China Focus Year in Review

PROSPECT Journal is collaborating with China Focus, a blog focusing China’s role in the world and U.S.-China relations. As part of this collaboration, PROSPECT will be intermittently publishing articles by the China Focus bloggers. Our journal is excited to bring a wider range of expert analysis of Chinese politics, economics and culture to our readers.

By Jack Zhang
Contributing Writer

The Chinese Dream and its Discontents

The contours of Xi Jinping’s ‘Chinese Dream’ began to crystalize in 2014. Both at home and abroad, he has pursued policies for the ‘great rejuvenation of the Chinese nation’ with single-minded determination. Orville Schell unpacked the ‘Chinese Dream’ into its major components at his February book talk for Wealth and Power: China’s Long March to the 21st Century. The realization of the ‘Chinese Dream’ is the pursuit of wealth and power to regain its preeminence in world affairs after the Century of Humiliation (1839-1949).

Evan Osnos, New Yorker staff writer and winner of the 2014 National Book Award for Non-Fiction (China Focus interview with Mr. Osnos will be up in the new year), saw two components of the ‘Chinese Dream’ in his December book talk for Age of Ambition: Chasing Fortune, Truth, and Faith in the New China (watch here): one international, and the other individual. The international component was the one on display as Xi Jinping and the 5th generation of leaders took power at the 18th Party Congress; it is the dream of national power and global ambition. The other component is the individual dreams and aspirations of 1.4 billion Chinese; it is the pursuit of fortune, truth, and faith. At times these two components exist in harmony, the individual pursuit of fortune propelled China’s economic miracle, but they can also conflict as Osnos illustrates in his book with profiles of Liu Xiaobo, Ai Weiwei, and Chen Guangchen. Osnos concludes his talk and his book with the insight that the reconciliation of the individual and national ambitions will determine the future of China.

Viewed through the Osnosian lens, 2014 was a clash between Xi’s dream of the great rejuvenation of the Chinese nation and its discontents. China overtook the United States as the world’s largest economy and achieved some landmark foreign policy victories. China’s pursuit of fortune resulted in the world’s largest ever IPO ($25 billion) as e-commerce giant Alibaba floated shares on the New York Stock Exchange and made its founder, Jack Ma, the richest man in China. Homegrown smartphone maker, Xiaomi, took the No. 1 position from Samsung in China’s domestic market and the company looks poised for global expansion as the third largest phone maker in the world. China also completed the South-North Water Transfer Project, one of the most ambitious engineering projects in world history, and began construction on a Nicaragua Canal to rival the Panama Canal.

But as we marked the 25th anniversary of the Tiananmen Square Incident, China is in the midst of what many consider the harshest crackdown on dissent since 1989. The Propaganda Department under Liu Yunshan has gone into overdrive and updated its approach to new social media. Writers and artists have been reminded that ‘the arts must serve the people and serve socialism’ and, in a throwback to the Cultural Revolution, artists will be sent to live in rural areas to “form a correct view of art.” All in all, the party demonstrated in 2014 that it is more willing and capable to interfere with the pursuit of truth in China than ever before.

2014 also witnessed the eruption of the largest mass demonstrations in Hong Kong since it returned to Chinese control in 1997. At the Spotlight on Hong Kong event in October, Professors Susan Shirk, Richard Madsen, and Victor Shih led a discussion on the meaning of Occupy Central and the implications for HKSAR-Mainland relations (listen here). Professor Jeffrey Wasserstrom observed in a recent op-ed, “Beijing’s handling of the Hong Kong situation was the latest illustration of the party’s fear that its grip on the national rejuvenation package is weaker than outsiders sometimes imagine.” Elsewhere in China, terrorist attacks on train stations Urumqi and Kunming were connected to Islamic terrorists from Xinjiang and were dubbed China’s 9/11 by the media. These acts of defiance, one peaceful and the other violent, both represent discordant notes in the pursuit of faith in China to the party’s central melody. Though effectively muffled by Beijing in 2014, the tension between these individual voices seeking truth and faith and the national pursuit of wealth and power will continue to clash in 2015 and this dialectic will give shape to the Chinese Dream.

End of the Economic Miracle?

Inaugural China Focus Debate Poster

China overtook the US as the world’s largest economy in 2014 (based on IMF purchasing power parity data). Yet the Chinese media response was muted and speculation abounded in the foreign press about the end of the Chinese economic miracle. The most read article on this blog in 2014 featured a debate between Victor Shih and Barry Naughton on this very topic (watch it here). Professors Shih and Naughton each led a team of UCSD students to debate the motion: “The house believes that the Chinese economy will collapse in five years.” Both sides agreed that the Chinese economy faces some serious challenges (housing bubble, mounting debt, weak exports, demographic decline) and the debate hinged the question of whether efforts to reform to the economy can overcome some of these challenges before the system unravels. Professor Shih and the proposition team (yes to the motion) won the debate by a large margin.

As Professor Susan Shirk remarked, “The debate that we’re having here on stage is really just a continuation of the debate that Barry and Victor have been having with each other in print and in the halls of the IR/PS buildings.” Both Professors Shih and Naughton participated in a panel earlier in the year on economic reform with one of China’s preeminent economists, Professor Wu Jinglian of the Chinese Academy of Social Sciences, and the Dean of the School of International Relations and Public Administration at Fudan University, Professor Chen Zhimin (watch it here).

Reflecting on the Third Plenum of the 18th CCP Congress in November 2013, which presented a wide-ranging blueprint for reform, Professor Naughton expressed cautious optimism about the reform. Professor Wu interpreted the plenum as a conclusive end to a decade-long debate about the reform in China: the market (rather than the state) will now have a decisive role in resource allocation. After being pulled in two different directions by the expansion of market forces on the one hand and the growth of state power and crony capitalism on the other, the plenum charts a course towards an integrated, open, competitive and rule-based market economy. Though more hopeful now than he has been in over a decade, Professor Wu is not as optimistic as Professor Naughton. He sees major obstacles from entrenched interests. Professor Shih echoed Professor Wu’s concerns. He faults the plenum for making too many vague promises, containing internal contradictions, and being disappointing on political reform.

Indeed, as 2014 drew to an end, after the rise and collapse of the super-bull market, the debate remains alive and well. The 2014 record for reform is decidedly mixed: a new Shanghai-Hong Kong Stock Exchange was established but the Shanghai Free Trade Zone disappoints, Hukou Reform was announced but its scope is very limited, the NDRC streamlined the approval process for international investors but foreign firms continue to be singled out for regulatory scrutiny, and the pace of SOE reform remains slow. Meanwhile, GDP growth slowed to in 7.3 percent in Q3 and ‘new normal’ has become a catchword among policymakers and in the press in China. A major unanswered question is whether the ongoing anti-corruption efforts will prepare the ground for deeper economic reforms. In any case, the trajectory of the Chinese economy will continue to be one of the biggest stories of 2015.

Foreign Policy in Big Strokes

Xi Jinping and Shinzo Abe shake hands at November 2014 APEC Summit.

Chinese foreign minister Wang Yi declared 2014 a ‘bumper harvest for China’s diplomacy’. Professor Xie Tao has called 2014 ‘a year of big strokes’ for Chinese foreign policy. Xi Jinping visited 18 countries and participated in a series of high profile summits, including a successful APEC where China and the US reached a landmark U.S.-China Climate Agreement and a number of other constructive accords. China pledged $10 billion for the BRICS Development Bank, $41 billion to the BRICS Emergency Fund, $50 billion to the Asian Infrastructure Investment Bank, and $40 billion to establish the Silk Road Fund. These investments appear to be part of a grand strategy of ‘One Belt, One Road (or the New Silk Road),’ which seeks to integrate economies and promote trade across the Eurasian landmass.

Indeed, as geopolitical crises roiled Europe and the United States in 2014 with the rise of the Islamic State in Iraq and Russia’s invasion of Crimea, foreign policy with Chinese characteristics seems worthy of admiration. But it is still too early to tell whether the seeds China sowed in 2014 will bear fruit. As the discussions at the China-Japan Relations and the Role of the US Conference in March and the Northeast Asia Cooperation Dialogue in September reveal, disputes in the East China Sea and South China Sea remain major challenges for China’s foreign policy. Chinese grand strategy seems to be guided by a belief that greater levels of economic integration will enhance Chinese political influence even though the opposite trend appears to be playing out in the region. Despite unprecedented levels of trade and investment between China and Japan (as well as the Philippines and Vietnam), political relations are deteriorating. Closer to home, Beijing’s long-standing policy of ‘one country, two systems,’ which appeals to the business elite, seems to have derailed in Hong Kong and distrusted by Taiwan in the face of populist opposition. With the landslide victory of nationalist Prime Minister Shinzo Abe in Japan this December and the pro-independence Democratic Progressive Party poised to regain power in Taiwan in 2016, democratic politics will continue to complicate China’s foreign policy initiatives in the region. Ambassador Clark Randt spoke on the challenges of the United State’s role in Asia’s rebalance at the Ellsworth Memorial Lecture in March.

Tigers and Flies

Xi Jinping’s anti-corruption campaign continued to grab headlines in 2014 as disciplinary probes reached the highest ranks of the party: Zhou Yongkang (former security czar and politburo standing committee member), Ling Jihua (former aide to President Hu Jintao), Xu Caihou (former vice chairman of the Central Military Commission). “Fighting Tigers (打老虎),” a euphemism for investigating high-level officials for anti-corruption, became one of the most popular search terms on Baidu in 2014. Scores of flies, low level officials caught up in the campaign, have been disciplined as well. 59 officials with vice-ministerial rank or above and 74 executives at state-owned enterprises as well as some 180,000 lower ranking cadres have been punished for ‘breaches of discipline’ by the Central Commission for Discipline Inspection (CCDI) in 2014. This excellent special report from SCMP tracks the relentless campaign across time and space. China’s anti-corruption czar, Wang Qishan vowed at a CCDI news conference that the crackdown would never end.

Amidst the continuing crackdown, the party has trumpeted a new slogan “socialist rule of law with Chinese characteristics” and made this the subject of the 4th plenum of the 18th Party Congress held in October. It has even decreed December 4 as Constitution Day. China’s leaders recognize the need to rule of law to constrain the abuses local officials can heap on their constituents. The Politics of Stability Maintenance Conference in August examined many of the challenges to social stability in China and the government’s responses. But as the consensus among the participants is that the party today stands above the law, and rule by law not rule of law prevails in China today. Xi’s campaign against graft serves as a poignant reminder of this fact; the CCDI’s brand of justice is arbitrary, non-transparent, and politically motivated. Rather than curbing arbitrary power of party officials in favor of a more transparent judiciary, rule of law with Chinese characteristics seems to be doing the opposite.

Cover photo from Flickr.

Photo from APEC summit from Creative Commons.


By Angela Luh
Staff Writer

Demonstrations for Hong Kong’s monumental student protest movement, dubbed “Occupy Central” and the “Umbrella Revolution,” have entered a sixth week since the first wave of protests sprung up at the end of September. The movement’s call for democracy within the ballooning apparatus of power by socialist China has elicited widespread media attention and overseas support. While Occupy Central has established visible rapport with many global citizens, some scholars and politicians caution that implementing democratic reforms in Hong Kong, whose laws remain largely under the control of the National People’s Congress in China, requires a “progressive approach” and that radical, quick-fix movements may do more harm than good. Indeed, as the protests have progressed, internal divisions within Hong Kong in support and in opposition of the movement have grown, and the number of street protesters has dwindled from thousands to hundreds.

Background on Occupy Central

The protests were sparked by Beijing’s decision in September to revise the nomination process for the 2017 election for Hong Kong’s Chief Executive (CE), the head of its leadership. The plan, approved by the National People’s Congress, designates a 1,200-person nominating committee to select candidates for the CE and reduces the number of eligible candidates for the position, but will, for the first time in Hong Kong’s history, allow the CE to be chosen by popular vote. Currently, however, the committee consists of only 7 percent of the total Hong Kong electorate and is generally pro-Beijing, allowing China to prevent CE candidates who harbor democratic sentiments. The Chinese government can also veto candidates they dislike, prompting criticism from Hong Kong voters, claiming they can only vote for candidates chosen by Beijing.

Hong Kong protesters are demanding the right to freely vote to nominate candidates in the 2017 CE election. They have also demanded the resignation of current executive, C.Y. Leung, who has lost favor with a number of Hong Kong citizens with his criticism of the protests; many view him as a pawn of Beijing.

The response from China has been that of unyielding non-concession. Chinese President Xi Jinping maintained Beijing’s stance on Hong Kong’s position as a Special Administrative Region (SAR), which prohibits voters from nominating CE candidates. The Central Government Liaison’s office backed his assertion with a statement that declared Hong Kong’s electoral rules well within Beijing’s jurisdiction.

Tensions over the restrictive electoral reforms culminated on September 28, with the “Occupy Central with Love and Peace” civil disobedience campaign. Initiated by Hong Kong University Law Professor Benny Tai and widely supported by Hong Kong students, the protests dramatically escalated within days, with thousands occupying the streets to protest the proposed election rules. Hong Kong’s officials reacted to the movement by sending out police to disperse the masses, but excessive use of force, including the use of tear gas and batons, only served to galvanize the protesters, triggering more demonstrations against C.Y. Leung and the Hong Kong government.

Changing Currents in the Protests

Six weeks into the protest, the movement has lost much of its momentum.

The protesters have continued to demand the resignation of Hong Kong’s legislature to trigger a public referendum on electoral reform. While C.Y. Leung’s popularity levels have fallen through the ground, the likelihood of generating a public referendum is very little, since it is prohibited by Hong Kong Basic Law.

Furthermore, domestic opposition towards the movement is growing. The counter-movement is made up of pro-Beijing party line and business owners who have faced business deficits since the street occupations started. Hong Kong’s economy, which depends heavily on tourism and business, has taken a hit since protests began. Many mainlanders and counter-protesters perceive the protest as a violation to social order, law and economic prosperity. In addition to censoring much of the news associated with the protests, China has used evidence of Hong Kong’s faltering economy to dissuade sympathizers. In an October poll conducted by the University of Hong Kong, 54 percent of interviewees opposed Occupy Central, with only 27 percent in support of it.

Student leaders are planning to send representatives to Beijing this week during the Asia-Pacific Economic Cooperation summit. As negotiations with the Hong Kong government have proven ineffective, the movement leaders hope that seeking direct talks with mainland Chinese officials will prompt a more substantial response.

The Future of Hong Kong-China Relations

Hong Kong remains limited in its autonomy as a SAR under the “one country, two systems” principle. Hong Kong’s courts maintain relationships with China’s Central Authorities and falls under common law jurisdiction within socialist China, limiting its ability to maneuver policy decisions, particularly as it holds much less leverage today than it did years ago.

Once a crucial gateway for trade, investment and capital for China, Hong Kong is now much less important to China, with major Chinese cities becoming central hubs for trade and investment. Hong Kong’s share of China’s total GDP has declined by nearly 12 percent in past decade. The roles have reversed in this imbalanced relationship, with Hong Kong becoming increasingly dependent on China for trade. China’s imports constitute less than 2 percent of the total share whereas Hong Kong’s exports to China exceed half of its total exports.

Despite its diminishing role as a trade and investment center, Hong Kong is still a critical player in China’s economy. Hong Kong is more reliable than the mainland for equity financing and is crucial for investment in and out of China, accounting for two-thirds of foreign direct investment into China last year. Hong Kong is also the global center for renminbi trading, with huge sums of liquidity flowing through it every year.

Thus, a crackdown on Hong Kong is unlikely. It is more likely that China will wait for the protests to lose traction among Hong Kong citizens before it makes any compromises. Beijing’s growing economic leverage over Hong Kong may only increase its influence in the region.

As was the case in Taiwan’s Sunflower Movement, China has proven that it can continue to stake its political influence in areas under its claim by guaranteeing economic growth and political stability. With many East Asian economies depending on trade and investment with China, Beijing can stifle support for pro-democracy protests and prevent them from entering China.

While China is unlikely to make concessions to Hong Kong protesters because it would show its weakness in regards to governing its other claims (Macau, Tibet, Xinjiang, Taiwan), China would benefit from economic stability in Hong Kong. Therefore, China and Hong Kong need to address the issue of political gridlock in the legislature, which prevents the government from making efficient and effective policy changes. The Hong Kong government must also clarify how the Legislative Council should be elected in 2016, define the composition of the 1,200-member nominating committee for the CE election and make changes to increase the representation of Hong Kong voters in the body. Both sides will need to concede a little and reach an agreement on the CE election in order to set a precedent for future political reforms.

Image by Oneris Rico