "Cultivating and Recruiting Young and Middle Aged Cadres Is an Urgent Task" in ZhongyangWenxianshi,Selectionof Important DocumentsSince the Plenum (Beijing: Renmin Publication, 1981); Hu Yaobang, "Speech at the Ceremony of the CCP's 60th Anniversary" in ZhongyangWenxianshi,Selection of Important DocumentsSince the 3'" Plenum;andJiangZemin, Reportto the 15th National Congressofthe CCP (Beijing: Renmin Publication,1997). 6 PengZhen, "Elaborationon the Draft of the Amendmentto the constitutionof the PRC" in ZhongyangWenxianshi,SelectionofImportantDocumentsSincethe Plenum. 7 See, for example, Joseph Fewsmith, "Elite politics" in Merle Goldman and Roderick MacFarquhar(eds.), The ParadoxofChina's Post-MaoReform(Cambridge,Mass.: Harvard University Press, 1999); Harry Harding, China's SecondRevolution: Reforms after Mao (Washington:Brookings,1987);Willy Wo-Lap Lam, China AfterDengXiaoping(New York: Wiley, 1995);andKennethLieberthal, GoverningChina (New York: Norton, 1995).

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THE DUAL SIGNIFICANCE OF POLITICAL REFORMS

formation of new enterprises,collectiveandprivate. During this period local governmentfrom the county level to the village was restructured.Communesand brigadeswere replaced(1982 to 1986) by 90,000 township governments and 820,000 directly elected village committees. Already by 1979 direct election of delegatesto the county People's Congress was required. This was followed by laws for such election, specifYing requirementsfor qualifYing for candidacy,registration, the nominations of candidates,campaigning, and the use of the secret ballot.8 In 1987 (effective for trial implementationin June 1988) a new law provided for elected village committees.Villagers' groups of 10 persons were permitted to nominate a candidate to be placed on the ballot for election to the village committeeand procedureof reduction were set if too many nameswere submitted.The reform for competitive village elections was presumablyadoptedto make village leadersmore accountableto the villagers, even though the initial objective of the top leaderswas to restore order and maintain stability in the countryside.It also could be seenas an opportunity for new interests,and new types of leaders,to come forward to competefor village positions. Further reforms provided more "real" power for the People'sCongressto superviselocal governmentactivities. People's Congressesin a sensewere no longer "rubber stamp institutions", but were to be less accountableto higher level officials and more accountableto their own constituents. These reforms have been interpreted differently by scholars, but there seemsto be somesupportfor the conclusionof one observerthat the balance between democracy and centralism is continually being renegotiated becauseof liberalising reforms in both the economy and the electoral system.9 Although the government in Beijing no doubt sees these local reforms as functional to the performanceof the economic system,and to political stability in the villages and townships,and certainly not intendedto make the massesmore interestedin a greaterdemocraticrole, there may be otherunintendedconsequences. Although the record of reform legislation is impressive,one must not assumethat implementationhas occurred easily, readily, and nation-wide. Thus the implementationof reform of local institutions, in particular the provision for competitive village elections of village committees,has been slow. The new organic law, adopted after much argument, was put into effect in over a thousand "demonstrationvillages" by 1992, in which 8 John P. Bums, Political Participation in Rural China (Berl