CHINA IN 2014: YEAR IN REVIEW

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.

TRUST YOUR NEIGHBOR

Panmunjom on the Korean Border

By James Kim
Staff Writer

A mother often punishes her child whenever he misbehaves and rewards him if he deserves it. So goes the ideology of Trustpolitik, the new South Korean policy on containing North Korean aggression. Since Park Geun-hye became South Korea’s first female president in 2012, Trustpolitik has offered a much more assertive approach to Kim Jong-un’s continuation of his father’s policies of nuclear extortion. If the North tries to provoke the South, President Park will cut off aid to her neighbor. This is a reversal of her predecessor’s Sunshine Policy, which was a more conciliatory approach, usually with no strings attached. Nonetheless, Park promises to help alleviate North Korea’s economic woes and reaffirm existing agreements if they can prove their commitment to the truce. Park’s inauguration address spoke of “a trust-building process, for Koreans [to live] prosperous and freer lives” [1].

On October 23rd, Lee Jong-joo, a representative of the South Korea’s Ministry of Unification, visited UC San Diego to explain what Trustpolitik means for South Korea’s future diplomacy with its northern neighbor. She pointed out in a slideshow that Kim Jong-un uses the nuclear game as a show of force to both the outside world and to inner party dissenters who question the young leader’s ability to rule. For the North Korean leader, nukes are merely a short-term political asset to a long-term economic goal as his nation still endures a devastating famine, not to mention the recession that has ailed the Communist bloc since the fall of the U.S.S.R. [2]. Obtaining nuclear weapons provides him not only with a cheap method for national security (as opposed to feeding and paying a burgeoning military), but also leverage in diplomatic talks with both the Republic of Korea across the 48th Parallel and the United States. Nonetheless, the recent flare-ups this spring show how precarious the double-edged sword of nuclear diplomacy has proven to be for Kim Jong-un, who not only incurred the wrath of the U.S. military, but also increased tensions with his only ally, China, which does not want an unstable nuclear-armed regime on its border [3].

Continuing in her lecture, Lee mentioned how the city of Kaesong represents a critical link between the two Koreas. Located inside North Korea near the Demilitarized Zone, the Kaesong Industrial Region helps stabilize the North Korean economy while providing South Korea with a source of physical labor for its chaebol, or major corporations [4]. The area’s closing during the spring tensions proved to be one of first tests for the Trustpolitik policy, as President Park refused to send back her economic advisors until North Korea could ensure it would not cause another international stir. She even warned “if North Korea launches another strike, then Seoul must respond immediately to ensure Pyongyang understands the costs of military provocation.” Since Kim Jong-un originally closed the economic zone, President Park wanted to see how long North Korea could stomach the loss of a vital part of its economy as well as handle a miscalculation by its leader. It appears that Kaesong was more important to the North then to the South, as the area was reopened in August and the North gave compensation to South Korean businesses that lost profit from its closing.

Trustpolitik survived its first trial, but it has yet to encounter a situation that actually involves loss of life, such as the sinking of the Cheonan that occurred during the administration of Park’s predecessor, Lee Myung-bak, a hardliner who refused to escalate the protests against North Korean aggression. It may be that the new policy will face rougher waves as Kim’s nuclear policy does not appear to be slowing down. However, Trustpolitik’s ability to extract concessions in its first major test still shows that this policy has had a fortunate start on its road to détente.

1. Lee, Jong-joo. Trustpolitik: A Way Forward on the Korean Peninsula. IR/PS: UCSD. 23 Oct. 2013. Event.

2. Ibid.

3. Ibid.

4. Ibid.

Image by Joe Doe

MODERNITY AT LARGE IN PERU

This week Prospect Journal is publishing a series of photo journals about international travel – join us as we explore a diverse set of countries by reading our “Changing Perspectives: Journalism Through an International Lens” series!

By Joe Armenta
Staff Writer

Peru is among the fastest growing economies in Latin America as a result of export-oriented policy and an expansion of foreign direct investment. Increased growth has led to greater prosperity among many Peruvians; however, it has also run into some new and existing challenges. This photo journal provides a brief look into these issues.

The municipality of Miraflores serves as the financial hub of the country, and is perhaps the most prominent emblem of Peru’s economic success. An expanding middle-class has created a housing boom, leading to the development of residential skyscrapers that tower over public spaces. As population density explodes in these highly concentrated urban zones, the need for central planning for utilities and infrastructure is crucial for residents.

One of the key components to the Peru’s 21st-century economic strategy is foreign direct investment brought about by international tourism. Machu Picchu, one of the New Seven Wonders of the World, is at the forefront of this surge. The site attracts hundreds of thousands of visitors per year, the majority of whom spread their foreign currencies throughout the country creating a large tourist industry.

Snowy peaks provide ample environment for backpackers seeking adventure, but also provide a challenging environment for the development of small communities in the highlands. The Peruvian Andes stretch down the middle of the country separating the desert coast from the lush Amazonian rainforest. Few roads exist that wind up the peaks of these mountains, which reach more than 21,000 feet in altitude.

Loreto is the largest region in Peru land-wise, and also harnesses some of the biggest opportunities for growth in the nation. The Amazon rainforest possesses a wide variety of natural resources that can be used for food and pharmaceuticals. However, much of the development of the region is hindered by the lack of infrastructure. Outsiders can access this area only by plane or boat. While rivers are often referred to as the highway of the rainforest, it often takes days to reach desired destinations using boats.

Protests are a common occurrence throughout Peru. As the highly centralized country continually grows, public servants regularly go on strike demanding higher wages. Public gatherings can be small, as is the case for this photo, or large collections of people halt the streets of the capital, Lima.

The success of the Peruvian economy should not overshadow one of the country’s most dire problems: inequality. On the outskirts of Lima, the slums of San Juan de Lurigancho house thousands of people who live in destitution. Poor living conditions are coupled with public health problems as well as the lack of basic necessities such as running water and adequate electricity. Houses are usually constructed with scrap material from industrial zones.

This is Patty’s house. Slum life is accompanied by many uncertainties. Access to quality education and healthcare is limited, as is the security of a long-term, well-paying job.

The urban explosion of Cusco, shown in the background, has pushed many residents higher into the mountainsides where utilities such as running water, sewage, and electricity are scarce. Residents often rely on traditional means to survive and build such things as terraces and llama corrals out of loose rock found nearby their homes. This creates a problem for archeologist studying the area, as many of these modern constructions are built upon centuries-old remains of the Inca civilization.

While Western culture has seeped into the country in the recent years, Peruvians still devote a great deal of energy to celebrating local festivities. In October, thousands of limeños turn out to celebrate the final days of a procession paying tribute to “Nuesto Señor de los Milargos.” This is a tradition that began during the colonial days and combines Catholic, African slave, and indigenous histories.

The presence of Catholicism is largely felt in Peru. During the colonial days, Catholicism was used as a form of recognizing administrative legitimacy and establishing control. Today, the religion plays more into the everyday lives of Peruvians and the decisions that they make.

Adding to the land of ruins that makes up Peru is a boat that rests on the beach of Chiclayo. The rusty marine craft is a by-product of the fishing industry of the late 20th century. A once dominant trade, the profession has since been replaced due to several factors including a territorial dispute with Chile and the loss of government protection. As the ship slowly deteriorates, a new country is emerging with the help of a boom in economic activity. While growth has bettered the lives of many Peruvians, there is still much work to be done both in terms of social and technological advancement.