China’s Role and Impact on the
World Political and Economic system:
An assessment of its past, present and Future
Du Zhifu
2006 03 24
Introduction
Among
developing countries, China’s economic growth is impressive. China has
sustained an 8% per year GDP growth over the past 25 years. In 2005, China’s
GDP surpassed the GDP of UK for the first time. Goldman Sachs predicts China’s
GDP will surpass Germany’s by 2010 and Japan’s by 2020[1].
At the end of 2005, the foreign debt US owed to Asian countries is over two
trillion dollars. Out of this amount, 820 billions is held by China alone[2].
With a 1.3 billion population, China’s continue growth at this rate can make it
a major player on world stage, economically and politically.
This
paper analyses the coming impact of China on the world following two
theoretical approaches. The first is the Neo-Gramscian Critical Theory Approach[3].
Under this approach, this paper considers: 1) the international social relation
of production, 2) how China internalizes it, 3) the stability of world order,
4) future transformative projects for China, internally and externally.
The
second theoretical approach used is the Gramscian historicization approach[4].
By this approach, the emphasis is on China’s perception of itself and its
perception of the historical structure it is in. These perceptions help us
understand China’s past actions and plausible future directions. This approach
also emphasizes the importance of the author’s reflective selection of future
transformative projects. It recognizes the role of the writer to bring forth
new insights based on his/her historicized reflections. China in this paper
means the state-civil complex[5]
as the actor/agent on world stage.
A Brief History
of China’s coming out and joining the world system
China
is an old civilization. China’s history can be traced back four thousand years
or more. For most of its history, China was ruled by a succession of dynasties
built on self sufficient, agricultural based economies. After 2000 years of dynastic
history, China’s last dynasty, Qing, was finally extinguished by 1911. Its
demise was brought about by western military and technological challenges.
Between 1911 and 1949 China struggled to establish a stable republic but failed
due to internal strives and the Japanese invasion between 1937 and 1945.
The
relevant Chinese history for this paper is from 1949 onward. In 1949, China was
finally unified under a new republic, namely: the People’s Republic of China.
The new republic was based on the Marxist/Leninist principle. But more
importantly, the new country took up position in the Soviet camp and entered
the Korean War in 1950 against the UN and the US. UN responded with an embargo
of China in1951. As a result, China was isolated from the capitalist world
until 1978.
From
1949 to 1978 China’s economy was centrally planned. Due to the UN embargo,
China adopted a self reliant and self sufficiency economy. China also followed
the Stalinist development model of maximum extraction from agriculture to build
heavy industries. The central planning and the negligence of the agricultural
sector led to disastrous results. Meanwhile China managed to sour its
relationship with the Soviet Union and got itself further isolated, even from
the Soviet bloc.
In
1978, under a new leadership, China decided to do a 180 degree about turn. It
broke its isolation and announced the Reform and Open to the World Policy
(gaige kaifang)[6]. Since 1978,
the world saw a China abandoning Marxism/Leninism and plunging unreservedly into
the world capitalist system. However, politically, China steadfastly holds onto
its one party authoritarian rule. The difficulty of steering 1.3 billion people
and internal stability concerns are the reasons given for this insistence.
China’s
re-emergence since 1978 is our main focus. China’s prior history given above is
to help us to build a base to historicize China as an actor on world stage. To
historicize China is to understand China’s self image and its perception of the
world. These inform us of China’s behavior today. The author’s own reflective
selection of China’s cultural and historical perspectives is to discern future
transformative roles for China both internally and externally.
China’s behavior
in the world system and the response of others
China’s behavior towards the world
Since
coming out on the world in 1978, every step China took was to deepen its tie
with the world’s capitalist system. By now China is a member of all the major
international institutions, including the UN, WTO, WHO, IMF, the World Bank and
some thirty other organizations. Its economy is now inexorably a part of the
world capitalist economy. At the same time China has transformed itself to
become the world’s factory for cheap consumer goods.
Economically,
this makes sense. The dominant world social relation of production today is the
transnationalization of production and finance. China provides the labor in
this social relation of production as well as being the largest sink for
foreign direct investments. China’s most abundant factor endowment is its
inexhaustible human resources. Maximizing the use of this factor is
economically sound[7].
However,
China’s overall behavior towards the world can be summed up as mercantilist[8],
realist and nationalist. These are evidenced by its export oriented trade and
exchange rate policies, its military build up[9]
and its reliance on nationalism to maintain internal stability.
China’s
current behavior is driven by its sense of itself and its perception of the
world.
China’s
sense of itself is a mixture of victimhood and its unshakable pride based on
its dynastic and cultural histories. Its feeling of victimhood comes from long
years of suffering under European and Japanese invasions. It makes China see
every move of the super powers as potential encirclement. Its dynastic and
cultural histories make it impossible for China to accept a semi-periphery[10]
status for long. This mixture of self perceptions explains China’s realist
tendency and its constant desire for a peaceful rise.
Its
mercantilist behavior in trade is both a direct copy of the other Asian NIEs
and also due to its trade relations with them. Many of the Asian NIEs have set
up factories in China for exporting to the US market.
Its
nationalistic approach to internal stability is due the current value crisis
within the country. The PRC, in its rise to power, adopted the Marxist/Leninist
ideology and at the same time rejected its Confucian past. Since the
Marxist/Leninist ideology is proven bankrupt, the state’s raison d’etre is
under question and its legitimacy too. In the vacuum of value guidance, the
state stirred up nationalism to maintain internal cohesion. However, after
1990, China started to re-habilitate Confucianism (p2 footnote 6), in the hope
to use it to support its authoritarian rule. This is also inspired by the
Singaporean and Malaysian idea of Asian Value.
US behavior towards China
Within
the US there are different voices about China. The neo-liberal side welcomes
China’s re-emergence. They would like to see China getting ever deeper into the
world capitalist system. These are also the people who come to China’s defense
in trade and exchange rate matters. They are found mostly among Wall Street
financiers, the Treasury, and the State Department officials. On the other hand
the conservative and the neo-conservative wings of the US political spectrum
see China as one of the top three threats to US security[11].
Their main concern is that China, unlike the other Asian NIEs, is still not a
democracy. Under the current Chinese political system, there in no protection
of basic human rights and freedom of press. Without a free press, China’s
statistics on economy, military and other areas are not trustworthy. With no
political opposition, China can enter a war without popular restraint. While
China can not be trusted as long as it is a one party dictatorship, US military
bases in central Asia, Japan, Korea, and Guam form a circle around China. Thus
the US can react to any move China may take against its neighbors, especially
Taiwan. This encirclement further arouses China’s realist instinct.
Other key players
The
other key players to China are the EU and Japan. EU is currently expanding its
trading relationship with China. Unlike Japan, there are no urgent political conflicts
between the EU and China. The only issue outstanding is when EU will lift its
arms sale embargo to China. EU will probably lift this embargo on its own
except for the US pressure to maintain it.
Japan
is also deepening its trading relationship with China. Japanese firms are
investing heavily in China. 2005 saw the first time Japanese trade with China
overtook Japanese trade with the US[12]. However, on the political front, the
Japanese relationship with China is difficult. Japan’s military alliance with
the US covers the Taiwan Straight as part of the areas they will protect. In
addition, Japanese leaders’ nationalistic pronouncements often stirred up
China’s painful memory of Japan’s military past. This situation is further
complicated by oil field disputes between China and Japan. These problems do
not appear they will be resolved soon adding to China’s heightened sense of
encirclement by both the US and Japan.
The likely long
term outcome of China’s interaction with the world
Pessimistic Structuralist
Perspective: as a large semi-periphery
Even
with China’s sustained economic growth in the past 25 years, China is still a
developing country. Its 2005, China’s per capita GDP at $1324 US dollars is
still very low among nations (p9 footnote 1). This is also evidenced by its
population structure. 61% of China’s 1.3 billion populations, that is 800
million people, are rural and many of them have an education level below grade
6. This is partly because of the extremely low level of spending on education by
the Chinese government[13].
But also because rural education is not funded the same way the cities are.
This lowly educated peasant population is now leaving their villages in droves
to become migrant workers in the cities. The migrant worker population has swell
to more than 120 millions in recent years[14].
They provide the inexhaustible pool of cheap labor for foreign joint venture
factories. This pool can only increase over time and their wage will not change
much beyond a few US dollars per day. With this low level of education and this
massive pool of cheap labor, China may remain a semi-periphery in the
foreseeable future.
To
move beyond this stage, China needs to restructure its society to become more
than 80% urban, and to invest in education, infrastructure, and health system
for many years to come. In
addition, it has to transform itself into an open society to encourage
creativity and initiatives. Development is not just GDP growth. It includes
human development and democratization goals[15].
These are monumental tasks and it is not clear China has the political will to
change its system. Without these changes, China may remain a large
semi-periphery.
Optimist structuralist
perspective: as part of the core of advance countries
China
eliminated all classes between 1949 and 1978. This was achieved by brutal
confiscations of properties from rich peasants, business and the industrial
classes[16].
What was unexpected was a government official class emerged instead. After
1978, new business and industrial classes are recreated from the ranks of the
government official class. Today a new state-civil complex is emerging. It is
made up of three types of elites, the political, the business and the knowledge
elites[17].
They see themselves as the rightful stake holder and the new capitalist class
of China.
Hartmut
Elsenhas[18] talked
about the need of a state class to be the authentic author of a national
development strategy. Strategies such as more equal distribution of income,
maximizing internal investment, land reform and institutional changes[19],
require a purposeful and capable state class to carry out the changes.
In
this regard, the confluence of the political, business and knowledge elites is
indeed a powerful grouping capable of this role. With this grouping, strategies
of development beyond semi-periphery have a chance.
However
it is very important to make sure the state class is sufficiently pressured to
deliver the goods to the masses and not just for their own benefits. The
current Chinese state-civil complex has already showed signs of deep seated
corruption[20]. This is
clearly due to the lack of checks and balances from institutions or from the
masses.
If
China is able to harness the power of this state-civil complex, and make sure
it has the welfare of the masses in heart, China may have a better chance to
grow beyond the semi-periphery status, particularly if the education level of
its people can be greatly improved.
Realist perspective: containment
and counter containment
China’s
current perception of encirclement by the US, and particularly the situation
involving Japan and Taiwan is worrisome. The US under the Bush Administration
sees China as a potential threat and a competitor. The threat to world
stability may become real if all sides take the realist view as their main
guidance.
The
trigger of conflict is unlikely to come from economic frictions, given the deep
integration of the Chinese economy with the world capitalist system. More
likely the trigger of conflict will come either from the Taiwanese independence
movement or from oil field conflicts with Japan.
From
the West, there should be an understanding that the Chinese were never a
conquering race; save for the Mongol and Manchu periods. These two periods had
its military vitality came from outside of China. Historically, China’s
military posture (e.g. the building of the Great Wall) was defensive due to the
pressure put on it by the nomads from the north. This is further supported by
the fact that China claimed no colonies even when its fleets ruled the seas as
far as the East Africa coast.[21]
The
realist instinct of China and the West needs to be tempered by a broader view
of world order and economic integration. Without this broader view, realist
instincts from all sides can lead to self fulfilling prophecies.
Neo-liberal perspective: peaceful
rise
Today,
China’s economists, in government or in institutions, are all trained in the
western economic tradition. Almost all of them belong to the neo-liberal
school. This explains China’s current belief in the power of the market and its
goal of a peaceful rise[22].
With all its economic views coming from the neo-liberal school, China’s
economic future has no other path than to be firmly rooted in the capitalist
market system. If China can get out of the victimhood mood and not see every
move of the West as encirclement, it can then better focus on the economic
transformation task in front of it and the goal of peaceful rise may become
more achievable.
Author’s
reflective selection of transformative projects for China
Internal Transformative Projects
China’s
state class elites have internalized the dominant neo-liberal globalization
project. In essence it is renting out its cheap labor pool to attract foreign
direct investments. The state becomes the transmission belt for the MNCs[23].
The social cultural interplay between the ruling state class and the subaltern
classes at this stage is simply turning lowly educated peasants into migrant or
factory workers. China thus becomes the factory of the world for cheap consumer
goods and the Chinese economy becomes export oriented and also mercantilist in
character.
This
situation is not sustainable, from a number of perspectives. Externally, the
continuous trade surplus China has with the US can not last. China already
holds 820 billion US dollar in its foreign reserve. Internally, the low wages
paid to the factory and migrant worker can be as low as 60 cents US per hour.
The low wages plus land confiscated from peasants and city neighborhoods to
build factories and high rises caused 74 thousand riots in 2005 alone[24].
The low wages also mean the Chinese internal market is anemic. The majority of
the population, i.e. the 800 million rural populations, is too poor to consume
despite the fact that some city folks can consume like North Americans. China’s
assembly factory economy means also severe environmental damages[25].
China,
with a foreign reserve of 820 billion US dollars, has a great opportunity to
enter into a major internal transformative project. That is to transform its
rural society into a modern agricultural and industrial society. This requires
massive investment in education, infrastructure, financial institutions,
markets, new towns, new industries, scientific and technological dissemination
capabilities[26]. If successful,
this transformation can turn China into a healthy, self sustaining and
continent wide economy instead of an export oriented NIE. The real
transformative nature of this project is to educate China’s subaltern classes
and turn them into modern citizens.
On
March 5, 2006, Premier Wen Jia Bao announced just such a project, called the
New Village Initiative. One trillion US dollars will be invested over 25 years
for this initiative[27].
It appears the Chinese leadership is on the right path towards economic
transformation beyond the current MNC subsidiary mode of production.
There
is another internal transformative project that is of equal importance. That is
the democratization of the Chinese political system. This is crucial because
without it the creativity of the Chinese people will continue to be shackled.
Deep seated corruption and arbitrary political decisions can not be checked.
The
democratization of China also has external implications. Without it China is a
security risk. China had gone to war with the US in Korea, then with India,
Vietnam, and the Soviet Union all in the short span between 1949 and 1982. This
is because the decisions to go to war in the current Chinese political system
rest on the shoulder of the supreme leader alone. It was Chairman Mao before
the Korean War and Deng Xiao Ping before the war with Vietnam.
It
will be reassuring if China’s rise is also democratic at the same time. This is
a more difficult project simply because no alternative political force is
allowed to build and no one can challenge the current political establishment.
External Transformative Projects
Externally,
China can begin by playing the role of a constructive contributor in its
region. In 1997, during the Asian financial crisis, China had demonstrated it
can be a responsible player. It held the line by not devalue its currency[28]
. New transformative projects in the region can include the widely desired
Asian Monetary Fund[29]
and a number of regional free trade zone possibilities. China has trade relations
with Thailand, Burma, Vietnam, Cambodia and Laos to the south. Korea, Japan and
Taiwan are all heavily invested in the Chinese economy. A number of free trade
zones are possible. These projects may have significant meaning for the less
developed countries of the region. China can play a constructive role in a self
reliant and mutual support strategy for the region’s developing countries[30],
i.e. strengthening the south-south trade and co-operations.
In
a wider scope, the world economic system can be made a healthier multilateral
system. China’s strong and sustained growth will make it an economic force soon
and allows it to join the US, EU and Japan to form a multilateral world
economic system. Russia, Brazil and India are also up and coming economic powers. Reform in IMF, the World Bank and the
WTO will have to be made to accommodate these new economic players.
From
a world order and security consideration, China’s contribution can go beyond
its current role as a junior partner in world affairs and a mediator in the
negotiation with North Korea.
Historically
China is better known as a cultural power. The dominant Chinese social
philosophy is Confucianism. Taoism and Buddhism are the other two major
philosophical influences in China. During Song dynasty (960-1279), the three
philosophies merged into Neo-Confucianism. Neo-Confucianism keeps the basic
tenets of Confucianism on self cultivation, social order and global harmony as
its dominant idea. But it also brought in the non-aggression influence from
Taoism and Buddhism and particularly the Taoist concept of Wu-Wei (no unnatural
action)[31],
and its respect for nature.
Neo-Confucianism
has a surprisingly wide influence around the world, but not widely known. It
was introduced into Europe by the Jesuits in 1583 and later exerted significant
influence on Europe’s Enlightenment period thinkers. They include Voltaire,
Rousseau, Montesquieu, Comte, Quesnay, Fontenelle, Diderot, Leibniz, Wolff,
Malebranche, Bayle, and even Defoe. Lionel Jensen claimed the European concept
of modernity was influenced by Confucianism’s secular, humanistic and rational
thoughts[32]. Today,
Confucianism continues to enjoy Asia wide influence. Some writers believe the
economic successes of Japan and the Asian NIEs’ are built on the Confucian
emphasis on education, hard work and social harmony. It is called Confucian
capitalism[33].
For
today’s world order and security considerations, China’s Confucian heritage has
particular relevance. In the
ancient text of Da Tong and Xiao Kang[34],
Confucius described the ideal of universal (global) harmony, and contrasting it
to local (national) prosperity. The global harmony ideal stresses self
cultivation, restrain, social order and harmony. It can be a moral counter to
the current conflictual and hegemonic world system. It can form part of what
Robert Cox called: “a model of global governance in a new multilateralism, with
a weak center as the depository of moral unity”[35].
For
world order and peace, China should promote the Confucian ideal of global harmony
as a transformative project at the UN level. Without such leadership, China can
only continue to play catch up as a late realist. Then, China offers nothing
really new.
We
need all cultures to make positive contributions to create a plural world of
coexisting civilizations[36].
Without such contributions we already know what the world system looks like, a
conflictual world with tragic under-development in many parts of the world.
Summary and
Conclusion
China
was an isolated communist country between 1949 and 1978. After 1978, China
broke its isolation and rejoined the world. In the process, China accepted and
converted to the world capitalist system. However, politically it remains a one
party authoritarian state.
China’s
one party political system is a world security concern due to its lack of
internal checks and balances. As China’s economy sustained a 25 year long fast
growth, it is becoming more urgent for the world, as well as China, to ponder
the paths ahead.
This
paper examined China’s immediate past and its perception of itself and of the
world. It points out the root causes of China’s realist, mercantilist and
nationalist behavior on world stage.
This
paper further analyses the current social structure and internal contradictions
within the Chinese societies. The author then identified a number of
transformative projects China should consider entering into. These
transformative projects are to deal with China’s internal and external
conflicts. It also takes into consideration China’s rich cultural and
historical heritages.
The
internal transformative projects identified are:
1)
Economic
transformation to bring in a balanced development model instead of the current
export oriented model. In this transformation, the aim is to achieve a balanced
and self sustaining economy with fairer distribution of income, education and
other social benefits.
2)
Political
transformation to bring in a democratic political system where people’s
creativity and talents are liberated, rights and properties are protected and
the political power is shared with checks and balances built in.
The
external transformative projects identified are:
1)
Join force with
other regional countries to establish a regional monetary fund
2)
Join force with
other regional countries to form regional free trade zones, and aims also to
mutually help each other on the road to development
3)
Join EU, Japan,
Brazil, Russia, India and the US to effect a truly multilateral world system,
economically and politically
China’s
peaceful rise is possible and desirable if China can change itself by carrying
out these transformative projects. With its rich cultural and historical
heritages, China can be a positive contributor and even a leader in the world
political and economic system.
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