Shifting Winds in China: How Far Can Beijing Go?

Eric Teo Chow Cheow (Council Member of the Singapore Institute for International Affairs)

As President Hu Jintao prepares to visit Washington for his first time as China's supreme leader, winds are fast shifting at home. There are signs of new thinking and debate within China on just about every facet of his country's identity.

On July 28, the People's Daily, in a front-page commentary, warned Chinese citizens to obey the law and that threats to social stability would not be tolerated. But this editorial curiously omitted reference to Hu's populist catch-phrase "harmonious society" and surprisingly stressed that widening inequality is an inevitable phase of development, as in developed economies.

On Aug. 3, the Culture Ministry announced that Beijing would bar new foreign television channels from entering China and step up censorship of imported programming to "safeguard national cultural safety"; this announcement appears designed to keep out liberal Western materials deemed politically and socially dangerous for China.

Two days later,China Daily quoted Health Minister Gao Qiang criticizing China's hospitals for being greedy, putting profit ahead of social function, adding burdens to patients, and seriously undermining the image of both medical personnel and public health departments. Gao's remarks followed a joint World Bank-State Council report that labeled medical reforms "basically unsuccessful."

Finally, on Aug. 22 the Institute for Labor and Wage Studies (ILWS), a Ministry of Labor and Social Security think-tank, warned that the growing income gap in China could trigger social instability if efforts to rein in the problem prove unsuccessful by 2010; this disparity is not just a rural-urban phenomenon, but also occurs within cities and rural areas, as well as between regions. Three days later, the government raised China's income tax level from RMB800 to RMB1,500 thus exempting the very poor from paying taxes altogether.

Behind these four moves appears to be mounting concern over growing social instability, which the authorities no longer hide from public discussions. Key officials worry openly in the face of mounting protests (rising officially to 74,000 in 2004 from 53,000 in 2003) and a widening income gap in a "socialist" economy, society, and state. As social instability is considered China's foremost historical bane, Beijing is determined to risk a public debate as it tries to reform Chinese society toward more equality.

The People's Daily commentary is particularly significant as it signals a debate on the merits and disadvantages of continuing economic liberalization vs. the imperatives of social equality and redistribution, given mounting social instability. Liberals argue for a continuous push toward kai fang (or "opening up") according to WTO tenets. Their argument is based on the need for the Chinese economy to grow at least 8 percent per annum (based on at least $40 billion of annual foreign direct investment) so that urban unemployment will not create risky levels of instability. A widening revenue gap and some inequality are deemed inevitable as a result of economic development, in accordance with Western market economy precepts.

Chinese "socialists" have been very critical of "rampant economic development" to the detriment of "social balance" and have questioned the need for accumulating more than $700 billion in foreign reserves when the widening social gap threatens China. They advocate a more social approach, just as Gao criticized the public service's "profit-chasing" ethos, and support "cooling" the Chinese economy. They emphasize social justice, as authorities lead the fight against corruption, and social redistribution to dampen widening social disparities, as underscored in the ILWS report and reformed fiscal measures.

China is acknowledging the tensions within Chinese society. There is a growing contradiction between the ideological tenets of the Chinese Communist Party (though much reduced today) and Deng Xiaoping's "grow rich is glorious" philosophy. This creates a vacuum within Chinese society: religion and moral ethics and then ideology were systematically "purged," leaving "wealth-chasing" in a morally bereft society in revolution as its only goal. The recent reassertion of control over the media underscores this facet of China's cultural and ideological drift; a less pro-Western tilt could be expected, in line with resurgent Chinese nationalism.

This debate could be a leadup to the 17 th Party Congress in autumn 2007, which is scheduled to see the full consolidation of power by President Hu. The president is believed to straddle the liberal and "new left" camps, although his socialist convictions are perceived as strong, given his personal imprint in the "harmonious society" andsan nong ("three agricultural") policies, and his efforts to cultivate the image of the "people's president."

Just as Jiang Zemin sealed the "Three Represents" theory as his historical legacy, Hu needs to consolidate his "people-centered" philosophy as he revives Confucianism, which advocates putting the people at the center of China's development. This socialist and "new left" leaning of Hu could be emphasized, probably to the detriment of the liberal school, especially when Hu's political rivals could use this debate to challenge the Hu-Wen team should the economy or society go into a tail-spin. As Hu's consolidation of power is still not guaranteed, this debate is likely to take on growing proportions within the Party and administration.

This socio-ideological debate could also be critical for the rest of Asia, as a new socio-economic development model may complement Asia's expected rise. Many Asian economies experience similar problems as a result of galloping economic growth, with widening internal social gaps threatening their stability.

This underscores the significance the region attaches to China's "peaceful rise," thanks to its own fears of instability in China, lessening threat perception, and even a new socio-economic model, to which Beijing may aspire. Ideology has been cleverly set aside by Beijing in favor of hard-nosed economic and social pragmatism. For that reason, China's smaller neighbors can now easily do business with China in a more relaxed way, just as they did during the four centuries of the Ming/Qing tributary system when China reigned supreme in Asia; it offered trade and protection to Beijing's tributaries in return for respect from them to the Chinese emperor.

The U.S. therefore faces a growing "soft power" challenge from China within Asia, as Beijing is intent in securing its immediate periphery, from the Korean Peninsula to Southeast Asia, through Central Asia. Moreover, Beijing's rivalry with Japan will increase, as Chinese leaders view the U.S.-Japan alliance as a device to contain China ; the Middle Kingdom mentality still weighs on Chinese leaders. This has driven Beijing to consolidate its strategic partnership with Russia (the recent war games attest to this geostrategic fact) and seek one with India, while supporting and bolstering regimes that are "threatened" by Washington and the West, ranging from Myanmar and Cambodia to Kyrgystan and Kazakhstan.

As Hu seeks to forge a new relationship with President Bush in Washington, winds of change are sweeping through China. This internal debate will determine the direction of the Chinese economy and society, as well as China's "peaceful rise" and its "continuous social revolution." Hu will want to ascertain at the summit how far Beijing can go regionally, as well as the prospects for future Chinese corporate buyouts in the U.S.

President Bush should try to gain insight from Hu regarding how this debate will influence the direction of the Chinese economy and society; in particular, he will want to know how committed the leadership is to reform if the economy does not cool down sufficiently. Of prime concern is the future direction of Sino-U.S. trade and intellectual property rights reforms, as well as the commitment to socio-political reform, like human rights and religious freedom, which Beijing may dampen in the name of social stability. Bush, in pressing Hu to continue liberalizing China, must be mindful that he does not weaken Hu unnecessarily as he faces the 17 th Party Congress in two years' time; this is crucial for China's future stability and its role in the region and beyond.

(Posted here with the permission of Pacific Forum CSIS)