Tuesday, May 5, 2015

Understanding China

China will be a different, benign power



China has shown enormous capacity for reform in the past three decades without the need to move towards a Western-style system — a point greatly underestimated by the West, said prominent China expert Martin Jacques in a wide-ranging interview with TODAY’s Celene Tan this week. Dr Jacques also said that the Chinese Communist Party does not need economic growth to legitimise its rule and he believes China will grow to be a benign power. Below is an excerpt from the interview.

The latest issue of Foreign Affairs painted a picture of China as a country facing the classic challenges of the middle phases of development. It said China’s existing institutions may not be able to manage the country’s problems in the long term and Beijing seems unlikely to adopt the reforms that could help because they would threaten the Communist Party’s hold on power. What are your views on this?

China has done extraordinarily well over the past 35 years. It has shown an enormous capacity for reform, not only economic reform, but also political reform. Because if you’re growing at roughly 10 per cent a year, your economy is doubling its size every seven years. Now, more like every 10 years with the current growth rate. It’s impossible for the institutions to cope with this level of change without being constantly reengineered and reinvented. Generally, this has been greatly underestimated in the West. Foreign Affairs is a sort of journal of the United States foreign policy establishment — generally they don’t recognise this political reform because the only political reform they recognise is that which is moving China closer to the West. So, if it’s not doing that, then it’s not acknowledged, really.

The first thing to say is China just has a very, very good track record, especially in governance. This, more than any other single factor, except for broad historical reasons, is why China has transformed itself. The government has been a brilliant leader of China’s transformation. You have to remember, this is the most remarkable economic transformation in human history. It far exceeds anything the West has managed to achieve — Britain, America, etc.

Now, it’s true that China is now approaching a new set of problems. If you’re a very poor developing country as China was, you’d face colossal problems, so it’s not new to have problems. These problems are distinctive because at each phase of your development, you have new problems, and the biggest single problem it has now is to shift the nature of its economy from one which is driven by exports and investment, to one driven by more emphasis on the domestic market, and more emphasis on value-added production and higher labour productivity. That is a difficult transition to make, but not an impossible transition.

So the question here is (whether) the institutions of governance, the Communist Party, single-party system and so on, would be able (to succeed) only if they adopt a Western-style government system. I fundamentally disagree with this. I think that we are not likely to see a major reform towards a Western-style system and I don’t think it is a precondition for China’s transformation.

On the contrary, I think that China’s government system, in some ways, increasingly is one in which the West is going to have to learn from. I don’t mean it should adopt the Chinese system, but the Chinese system does have advantages over the West, as well as some difficulties. And the advantage that it has is its sheer competence. Actually, what the Chinese government system is really good at doing is being very efficient and — as well as a capacity for reform — a lot of continuity. I think the Chinese state, especially given that it is a developing state, is hugely competent. The problem with that way of thinking is that it is the traditional Western view about China and it has been served up in many different versions over the past 30 years, and it’s always been wrong. So far, it has always been wrong.

Do you think that the Chinese Communist Party uses economic growth to legitimise its power? With its growth slowing down and heightened fears of a hard landing, do you foresee a change in how the party legitimises its rule? Will the Chinese people accept it?

In all the polls you see, like the Pew Global Attitudes surveys, China records the highest levels of satisfaction in government, of any country in the world. I think there’s a huge reservoir of goodwill in China towards the government. I don’t mean there aren’t lots of protests and grumbles — of course there are, that’s absolutely to be expected. But basically, there’s a reservoir of profound goodwill towards the government in China. If it really had a serious hard landing, if it did what Japan did at the end of the bubble, then it would obviously affect public support. But I don’t think that’s going to happen. I think it’s going to have a reduced growth rate because of where it has reached economically, but it’s not going to be anything like what happened to Japan.

The other thing is, the high level of satisfaction in China with the government is, of course, related to its economic success. But I don’t think that it’s only about economic success. I think what we have to do is understand what China is, where it’s worked, the nature of its culture and so on. The Chinese state is an extremely important institution in China. It’s much more important even than the government here (in Singapore), and the government here is important because you’re a predominantly Chinese society, you have certain Confucian traditions in Singapore as well. But, of course, in China they’re a lot stronger.

The way in which government is regarded in China or in Confucian societies is different from Western societies. Western societies have a very kind of instrumentalist, utilitarian view of what they expect from government. That’s not true in China. The government in society is a much more deeply-rooted phenomenon; people view it not in a utilitarian-instrumentalist way, but more in a familial way, like a parent — it’s true here as well. And so, these are also extremely important sources of the legitimacy of the Chinese government. In fact, if you ask me, in the long run, I think they’re more important than economic success actually. China is not like the West, never has been, isn’t now, and never will be. And the reason Westerners, in particular, have got China so wrong, so often, is because they think it should be.

Seeing as China is so different from the West, and you mentioned earlier that it can even learn from the Chinese system, what can the West learn from China?

China is a developing country, the most successful and powerful developing country. So what China offers the world at the moment is, first and foremost, (lessons for) the developing world, not the developed world. But this is very important because, remember, 85 per cent of the world’s population live in developing countries. And in the developing world, as you can see, whether you’re in Africa, or East Asia, or Central Asia, or Latin America, China is seen as an example of what can be achieved. Therefore they ask a question: “What can we learn from China?”

A lot of the reason for the success of the Asian Infrastructure Investment Bank (AIIB) is China has a proven track record, it understands development because it’s a developing country and it understands the centrality of infrastructure to development, in a way that, for example, the Americans don’t. So, China’s influence in the developing world, and the respect for it, is very high.

Now, in the developed world, I’d say that it’s a different paradigm, because China is not a developed country, therefore what it offers developed countries is a work in progress, rather than the finished article. But over time, I think China is going to be very rich in the developed world as well, assuming that it keeps successful development, which I expect it to do.

The initiatives such as the AIIB and the One Road, One Belt, demonstrate China’s eagerness to project its influence in the region and beyond. Will China grow to be a benign power?

Well, I think it’s going to be a very different kind of power from the US and Britain. I think that if you look at these countries, their global influence has had a great deal to do with military and political power. I mean, America rings the world with military bases and relies hugely on military force. And if you talk about European powers, they colonised large parts of the world.

The Chinese tradition has been very different. The Chinese never had a colonial empire, they had this tributary system, but that was very different, by and large, it didn’t involve military force — there were wars, but it wasn’t that China had conquered countries. It didn’t take territories, it, by and large, didn’t replace rulers. Its history was very different from Western history.

Historically, China has been very preoccupied with itself and I think this is always the priority with China. It is so challenging to govern, inevitably, its priority is domestic. I don’t think for historical reasons and for cultural reasons, that China will develop along Western lines as a global power. I think this also will be true of what China will be like as a great power.

I think one of its two main forms of influence in the world would be economic because it’s going to be so large — already even though its living standards are only one-fifth of America’s, it has an economy of the same size, and it’s projected by 2030 the Chinese economy will probably account for one-third of global gross domestic product, and will be twice the size of the American economy. So China’s going to be vast economically, it’s going to have a huge market, it’s going to have very big companies, it’s going to have very technologically advanced companies because it has such a huge market it’s going to probably in effect set the standards in lots of different products and technologies. Not now, it’s beginning to now, but in the longer run, in the next 20 years, we’ll see a big change.

The other (form of influence) is cultural. I think, historically, what was important for China in its heyday was that it took great pride in its culture. “The land under heaven”, “the Middle Kingdom” — it saw itself as the most advanced culture in the world, with very advanced forms of governance, statecraft and so on.

It has always had a kind of moral order, if you like, in Confucianism about how to behave and what is acceptable behaviour. Its emphasis in the importance of education is very different from the West. The Chinese, historically, have for 2,000 years recognised the centrality of education. So I think China will also exercise — not so obvious now — but over time, as it becomes more developed, a big cultural influence.

Will it be a benign power? On the whole, yes, I think it will be a benign power.

China has been trying to, to use Western terminology, “challenge the status quo” in other ways, and assert itself in the region and beyond, would you agree with that?

I would avoid the use of the term “assert”; I mean, we should try to find another word because China has 20 per cent of the world’s population, it has grown to the size of the US economy; inevitably, the ramifications of China’s rise are being felt beyond its borders. The whole phenomenon of the Asian miracle, the Asian tigers, was about being successful in the international market. So China, in that sense, is not very different from the other Asian tigers, except that it is written on a huge scale because it has such a large population.

The standard American criticism of China has been, “You’re a free-rider, and when you do things, you do things on your own; why don’t you take responsibility in a more multi-lateral sense as an actor on the global stage?” So China did it. President Xi Jinping in 2013 came up with the idea of the AIIB and it is China’s first-ever initiative of this kind, and what happens? The Americans oppose it. And the great majority of countries in East Asia, South Asia and Central Asia sign up for it. Not only that, but even the Europeans signed up for it. So it was a hugely positive response.

In the developing world in Asia, the big problem is infrastructure. That is the biggest constraint to growth. And we need very large amounts of money, huge resources, to be able to fund this. So this bank is designed to do that.

It’s obviously a good thing and that’s why countries have been voting for it and the Americans are sulking because all their friends have deserted them. Well, not all their friends, but a lot of them, except Japan.


Dr Martin Jacques is visiting professor at the Lee Kuan Yew School of Public Policy and author of When China Rules The World.


This is the first of a two-part series. Look out for Part Two tomorrow, as Dr Jacques talks about Hong Kong, Taiwan and China’s anti-corruption campaign.

China going through reforms ‘but not the way the West wants’


SINGAPORE — China’s rise has to be viewed with the right lens and many in the West fail to understand the Asian power because of a lack of knowledge of the country’s unique history and culture, said prominent China expert Dr Martin Jacques.

In an interview with TODAY, the British-born author said it is a mistake for the West to think that Beijing is unwilling to implement political reforms in its institutions simply because the reforms China has taken do not move towards a Western-style system.

Instead, China’s vast economic transformation in a mere few decades means that institutions in the country have been constantly re-engineered and reinvented to cope with the level of change, said Dr Jacques, whose book When China Rules The World has sold over 250,000 copies worldwide. “Generally, this has been greatly underestimated in the West — they don’t recognise this political reform (in China) because the only political reform they recognise is that which is moving China closer to the West,” he said.

Many observers also forget that China is a developing nation that is home to 20 per cent of the world’s population, putting any government to a formidable test of statecraft, added Dr Jacques. Yet the Chinese government has clearly demonstrated its competence in steering China through astronomic growth and economic transformation, he said.

“The government has been a brilliant leader of China’s transformation. You’ve got to remember, this is the most remarkable economic transformation in human history. It far exceeds anything the West has managed to achieve.”

While the country’s economic success has helped to legitimise the Communist Party’s rule among the people, Dr Jacques says that support for the ruling party stems primarily from a longstanding historical and cultural respect for government. This is why he does not think that the party’s legitimacy will be threatened by China’s recent economic slowdown.

“The government in (Chinese) society is a much more deeply-rooted phenomenon; people view it in a familial way, like a parent,” he said.

There is also a reservoir of profound goodwill towards the government, he added, citing high levels of satisfaction with the Chinese government in the Pew Research Centre’s Global Attitudes Survey.

China’s unique history and culture will also chart a very different path for its rise compared with the United States and some European countries, whose past and present global influence have had a great deal to do with military and political power. Instead, Dr Jacques sees China’s rising as a benign global power through gaining global economic and cultural influence.

“Because it has such a huge market, it’s going to probably set the standards in lots of different products and technologies,” said Dr Jacques.

“I don’t think there’s any doubt at all that China’s going to develop some really formidable companies. And they’ve got some formidable companies now, like Lenovo, Huawei, Xiaomi, and then you’ve got to take the Internet world. Baidu is a very effective search engine, and the reason I think Google pulled out of China is because Baidu gave them a competitive beating.”

He added that China would have a big cultural influence as it becomes more developed, because it takes great pride in its culture, having dubbed itself as the “Middle Kingdom” and the “Land under Heaven”.

Dr Jacques said China faces three key challenges in the near term. The first is the need to shift the economy from one based on cheap production for export to one that hires more skilled labour in higher value-adding production. The second challenge is that China has to be more heavily involved in global affairs before it has fully completed its economic take-off.

China’s third challenge is governance. “The Chinese governance will have to keep changing, keep performing, because if they don’t, they will get out of sync, out of kilter … (and) there will be serious political consequences,” he said.

Dr Jacques believes the Chinese government will live up to this challenge. “Chinese governance is very impressive; it’s the oldest statecraft in the world. I think this is the probably the greatest tradition of statecraft in the world,” he said.

“But just saying that doesn’t solve the problem. The government system is going to have to be more accountable, more representative, more transparent, more institutionally innovative, less top-down — that’s a big challenge.”

Dr Jacques is in Singapore for two months as a visiting professor at the Lee Kuan Yew School of Public Policy. Yesterday, he spoke on the global impact of the imminent rise of China in a student forum organised by Business China.

Beijing faces challenge of keeping up good governance

The unhappiness with China among segments of Hong Kong society stems from the city’s failure to understand its privileged relationship with Beijing, prominent China expert Dr Martin Jacques said. In a wide-ranging interview with Celene Tan, the British-born author added that China has learnt from the past and will be patient in drawing Taiwan closer to the mainland. He also spoke about China’s territorial claims and President Xi Jinping’s anti-corruption campaign. Below is an excerpt of the interview, the first part of which was published yesterday.

By Celene Tan

May 1

As China takes on more global responsibilities, it is faltering in its effort to pull Hong Kong and Taiwan closer to the mainland. Why are the people in these two territories so resistant to China? How can they be swayed by Beijing?
Hong Kong had been under British rule for 155 years. The whole of Hong Kong’s modern experience was under British colonial rule, so it grew up, in a sense, deprived of its birthright, which was China, because it was cut off from China. It was brought up with a kind of adopted birthright, which was Britain, and looked West.

One-hundred-and-fifty-five years is a long time — many, many generations — so it’s left deep roots in the way in which Hongkongers see the world. They were very ignorant, by the end of British rule, about the country to their north. They were Chinese, but they knew very little about China. On the other hand, they were very knowledgeable, in many ways, about the world to their west, particularly Britain and, to a lesser extent, other countries in Europe and, of course, the United States.

Then you have the handover, and the Chinese recognised that this was going to be problematic, because they were inheriting a country that was, in many ways, very distant — the people were very distant from them and didn’t identify with them, except in certain, very few aspects. So they came up with the solution “one country, two systems”, which was a very novel solution, a very Chinese solution, a very un-Western type of solution that would enable Hong Kong to maintain some of the things that were very important to them — which was out of respect for them — while at the same time being part of China.

I wasn’t particularly surprised by the events last year in Hong Kong, because I’d say (the territory) has its growing pains. I think Hong Kongers are finding it very difficult — though not all of Hong Kong, because the opinion is very divided, but (the protesters) are more privileged because they’re students — to accept their new situation. And their new situation is more complicated than it’s been presented.

Hong Kong got lucky because when Deng Xiaoping opened up China in 1978, it didn’t allow Western and foreign companies to easily settle in China. That part happened later in the 1990s. So for 20 years, Hong Kong was the gateway to China, and it enjoyed an arbitrage advantage. Foreign companies put their Chinese headquarters in Hong Kong. That period was bound to come to an end. It was a transient period, but Hong Kong was like: “Ah, we’re very smart.” They became very arrogant, thinking: “Aren’t we clever.” No, they weren’t clever, they just got lucky for a period, and now, the truth is that Hong Kong matters much less to China than it did at the time of the handover. Its portion of the Chinese economy has gone down, from roughly — and these figures aren’t exact — just under a fifth to something like 5 or 6 per cent. So from walking tall and thinking they were extremely important and that they also had a special line of contact with Britain and the West, Hong Kong is finding itself having to accept a very different position in the world.

Now, it is still very privileged, because it has a privileged relationship with China. Where would it be if it didn’t have access to the Chinese economy? It is almost totally dependent on it.

So Hong Kong is finding it very difficult to come to terms. And I don’t have much sympathy for it, to be honest. Because it did get lucky, and now, Hongkongers are still privileged compared with Chinese mainlanders. They’ve still got much higher standards of living. I think, over time, they’ll get used to it. I think they will adjust.

The other thing to point out, which I do find irritating, is that they’re complaining about the new electoral arrangements. But the British ruled Hong Kong for 155 years and never granted the Hong Kong population universal suffrage. What a load of hypocrites! The British or whatever criticise China for doing it in the wrong way. But why did they never (grant Hong Kong universal sufferage)? Because it was a colony.

So they need to have some context to understand all this. But of course, you need patience. You can’t expect that in a period of 18 years that everything could change. These things will take decades.

And Taiwan is different. Taiwan is much closer to China than it has been at any stage since 1949, so the gravitational pull of China is very clear. The Taiwanese economy is very dependent on the Chinese economy, which is natural, because they have an affinity, because China is so huge and because the West, including America, is in such economic decline in this region. But Taiwan has also grown up in a separate context from China; they’re Chinese, but they have grown up separated from China. They are on an island, they have an idea of their own distinctive identity, so they think of themselves as Chinese.

I think China been very patient. There was a period in the 1990s when it wasn’t, but it has learnt patience and it is not going to mess it up. China will be patient.

What will happen in the long run? I think there will be some type of constitutional setting, similar to that in Hong Kong, but which grants Taiwan more autonomy, because it’s much bigger — about 20 million people — and it’s an island separate from the mainland. But I think we’re talking about a long time.

Where do you see Mr Xi’s anti-corruption campaign going?
I think no one expected the ferocity and scale (of the campaign). That probably tells us two things. One, the corruption problem was very serious and far too ubiquitous at all levels of the Communist Party. And secondly, it tells us that Mr Xi is determined, as far as he can, to root it out.
I don’t think he’ll succeed. The red envelope is a symbol of Chinese culture and Chinese corruption. But he has obviously made a big impression. You can see it in the fall in the consumption of luxury goods and the behaviour of the rich as the wealthiest become a lot more cautious. Sales of moutai, an extremely expensive spirit, have gone into negative territory and they are still not recovered by a long way.

So I think (the anti-corruption drive) is for real and it’s big, and I think it will carry on. Because in truth, most people — probably the great majority — who have engaged in major corruption have not been caught.

What do you think are other serious challenges that China faces today?
I think the first is shifting the nature of the economy, from one based on cheap production for export markets towards one based on moving up the value-added production scale, becoming more sophisticated in terms of the products it makes, being based on much more skilled labour. We know that is not an easy shift to make.

The second problem is that China is clearly going to become involved heavily in global affairs, which is, in a way, bad luck for China. Britain finished its industrial revolution before it became a major global power. America didn’t become a major player globally until after World War I, when it had finished its industrial revolution. But half of China’s population still live in the countryside, so China has not, by any means, finished its industrial revolution or economic take-off. It’s still in the midst of it, but because of its size — the reason that it’s the biggest economy in the world — it’s going to get drawn into being an international or global player before it’s ready.

China’s got to think, “What is our foreign policy?”, and so on. Because China is different, it will have a very distinctive policy. It can’t just look at America; it’s a very different culture with a very different set of values. So it is going to have to work out what its distinctive foreign policy is going to be. Managing its rise, managing its relationships with the rest of the world and with the United States, its most important relationship, are going to be very consuming.

Third, it’s about governance. The Chinese government will have to keep changing, keep performing, because if it doesn’t, it will get out of sync, out of kilter. It is going to have an asymmetrical relationship with society, and that will store up big problems. What it has done so well so far, it has to keep doing well, otherwise there would be serious political consequences — it would grow out of touch with the people.

I think the government can do it. I think Chinese governance is very impressive. It’s the oldest statecraft in the world. I think it is probably the greatest tradition of statecraft in the world, so the government is very competent. It has a lot of historical resources. But just saying that doesn’t solve the problem. The government system is going to have to be more accountable, more representative, more transparent, more institutionally innovative, less top-down — and those are big challenges.

But I am confident that China can be successful, and I think it is going to. I’m not expecting a hard landing, I’m not saying it’s impossible. I do expect it to make this economic transition we’re talking about and maintain a growth rate of about 5 to 7 per cent probably over a couple of decades. By then, it will be a very different economy.

I do think that, with China’s government tradition so strong and its achievements so powerful, it will be able to sustain this kind of dynamic of reform with very Chinese characteristics, not Western. The signs are positive, but you never know the future, you never know what’s going to happen.

Beijing has been carrying out land reclamations in the South China Sea, something with which the other countries that have rival claims to the waters are not very happy. Looking at China’s foreign policy in this aspect, is it really benign?

The other countries have carried out land reclamations too. China is not the first. Vietnam and the Philippines have also done that, and they also have airstrips on their land features.

Certainly, the other claimants, mainly Malaysia, Brunei, Vietnam and the Philippines, in varying degrees are disgruntled with what the Chinese are doing. Malaysia has maintained a good relationship with China, despite the differences over their claims on the Spratlys. I interviewed Dr Mahathir Mohamad, Malaysia’s former Prime Minister, last Wednesday, and he was very positive about China. He thinks China is a benign force as well. He says that if China is treated properly, it will be a benign force.

Now, Vietnam and the Philippines are in different situations. Vietnam is a long-standing adversary of China; it’s had to live next to China forever.

And for the past thousand years, they’ve had a problematic relationship. So, this is a piece of history that is going to be played out.

I think the Philippines is playing the American game. The Americans have decided to have a big role in the Philippines.

What’s going to happen? There’s not going to be a war, there’s not going to be any military exchanges. There will be a settlement, but it will take time and it will be in the long run and on Chinese terms, because China is so powerful.

But you see, for the Chinese, I don’t think it’s about the resources (in the South China Sea). I think it’s mainly about security and also their historical view, which is that this was a Chinese sea, or a Chinese lake.

I’m not saying that’s right or wrong. I listen to the Chinese claim, because you have to listen to where they’re coming from. And it is coming from a different history and position and point of view from other countries or the recent post-1945 maritime law. China’s going to be a big player in the world; ultimately, it will be the dominant player. All international law now is Western law. And China’s going to be more and more a shaper of global law. It is bothered about American military presence in the South China Sea. The Americans have a much bigger military presence in the South China Sea than the Chinese.

But I agree that it’s a problem for countries in this region. The Chinese and the Vietnamese could carry on arguing. It might boil over, because they’re used to getting on with each other as well as falling out with each other. The Philippines is all about the US. Malaysia will make a settlement when it has a chance and Brunei will make a settlement. And none of the other Association of South-east Asian Nations countries are claimants — of the 10, only four have claims to the waters. The majority are not. Singapore is not, so it has remained steadfastly neutral.

China lags behind America in innovation. How and when can we see the Chinese equivalent of Apple, Nike, IBM and so on?
What you’ve got to remember is that a catch-up society, a catch-up economy, is not an innovative economy. I mean, it’s innovative in its capacity to copy, so we shouldn’t think of it as simply sort of inert and dead. There is innovation in copying, but it’s still basically copying. They are not your own inventions, innovations, resources or research and development. All poor countries start off essentially as catch-up economies, and that’s why they can grow very quickly, because they’re closing the gap. And all the economies in this region — or most of them — have gone through that process.

Japan was the first, and it used to make copycat goods. It used to be a relatively poor society, and then Japan became a byword for lots of very impressive products. Korea has gone through the same journey, roughly the same time that Singapore went through it, and has some cracking companies like Samsung and Hyundai. China would just be following in those tracks, and I don’t think there’s any doubt at all that it’s going to develop some really formidable companies.

It’s got some formidable companies now, like Lenovo, Huawei, Xiaomi. On the Internet, Baidu is a very effective search engine, and I think the reason that Google pulled out of China is that Baidu gave it a competitive beating. And then you’ve got Alibaba and Tencent. China has some very good firms already.

In fact, it looks as if China’s been able to develop firms like these of a very high capacity and quality in cyberspace, in a way that it’s found much more difficult to with consumer products. It has, so far, not really been able to develop a successful domestic car firm. There are lots of firms, like Geely and Chery, but they’ve not made a big international impact.

Over time, the Chinese will develop in these areas. Maybe not as fast as they should be, but in the areas they have, they’ve been brilliantly successful, like with Alibaba, which had the biggest IPO offering on the New York Stock Exchange.

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