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Exclusive: Brace For Impact: What Is China’s Endgame?

On March 6, 2015, the New York Times published an article by respected China scholar David Shambaugh which posited that China (and specifically the Communist Party) was heading toward its breaking point. Shambaugh cited a variety of evidences, including the fact that many rich in China are moving assets abroad and Xi Jinping’s recent push against corruption (which many see as a form of political repression).

Shambaugh’s points are well-taken. It would seem that the country is going through a series of difficulties hidden behind the veil of the Chinese mystique. Even layman are beginning to see cracks of the façade in the summer of 2015 when the Chinese stock market crashed due to continuing investment despite slow growth and weak company profits. Mixed with China’s looming real estate bubble and the demographic time bomb leftover from the one-child policy, Shambaugh’s proposition does not seem as far-fetched as his critics would believe.

This begs the question. What is China going to do about it? After emerging virtually unscathed from the late-2000s financial crisis, China’s economic juggernaut was the motor of the world. The huge growth allowed China to overtake Japan as the world’s second-largest economy in 2010 with many commentators believing it would eventually overtake the United States. Perhaps the most interesting analysis came from Michael Pillsbury, who in his book The One-Hundred Year Marathon: China’s Secret Strategy to Replace America as the Global Superpower, suggests that China’s grand strategy is to replace the United States as the world’s sole global superpower. (You can read a review of the book here and read a dissenting opinion here.)

It is a shame that the book (released on February 6, 2015) was published before being able to read Shambaugh’s analysis of China on March 6 of that year or even have a chance to interpret the stock market crash in June(again in 2015). I also find it interesting that Pillsbury argues that the plan to replace the US began in 1949 (with the Communist victory of the Chinese Civil War) and will be completed around 2049 (Pillsbury’s projection). This would mean that from Mao Zedong in 1949 to Xi Jinping today, China policy was directed toward replacing the US! Talk about consistency!

The past five generations of Chinese leadership. Listed from left to right: Mao Zedong, Deng Xiaoping, Jiang Zemin, Hu Jintao, and Xi Jinping.

But what is China’s endgame? What does the country want? Frankly, I think China’s goals are better reflected in another book, Orville Schell and John Delury’s Wealth and Power: China’s Long March to the Twenty-First Century. In this book, China’s goal is not to supplant the United States as the world’s hegemon, but rather to seek fuqiang, a Chinese term meaning “wealth and power”. Schell and Delury trace this back to the Legalist philosophy Han Feizi who they quote as saying “If a wise ruler masters wealth and power, he can have whatever he desires.” In the long run, I believe that this is China’s goal, to crawl out of a century of humiliation and to be respected among the body of nations.

But how does Shambaugh fit into all this? I thought he was talking about China’s internal politics?

I believe that when we talk about China’s global strategy, it is important to consider China’s domestic situation as well as its national interests. I think Shambaugh’s argument has strong points. China’s slowing growth is sure to have major repercussions for China’s export-driven economy. At the same time, social tensions in the country threaten to destabilize the country stemming from conflicts arising along lines of race, class, and social group. As growth begins to slow, the perceptions of domestic inequality will become more apparent to the Chinese, especially with a hukou system that displaces families and unintentionally creating an undereducated rural population unable to compete effectively with China’s urban populations.

Some see the hukou system as barring equal opportunity for individuals designated "rural."
Some see the hukou system as barring equal opportunity for individuals designated “rural.”

Despite China’s huge population, its workforce is uneven. There are too many jobseekers clawing for scare resources with a major part of population (the rural population) underprepared to work in a 21st century economy. Divisions along class lines, along with ethnic divisions in China’s western regions, could spur future instability across the country.

Instability in China would be detrimental for the country’s future, especially in the midst of the political situation. For so long, economic growth had been a major unification factor for the nation, with China’s strong economy creating, for the most part, relative stability. However, with slowing growth, China must find a new way to prevent instability. In a recent article of Foreign Affairs, Robert Kagan argued that China’s recent push for military assertiveness in the South and East China was done to create nationalism as a means to create social cohesion. Perhaps there is some truth to this, however I do not think this is the whole picture.

With the growing threat of instability combined with a slowing economy, I believe China’s political moves, both domestic and international, are a way for the country to brace for impact. As China adjusts to a “new normal,” the country will no longer have the unifying factor of economic growth and will face major social, economic, and political challenges for the future. It is a popular stereotype (both in and out of China) to take the change of political governance well, acknowledging that while the leaders change, China, as a cultural entity, will remain. However, transitions between these periods of long peace’s involve short periods of violence, and the current Chinese administration is now doing all it can to preserve China as we currently know it.

The anti-graft campaign and power consolidation

Chinese President Xi Jinping (right) with Wang Qishan, the face of the anti-corruption campaign.
Chinese President Xi Jinping (right) with Wang Qishan, the face of the anti-corruption campaign.

No doubt public instability is worrisome. However, more worrisome are political forces that would be able to harness such unrest for their own purposes. Political opportunists possess a major threat to Chinese stability, as certain political forces could utilize public outcry to challenge the present Chinese administration under Xi Jinping. Xi, one of the Princelings, (children of China’s previous Communist Party leaders), would possibly face a hard battle against other ambitious leaders in China. Bo Xilai is a name that most commentators like to throw around, and after his fall from grace, many observers argued that this was due to the fact that he challenged Xi’s (then the incoming leader’s) power.

Later, Xi pushed a major anti-corruption campaign that targeted many of China’s leaders. This has been taken many ways, while corruption does plague the Chinese government; one observer argues that Xi is running a “selective campaign” to punish his political opponents. This has lead an assortment of commentators to conclude that Xi is consolidating his power.

While some see this campaign as a natural consequence of communism others see this as Xi Jinping carrying out a Stalinistic purge. However, by consolidating his power, Xi is setting a precedent. Although it is unknown whether Xi will step down at the expected time (Chinese leaders typically serve for ten years, thus Xi is expected to step down in 2022), however whether he does or not, Xi has already set precedent for future Chinese presidents.

Let us not forget that Deng Xiaoping was neither President nor General Secretary of the Communist Party when he led the People’s Republic of China, but rather simply the head of the Central Military Commission (CMC). Later, the three titles mentioned above (President, General Secretary, and CMC Chairman) were all held by one individual for each administration succeeding Deng: Jiang Zemin, Hu Jintao, and Xi Jinping, respectively.

Deng Xiaoping, leader of China from 1978-1989. Deng was never President of China nor was he General Secretary of the Communist Party
Deng Xiaoping, leader of China from 1978-1989. Deng was never President of China nor was he General Secretary of the Communist Party

In fact, it was not until April 2016 that Xi Jinping added the title “Commander In Chief of the military’s Joint Operations Command Center” to his resume. Xi Jinping has undeniably established himself as the most powerful man in China and the most powerful leader since Mao Zedong. However, I remain skeptical that this is purely a vanity fair. While I do feel Xi seeks to benefit from his leadership in China, I think the anti-graft push is meant to remove political opponents in order to give the country consistency.

The biggest deciding factor of whether China will benefit from this power consolidation depends on whether Xi is consolidating power in his person or in his office. If Xi is consolidating power in his person, then it is fair to be concerned of a sort of Putinesque-style of governance in China’s future. However, if Xi is consolidating power in his office, then he is setting a precedent for the future of Chinese politics, namely, that the President/General Secretary (with all of its other titles) will continue to be the most powerful political office in China. If Xi is truly making the office of President/General Secretary the unchallenged head of party and state, it will give China a sort of consistency to continue ad infinitum. If some sort of financial upheaval does arrive, China is going to need it.

National security push

Part of a cartoon warning citizens about foreign spies. In the story the girl falls for an attractive and charming foreigner who turns out to be a spy.
Part of a cartoon warning citizens about foreign spies. In the story the girl falls for an attractive and charming foreigner who turns out to be a spy.

Have you ever worked in a non-governmental organization? I used to work at a few in my time and the biggest thing I found is that outside parties always seem to misinterpret our mission and overestimate our resources. It’s a natural thing I suppose, especially in countries that remain suspicious of foreign influence.

Foreign influence is a terrifying thing for all nations as it is an existential threat to that nation’s sovereignty. In China, the fear of Western influence is palpable. It must be noted that when I mean Western influence, I mean political influence. I make this distinction not only to relax your fears that the Chinese won’t understand your references to The Big Bang Theory and Dragon Ball Z, but also to point out the irony of China’s stronger restrictions on non-governmental organizations (NGOs).

This past April, China passed a law that will place heavy restrictions on foreign NGOs. While the law does not ban them outright, the “new law will require foreign NGOs to register with Chinese police and the Ministry of Public Security before beginning operations in China. Foreign NGOs will be ‘banned from engaging in or sponsoring commercial and political activities or illegally engaging in or sponsoring religious activities.’”

The law exemplifies China’s harsh (and, let’s face it, unsurprising) paranoia with foreign influence, particularly from “color revolutions” or “social discord and eventually rebellion fostered by nefarious foreign agents, often working in the guise of nonprofits.” This is a fear shared by Russia, particularly in the 2000s, where a variety of these “color revolutions” danced around the nations of the former Soviet bloc.

"Color revolutions" that took place in the early 2000s in the former Soviet bloc. Russia has claimed that these revolutions were funded abroad through NGOs.
“Color revolutions” that took place in the early 2000s in the former Soviet bloc. Russia has claimed that these revolutions were funded abroad through NGOs.

China has also pushed stronger national security laws aimed to defend from the machinations of “the nefarious foreigners as well as the Chinese citizens who fall under their influence” as well as “rooting out both foreigners and those who subscribe to ‘foreign values.’” The government even went so far to celebrate April 15 as “national security awareness day” in which the Chinese public was encouraged to report on suspected spies. Observers are sure to find this eerily Orwellian, made stranger by the fact that real foreign spies will probably be practicing their trade via the Internet rather than in the open air.

It is possible that China’s recent national security push is directed toward political dissent. More importantly however, this push is also aiming for dissent in two critical regions, Xinjiang and Tibet (Xizang). While Tibet is the more publically known, Xinjiang remains the more worrisome of the two provinces.

In an earlier article, I mentioned that Xinjiang is a major linchpin for China’s One Belt One Road Initiative (OBOR) as it is China’s link with the Europe and Central Asia which would help “lead China’s surplus capital and industrial overcapacity into the infrastructure and industrial investments in countries along the OBOR project’s routes.”

However, political unrest in Xinjiang could threaten the effectiveness of the initiative. With a huge immigration of Mandarin-speaking Han Chinese moving into Xinjiang combined with the jobs that will be introduced into the region with OBOR, the local population (mainly Uyghurs, but also including Kazakhs and Uzbeks and Kyrgyz among others) are faced with a choice, abandon their language for practical purposes of work or defer on job opportunities to immigrating Han.

Xinjiang Uyghur Autonomous Region, the western-most region governed by China.
Xinjiang Uyghur Autonomous Region, the western-most region governed by China.

Also, in the context of international terrorism, Xinjiang is also dubious, as the majority population of the province is Muslim. Islamist extremism does play a role in the region especially with the Islamic State (ISIS). ISIS concerns China (although not as much as it concerns the West) and an expansive ISIS could threaten to awaken the Uyghur population. ISIS could also be attractive to Uyghurs (a Turkic people) as the terrorist group’s alliances with the Nigeria-based Boko Haram showcases that it is not solely an Arab (nor even solely a Middle East) phenomenon. Moving beyond a pan-Arab movement makes ISIS appealing, as it offers appeals to “oppressed” Muslims of all nations.

Presently, China has pushed for peace in the Middle East. This has worked to increase China’s international presence. However, ISIS also poses a threat to China’s internal security and energy security, as the terrorist group endangers China’s oil and gas producers among the nations of the Middle East. ISIS also provides a troublesome roadblock in the way of China’s OBOR Initiative, which could endanger the series of roads, railways, and pipelines intended to connect China with West Asia, Europe, and Africa. It is not unthinkable that, China would seek a stronger national security agenda as its interests are so heavily threatened within its borders and internal security. If China is preparing for instability, its national security policy is a step in the right direction.

Joint exercises

China and India held joint military exercises in 2015
China and India held joint military exercises in 2015

Joint exercises are always a fun thing to look at, and recently, they have been used heavily as an unspoken challenge toward another nation. Think of it like one of those frogs that inflate to scare predators or those muscle-men at the beach that flex to scare away women. One recent example is an exercise made by the United States and the Philippines that was aimed towards China earlier this year. The US also conducts annual exercises with India and Japan in Operation Malabar, perhaps one of the most interesting as it hints at the old Quadrilateral Security Dialogue, taken by China as a means of containment.

China has conducted a few exercises of its own. Take for example, a joint exercise between China and India. In October 2015, China and India held a “counter-terrorism drill.” China has also joined with Russia (interestingly held in the Aegean Sea where China has a major stake in the Piraeus port) and in the Sea of Japan. China has also conducted joint exercises with Cambodia and Thailand as well as vowed military cooperation with some of the Central Asian Republics.

However, before my words make it sound like an US-China alliance race, it must be mentioned that China has (and plans to) conduct military exercises with the United States.

Interestingly, it would seem that China has focused anti-terror and maritime operations which could be aimed at combating the potential problems that China could face in OBOR and to secure the safe movements of goods (exports and imports) as well as energy along troublesome lines of communication.

International institutions

It is common to speak of US military, cultural, political, and economic power, but one aspect of power that is easy to ignore is US institutional power. International institutions form the few semblances of an international order. Today, the most powerful are the United Nations (UN) and the international economic organizations, the International Monetary Fund, the World Bank, and the World Trade Organization. China is a member of all of these organizations. However China has created an institution of its own: the Asian Infrastructure Investment Bank (AIIB).

Membership in the Asian Infrastructure Investment Bank
Membership in the Asian Infrastructure Investment Bank and the Asian Development Bank.

This bank began as a diplomatic nightmare for the US as the closest of America’s allies (save Japan) opted to join the China-led bank. The AIIB was seen as a means of competition against the US-led organizations. However, the AIIB possessed a difference. While the US-led organizations lent capital with “strings attached” (the Washington Consensus) which required some structural adjustment to the borrower nation, the AIIB would not include these reservations.

This led some to declare that the Chinese-led institution would advocate for a “Beijing Consensus” of which a definition is yet to be found. Most try to define it as advocating China’s noninterference into other nation’s internal affairs (which was received well by dictators and strongmen).

While the AIIB was initially received coolly by the United States, Jim Yong Kim, President of the World Bank, later welcomed the AIIB and later the BRICS-established New Development Bank (NDB) and encouraged the institutions to work together with existing institutions to combat “extreme poverty.”

Leadership of the BRICS. Listed from left to right: Vladimir Putin (Russia), Narendra Modi (India), Dilma Rouseff (Brazil), Xi Jinping (China), and Jacob Zuma (South Africa)
Leadership of the BRICS. Listed from left to right: Vladimir Putin (Russia), Narendra Modi (India), Dilma Rouseff (Brazil), Xi Jinping (China), and Jacob Zuma (South Africa)

These international institutions provide China with much needed “soft power” and, in all honesty, the fact that China has not included the “strings” of the Washington Consensus has helped the country’s image in the face of borrowers. To many, the fact that the US pursues international values is taken with hesitation, as most cooperators believe the US is hiding some sort of nefarious purpose. On the other hand, with China, underlying interests are not hidden, and the countries enter into contracts acknowledging that China is not in their country for purely altruistic reasons (which always draw suspicion).

The AIIB and NDB provide China with a way to become deeply involved with the world’s many nations. By creating a strong investment relationship, China becomes more and more deeply ingrained into the economic lives of other nations in various regions all over the world.

OBOR also continues to play a big role as China pursues closer involvement with nations in Central Asia, Southeast Asia, South Asia, Africa, and Europe. Announced in 2013 by President Xi, the initiative is a plan to create strong economic interconnectivity with countries along the planned routes through a Chinese networks of international trade based on “existing and future Free Trade Agreements,” “new international development financing institutions” like the AIIB and the Silk Road Fund, an “internationalized Renminbi,” and “new land and maritime infrastructures that connect the Eurasian landmass.” OBOR will be China’s biggest vehicle of interconnectivity and will help it in its desire to circumvent “the pressure from the United States and its allies on the east coast and protecting China’s energy security.”

Planned routes of One Belt One Road
Planned routes of One Belt One Road

China has also become the number one trade partner for a variety of countries around East and Southeast Asia as well as a major investor in Africa.

Frankly, I think that China’s investment into all these countries are neither purely altruistic nor a case of neocolonialism. When China makes a deal with an African nation, there is a clear trade-off taking place, with the African nation gaining an important piece of infrastructure, like a railroad which will connect landlocked Ethiopia with coastal Djibouti for economic purposes, while also helping China by giving it a way to access Ethiopia’s economy through Djibouti, which hosts China’s first overseas military base (along with US, French, and Japanese bases).

Chinese investment in Africa from 2010
Chinese investment in Africa from 2010

Africa provides a variety of natural resources and a plethora of economic opportunities for Chinese investment and development. It seems that China has found a niche in the country that the West had failed to fill, and while the West may argue that Chinese involvement is neocolonialism, African nations will continue to work with China in order to proceed with development.

It seems in this case that China’s economy has become incredibly entwined with much of the world, and through the use of the AIIB and NDB, China will continue to be important for these nations. Should China ever come into some sort of future trouble, the nations of OBOR as well as those reliant on Chinese cooperation could not let it fail, lest face the global economic repercussions of such a disaster.

South China Sea

China's claims in the South China Sea
China’s claims in the South China Sea

In the context of the OBOR, the conflicts in the South China Sea remain the most puzzling. Earlier, when considering Chinese activity in the South China Sea, I posited that China boosted its activity in the region as a way to counter US influence in the region. ASEAN remains an uncommitted factor in the whole dispute, with Vietnam and the Philippines being strong critics of Chinese influence in the region and three others who reached a consensus with China on the South China Sea (Brunei, Cambodia, and Laos).

It is also very important not to forget China’s economic situation with ASEAN. ASEAN is “China’s third largest trade partner, with a bilateral trade volume of 480.3 billion US dollars in 2014” with both sides “negotiating to upgrade their extant China-ASEAN Free Trade Area.” All of the member states have also signed aboard the Asian Infrastructure Investment Bank. The economic relationship between China and ASEAN is the key to China’s perceived actions of assertiveness in the region. China can afford to gamble and win as efforts of the other littoral parties in the dispute cannot afford to lose the trade and investment, both existing as well as future opportunities, with China.

China-ASEAN trade volume
China-ASEAN trade volume

Finally, China’s ambitious claims, which cover a majority of the disputed waters, are also important for China. Knowing that the situation is unlikely to lead to outright war, China acknowledges that the issue will be settled through some sort of dispute resolution. By having a de facto reach over the region, particularly through China’s defense infrastructure on artificial islands, China will enter talks with strong bargaining tools and increased leverage. Even if China does not gain control over the whole South China Sea, the area it would get from a compromise is sure to be more than if they did not assert their strength in the region at all.

Imagine bargaining with a shopkeeper for an item that costs $40. Suppose you want to spend $25. You suggest paying $15 to the shopkeeper’s shock and chagrin and then proceeds to lower the price to $35. You insist on $15 which impels the shopkeeper to verbally attack you before letting slip that he is willing to go to $30. You finally suggest meeting each other at $25 (closer to his asking price than yours) to which he agrees. Congratulations, you got exactly what you wanted. I believe that this is what China is going for in the South China Sea and in a situation where ASEAN cannot afford to have China take away its investments, it would be better to negotiate than to engage in war. Xi would agree.

Energy security

Russian President Vladimir Putin with Chinese President Xi Jinping
Russian President Vladimir Putin with Chinese President Xi Jinping

Around the middle of 2015, a green and wet-behind the ears undergraduate student provided some analysis of a 2014 China-Russia gas deal, the energy relationship between China and Russia, and its repercussions on international affairs (spoiler alert: it was me). In that analysis, I reiterated Bobo Lo’s declaration that the relationship between China and Russia was “convenient cooperation” and was pursued to secure permanent interests rather than permanent allies. (You can read the full text here.)

As time goes on however, the gas deal, a global game of “chicken” showing the West that Russia has customers other than Europe to export its oil and gas, seems to have favored China over Russia. Many commentators see the deal has heavily favoring China over Russia, with Russia becoming China’s “junior partner,” exporting natural resources to the East Asian giant.

China’s cooperation with Russia is made for energy diversification. Currently, China receives most of its energy from the Middle East and Africa, however, should something, for example, terror or pirates, cause trouble in the region, China will need to work with Russia to make up the difference in terms of energy. OBOR is intended to include a series of railways, roads, and pipelines to increases Chinese connectivity with neighboring countries (and their economic opportunities). With the Power of Siberia pipeline in China’s Northeast and (possibly) an Altai Pipeline in the Northwest, China will be able to access much of Russia’s oil and gas to fit its need.

Possible pipelines between China and Russia
Possible pipelines between China and Russia

Energy security is of major importance for China, as it requires the energy to support its export-led growth. I believe that energy security is of major importance in China’s military expansion. China has also helped develop a series of ports and projects in a variety of South Asian countries, the so-called “String of Pearls.” However, above all, I believe this to be an attempt to protect maritime security.

Take the Gwadar Port for example. Rather than being a means for China to strike against India, the Gwadar Port provides the opportunity. Currently, China is incredibly reliant on the Malacca and Lombok Straits in Indonesia. At the same time, with concern in the South China Sea as well as with Indonesian President Joko Widodo’s “sink-the-vessels” policy, as well as Australia’s stronger military presence, China needs to find alternative routes to connect the upstream to China. The Gwadar Port, therefore, provides a means to funnel in Middle East and African oil through the Gwadar Port, through Pakistan, and into Western China. Of course, there exists the danger of terror in Pakistan and Western China, but we’ve discussed this.

The Indian Ocean region
The Indian Ocean region

Final thoughts

In 1998, then-Secretary of State Madeleine Albright declared the United States “the indispensable nation.” This is as true today as it was in 1998. In every global problem, whether economic, political, or military, the United States seems to be, for better or worse, involved in some way. Everyone, from neocons to non-interventionists, take this to be the fact of the matter. However, despite all of the negative aspects of such entanglement to the world, one thing remains clear; the United States is not going to be irrelevant in world affairs anytime soon.

It is this kind of indispensability, I believe, that China is seeking, at least in the economic realm. I do not believe that China wants to burn its resources on distant wars and occupations of countries. China wants to be relevant and at the center of the action. In this globalized world, nations have become inextricable to each other. Today, a local election in a middle economy can have major global effects.

Although I risk presumption (since no one can honestly know the whole truth of China’s grand strategy), I do not think it is too conspiratorial to suppose that China is seeking to be a major linchpin in the global economic framework. We often say that certain actors in a country’s economy are “too big to fail” and that the detriment of such a company failing would be economically disastrous. In a similar fashion, should a China so intertwined in international globalization meet some cataclysm, the result would be disastrous for the global economy.

The solution is indispensability. In order to counter the nightmare foreseen by Shambaugh or perhaps some other financial calamity, China is tightening up its internal power structure, pushing domestic stability, and ensuring international connectivity and fluid lines of communication. China is bracing for impact and with indispensability, the countries that rely on the giant will not (and cannot) afford to let China fail.