Dr. Ming Xia on ‘Grey Rhinos’ and the Chinese Party-State

Since the initiation of the trade war by the Trump administration in 2018, pressure on China from the United States has been harsh. Xi’s leadership has been confronted with international challenges with respect to its orientation towards the economy, COVID, high technology, the South China Sea, and human rights in Xinjiang and Hong Kong. In this interview, Ming Xia, professor of political science and global affairs at City University of New York, shares his insights on these issues and how China’s domestic governance is shaping US-China relations.

Ming Xia is a professor of political science at the CUNY Graduate Center and in the Department of Political Science and Global Affairs at College of Staten Island, City University of New York. He is the author of The Dual Developmental State (Routledge, 2000), The People’s Congresses and Governance in China (Routledge, 2008), Political Venus (Morning Bell Book House, 2012), Empire of the Red Sun (Mirror Books, 2015, in Chinese), High Peak, Flowing River: On Tibet (Tibetan Book Shop, 2019), and Explaining Power with Political Science: Misgovernment by Demagogues from China to US, 2010-2020 (Bouden House, 2021, in Chinese).

This interview was conducted by Xin Tong, graduate assistant for the Carter Center’s China Focus and Master of Public Policy student at the University of California, Irvine. This interview has been edited for clarity and brevity.

Good afternoon, Professor Xia. Thank you for being our guest and we are very grateful to have the opportunity to speak with you about US-China relations today.

Thank you for your invitation. It’s a great honor to work with you.

How do you view the general political and social situation in China in 2022? What might be ‘gray rhino’ events that might shock China and the US?

If you have observed the dialogues or debates in the US-China relationship or about Chinese politics, you can find out that I belong to the camp of pessimists. Many people talk about how China is thriving and the US is in decline, but I think that China has a lot of issues. If China really wants to become a great country in the 21st century and to become a major driver of international politics, I think China has a lot of domestic issues to deal with.

Now, if we look at 2022, I think there are so many crises. They are mounting. They are also accumulating. They are interacting with each other to make any single solution difficult or almost impossible. But of course, at this moment, since the crises are deepening, I have not spoken much because it’s just like when you go to a doctor and saying, “I hope the doctor is going to do something,” but sometimes doctor just says, “No, I cannot do anything anymore” and moves on.

I think at this moment, I have deeper pessimism because, as a political scientist, I think my job is to try to identify certain political problems, explore solutions, and share them with decision-makers and the public. But when I realize there is no way out or there is no way to retreat and change the pathway, sometimes I just realize that no matter what I do, history is going to be like a brutal machine. It is going to crush things on the road.

This is my present mentality when looking at China, especially when you ask, what is the gray rhino? There are so many crises. If we think about black swans, we do not know what things can happen, like COVID-19. Suddenly it happened, so it’s one of the black swans. Then if we think about a gray rhino, people refer to huge structural problems that people tend to neglect. I think at this moment in Chinese political economy and in Chinese society, the gray rhino is the powerful Chinese state.

People often believe the Chinese state is invincible, omnipotent even… I sometimes call it a providential state. It looks like it has magic power to do everything, and when you say, “Oh, Chinese society is unstable,” then people are going to say, “We have the state. The state is strong.” When we say, “Oh, the Chinese local banking system, it is in crisis,” they say, “Oh, we have the central state and can bail them out.”

When we say, “China is facing so many crises,” some people would say, “China has such great power,” and like Xi often said, “We have the whole country, and then we mobilize them to do whatever over Hong Kong, over Macao. We can do it.” But I want to point out, it’s because we have neglected that, the Chinese state, and the huge Leviathan itself, is in a deep crisis. If we look at the Chinese state as Hobbes once said, as an “artificial man”, we can realize that the Chinese state, and especially it’s information system, is already in disarray. Under Xi’s first nine years, he purged somewhere more than one million Chinese Communist members or cadres as punishment or discipline. I believe for the Chinese, even the government officials or people with expertise, I think many of them are demoralized.

I can see at this moment, too many people, including some observers in the US, always say, “China would have no problem. Even another financial crisis would not make a dent on the Chinese body politic, because the central government and the state can always come to the rescue.” So then I ask, the question is, “Who is coming to the rescue of the Chinese central state if the central state already has lost its capacity due to corruption, informational chaos, and due to internal power struggles and purges that are demoralizing the Party?” This is one major issue.

Also, when we talk about the Chinese central state at this moment, it is closely related to Xi, so we are going to ask another important question, which is, when China is facing so many crises, especially the Shanghai lockdown and the ongoing COVID-19 struggle, the economic market/stock market crash since 2015, and China’s foreign relations with respect to Trump’s trade war against China and the current Russian invasion into Ukraine.

If we look at all these crises, they are making China more and more difficult to maneuver. So now, as the people count on the central state, the central state counts on the wise leadership from Xi. One fundamental question is whether Xi is going to offer more confidence to the Chinese people and to the Chinese capital market and to the outside world, especially to the global capital market?

But my reading is actually that Xi himself is destroying such kind of confidence, so this is what I have to point out. The gray rhino, I think, is the Chinese central state under the leadership of Xi Jinping.

You mentioned that you take a relatively pessimistic view on China’s future. It seems that we should not underestimate the current fiscal and financial predicament in China. Xi once said that the dynamic zero-COVID policy is the overriding political strategy in China. Notably, however, some scholars argue that the CCP’s legitimacy is built on the basis on Chinese economic prosperity. Do you think China’s current fiscal and financial crisis will affect its social stability? Will this crisis be temporary or the beginning of a gloomy future for Chinese society?

In my 2018 article “China’s Financial Crisis in the Making” , I made the very worrisome prediction that a financial crisis was on the horizon.

If we look at some of China’s major financial difficulties that may culminate in a financial crisis, one major factor is that it’s more and more difficult for the Chinese government to deal with the cash and the financial situation. One here I wanted to point out are four important changes. The Chinese government now is gradually being starved by a lack of financial resources or lack of cash.

As one Chinese leader once said, if there are any contradictions that can be solved with money, they are internal contradictions within the people. At this moment, more and more contradictions are emerging, and the government needs cash to solve them, but unfortunately, the Chinese government at this moment is facing the shortage in cash.

Now, why China is coming into this scenario? I think it relates to four “Ali Baba” caves of treasures and financial resources that are now closed or closing.

The first cave relates to China’s demographic dividend. The Chinese government, by using the hukou or residential registration system, could squeeze value from migrant labors, because we know for the past some decades, hundreds of millions of migrant workers could not get full pay, even when we compare them to the urban residents. I believe the Chinese government, by exploiting this demographic dividend and by squeezing surplus value from migrant workers could create windfalls of wealth.

Second, the Chinese government got into land and real estate. The Chinese government pushed for the commercialization and financialization of land and real estate. We know that the land in China is owned by the state, not by the people, and that the Chinese government has become heavily dependent upon revenue from land sales.

Third, the high savings of Chinese people. Our parents had so many children and so they could not have high savings, but now my generation reflects, “Our parents, they have job. They have money, and so they can save.” We have only one child. After my generation, the next generation also, most likely, they have only one child. They have parents who are working and have only one child to support. Therefore, they have extra cash in the bank.

Suddenly, from the 1990s and so on, savings could reach somewhere above 70% of the GDP. In Chinese banking system, it is highly centralized and has tools of financial repression at its disposal. As a result, the central government and banks have been able to take advantage of this cash because the savings interest rate has always been lower than the inflation rate. At times, the Chinese government has even used the inflation policy to wash away people’s savings in order to preserve itself.

Finally, the fourth cave is seigniorage, or profits made when the government issues currency. In a sovereign state, one important privilege is to print money, so it’s called seigniorage. For example, if you print out a 100 US dollar bill, the cost is somewhere around five cents. If you think about the US and central bank, they also use seigniorage. The People’s Bank of China is also using printing money, the privilege, and the seigniorage, to get a lot of untaxed money and untaxed wealth.

If you look at today and the percentage and the ratio between M2, the money over GDP, and I checked last year’s number, and which country or which market has highest ratio, that is Hong Kong. Hong Kong has 454.8%. It means the money printed by Hong Kong money authorities over the GDP is almost five times higher. Now, which country was ranked number two? It was Japan, 281.2%. Which country has the third highest? That’s China. It’s 211.9% in China.

If we go back several years earlier, Lebanon was the country which had the highest percentage, but we know in the year 2020, a financial crisis basically destroyed Lebanon causing it to fall in the rankings. With such high M2 ratios, it means it’s difficult for the Chinese government to keep printing money.

All these four caves have been emptied. I believe the Chinese government at this moment is dealing with all these difficulties, and this is why the Chinese government is shirking a lot of its responsibilities. Not only that, it is dumping the crisis onto the local governments and the Chinese people.

This is well reflected by speculation in the real estate market, which is now frozen and losing value in many inland areas. If you look at stock market, you see it lost 25% and some 30%, and in the year 2015, China fell into financial crisis. If you look at the banks and the debt ratio, or if you look at many banks and standard market economy, you see that they are in crisis. I believe for Chinese people, the good times have ended.

In your recent book, Explaining Power with Political Science, you mentioned that Bo Xilai was trying to build the Chongqing model by leveraging the ideology of the Chinese New Left to form political support. You commented at that time that whether the Bo Xilai scandal can bring opportunities for China’s political reform depends on whether the new administration of Xi and Li Keqiang have courage, wisdom, and vision. It has now been 10 years since the Bo Xilai scandal. My next question is, does a Xi’s model exist? And if it does, what are its characteristic? What are its impacts on China’s policies at home and abroad?

When Bo and Xi were in competition for China’s top leadership, Bo eventually lost. I thought for Xi, it opened up some opportunities. One important reason is because Bo Xilai was seeking to create new spaces for himself along the Chinese political ideological spectrum, which was dominated by more moderate figures like Li Keqiang slightly to the left and Web Jiabao slightly to the right.

For Bo, he wanted to find his populist identity and break into this political landscape, so he followed Mao’s strategy of mobilization, such as with respect to his “Chang Hong Da Hei”(“唱红打黑”), “sing the red and strike the organized crime forces”. This helped build his support among the Chinese lower classes and the losers of the market economy.

Now, if we look at the fiasco of Bo Xilai, clearly, he failed, and his failure should have blocked the pathway toward ultra-left direction. I think this should have sent a signal to Xi: “You should not go to that direction.” But unfortunately, I think that Xi followed that direction, and I think Xi is following the Bo Xilai doctrine without Bo Xilai. Similarly, in the same book, I also argue that Xi is practicing Zhou Yongkang’s stability maintenance policy but without Zhou Yongkang.

Clearly, I think Xi made a bad choice. He should not go the way that he did. After all, his formative years were spent under the ultra-leftism of the Mao era and the tumultuous consequences of the Great Leap Forward and Cultural Revolution. However, he does seem to think that if he has power and can control everything, he can keep the house in order.

We know that in the Chinese context, guanxi is a form of interpersonal interaction, and this interaction is highly influenced by perceptions, which can considerably impact decision-making. From your perspective, what are the current perceptions and misunderstandings between US and China? How would you like to explain the differences in Chinese and American context and its relative impacts?

We often have the two ideal types to compare the US and China. We believe the US is very legalistic because, most likely, the government officials or diplomats received legal training. They follow the rule of law, and they can be less personal. The Chinese system is more based upon emotion, based upon individual connections and based upon particularistic interest, and therefore sometimes does not follow the rule of law.

But I think for the past half a century, concept of connections or guanxi are more and more appreciated by the West. In terms of business, strategic thinking, and international relations, I think that China and the US are converging.

Now, if we look at guanxi, China, of course, has emphasized guanxi in its foreign policy. If we think about what Fei Xiaotong wrote, he talked about the differentiated guanxi/relationships among countries and among people and how distance influences how intense the relationship should be. For example, you can find China’s United Front all over the world as China seeks to connect with diaspora who it considers part of, or old friends, of Chinese people. Even if you look at China’s strategy the Belt and Road Initiative, you can find China has employed practices of guanxi.

I think the Chinese guanxi is  more self-centered, and it is more based upon particularistic interests, and so it is more a case-by-case expediency. China often does not ask about a country’s fundamental principles or values, and whether it shares those fundamental values. Sometimes you can find China’s foreign policy is, “No, we don’t care.” “Whether you violate human rights, well, that is domestic policy. I don’t care. And whether you behave bad toward other country, if not with me, I don’t care.”

But the US, you can find it usually different. If we look at the Biden administration’s diplomacy and the secret tool to its success among allied countries, I think one important reason is Biden also knows the importance of personal relationships like guanxi. This differentiates him from the more America-centered approach of the Trump administration. However, the US does look at whether a country embraces agreed upon values. This helps explain the US relationship with Japan and South Korea.

This is why I think the Chinese guanxi and the US guanxi have some differences. Chinese guanxi, since it is based more upon particularistic interest, is also more associated with secret diplomacy, and so sometimes it can become very unpredictable. For America, however, we know open diplomacy was advocated by President Wilson, so for the US, nothing can be kept in secret.

Why there is no consensus for US-China friendship? Because more than 70% of Americans believe China is America’s number one enemy. When you have this super majority here, the president, the Congress and the politicians can take the cue from the majority of public opinion. That’s how I believe, that for the Americans to manage the guanxi, it has to be more value-based, because there is no one single person who can become the representative to speak with one unified voice for the national interest.

The two countries are now entering a state of comprehensive competition and confrontation. What do you attribute to the turn in US-China relations?

When we look at US-China relations, we often focus on four “C”s. The first is cooperation, the second is competition, the third is confrontation, and the last one is conflict. You can find at this moment, cooperation has become less important, and so competition has become more important, and now occasionally, you can find the US is not going to hesitate to confront China or vice versa, even China to the US.

Now the question is how the two countries manage the conflict. Here the conflict more means military conflict. I think at this moment, these forces are dictating the US-China relationship. If we look at, as you have mentioned, the honeymoon, it is actually a long honeymoon. It’s not only a month, and it has been for more than a decade.

Since Nixon’s visit to China, the US has tried to invite China to be America’s strategic partner, and you have to keep in mind, at that moment, China was in chaos under Mao Zedong during the Cultural Revolution. If you think from then on until the year 2018, the trade war, and then the COVID-19 pandemic, and so we can see the US overall was trying to bring China closer to the US and the international system. For the past four decades, or even half century, the US has invited China to tango. But we know to tango, you need two people, and you need to follow the tune: in the case of the US, a market economy, a liberalizing society, individual liberties, and pluralism.

However, the Chinese government rejected that kind of goodwill. It’s a big misfortune in history, because if you think about in the first decade of the 21st century, Americans talk about the G2, and the US and China to become the G2 countries to offer leadership to the world, and so the Americans talk about China as the stakeholder. China is going to be part of the system, and then to offer the co-leadership.

This, I think, is a great invitation for China. If China could, as I said, follow the pace and tango with the US, China could become a copilot for the global political economy, but unfortunately, China did not follow that, China rejected it. What China got now is, “Okay, the US will work with the European Union and with Canada and the North American country, and then with Asian democratic countries, from Japan to South Korea, and now, even to Taiwan, and then ASEAN, and then there is now the Indo-Pacific strategy.”

For the Chinese, the Chinese government has lost the big opportunity, but then in exchange, the Chinese government got into the most difficult situation, that is, China created a bastion of authoritarianism under the Shanghai Cooperation Organization framework.

I think the Chinese people and the Chinese government lost a great historic opportunity, and it reminds me of what Chiang Kai-shek lost, because at the end of World War Two, especially if we think about the Cairo Conference, FDR wanted China to become one of the “four policemen” in the future world. But of course, Chiang Kai-shek could not take that offer because of his corruption, incompetency, because of his shortsightedness, and so on.

You can find, eventually, China was not a great power on the world stage for half a century, and Chiang Kai-shek even lost the power on the mainland, and so eventually, the US and a handful support two countries, and the US defeated them during World War II, Germany in Europe and Japan in Asia. So they became American supporters in American policy to police the world. This is what I believe now for the second time China missed the historic opportunity. This is what I think is very unfortunate for China and also for the world.

I do think at this moment, US and China bilateral relationship has been poisoned. I think misunderstandings, hostilities and even vitriolic attacks run very deep. I fear they are at this moment dominating or hijacking the bilateral relationship. The bilateral relationship is going to suffer for the years to come as a result.

What are your predictions about the future of the US-China relations?

To answer this question, you remind me, I did not touch one part of your previous question about what caused the deterioration. It’s more because of individual factors or because of other factors, and especially we talk about the spirit of times, Zeitgeist. I think in answering part of that question, we can answer your new question.

I think that for international politics, we always talk about “structural agency”, and so we have to pay attention to structure and then we have to pay attention to the agency of decision-makers and leaders. In the case of US-China relationship, especially, its deterioration, we can find both. Structurally speaking, these two countries have some factors that make the relationship more difficult.

Of course, one important factor is, while China has grown more powerful and richer, China has been less happy to act modestly or humbly in front of the US. China has done away with the so-called “Tao Guang Yang Hui”(“韬光养晦”), ‘to keep your light under the table and bide time’ approach that characterized previous eras. China now has become more assertive and does not hesitate to challenge the US.

This is, I think, one big structural change. For the US, it enjoyed the moment of the only superpower from 1991 until 2015. How US is going to accept the fact that now China has got number two country which is catching up and is challenging it and wants to have more power and more space? This is, I think, one important structural factor.

Another important structural factor is ideology. Many people would think an ideology has nothing to do with the relationship, everything is about interests, and so might is right, and so we follow realism, but you can find the US is a country of an idea. US is a country of the manifestation of an idea. The US, for the past 200-plus years, has pursued the idea comprised of three values in one: one is a market economy, and another is a political system which is a liberal democratic republic, then the third is the global peace.

Now if we look at the US, they clearly have been manifesting these three values, and they are fighting for, defending, and try to force other countries to embrace these three values. If we look at these three values, we can see for the past 200 years, the US has done pretty well, because the US has certainly pushed the world towards these three values. But it’s clearly apparent that the US will never achieve what Hegel and Fukuyama described as the ‘end of history’ where there is totalizing liberal democracy, market economics, and global peace. Nonetheless, many elite Chinese support these ideological values, which is why the fundamental concern of the Party is that they may lose power.

This side, I believe, is a big factor for the Chinese system to become so suspicious about the US and about the West, because the West exists as a reminder to the Chinese people of the differences between China, the Chinese regime, and other countries. It also inspires many Chinese people to think more about democracy and liberty and to fight for those values. So, to some extent Tiananmen 1989 and the Charter 2008 movement started by Liu Xiaobo are a reflection of this.

The US has been created as the enemy for the convenient use by the Chinese government, and so they are going to always remind people, “We have a big enemy and the US wants to not only defeat us, also, the US is going to defeat the Chinese culture, Chinese civilization, is going to cause the death of China, the death of Chinese, so-called ‘Wang Guo Wang Zu’(“亡国亡族”)”. I think for the Chinese government, like what we see in the book 1984, it is a good strategy and a convenient prop for the Chinese government to make an enemy out of the US.

Then there is one more important factor. Because there are many other factors I don’t have time to talk about, but I want to point out how state-owned enterprises (SOEs) have played important role under the developmental state since Deng Xiaoping. They’ve become a big part of Chinese economy. Once the Chinese economy became more mature, the private sector also became more powerful.

For the Chinese, and especially the ruling elite, I think they sense a big threat. A big threat from the private capital, a big threat from the liberalized Chinese society to challenge state ownership and to challenge the government monopoly of control over the economy and over the society. By serving to protect these enterprises, the ruling elite makes it more difficult for the private sector and foreign investors to do business in China. This has also contributed to the deterioration of US-China relations, because the relationship has been nurtured and supported by US business.

I also now I want to say one individual factor, personal factor. People said, “Xi is in control and he is the core of leadership and he commands everything”, and so now the question is, to what extent Xi should take responsibility for what’s going on in the US-China relations? Even though Xi has visited and lived in the US, I think he has no understanding of American system and of the West.

His personal philosophy, personal ideology and many other things have determined his personality, and so I think Xi basically, at this moment, is trying to prove, “I can do better than other great leaders, and China under my leadership can do better than the US.” But this is not something about your power will. It’s not about what Mao Zedong had said, “I can surpass the US, surpass the United Kingdom,” but in this moment, I think Xi has not understood why the US is powerful, why the US has become the superpower for the past almost 100 years.

With respect to my prediction as to whether China and the US can turn things around, I’m very pessimistic. When it comes to global leadership, we are living in an age of bronze and iron, not in gold and silver. And because you can find all over the world, and many of the leaders are populist, demagogues, and they have mobilized hatred, and they have exploited division, and they have abetted hatred among people or toward other countries.

We have such kind of leaders in both democratic and autocratic countries. In this country, the US, we just got rid of a leader who was a demagogue and who used hatred and division as the fuel for his politics. That’s how I think, and when you look at all these leaders, the political elites, they can abuse their power by exploiting our conflicts, frustrations and the crisis for their either personal gains or their group gains. With respect to China, I have already spoken about Xi.

This is what I think, and unfortunately, for the foreseeable future. I don’t predict that the political elites are going to improve, to embrace more humanity or compassionate leadership for the people. This is my fundamental reason to be a pessimistic observer about global politics and US-China relations.

Talking about Xi’s personal philosophy, I wanted to take a moment to reflect on the Deng era. We know that under Deng, American democracy attracted a large number of Chinese fans. Under Xi Jinping’s leadership, however, negative views of American democracy have increased substantially. Today, Chinese state media and think tanks frequently publish the reports claiming to uncover US hypocrisy. We can also see that the Chinese public’s views on the US have become increasingly polarized. Do you think this kind of political propaganda or public opinion warfare affects US-China relations?

Yes, I think so, and for several reasons. One important reason is that the friendship between these two countries is built upon the goodwill of people. If the people from the two countries think, “We don’t share the same value and we cannot talk to each other,” the two countries are going become alienated from each other.

The second factor, as I’ve mentioned before, we should keep in mind is the conflict between American and Chinese values. If China is not going to embrace them, I think it’s going to make it difficult for the US to improve relationship.

Then the third important factor is, there are several millions of Chinese who left mainland and have settled in the US. Think about legal immigrants or illegal immigrants who came to this country since 1980s, somewhere above three and below seven million is a reasonable number.

Just think about, if in this country, we have several millions of Chinese and they have strong attachments to mainland China, and it means through the linkage politics, whatever happens within China is going to have disturbances within the US. Whatever is happening in the US is going to have ripple effect upon Chinese back home. When the Chinese community or the Chinese diaspora, if many of them are still in tune to the CCTV, to the Beijing propaganda, it means many of them are going to become alienated from American system. They are going to, for example, some people, become part of the riots on January 6th against American fundamental democracy.

This is what I believe, and when the Chinese people, they are divided over whatever policies that have been proposed from Beijing or from Washington D.C., the Chinese diaspora is so divided and so hostile toward each other, even they don’t have the consensus, and I think it’s going to make the US-China relationship more and more difficult, because you are going to deepen the suspicions.

This is why I think when the Chinese government is reaching into our living rooms in the US, and many people take whatever the Chinese government says at face value, but we know many official propagandas are lies, disinformation, politically motivated to create division, or the so-called schismogenesis.

I think the Beijing propaganda, to some extent, is creating schismogenesis in the US, among the Chinese, the Chinese Americans, and I think this is going to make it more and more difficult for these two countries to improve their relationship, because you don’t have a united group with ethnic solidarity to help the motherland promote the value and the interest or foreign policy.