China, the Abnormal Great Power- Yukon Huang
March 5, 2013
China’s
rising economic influence has leaders around the world on the edge of
their seats. But Beijing is an abnormal great power. Its international
potential is constrained by significant domestic economic
vulnerabilities, and the inward-looking Chinese leadership has yet to
craft a nimble and constructive international posture. And as the
Chinese economy normalizes, its growing pains are laid bare. All this
has the effect of elevating risks and aggravating insecurities in
China’s neighborhood and beyond.
This
is not the path many hoped Beijing would follow. As China became a
global economic power, expectations were raised that it would act as a
responsible stakeholder, as Robert Zoellick put it when he was U.S.
deputy secretary of state. Beijing, it was hoped, would help shape the
international agenda—consistent with norms largely established by the
West—rather than continue to adhere to long-established national
interests. And indeed, Beijing seemed headed that way.
As
far back as April 1974, the Chinese leadership was avowing its peaceful
intentions. Deng Xiaoping, in a special address to the UN General
Assembly, declared that “China is not a superpower, nor will she ever
seek to be one. If one day China should change her color and turn into a
superpower, if she too should play the tyrant in the world, and
everywhere subject others to her bullying, aggression and exploitation,
the people of the world should identify her as social-imperialism,
expose it, oppose it and work together with the Chinese people to
overthrow it.” In 2003, the Communist Party’s theorist Zheng Bijian
echoed the sentiment, explaining that China’s economic ascendancy should
be seen as a “peaceful development” that posed little threat to its
neighbors but offered many benefits to
the world at large.
But
expectations were clearly unrealistic. China’s remarkable economic
progress has encouraged Beijing to become more rather than less
confrontational. Most observers see a diminished likelihood of China
playing a positive role in global affairs. The discussion is now about
how rising nationalism and related security interests have hardened
China’s foreign policy positions. This has created the
impression—arguably unfair at times—that Beijing is more inclined to use
its economic clout to advance core interests than to strengthen
political relationships.
While
the country is criticized for becoming more assertive, aggressive, and
bullying, in reality it should be seen as being too reactive.
China’s
position stems in part from the fact that the leadership in Beijing
feels the need to get its own house in order before forging its
international path. Beijing is an emerging great power trying to escape
the middle-income trap—domestic wages have risen so China is no longer
the least expensive producer of low-cost goods, but it still cannot
compete effectively with technologically more advanced countries. China
also faces particular impediments that were not present for other rising
states. And in transitioning to a slower but more normal growth
trajectory, instability and risks have emerged. Thus, contrary to
expectations, its economic successes do not translate necessarily into
greater self-confidence at this stage in its development.
Traditionally,
Beijing has sought to bide its time in dealing with many sensitive
geopolitical issues, preferring to build up its capabilities and wait
for a favorable shift in the balance of power. But in many cases, events
have forced it to act earlier than it would have liked. This reactive
posture is often not well thought through and is potentially
self-defeating.
Many
areas of friction have emerged as a result of these tendencies,
including emotionally charged claims over the Diaoyu/Senkaku islands.
But these reactive stances emanate from a wider set of issues, including
trade and investment flows, intellectual property rights violations,
interactions with “rogue” regimes, and other geopolitical concerns.
These
tensions are manageable. Beijing will soon be forced to take a more
nimble and practical outward view—a reactive posture is
counterproductive. In the meantime, both China and the United States in
particular should focus on building their relationship in the economic
realm and on developing more inclusive international policies.
Becoming
a Normal Economy but Abnormal Great PowerChina’s rapid economic rise
has pushed it into the unique position of becoming a superpower earlier
than expected or intended. The country has had startling economic
success, moving from low- to upper-middle-income status and lifting some
600 million Chinese out of poverty in only three decades. Some see
Beijing as being able to exercise considerable influence, but in
reality, its ability to do so is limited.
In
transitioning from central planning, China’s institutional base and
experience in dealing with sensitive global issues lag well behind its
impressive economic achievements, placing it at a disadvantage in
working with other major powers. And part of the cost of becoming a more
“normal” economy is slowing growth and increased vulnerability to
global economic cycles.
Beijing
is facing a bumpy road ahead. The country will no longer be able to
maintain stability by controlling key economic prices, such as interest
and exchange rates, and limiting capital movements. Liberalization in
the context of internationalizing the renminbi naturally involves
greater exposure and risks.
And
this prospect has only exacerbated anxieties within the Chinese
leadership. Those concerns then spill over into foreign policy decisions
aimed at diverting attention away from domestic problems to real or
imagined threats abroad.
Adding
to the pressure on the leadership to bring stability and success to
China is the country’s long history. China as a great power will be an
“abnormal” great power compared with the United States, Japan, and the
major European economies. Unlike the others, whose ascendancy
represented a broadly continuous and lengthy process, China is unique in
being a returning great power—one that accounted for 30 percent of
global production two centuries ago but saw its share fall to less than 5
percent by 1950. Even today, after three decades of double-digit
growth, its share at 15 percent is only half of what it once was.
Moreover,
despite its economic resurgence, China’s ability to escape the
middle-income trap is not a foregone conclusion. Only a handful of
middle-income countries have made the transition to high-income status
in the past quarter century, and none of them had China’s formidable
handicaps.
Foremost
among these challenges is that China will become old before it becomes
rich. Its working-age labor force is shrinking, and the needs of the
elderly represent a major financial burden. Many observers do not
realize how relatively poor China is, with a per capita income ranking
only around 90th internationally. Even by 2030, only about 10 percent of
China’s population will be seen as relatively well off (defined as
within the top decile of global incomes) compared with about 90 percent
of the population in the United States.
With
a legacy to live up to and domestic issues to overcome, China remains
inward looking. And that stance has affected its relationships with the
outside world. Tensions have arisen in a number of areas as the Chinese
leadership attempts to balance its internal struggles with an evolving
international order that waits for no one.
Trade
and Investment Tensions. For much of the last decade, friction with China
has been most often reflected in trade issues. Headline criticism
focuses on complaints that Beijing manipulates the exchange rate and
unfairly subsidizes exporters. Since accession to the WTO in 2001, China
has become the number-one target for complaints filed by the United
States and Europe. But this situation has to do with China’s approach to
development, not aggressive Chinese policies meant to bully the rest of
the world.
Increased
litigiousness against China does not jibe with the country’s decreasing
trade surplus, which has fallen sharply to around 2 percent of its GDP
from a high of 8 percent five years ago. Nevertheless, trade tensions
with the West persist because of China’s unique position in the East
Asian production-sharing network. Components produced by its neighbors
are shipped to China for assembly and final export largely to the United
States and Europe. China actually benefits much less financially but
bears the brunt of trade tensions with the West that should in theory be
shared with others in Asia.
Beijing’s
development strategy has been focused on export-oriented investment.
Its economic success has been facilitated by its rapid assimilation of
foreign technology through direct investments of multinationals and
reverse engineering. This strategy helped propel China from a poor country to middle-income status.
But
the reality is that such an approach will be less helpful in the
future. The country now faces the challenge of producing more
sophisticated components that rely on indigenous technology. This
structural transition will further raise tensions in the region as China
begins to compete with more developed Asian economies as well as the
United States and Europe. This is evidenced by recent U.S. and European
complaints against China’s production of solar cells and wind turbine
equipment.
Moreover,
China is increasingly under attack for promoting indigenous innovation
through forced technology transfers or theft. Here, China’s rise
directly influences perceptions about its behavior as an international
stakeholder as it grapples with implementing wide-ranging structural and
legal transformations that are required to improve the enforcement of
intellectual property rights.
And
the qualitative importance of foreign direct investment to the Chinese
economy is falling. Beijing wants instead to tap expertise abroad
through direct investment in foreign ventures. But there too, China has
problems.
Beijing’s
efforts are often subject to security restrictions in destination
countries. That was demonstrated recently in a congressional report that
raised still-to-be-substantiated national security concerns about
Huawei Technologies and ZTE, two large Chinese telecommunications
companies. These suspicions were based largely on the companies’
presumed connections to the Chinese government.
These
incidents only accentuate the image that China cannot be trusted,
making it all the more difficult to nurture the vision of it becoming a
responsible stakeholder.
Resource
Needs, Rogue States Further complicating matters is a major component of
China’s overseas investment strategy: the search for new energy sources
and natural resources. China’s overseas investments and aid flows now
dwarf the amounts coming from all other multilateral and bilateral
donors. That strategy, too, is not without drawbacks.
A
hostile reception and burdensome regulations in more developed
countries have led China to turn to markets portrayed in some cases as
“rogue” states to power its growth engine. In doing business with these
regimes, Beijing has at times evaded or failed to actively implement
sanctions—a policy that has attracted criticism. Its export-financing
terms are seen as undercutting OECD guidelines. And because China abides
by principles of noninterference and respects the wishes of host
governments, an oft-cited complaint is that China does not adhere to
established international norms and ignores the sensitivities of
affected local communities.
But
this policy is unlikely to change in the near future, which means the
negative effects of China’s approach are likely to persist. Its
voracious appetite for securing these resources abroad will not diminish
because its industrial structure will remain heavily resource intensive
for the rest of this decade. Energy consumption will continue to
increase as more Chinese are lifted into the middle class. This pattern
will not be mitigated by recent efforts to develop renewable energy
sources, and unlike the United States, China is much further behind in
being able to exploit its shale-oil deposits.
Differing
Time Perspectives on Geopolitical Issues. Still, the most visceral global
reactions to China’s perceived assertiveness come from interactions
that are seen as impacting America’s security and humanitarian interests
and that are shared to varying degrees by other Asian countries and the
EU. China’s real intentions in supporting the six-party talks on North
Korea, for example, are questioned. Taiwan is a continuing point of
contention with the United States, and Beijing’s position on Tibet
attracts emotionally tinged criticism from many quarters.
On
these geopolitical issues, China has been firm in supporting its
long-standing principle of noninterference shaped by concerns of how the
West might one day target China. But the interactions are also
influenced by differing concepts of time. In such disputes, China has
preferred to put off addressing the issue. This approach reflects its
belief that many sensitive issues such as Taiwan will resolve themselves
over time without the need for confrontation or that waiting will
promote better outcomes.
Political
differences between China and Western powers only heighten this
divergence, as democracies like the United States with frequent election
cycles tend to think of policy implications in terms of years while
China’s leaders consider policy choices more in generations. In the
North Korean example, both China and the West have a shared interest in a
stable, non-nuclear state. But China is reluctant to put pressure on
Pyongyang now because it hopes North Korea will eventually become a more
reasonable country that can still act as a socialist buffer state.
Beijing believes this waiting game will better serve its long-term
interests.
But
events have often forced China to react before it really wanted to. The
result is that its actions may not be well considered. This stance
harms China’s image as a responsible stakeholder if others see it as
being deliberately uncooperative.
Territorial
Disputes and Shifting Asian Alliances. Deng’s admonition that China
should avoid getting involved in external issues remains a guiding
principle for Beijing. But if the actions of others are seen as
jeopardizing China’s longer-term interests, the Chinese leadership may
feel that its decades-old posture is no longer tenable and presents
risks for both sides. In this context, defending its interests is not
seen by China as being more assertive but rather as ensuring that the
country can move forward on its “rightful path” at the right time. This
becomes very clear in the context of ongoing territorial disputes, such
as the conflict over Diaoyu/Senkaku islands that both China and Japan
claim as their own, and in China’s response to America’s return to Asia.
A
decade ago, China presented itself as a source of support for its
neighbors that felt the West had abandoned them amid an Asian financial
crisis. With reassuring visits by its senior leaders paired with offers
of economic assistance both directly and through regional frameworks,
China’s top leaders demonstrated a skillful use of soft power in the
first half of the last decade. It contrasted favorably with America’s
neglect of its traditional interests in Asia. But territorial disputes
and more aggressive fishing ventures in the South China Sea and the
waters between China and Japan have squandered this goodwill and caused
many in the region to welcome an expanded U.S. role in Asia to
counterbalance China’s influence.
China
is also deeply suspicious about America’s intentions in launching its
much-heralded “pivot” or rebalancing toward Asia, which Beijing has
interpreted as attempted containment of Chinese power. Such a move calls
into question Washington’s willingness to provide more space for a
rising China. The aggressive way that America has been pushing the
Trans-Pacific Partnership (TPP) with a host of Asian countries is a case
in point. There is little logic in a major regional trade and
investment agreement that does not include the region’s largest trader
and investor. Yet, the conditions of the TPP gave China no choice but to
eschew membership.
China
has also taken a strong stance in territorial disputes. Its response
has been seen as a sign of rising nationalism fueling increased
assertiveness abroad. But it can also be seen as a knee-jerk reaction to
what Beijing sees as the provocative acts of others. Nationalism is on
the rise not only in China but also in Japan and elsewhere in the
region.
Domestic
economic development also plays a role in island disputes. Lagging
ASEAN countries have pressing energy and other resource needs and often
look to these territories and their surrounding waters for oil and
seafood.
The
shifting power balance between Japan and China has also dragged
long-standing territorial disputes to the fore. More naval equipment and
nonmilitary boats from both sides are being deployed in the region—some
acting independently of Beijing—and private fishing operations roam
further afield as domestic consumption has soared with rising incomes.
Such moves heighten the risk of accidental collisions or other incidents
that could ignite conflict in the region.
China
is not necessarily the aggressor in all of these conflicts. But it can
be seen as being guilty of not staking out more clearly in advance what
it would tolerate and thus encouraging others to become more aggressive.
For example, China viewed Japan’s move in 2012 to purchase some of the
disputed Diaoyu/Senkaku islands as a provocative attempt to nationalize
the territory—even if Tokyo’s intentions were more benign. When pressed
in that way, China responded with more forceful measures to establish
firmer goalposts. While in the past Beijing may have expressed its
unhappiness with a statement or a diplomatic cable, it now has enough
weight to act.
Engaging
an Abnormal Great Power. But China does not see itself as an unstoppable
economic juggernaut. Chinese leaders see a country with deeply ingrained
national interests and an economy faced with significant challenges and
vulnerabilities that constrain its behavior on the international stage.
A
slowing growth trajectory, weakened ability to tap export surpluses,
declining access to technology transfers, qualitatively less significant
inflows of foreign direct investment, and sustainable growth demands
are all issues China must address as it tries to transition from a
middle-income to an advanced economy. China also recognizes the reality
that if it ever succumbs to a major economic crisis, adequate financial
support from the global community is unlikely to materialize not only
because of its sheer size but also because of differences in shared
values with the other major powers.
But
biding time until circumstances become more favorable is not a workable
option for China if the actions of others force an earlier-than-desired
reaction. Beijing believes that responding aggressively will forestall
future disputes, but such behavior has only increased tensions with
regional partners and drawn the United States into establishing a
greater presence in the region—both unanticipated results of a
self-defeating strategy.
A
stance of engagement, reaching out, and seeking compromise with due
consideration of the interests of others in region would serve China
better.
Of
course, China cannot be expected to follow the international consensus
when this harms its own interests—that can be expected of no great
power, including the United States. And thus far, China has largely been
an outsider to an international system built by the West. It does not
see itself as part of the system or bound by its rules.
In
an ideal world, China would not be seen as a threat to be contained but
as a strategic competitor that can be brought in as a partner when
needed to help reduce tensions and ensure more constructive outcomes on
global issues of a particularly sensitive nature. Providing China with
more say in dealing with these issues might encourage a more cooperative
relationship with the West.
This
will require greater openness on the part of both China and the United
States in particular. And the two powers should concentrate on promoting
cooperative commercial relations, which will help them avoid fueling
tensions over hot-button issues like sovereignty.
Beijing
can start by taking the lead in supporting open markets and fighting
protectionism. It would help China counter criticisms of its trade
practices and put pressure on the United States and other developed
countries that are moving in the direction of more protectionism. And
supporting an open-trading system for commodities makes sense for China
given that it is vulnerable to cuts in food imports during periods of
scarcity.
As
it seeks to increase its outbound investment, China also needs to
support a level playing field. More open capital markets and bilateral
and multilateral investment agreements can help ensure appropriate
treatment and provide more flexibility to address security concerns.
China needs to be sensitive to international norms about its use of aid
money, but the West can also learn from China’s more efficient use of
assistance for infrastructure investments.
Efforts
to be more inclusive should extend to the U.S. pivot. The TPP should
have been made more flexible so that China would see itself as having a
stake in constructing a productive outcome rather than seeing little to
be gained by being included. That lesson should be learned and applied
to future trade deals.
Given
the charged nature of sovereignty disputes, China and other Asian
claimants might be well served by setting aside this question and
focusing on narrow confidence-building measures or negotiating less
troublesome resource rights, perhaps on the model of Taiwan’s East China
Sea Peace Initiative. The United States should avoid making commitments
that destabilize the situation and appear to favor one claimant over
others.
And
because the disputes are complex, with multiple claims and overlapping
interests, China should recognize that multilateral approaches involving
the most concerned regional parties as well as other interests or
advisory groups can help achieve fairer and more inclusive solutions—a
consistent goal in China’s history of international relations.
A
reactive China is helping neither itself nor others. The United States
and other major powers should take pains to stress the benefits of more
active participation in shaping the international agenda as China enters
a riskier period of economic transition. Harsh rhetoric and actions
that are perceived as attempts to contain China’s development will not
be helpful, but reaching out and constructing sensible solutions would
be wise policy for Washington. The key is convincing Beijing that its
interests are best served by forging solutions now, showing that
compromise and cooperation will help China in the long run, and
reassuring Beijing that its concerns will be heard.
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