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- Herausgeber: John Wiley & Sons
- Kategorie: Geisteswissenschaft
- Sprache: Englisch
China's future is arguably the most consequential question in global affairs. Having enjoyed unprecedented levels of growth, China is at a critical juncture in the development of its economy, society, polity, national security, and international relations. The direction the nation takes at this turning point will determine whether it stalls or continues to develop and prosper. Will China be successful in implementing a new wave of transformational reforms that could last decades and make it the world's leading superpower? Or will its leaders shy away from the drastic changes required because the regime's power is at risk? If so, will that lead to prolonged stagnation or even regime collapse? Might China move down a more liberal or even democratic path? Or will China instead emerge as a hard, authoritarian and aggressive superstate? In this new book, David Shambaugh argues that these potential pathways are all possibilities - but they depend on key decisions yet to be made by China's leaders, different pressures from within Chinese society, as well as actions taken by other nations. Assessing these scenarios and their implications, he offers a thoughtful and clear study of China's future for all those seeking to understand the country's likely trajectory over the coming decade and beyond.
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Contents
Cover
Dedication
Title Page
Copyright
Acknowledgments
Preface
1 Pathways to China’s Future
China Today: Paying the Price for a Path Already Taken
Is China Too Big to Fail?
Variables and Questions Shaping China’s Future
Notes
2 China’s Economy
Where Do They Want to Go? The Third Plenum Revisited
Rebalancing
Growth Rates
Worrying Sectoral Signs
The Financial System
Personal Consumption and Spending
State-Owned Enterprise Reform
The Key to Success: Innovation
Pathways to China’s Economic Future
Prospects
Notes
3 China’s Society
China’s Shifting Class Composition
The Volatile Periphery
Civil Society
Urbanization
Migration and the Labor Market
Demographic Transition
Provision of Public Goods
Pathways to China’s Social Future
Notes
4 China’s Polity
China’s Recent Political Evolution
Pathways to China’s Political Future
Notes
5 China’s Future and the World
Rising Tensions on China’s Periphery
China’s Relations with Other Powers
The Global South: Fraternity or Neo-Colonialism?
China’s Growing Military Capabilities
China’s Future Impact on the World
Notes
Index
End User License Agreement
List of Figures
1.1 Possible Pathways for China’s Future
1.2 Pathways and Likely Results for China’s Future
1.3 The J-Curve
2.1 China’s Development Strategy
2.2 China’s GDP Growth Rates
2.3 China’s Alternative GDP Projections
3.1 China’s Gini Coefficient
3.2 China’s Gini Coefficient in Comparison
3.3 China’s Reported Incidents of Mass Unrest
3.4 Xinjiang and Tibet
3.5 Hong Kong’s “Umbrella Revolution”
3.6 Taiwan’s Sunflower Movement
3.7 China’s Urbanization Growth
3.8 China’s Demographic Projections
4.1 China’s Political Orientation 1985–2015
4.2 Zeng Qinghong
4.3 Xi Jinping
5.1 China’s Trade in Asia
5.2 Asian Perceptions of China’s Territorial Disputes
5.3 Perceptions of China as a Global Power
5.4 American Views of China 2005–2015
5.5 Presidents Xi Jinping and Vladimir Putin
5.6 China’s Soft Power Appeal in the Developing World
5.7 China’s Military Spending 2000-2014
Guide
Cover
Table of Contents
Begin Reading
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Dedicated to Harry Harding
China’s Future
David Shambaugh
polity
Copyright © David Shambaugh 2016
The right of David Shambaugh to be identified as Author of this Work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988.
First published in 2016 by Polity Press
Polity Press65 Bridge StreetCambridge CB2 1UR, UK
Polity Press350 Main StreetMalden, MA 02148, USA
All rights reserved. Except for the quotation of short passages for the purpose of criticism and review, no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher.
ISBN-13: 978-1-5095-0717-7
A catalogue record for this book is available from the British Library.
The publisher has used its best endeavours to ensure that the URLs for external websites referred to in this book are correct and active at the time of going to press. However, the publisher has no responsibility for the websites and can make no guarantee that a site will remain live or that the content is or will remain appropriate.
Every effort has been made to trace all copyright holders, but if any have been inadvertently overlooked the publisher will be pleased to include any necessary credits in any subsequent reprint or edition.
For further information on Polity, visit our website:politybooks.com
Acknowledgments
This book has its origins in a keynote lecture I gave in July 2014 at the “China at the Crossroads” Conference at the Contemporary China Research Center of Victoria University in Wellington, New Zealand. Trying to think through the totality of China and its future trajectory for that event was a challenge, but it percolated in my brain over the subsequent year. During this time I took advantage of invitations to lecture—at the American Academy in Berlin, the University of Edinburgh, the School of Oriental and African Studies at the University of London, and several universities in the United States—to further refine my thinking and revise the lecture. I am most grateful to professional colleagues, students, and members of the audiences for pushing me further in my thinking about China’s current state and potential future directions.
As I revised the lecture many times for successive events, I kept wondering what else I could do with the material. It is, after all, one thing for a scholar to give a lecture speculating on the sensitive subject of China’s future, but quite another to go into print on it. What turned the material from a lecture into this book came to me one evening just as I finished reading Joseph S. Nye’s Is the American Century Over? As I marveled at the compact nature (physically and intellectually) of Nye’s latest book, it suddenly dawned on me that the lecture I had been giving could be fleshed out into a similar short volume. So I shot Joe an email inquiring about his experience publishing with Polity Press. He responded quickly and very positively, putting me in touch with Louise Knight, the Politics and International Relations editor at Polity. It did not take long for me to elucidate the idea with Louise in emails and a transoceanic phone conversation before she signed me up with a contract for this volume. I am very impressed by the quality of Polity’s publications list and the niche they have carved out in the market with short and topical books that examine key issues of the day. The idea of writing a relatively short book about China’s future appealed to me (despite the daunting nature of the subject). All of my previous books gestated—through research and writing—for about five years each. This one I wrote over eight weeks during the summer of 2015! Once again I was fortunate to retire to our cabins in northern Michigan overlooking Grand Traverse Bay, the perfect place to think and write. I am deeply grateful to my family—my wife Ingrid and sons Christopher and Alexander—for their patience and tolerance as I wrote during vacation time.
I also wish to thank the Smith Richardson Foundation, and particularly Senior Vice-President and Director of Programs Marin Strmecki, for a grant (SRF Grant #2015-0941) to support the research and writing of this book. This is the third of my books that the foundation has supported, for which I am truly grateful. I also wish to thank my home institution—the Elliott School of International Affairs at The George Washington University—for a Strategic Opportunities for Academic Research (SOAR) award. The Elliott School has now been my professional home for two decades, and I am most grateful for the collegial community and research support it has provided.
I also wish to particularly thank my colleagues and friends Bob Ash, Pieter Bottelier, Bruce Dickson, Tom Gold, Chris Horner, David Lubin, Andrew Nathan, Bob Sutter, and Michael Yahuda for taking the time to read individual draft chapters. Their expertise helped much to substantively improve the manuscript and save me from embarrassing errors. I also wish to thank Ann Klefstad for her excellent copyediting of the manuscript, while Louise Knight, Nekane Tanaka Galdos, and Neil de Cort at Polity Press have all been a true pleasure to work with throughout the publication process.
Finally, I wish to dedicate this volume to Harry Harding. He and I first met in 1978 and have been close friends and colleagues ever since. While I was not his student, Harry mentored me from afar during my graduate school years and offered me important academic opportunities. If he had not been supportive of my application for a scholarship to go to China to conduct my doctoral dissertation research, I would not have been selected and thus likely would never have had an academic career. He “rescued” me at a critical juncture in my graduate education. Subsequently, Harry also became my Dean and faculty colleague at George Washington University’s Elliott School of International Affairs, after he lured me back across the Atlantic from England where I was then resident and teaching. We have remained in close contact since he decamped from GWU to go to the University of Virginia and Hong Kong University of Science and Technology. We share the same areas of professional interest and expertise—China, Asia, and U.S.-China relations—and have interacted in countless conferences on these topics over the years. I have always marveled at Harry’s extraordinary intellectual ability to incisively analyze a problem or an issue, and to place it in a larger context. He sees the forest when the rest of us only see trees. He has thus pushed me to think about things in ways I otherwise would not have done. This volume is another instance. Among his other intellectual and professional pursuits, Harry has become something of an expert on forecasting and political risk analysis, as a result of a year he spent as Director of Research at the Eurasia Group in New York. As I was planning and thinking through this volume, he was extremely helpful in getting me to read into the political risk literature broadly—while this book may not reflect the paradigms of this mini-profession of risk analysis, the literature did help me to conceptualize the study. For all of these reasons, I am deeply grateful to Harry and have always held him in very high personal and professional regard—and therefore I admiringly dedicate this volume to him.
Preface
This is a relatively short book about a Big Topic: China’s future. As one of the key global uncertainties over the coming decades, China’s evolution will continue to have consequences—for better and for worse—for the whole world. China’s future development is also going to be the test of longstanding debates among social scientists over whether political democratization must accompany economic modernization. To date, there has not been a single case of a country that has developed a modern economy without also democratizing. The experience of other newly industrialized economies (NIEs) is that democratization is not only a consequence of modernization—it is also a necessary facilitator of it. At a minimum, they are symbiotic processes.
China’s authoritarian government has distinctly and righteously rejected this linkage, yet so far it has succeeded in facilitating the country’s dramatic development. But now China has reached a qualitatively different level of development—the transition from a newly industrialized economy to a fully “mature” one—where the experiences of all other successful newly industrialized economies suggest that a more open and democratic political system is necessary in order to achieve the economic transition. Those countries that have not democratized to some extent have not successfully modernized. China has bucked this universal trend to date, but can it continue to do so by maintaining its authoritarian political system? If so, or if not, what are the consequences for China’s future? Will it be successful in transitioning out of the “middle income trap” and implementing various reforms to “rebalance” the economy and move up the value chain—or will its authoritarian political system prevent it from doing so? Time will tell. I explore these core questions throughout this book.
It is a particularly uncertain time in China’s development. At present the nation is at a series of critical junctures in its overall evolution, facing some stark alternatives. The choices that China’s leaders make—and the actions its citizens take—will have profound consequences for the country and the entire world.
Peering into China’s Future
There is no shortage of speculation about China’s future. A tsunami of scholarly studies on various aspects of China’s “rise” have been published over the past two decades,1 while fund managers, corporations, political risk analysts, government intelligence agencies, and futurologists all spend countless hours (and large sums of money) trying to anticipate China’s trajectory. Predictably this punditry ranges across a full spectrum of possibilities, from China becoming the superpower of the twenty-first century to its stagnation or even collapse.
Trying to predict China’s future is more than difficult; it can also be professionally hazardous. The Sinological landscape is littered with China watchers’ wrong predictions, as the nation has continued to surprise even the most knowledgeable and seasoned observers.2 I am acutely conscious of this record of prognostication. While I have no crystal ball that permits me to peer into the future with any certainty, and I am aware of the potential professional pitfalls, I still believe it is incumbent on China specialists to venture into the unknown and do our best to offer informed and reasoned projections about the future, so as to inform the global public. This is our professional responsibility. We are supposedly in the best position to make informed judgments. We should strive to do so by carefully mining available data and working with multiple sources (inside and outside of China), identifying the principal variables at play in the country and their trajectories, taking a macro view but being cognizant of micro issues, anticipating discontinuities, and viewing China through a comparative lens.
China is certainly distinct, but it is not unique; it is experiencing many of the same challenges that other newly industrializing economies and societies, as well as Leninist polities, pass through. Being cognizant of China’s own history is also important, as distinguishable patterns within dynastic cycles are also relevant. It is also important to have an awareness of the megatrends associated with globalization that affect all societies in the world today: technological changes, the revolution in communications, international politics, ecological systems, ideational trends, social movements. China is not immune, after all, to the exogenous global forces sweeping our planet and shaping the future of humankind. We should not get caught up in the fashionable analytical zeitgeist of the day within China-watching circles. Scholars must also be vigilant against self-censorship or intimidation from the Chinese government, or the blind acceptance of fashionable propaganda narratives and slogans used by the Chinese authorities to describe their policies. Maintaining one’s independent judgment is crucial.
Finally, and perhaps most important, we should not anticipate that developments in China will be linear—straight-line projections of the present (“path dependency”) or “muddling through.” Sharp changes of course have occurred with some regularity throughout China’s history, and the country has a proven capacity to surprise the world. One should always expect the unexpected in China.
None of us are able to peer into China’s future with any precision or great clarity, but if we bear in mind these guidelines some insights may result. This book attempts to adhere to my own admonitions. It is based on four decades of China-watching and on visiting or living in the country every year since 1979, and it offers my best estimations about China’s future evolution over the next decade or two. Readers will see that I eschew hard-and-fast singular predictions—that would be folly. Instead, I offer a menu of alternative pathways that China could follow. Yet I do offer my estimates of which pathways are more or less likely, and what the consequences of each may be. I welcome the inevitable disagreements from other China watchers (including Chinese officialdom), but hope to stimulate readers to better understand the contemporary complexities, and to think about a range of possible alternatives for China’s future.
Washington, DC
October 11, 2015
Notes
1.
Many of these writings are captured in David Shambaugh (ed.),
The China Reader: Rising Power
(Oxford and New York: Oxford University Press, 2016). An interesting assessment of previous studies of China’s future can be found in Roger Irvine,
Forecasting China’s Future: Dominance or Collapse?
(London: Routledge, 2015). For China's perceptions of its future, see Daniel C. Lynch,
China’s Futures: PRC Elites Debate Economics, Politics, and Foreign Policy
(Stanford, CA: Stanford University Press, 2015).
2.
Roger Irvine, ibid.
1Pathways to China’s Future
China has reached a series of key turning points on its developmental path and dramatic national transformation. After more than three decades of successful reforms, the nation has reached critical junctures in its economic, social, political, environmental, technological, and intellectual development, as well as in national security, foreign affairs, and other realms of policy. Diminishing returns have set in and it has become plainly evident that the main elements of the broad reform program first launched by Deng Xiaoping in 1978 are no longer applicable or sustainable for spurring China’s continued modernization over the coming decades.
Change is required. Indeed, China’s own contemporary leaders have evinced their deep concerns. In 2007, former Premier Wen Jiabao bluntly described the nation’s economy as characterized by the “four ‘uns’”: “unstable, unbalanced, uncoordinated, and unsustainable.”1 And this came from the man in charge of the national economy. Wen’s successor, Premier Li Keqiang, also offered a fairly dire assessment in 2015: “China’s economic growth model remains inefficient; our capacity for innovation is insufficient; overcapacity is a pronounced problem; and the foundation of agriculture is weak.”2 China’s current paramount leader Xi Jinping has also lamented that “the tasks our Party faces in reform, development, and stability are more onerous than ever—and the conflicts, dangers, and challenges are more numerous than ever.”3 So even China’s leaders evince the view that the nation faces severe challenges and is at a series of turning points.
Figure 1.1 Possible Pathways for China’s Future
China’s future is not unlike a car that approaches a roundabout, where the driver faces several roads ahead. This book argues that there are four essential choices (Figure 1.1). I label them Neo-Totalitarianism, Hard Authoritarianism, Soft Authoritarianism, and Semi-Democracy.
Like all drivers, China approaches the roundabout already on an established road. I would characterize the current path that China is on as Hard Authoritarianism. China’s leaders, the driver of the car, have already selected this route and can continue straight ahead. This is one option, certainly the easiest option, but for the reasons explained in subsequent chapters it is not the optimal one. If they stay on this course, I judge that China will have only limited success in achieving the reforms necessary to make qualitative changes in the economy, society, and polity that will power China through its current “trapped transition” (in Minxin Pei’s apt term)4 and on to a path of sustainable development to become a mature and fully developed modern economy. Rather, if the regime stays on its current course, I predict that economic development will stagnate and even stall, exacerbating already acute social problems, and producing the protracted political decline of the ruling Chinese Communist Party.
Only by making a mid-course correction and taking a route different from that of recent years can the nation embark on decades of more dynamic growth and development—thus realizing its true potential as a superpower. Here I envision three possibilities.
At one extreme, China could lurch backward in the direction of Neo-Totalitarianism. This, of course, is not a positive pathway to the future. But it is a conceptual possibility that needs to be considered. Such a course correction would be stimulated by the failure of the Hard Authoritarian path to sufficiently deliver economic reforms coupled with widespread social instability across the country. Politically, the regime would be under siege. At this point a group of hardline conservative leaders would push to close China’s doors to the outside and reinstitute sweeping draconian control measures inside the country. Under this scenario China would revert to a situation not unlike 1989–1992. For reasons that will be discussed in chapters 2–4, I do not see this as a feasible alternative (even if it is attempted) for three reasons. First, the private sector of the economy is already too deeply entrenched and China is too intertwined with—and dependent on—the global economy. Second, I suspect that the citizenry would resist, and perhaps revolt, if the relative freedoms they have come to know over the past forty years were rolled back. Third, I think that elements of the Party and military would not endorse such a revisionist change of national course, and these two central institutional pillars of power would therefore split. Thus, while there may well be some forces in China and in the party-state apparatus which might be tempted to recentralize state power as an answer to a stagnating economy and reform agenda (who would argue “we told you so—those reforms were not a good idea in the first place”), my judgment is that the genie is already out of the bottle and there is no going back.
A third alternative pathway would be for China to stay on the authoritarian track, but to significantly loosen its party-state controls and liberalize a variety of aspects of civic life and the political system. This Soft Authoritarianism alternative would, in fact, be a return to the course taken from 1998 through 2008. By loosening and liberalizing the way the party-state approaches the media, nongovernmental organizations, intellectuals, education, dissent, social discourse, and other aspects of civic life, the necessary conditions would be laid for qualitative changes in the economy that would better (but not completely) achieve its reform ambitions. Loosening controls on civic life would be coupled with significant changes in the way that the Chinese Communist Party operates and relates to society, thus making real political reforms within the existing one-party system. This is a far preferable course for China to take and there is a possibility of China altering its course on to the Soft Authoritarian track after 2017—but, for reasons elaborated in chapter 4, I judge it will likely not be the road taken.
Another potential pathway would be for China to embark on the entirely new road of Semi-Democracy. Democracy comes in many forms; one size does not fit all. Should China pursue this pathway it would, in all likelihood, bear a strong resemblance to the Singaporean model. In Singapore, to be sure, some rights are restricted and the ruling party remains in power. But Singapore has many aspects of democracy: multiple political parties, regular elections, a parliament and judiciary independent of the executive, a very open media (with restrictions), real rule of law, an exemplary professional civil service, no corruption, active NGOs, a full market-driven and open economy, a multiethnic society without discrimination, a high-quality and globalized educational system, and protection of many basic freedoms and human rights. China remains a very long way from having these progressive features, and it is highly doubtful that the Chinese Communist Party would tolerate them. Nonetheless, it is not inconceivable that China could move in this alternative direction—particularly growing out of Soft Authoritarianism, if it too reached its reform limits and China remained in a “trapped transition.”
Thus, these four alternative routes present themselves for China’s future. As Figure 1.2 illustrates, each has its own likely consequences:
Figure 1.2 Pathways and Likely Results for China’s Future
It is always easiest—for cars, people, or governments—to stay on the same course. To a large extent, nations (like cars) are “path dependent,” and can only make an alteration in course by making strong decisions and allocating sustained resources to the newly chosen direction. Otherwise, the path already taken has a continuing power of its own. In fact, it is much more difficult for nations to alter their direction than it is for cars. Even when it is evident that a chosen direction is failing, it remains difficult to alter course. Vested interests make it so. Fear of unknown consequences is another deterrent. Size is another factor. Turning a nation the size of China, even a modest degree, is more like turning an ocean liner—much less nimble than a car. It is always easiest to carry on, “muddle through,” and make minor adjustments than to make fundamental alterations. The Chinese call this “crossing the river by feeling the stones” .
With these possibilities and caveats in mind, let us begin our exploratory journey through China’s future by understanding the road currently taken and the choices previously made.
China Today: Paying the Price for a Path Already Taken
Two key periods over the past decade have done much to determine the path China is on today. The first came between 2007 and 2009, when China’s leaders avoided some fundamental decisions and made others. The non-decisions concerned the economy, while the proactive decisions affected the political system and society. The leadership decided to defer the tough choices for changing China’s economic growth model, while at the same time deciding to cease proceeding with a package of political reforms practiced over the previous decade and to crack down. By 2012–2013 the postponed economic choices were made, however, and were coupled with the new wave of political repression.
China’s real economic dilemmas became evident to many economists inside and outside of the country around 2007–2008 when it became apparent that diminishing returns from China’s post-1978 economic development model had begun to take hold and a qualitatively new macro growth model was needed (as evidenced by Premier Wen Jiabao’s “four ‘uns’”). But Wen’s warnings went largely unheeded until 2012, as the government remained path-dependent in its “comfort zone,” staying with what had worked so well for three decades. Thus, the macro economic growth model of large fixed-asset investment domestically (primarily into hard infrastructure) plus low-end, low-cost export manufacturing remained intact. The situation was analogous to that of a drug addict—even knowing that the habit had to be broken, it remained easier to continue as before. Nor was there yet a clear comprehensive set of alternatives available.
The onset of the devastating Global Financial Crisis in 2008 only compounded the problem, as China’s leaders looked for ways to buffer their country from the global contagion. The government’s response to the crisis was “more of the same,” as it unveiled a gargantuan economic stimulus package worth $586 billion (RMB 4 trillion). In hindsight, while the stimulus injected enormous new funds into the economy—thus stabilizing not only China but also stemming the global hemorrhaging—much of the money came from loosened local bank lending and “shadow banking” instruments. This only dug local governments deeper into debt and created asset bubbles. Most important, perhaps, it postponed much-needed structural reforms that would put the nation’s economy on a qualitatively new and different growth path. The global financial crisis also had the ancillary effects of further convincing Chinese decision-makers that the West was in terminal decline and, concomitantly, of the efficacy of their own “China Model” . China’s foreign policy also became more “assertive” during this time.
The fiscal loosening was coupled with political tightening. While stimulus funds were flowing into the domestic economy, in an unannounced but dramatic departure beginning in 2009, the regime abruptly abandoned the political reform path it had been on over the previous decade (1998–2008). These political reforms are detailed in chapter 4. In effect, during this decade, Jiang Zemin and Hu Jintao initiated and had sought to manage political change rather than to resist it. But in 2009, for reasons described in chapter 4, the leadership reversed course, abandoned political reform, and initiated a sustained crackdown that exists to this day.
By November 2012 a new leadership had come to power at the Eighteenth Party Congress, led by Xi Jinping. By 2013 the new leadership was ready to act on the economic front in the way that the old leadership was not. Early in the year it signaled that the Third Plenum, which would convene in the autumn, would be a major and significant event, and systematic planning began for it throughout the bureaucracy. Communist Party General Secretary and President Xi Jinping took personal charge of the special leading group overseeing preparations (instead of the more likely Premier Li Keqiang). When the Third Plenum convened in November 2013 Xi, not Li, was clearly in charge. At its conclusion the plenary session issued the Decision on Major Issues Concerning Comprehensively Deepening Reforms and an ancillary Explanation of the Decision given by Xi Jinping.5 The massive communiqué ran 22,000 Chinese characters in length and identified more than 300 specific reform measures in 60 separate categories.6
What was particularly noteworthy was the systematic and comprehensive approach reflected in the Third Plenum documents. Previously, the government had only offered piecemeal and incremental proposals for the future. The Plenum was the first serious attempt by the Chinese Communist Party and the government to grapple with the full and complex agenda of issues they confronted. The Decision and Xi Jinping’s subsequent Explanation were, at the same time, refreshingly candid in places but frustratingly vague in others. For example, it was forthright about the high number and seriousness of the problems facing the party-state, to wit:
At present, extensive and profound changes have occurred in the internal and external environments. China’s development faces a series of outstanding contradictions and challenges. There are still many more difficulties and problems waiting for us in the future. For example, the lack of balance, coordination, and sustainability in development is still outstanding. The capability of scientific and technological innovation is not strong. The industrial structure is not reasonable and the development mode is still extensive. The development gap between urban and rural areas and between regions is still large, and so are income disparities. Social problems have increased markedly. There are many problems affecting people’s immediate interests in education, employment, social security, healthcare, housing, the ecological environment, food and drug safety, workplace safety, public security, law enforcement, and administration of justice. Some people still lead hard lives. The problems of going through formalities, bureaucratism, hedonism, and extravagant practice are outstanding. Some sectors are prone to corruption and other misconduct, and the fight against corruption remains a serious challenge for us. The key to solving these problems lies in deepening reform.
Yet many other sections were notable for their opacity and vagueness. This suggested ongoing debates and irresolution of issues behind the scenes. Despite the lack of specificity in many aspects, the Third Plenum Decision was commendable for the broad-brush sweep it took in identifying needed areas of reform. Underlying it was an acute awareness that China’s old development path had run its course and a fundamentally new one was needed.
While the Third Plenum can be praised in this respect, it is noteworthy that two years later there has been so little follow-through of the Decision. The US-China Business Council, for example, maintains a running online tracker of its implementation—by 2015 it reported a dismal implementation rate of less than 10 percent.7 The European Chamber of Commerce in China released a similarly downbeat assessment entitled “Third Plenum Reality Check.”8 Most other economists and China watchers are similarly unimpressed with the progress to date.
Is China Too Big to Fail?
China’s reforms thus seem stuck in a trap, or series of traps. The situation today (2015) combines the hardened political repression evident since 2009 (but intensified since Xi Jinping took office in 2012) with very marginal economic reforms and increasingly acute social problems. This is precisely the new juncture China currently faces. The common denominator is the political system. To my mind, there is a direct linkage between politics and all other aspects of China’s future.
Without a return to a path of political reform, with a substantial liberalization and loosening of many aspects of the relationship between the party-state and society, there will continue to be very marginal economic reform and social progress. This is the main argument of this book.
This is not to say that China’s economy will not continue to grow if it remains on its Hard Authoritarian course, but it will do so at a much more modest and uneven pace. It will certainly continue to have some successes, but without political liberalization I assess that China will be unable to reach its growth potential and aspirations, and relative stagnation will become the “new normal.” There are multiple signs that this is already the case. It will not be Japanese-style stagnation (with minimal or even negative growth coupled with deflation); it will rather be “[relative] stagnation with Chinese characteristics.” A $10 trillion economy that grows at, say, 3 to 5 percent will still be significant in domestic, regional, and global terms. Such a contraction of the economy and failure to make the transition through the “Middle Income Trap” (a condition that it already finds itself in) will trigger all kinds of disruptive social and political side effects.
Thus, I see China as currently stagnating in what scholar Minxin Pei very astutely and presciently described in 2006 as a “trapped transition.”9 In his insightful and visionary book, Pei marshaled a sophisticated argument and considerable evidence to reveal the limits of what he describes as China’s “developmental autocracy,” where the economic foundation is inevitably constrained by its political superstructure. Without fundamental and far-reaching political reforms, China’s economy will stagnate and the regime may well collapse, Pei has consistently argued. I did not agree with his argument at the time, but have come around to agree with him now. The reason for my changed assessment is that China has changed in the interim. At the time (2006) I was of the view that China was undertaking necessary political reforms—what I termed “adaptation” in my own book, China’s Communist Party: Atrophy and Adaptation
