China And The Global Political Economy - UNTAG

Introduction: China – Yes, But It seems that Napoleon was right – the world has been shaken by China’sawakening. Although China engaged the United Nations (UN) in military conflict in Korea in the 1950s, has been a nuclear power since the1960s, a permanent member of the United Nations Security Councilsince 1971 and was a key actor in Cold War politics, China’s re-engagement with the global political economy has been a major reason whythe world has been shaken into re-evaluating China’s importance. To befair, China’s importance has been clear and present in some parts of theworld for quite some time – for China’s neighbours, long standing fearsof potential conflict in Japan, Taiwan and much of Southeast Asia sitalongside actual experiences of military engagement with China inIndia, Vietnam and the former Soviet Union. What has changed is thatthe China challenge is now being taken seriously in other parts of theworld as well – China is shaking the West, and shaking the United States(US) in particular.For a relatively loud and influential group of writers primarily, butnot only, in the US, China’s rise is taken very seriously. It is not justthat China will become ever more important and or influential in theinternational system, but that there is something sinister or dangerousabout China’s rise. Of course, it’s not just about economics alone.Whilst some International Relations (IR) theorists point to the volatility caused when hegemonic stability is challenged by any new risingpower, others point to the importance of whether that rising powershares the status quo values and norms (Johnston 2003). It’s not beingflippant to suggest that China represents a new ‘orange peril’ to theWest, in that it combines the fear of the red communist alternativewith the yellow Asian cultural and economic challenge to dominantWestern values. What China’s leaders do to their own people might be1

2 China and Global Political Economydisagreeable to many in the international community, and opposingthe policy objectives of Western states can be irritating and problematic. But in the long term, the bigger threat to the global order is seenas lying in the provision of a credible Chinese alternative to the statusquo. As Ramo (2004: 3) argues:China’s new ideas are having a gigantic effect outside of China.China is marking a path for other nations around the world who aretrying to figure out not simply how to develop their countries,but also how to fit into the international order in a way that allowsthem to be truly independent, to protect their way of life and political choices in a world with a single massively powerful centre ofgravity.For some, confrontation and military conflict with the USA asthe existing superpower is inevitable (Bernstein and Munro 1998,Timperlake 1999, Gertz 2002, Menges 2005). China’s centuries oldsuperiority complex is manifest in an aspiration to return itself to itsrightful place of global dominance (Mosher 2000), with China willingto ally with radical Islam to find a means of overcoming the US(Thomas 2001, Babbin and Timperlake 2006). Or at the very least, thegrowth of an assertive nationalism in China threatens regional stabilitythrough military conflict with Taiwan or Japan which might easilyescalate into conflict with the US. Why else would China’s leadersbe spending millions of dollars rapidly modernising and upgradingtheir armed forces, and continually reminding Taiwan that they willuse whatever force is necessary to prevent the creation of a separateTaiwanese state.Yet even considerations of values/norms/ideas and military capabilities and objectives are at least linked to China’s extraordinary economic transformation – it might not just be about economics alone,but economics is usually there somewhere. China’s alternative path ispartly attractive because of the apparent success of the experience ofeconomic reform. Other developing states might also lean towards theChinese way not just because China’s leaders don’t attach democratising and liberalising conditions to bilateral relations, but also becauseChina is coming to provide alternative sources of economic opportunities (with non-democratising strings attached). In terms of militarycapabilities, economic performance is clearly crucial in providing theresources to upgrade and expand, and also the foreign currency to buymodern equipment from those who are prepared to sell to China. But

Introduction: China – Yes, But 3there is also a less tangible relationship between economic performance and nationalist sentiments and objectives – both on behalf ofthe government and the Chinese people. On one level, Hughes (2006)argues that nationalism was at the heart of the reform process initiatedby Deng Xiaoping – reforming the old system was justified and legitimated by the need to build a strong China that could resist (and evenoppose) the existing hegemonic global order.On another level, the resurgence of nationalism in China is at leastpartly explained by a new sense of pride in China’s economic successes – what Whiting (1995) termed ‘affirmative nationalism’ – and/or the feeling that key external groups have been trying to preventChina’s development and threaten Chinese interests – in Whiting’stypology, ‘assertive nationalism’.1 The flip side of this coin is thedebates over the extent to which the pursuit of economic gains andthe extent of China’s economic integration act as a break on popularnationalist ambitions and/or the extent to which the leadershipcan separate the promotion of nationalism as a source of domesticconsolidation and regime legitimation from the promotion ofChina as a rational predictable and reliable international partner foran international audience.When the debate is just about economics alone, then there is a relatively strong school of thought that points to China as the engine ofgrowth in the global economy; at least an emerging power well on theway to becoming a global economic superpower that threatens toreconfigure the global political economy around Chinese interests(Weidenbaum and Hughes 1996, Bacani 2003, Overholt 1994, Murray1998). The prima facie supporting evidence appears to be compelling.The Chinese economy is already the second biggest economy in theworld using Purchasing Power Parity (PPP) calculations and is predictedto overtake the US in 2020 or 2041 or 2050 or some time this century.China overtook the US as the single biggest recipient of non-stocks andshares Foreign Direct Investment (FDI) in 2002. China is the fourthlargest trader in the world, and has massive foreign currency reservessecond only to Japan at the time of writing (and probably even higher bythe time of publication). And it is not just size that is important (thoughit clearly is) but also the incredible speed of change. For example, the factthat China’s trade surplus for 2005 was US 102 billion is remarkable –the fact that it tripled during the year even more so. Similarly, it’s notjust that foreign currency reserves at the start of 2006 were US 819 thatgenerates international interest and much concern, but also that thesereserves increased by a third during 2005 (Goodman 2006). And perhaps

4 China and Global Political Economynot surprisingly, this emerging economic superpower is seen by some asthe major challenge to the existing global economic order in general,and to US economic interests in particular (Shenkar 2004, Fishman2005).Yes, but This extremely brief overview of perceptions of the impact of China’sawakening has used sources that depict rather extreme views ofChina’s new global role – not all of them particularly academic innature – and not mentioned some of the excellent balanced studies ofglobalisation and China (for example Zweig 2002, Zheng Yongnian2004). Having established these positions, the next logical step is toknock down and rubbish these interpretations of China. And I amindeed critical of some of the basic assumptions that generate theseconclusions. Nevertheless, it would be ridiculous to dismiss the realityof China’s amazing economic transformation since 1978 and in particular, since 1992. Even Segal (1999) who answered his own question,‘Does China Matter?’ in the negative in reality accepted that China’seconomic transformation was important and significant – but crucially,not as much as dominant approaches and voices would have usbelieve. As Yahuda (2004: 1) noted in his assessment of Segal’s work:The article was intended as a wake-up call for many in Washingtonand elsewhere. In Segal’s view the persistent exaggeration of thesignificance of China was damaging, as it prevented the development of sustained coherent policies commensurate with the securityand commercial interests of the WestI not only share Yahuda’s interpretation of Segal’s work (see Breslin2005: 735), but also have considerable sympathy with the aim of tempering such ‘persistent exaggeration’.It is easy to see why China is often posited as an example of successful economic reform and a coming superpower – at the very least economically and perhaps even by any definition of superpower. If youvisit Beijing or Shanghai you visit cities that have changed beyondrecognition in an amazingly short period of time, and whose populations increasingly live modern urban lifestyles that have much incommon with lifestyles of many in the advanced industrial west. Eventhose who go further afield to other Chinese cities in the interior seeclear signs of growth and wealth. And it is not just cosmetic change or

Introduction: China – Yes, But 5an elaborate hoax. The lives of millions of China’s urban dwellersreally have been changed almost beyond recognition in two decades.Many millions more in the countryside are also much better offthan before, with the reduction of people living in poverty in Chinaaccounting for most of the overall reduction in global poverty. China’speople also have more individual freedom – they have a personal spacethat was previously denied to them – even though total freedom andpolitical plurality may still be a long way off.China’s engagement with the global economy has also broughtmany successes, and China is now massively significant for the functioning of the global economy. The way in which parts of the Chineseeconomy have been inserted into the global economy have alreadyresulted in a reconstruction of the East Asian regional economy, isimpacting on the developmental trajectories of developing states acrossthe world, and is altering production processes in (and in the processremoving jobs from) even the most advanced economies in the world.All of this is true – and Chapters 2 and 3 of this book are devoted toexploring how these dramatic changes have come about. But we needto take care not to simply assume that growth equates to development,wealth for all and power – or not yet at least. Yes, China is changingfast, but there are a number of ‘buts’ that qualify the ‘yes’. Yes therehas been close to double digit growth for two decades, but despitethis, China still remains a relatively poor country in per capita termscoming in at 107th using PPP (US 6,600 per capita) and 128th(US 1,740 per capita) using the atlas method in lists of the world’srichest countries in per capita terms. China as a whole may no longerbe considered to be ‘poor’, but is still only ranked as a ‘middle income’country at best, and more often as ‘lower middle income’. If we takethe higher of the per capita income figures using PPP calculations, thenChina still comes out below Kazakhstan, Namibia, Tonga, Iran,Equatorial Guinea, Thailand, Costa Rica and many others. It is instructive that despite the great successes of China’s reform experience, andthe fact that it is often favourably compared to the Russian experience,whichever calculation is used, per capita income in Russia is stillaround 50 per cent more than China’s (not least because of the verylow base level that China started from).Yes there has been significant growth in China, but has this growthbeen accompanied by concomitant levels of development, or have thebenefits of growth not been as impressive and immediate as the headline figures suggest. Yes there has been growth, but at what costs? Coststo the environment, and human costs as well. Yes, there have been

6 China and Global Political Economymany millions that have been brought out of poverty, and millions ofothers that have seen their lives dramatically change for the better. Butthere are still many millions who remain in poverty and millionswhose lives have not improved much at all (or as much as they wouldlike). There are also millions for whom things have got worse.Economic reform in China has entailed a new industrial revolution,but through the transition from socialism, it has also entailed a simultaneous process of de-industrialisation. Yes, economic reform andgrowth have been an important component in legitimating the continuation of the Chinese Communist Party’s (CCP) monopoly of politicalpower, but it has also resulted in class reformulation and social dislocations that might come to threaten that power. Yes it is possible that anew middle class will lead China slowly towards democracy, but it isfar from impossible that China might go down an alternative politicalpath. Certainly, those forecasts of China’s future(s) that assume asteady and peaceful domestic political situation are making assumptions that China’s current leaders amongst others are not prepared tomake.Yes, the way that China has re-engaged with the global politicaleconomy has altered the structure of the Chinese economy, and hasalso impacted on the economies of developing and developed countries alike. But does this mean that China has the economic power thatsome suggest, or does the locus of economic power, for the time beingat least, still reside elsewhere? Has China actually benefited as much asthe figures seem to suggest, or is it in fact consumers and companies inthe West that gain most from China’s ‘rise’ – even as that rise results inthe transfer of jobs from West to East?2Chapter 1 is devoted to exploring different ways of studying Chinain an era of globalisation, and explains in detail why different assumptions and approaches generate conflicting visions. There is no point inrepeating this analysis here, but in essence, this chapter suggests thatthere are four key issues which in my view create at best only partialunderstandings.First, as already noted, there is often an assumption that a linear progression will occur – assumptions that are sometimes based on historical experiences of other societies and which typically discountdomestic political turmoil. Second, the concept of ‘power’ is often leftundefined, with an assumption that size and importance is the same aspower. Third, too many of these analyses forget or ignore politics.Fourth and very much related (indeed, is it really a separate issue?),these studies tend to take ‘China’ as the unit of analysis. This might

Introduction: China – Yes, But 7sound strange – not least because this is a book that itself focuses onChina. But on one level, we need to consider the differential politicalconsequences of economic reform within China itself. Of course it isimportant to ask questions about whether x or y – globalisation orjoining the World Trade Organisation (WTO) for example – are goodfor China. But an aggregate answer of ‘yes’ for China as a whole willalmost always miss the fact that what is good for some can be bad forothers. So we should ask instead (or at least in addition) who is x or ygood for? On another level, many analyses of the political implicationsof international economic relations assume that these relations are justthat – inter (or between) national units. The analysis remains imbedded in conceptions of international, whereas the reality of productionis transnational (or globalised). This book builds on these four keyareas by providing alternative ways of conceptualising the implicationof China’s international economic relations in Chapters 4 and 5, andthe domestic political implications of economic reform in Chapter 6.The primary target of this book is those scholars of internationalrelations and/or international political economy who do not have adetailed knowledge of the Chinese case. To this end, it contains somesections of explanatory detail – for example, outlining the process ofeconomic reform and opening in Chapters 2 and 3 respectively.Perhaps most clearly of all, the contents of Chapter 6 – ‘Stretching theSocial Fabric’ – might seem to be so obvious as to be unnecessary forstudents of Chinese politics. But its inclusion reflects what I continually find to be a rather large gap in general knowledge about domesticdislocations in China amongst academics and some policy makers,which relates back to previous comments about the aggregation ofChina as a single unit of analysis and the relative neglect of domesticpolitics in considerations of China’s global (economic) role. JeffreySachs might be right that China’s experience in poverty reduction isimpressive, but his assertion that ‘we can see from China’s experiencethat the end of poverty is absolutely palpable and real in the space of avery few years’ (Watts 2006) rather overestimates the situation, andskips over the millions or rural Chinese that are still in poverty, themany millions more that are danger of slipping back into poverty, andthe increasing numbers of urban poor. Yes, much has been done, but alot still remains to be done before Chinese poverty can be confined tohistorical studies.Although some policy makers are already now thinking of China asrich and powerful, most of the forecasts of Chinese superpower status arestill predictions of what will happen in the future. As already noted, I am

8 China and Global Political Economysomewhat critical of the basis of some of these predictions – of theirassumptions about where China is now, and about their assumptions ofinevitable or at least highly likely future trajectories. Nolan (2003: 252)rightly rebukes those analysts who simply assume that China’s developmental trajectory will inevitably (and teleologically) emulate either theearly developmental experience of Great Britain or the later developers ofEast Asia (including the relationship between economic and politicalchange). It is notable that when examples of transition are used to justifyevolutionary assumptions, Indonesia is not typically one of the casesreferred to, and it is also instructive to remember the hyperbole aboutthe coming

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