China in Focus #21: Finding Middle Ground in the Middle Kingdom

, China project manager and senior analyst | April 10, 2018, 5:45 am EST
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China’s a big country with large economy. But it also has an enormous population. When you take every Chinese individual into account the average person ranks 73rd among all nations in income and 72nd in production. Despite all the talk about the rise of China, after three decades of rapid economic growth China is still a middle income nation with a developing economy, well behind the upper income nations with advanced economies like the United States.

A personal encounter with China’s belt and road initiative: finding Polish yogurt in a local grocery in this neighborhood in Xuzhou for 45 cents.

The gap between China and the world’s leading economies is self-evident to the average Chinese person and their political leaders. President Xi Jinping may have a head full of Chinese dreams, but he wakes up every day with the problem of how to satisfy the needs and expectations of 1.4 billion individuals, or about one out of every five people on the planet.

Keeping that in mind might make China appear a little less imposing and a little more sympathetic to the average American, who is being told, by US pundits and politicians, that the modest increase in the average Chinese person’s standard of living has come at their expense.

Fair Trade or Fear

President Trump is starting a trade war with China because he thinks the United States is treated unfairly. But the economist who talked him into this war has other motivations. White House Trade Advisor Peter Navarro wants to stop China’s economy from growing. He sees China as a threat and endorses the following diagnosis from University of Chicago professor John Mearsheimer.

What really makes China so scary today is the fact that it has so many people, and it’s also becoming an incredibly wealthy country so that our great fear is that China will turn into a giant Hong Kong. And if China has a per capita GNP that’s anywhere near Hong Kong’s GNP, it will be one formidable military power. So a much more attractive strategy would be to do whatever we can to slow down China’s economic growth – because if it doesn’t grow economically, it can’t turn that wealth into military might and become a potential hegemon in Asia.”

Hong Kong’s current per capita GNP of $46,080 is nearly fives times greater than China’s $9,380 and more than four times the global average of $11,310. (The current per capita GNP of the United States is $61,690.) At their present rates of economic and population growth it would take China about 100 years to approach Hong Kong’s per capita GNP.

This is why most Chinese people see the country’s enormous population as a burden not an asset. They understand that China’s newfound prosperity must be shared among a very large group of people who will rise up in anger if it isn’t shared equitably. That is the fear, more than any other, that animates the behavior of China’s leaders. Their dogged pursuit of sustained economic growth is not a manifestation of excess national pride or global ambition. It’s a matter of political life or death.

Xi Jinping

China is a communist country. The ruling communist party manages an economy it defines as being in the early stages of socialism. Everything its leadership does is the product of a way of looking at China and the world that most Americans, including the corporate executives who invested in the Chinese market, don’t understand or care to understand. For decades they’ve mistakenly looked at Chinese communist ideology as a fig leaf intended to protect the political legitimacy of leaders who didn’t believe in it themselves. This may be why they seem caught off-guard, and feel disadvantaged, by the way China manages its economy.

Xi Jinping was a dark horse candidate for General Secretary elected in 2012 by a majority of his comrades in the Central Committee, and the first party leader not ordained by its founders. He won the job with a plan to prevent the party’s collapse. Twenty years of economic reform and globalization created a dangerous gap between Chinese haves and have nots. Many ordinary Chinese associated economic success with government connections and corruption. Among the upper echelon of the 80 million member Chinese Communist Party there was a sense they were losing control of the country.

Five years into his administration the consensus among my Chinese friends and colleagues is that Xi has made a difference, cleaned things up, made the system more fair and shrunk the gap between rich and poor. They all think the elimination of term limits is a step backwards, but most believe they have a leader who is attentive to national needs and they like the idea that Xi won’t be a lame duck in his second term.

I lived and worked in China a long time. I still spend 6-8 weeks of every year here. I know a lot of people of all ages from many different parts of the country and many different walks of life. I feel confident their support is not a product of the heavy-handed propaganda coming from China’s state media. They’ve been exposed to communist propaganda all their lives, understand what it is and consume it with a healthy skepticism. Their measure of Xi’s leadership is grounded in the changes they’ve noticed in the way decisions are made and resources are allocated where they live and work.

There are dissenters, mostly among the well-educated, who know China’s history and see uncomfortable parallels between Chairman Xi and Chairman Mao. The worst of these is the imposition of much tighter controls on speech, publication and association that could undermine progress. Before Xi there was an “anything goes” mentality that enabled the innovative as well as the corrupt. Caution is the watchword now, and cadres throughout the communist system are afraid to take risks.

Nationalism and Militarism

Every nation has its community of “patriotic” hotheads and in China they’ve found a home in the propaganda apparatus and on social media. But in my circles I haven’t noticed an appreciable change in people’s attitudes. Strangers treat me pretty much the same as they always have, with a mix of curiosity and courtesy. Conversations of any length inevitably turn towards politics and I think the average American would be pleasantly surprised at the degree of objective sophistication exhibited by their Chinese counterparts.

At a recent international conference in Tokyo some participants expressed concern about Chinese “expansionism,” especially in the south and east China seas. The Chinese delegates pointed out that China’s territorial claims have not changed since the founding of the People’s Republic in 1949. What has changed is China’s capability to defend those claims. China has held military spending to an average of 2% of GDP per year since 1988, when Deng Xiaoping initiated policies on government spending that prioritized economic development over national defense. (The United States averaged 3.9% of GDP per year during the same period.) But two decades of rapid economic growth made China’s 2% part of an increasingly larger economic pie, and China’s military is better trained and equipped than it was before.

In the course of my work I’ve had an opportunity to speak with quite a few Chinese military officers and not a single one of them agrees with the optimistic assessments of China’s military capabilities dished out by what they derisively refer to as China’s “television generals.” They do tend to be pleasantly amused, however, that American officials take this kind of propaganda more seriously than most Chinese. They also take care to remind me that China’s leaders will go to war if US policy-makers leave them no other options, especially on the core issue of Taiwan. But none of them are anxious to start a war or confident of the outcome.

Global Reach

Some of the most alarming US commentary on China is connected to its efforts to play a greater role in international governance. Foreign Policy recently published an article by Rep. Michael McCaul that described those efforts as a “long march on American democracy” that has “blanketed the globe with a cloud of Chinese Communist influence.”

Globalization has been good for China and until recently its leaders were content to take a free ride on US stewardship of the process. US experts and officials used to complain about that. But the financial crisis of 2008 undermined Chinese confidence in US economic and political elites. China’s leaders have been struggling to adapt ever since. Given the pressure of their enormous population, and the inherent interdependence of the global economy, China’s leaders decided to play a more active role in international economic management.

China is applying its experience at home to what it does abroad. One of the most successful things Chinese economic planners do is building infrastructure. So it should not be surprising that China’s primary global economic initiative is the reconstruction of the ancient Silk Road trade routes connecting Europe, Africa and Asia by land and by sea. Chinese leaders hope this “belt and road initiative” will create the same sort of economic opportunities abroad that China’s high-speed rail network, subway systems and other infrastructure projects created at home.

US critics may be justified in wondering about the economic viability and political consequences of Chinese government investments whose returns will not be distributed to private shareholders in the form of profits but to national governments and their populations in the form of public goods. In that sense, what China is proposing may present a significant challenge to the corporate-dominated model of globalization advanced by the United States. It could also lead to long-term changes in global trade flows and the rules that govern them.

Looking Forward

If, like President Trump, you believe global economics is a zero-sum game, then China’s ongoing economic development may seem threatening. But if you don’t, then there are reasons to look at China’s progress with less dread.

Another lesson Chinese leaders appear to have learned during the last three decades is that long term economic growth is unsustainable without a healthy natural environment. The Chinese leadership’s support for the Paris agreement on climate change emerged from a recognition that Chinese could not continue to plunder and pollute their natural resources. Environmental degradation is the single greatest complaint leveled at the Chinese communist party by the 1.4 billion individuals it governs. If China’s rulers can solve the problem of how to provide its masses with a decent standard of living and a sustainable environment at the same time they will have solved the most important problem humanity faces. Why should we hope they fail?

What’s happening in China is likely to exert considerable influence on the US economy and US standing in the world for decades to come. It deserves our government’s attention. But my own experience suggests the fear mongering behind Trump’s trade war and the hyperbole coming out of Congress make it difficult for many Americans to get a balanced look.

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  • Ryan Alt

    I would call the US’ waning influence of much greater concern than anything else. Also, the last time I checked, Hong Kong is not a separate state but has been part of China since 1997. Nor do I think that the US is going to war with China anytime soon as the US would certainly have a lot to loose and nothing to gain.