2018 marks the 40th anniversary of China’s reform and opening up policy, which was introduced under the leadership of Deng Xiaoping and was described by him as China’s ‘second revolution’. China has achieved a lot in the last 40 years. From being one of the poorest countries in the world in 1978, China is now one of the largest contributors to international growth. It holds around 4 trillion dollars in foreign exchange reserves. It is not only the second largest economy in the world but also among the largest trading partners of the majority of countries in the world. The words ‘Made in China’ have become household terms. However, the pace of development has given rise to a number of new challenges for the Chinese government.
The living standards of the Chinese people have been improving year by year. According to a report released by the China’s State Council Leading Group Office of Poverty Alleviation and Development, the Chinese government successfully managed to lift around 68 million people out of poverty in the last five years and 600 million in the last 30 years. Another prominent example of the strength of the Chinese economy today is the launch of the Belt and Road Initiative (BRI). China is presently a global power, with its remarkable economic growth also facilitating vigorous military modernization.
The Chinese domestic political environment has also transformed in the last four decades. During his 2018 New Year’s speech, Chinese President Xi Jinping re-emphasized, “With the 40th anniversary of the reform and opening-up policy as a turning point, we shall cut paths through mountains and build bridges across rivers, overcome all difficulties and carry reform through to the end.”
However, the last forty years have given rise to newer challenges and hurdles, which call for newer ways to tackle them. The Chinese economy, society and politics, all are undergoing rapid modifications; and only time will tell if the CPC is prepared to adapt to these changes and how far it would be successful in this exercise. In this context, this article will discuss three broad areas of Chinese economy; society, polity and environment; and foreign policy and strategy.
Economy
China witnessed around double digit growth figures for almost 30 years. But with the economy expanding, the government has accepted that this is no longer achievable. The Chinese government has accepted the term ‘New Normal’, which generally argues that the Chinese economy will now grow at relatively lower rates. The target set at the National People’s Congress (NPC) concluded in March 2018 was 6.5 percent. There is also a call to push for consumer-led economic growth. However, the government has extended targeted focus on developing better R&D and is also showing interest in the development of Artificial Intelligence (AI).
According to a report in the China Daily, China has around 1,011 AI companies and ranks second in the world in this field. The Chinese government is also heavily focused on ‘Innovation led’ growth. According to a report, “China will keep innovation and industrial upgrading at the center of efforts to ensure sustainable and stable economic growth.” The government hopes to use the new developments in technology and innovation to help it “foster a new national leadership and establish the key fundamentals for an economic great power.” It is still unclear how the proposed changes will affect the Chinese economy as this may also require major restructuring of the State Owned Enterprises (SOE). In the last forty years the share of the SOEs to the GDP has reduced from 80 percent to 18 percent and they still employ more than half of the Chinese workforce. Under Xi the Chinese government has been putting more emphasis on increasing the role of the private sector, especially by reducing the existing barriers to its growth in the country. In the words of Xi Jinping, “We will unswervingly develop the public sector and will unswervingly encourage, support, guide and protect the development of the private sector.”
Society, Polity and Environment
The basic target of the reform and opening-up policy was the restructuring of the Chinese economy, but the Chinese government had not fathomed the changes, which the reforms would bring in the Chinese society. In addition to improving the living standards and income of the Chinese people, the reforms also resulted in a large number of problems; the most prominent being environmental pollution, income inequalities and rise in corruption. The gravity of these problems can be gauged from the fact that during his speech at the 19th Party Congress concluded in October 2017, Xi Jinping in his three-hour long speech used the word ‘environment pollution’ around 89 times while the term ‘economy’ was mentioned only 70 times. According to reports, around 1.1 million people died because of air pollution in China in 2015. The pollution is also responsible for major economic losses. It has also become one of the leading causes for people’s protests in China which the Chinese government calls ‘mass incidents’.
[1] In his speech Xi asserted, “We must continue the beautiful China initiative to create good working and living environments for our people and play our part in ensuring global ecological security.”
In addition to this, Xi Jinping launched the Anti-Corruption campaign after he came to power. The campaign has affected the Chinese politicians and military personnel massively, as from 2014 to 2017 around 18 sitting central committee members were accused of corruption. While talking about corruption at the 19th Party Congress, Xi said that, “We will work for the adoption of national anti-corruption legislation and create a corruption reporting platform that covers both disciplinary inspection commissions and supervision agencies.” The anti-corruption drive by Xi has directly or indirectly put around 100,000 Chinese officials in trouble. The Chinese government aims to root out corruption from all levels of the government.
The existing income inequalities are considered the primary cause for the growing number of protests within China. As Deng Xiaoping had predicted that ‘some people will get richer first’, the pace of development has given rise to a huge section of the people who ‘did not get rich’. The western and central provinces of China are still underdeveloped while the coastal provinces raced ahead. To counter this, the government has introduced the ‘look west policy’, however, it has not proven to be very successful keeping in view the ongoing unrest and distrust towards the CCP in Xinjiang. The Chinese government is exploring ways to rectify the enormous disparity in income distribution by adopting better economic policies like encouraging domestic consumption, restructuring the SOEs and also encouraging the private sector coupled with the anti-corruption drive.
One of the prominent commitments of the CPC has been towards poverty alleviation. China aims to reduce the rural population below national poverty line by 10 million in the year 2018. At the same time, under Xi, it must be noted that China has witnessed increase in ‘control and command’ structures. The Chinese media is facing higher monitoring and censoring; so is the case with the ethnic minorities, especially in Xinjiang and Tibet.
Foreign Policy and Strategy
China has also used its economic strength and clout to influence the regional and global geopolitical dynamics. It is argued today that China’s economic influence can surpass that of the United States of America in Japan and the Southeast Asian region. As per reports, “In 2030, China's economic impact on Southeast Asia and Japan will be 1.8 times what it was in 2015 and 40% higher than that of the U.S.” In the words of Klaus Schwab, founder and executive chairman of the World Economic Forum, “China has long sought greater clout in global institutions commensurate with its growing economic might. The country has led the creation of the Asian Infrastructure Investment Bank, an alternative to the International Monetary Fund and the World Bank, with both developing and developed countries as its perspective founding members.” This further strengthens the argument that China today has managed to create a functioning alternative to the Western-dominated Bretton Woods system.
Beijing is also a very important player in a number of regional and multilateral organizations. The influence that China enjoys in organizations like the Shanghai Cooperation Organization (SCO) is well known and it has successfully used the organization to extend its anti-terrorism agenda at home (Xinjiang). Besides, China is also a prominent member of the BRICS grouping and has used its influence to direct the course of negotiations and policy making in it. China has already proven its clout in the international climate change negotiations and proclaimed leadership in advancing the low-carbon economy agenda through development of clean technologies. China is one of the largest contributors to National Development Bank (NDB) and Asian Infrastructure Investment Bank (AIIB), and thus enjoys greater autonomy and say in their working.
In addition to the regional organizations, Beijing under the leadership of Xi is pushing for ‘global’ influence with the BRI. The grand plan of building trade and infrastructure routes (land and sea) for connecting buyers and sellers across the globe has led to an increasing unease in the international order. There are fears that with economic interests, Chinese military will also follow, as has been the case in Djibouti. But when only seen from the economic perspective, the BRI does provide some insights into China’s economic capacity and the Chinese leadership’s commitment to use it for regional and global influence.
However, the recent trade war between China and the United States does have capacity to adversely affect its economy as well as it bilateral relations with Washington. According to some articles, “Still, as the trade war escalates, it will not be easy for the Chinese government to use public spending to boost investments due to its mounting debt.”
Conclusion
Whatever the domestic problems, China has managed to achieve major economic goals and is an important international actor today. The direction which the Chinese economy takes has the capacity to affect other countries and it is estimated that China will be the largest economy by 2024. With the introduction of the BRI, Chinese influence and might will also expand while straining its capabilities to secure and manage its global and domestic interests as it will have to expand and spread its existing military and security apparatuses.
However, the level of economic growth is largely linked to the stability of the society. With the opening up and reform there was a shift from ideological loyalty towards the Party to economic loyalty towards it. The CPC believes that in order to continue enjoying the loyalty of the Chinese people it needs to maintain a certain pace of economic growth. If the economic targets are not met it may lead to unrest in the society and generate opposition to the CPC’s rule. It appears that it is this fear of economic instability and political ousting that has pushed Xi Jinping to abolish the term limit of Presidential tenure in the Chinese Constitution. Xi is worried that if there is a transition of leadership it may lead to further slowing down of the economy and this may directly affect the future of the CPC. Xi realizes that if China’s growth levels are to be maintained, the government will have to push for a new reform of the Chinese growth model. The CPC is hoping that innovation-driven growth, BRI and better laws will help it brace any impact that affects its existence and power position.
Xi has introduced better environmental laws and anti-corruption drive while also looking for ways to develop the underdeveloped regions. With the help of BRI, the Chinese government is looking for newer economic channels and also hoping to be able to link its landlocked regions to better markets. In short, with the introduction of new policies and economic initiatives, the Chinese government would strive to manage the impending challenges which are emerging in the Chinese society, economy and politics.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the view of Manipal Advanced Research Group.
Notes
[1]An article in Global Times argues, “According to official figures, 8,700 separate incidents occurred in 1993, and that number rose ten times to 87,000 in 2005 and to over 90,000 in 2006.” The article is available at http://www.globaltimes.cn/content/433271.shtml.
Gunjan Singh, Research Associate, Institute of Chinese Studies (ICS), New Delhi.
