Chinese dreaming in an interdependent world

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-- By Gustaaf Geeraerts, director of the Brussels Institute of Contemporary China Studies (BICCS) Vrije Universiteit Brussel (VUB).

Xi Jinping made his first pronouncement on the "Chinese dream" during his visit to the exhibition "The Road to Revival" at China"s National Museum in Beijing in November 2012, after he became General Secretary of the Chinese Communist Party. Ever since the Chinese dream has preoccupied many people, both in China and abroad. What is this dream all about and who is actually dreaming? Looking back in history it appears safe to assume that it is the "zhongguo (中国) dream" rather than the "zhongguoren (中国人)" dream. It is foremost a dream of the Chinese nation, rather than a dream of Chinese people. This undoubtedly reflects historical precedents. The main preoccupation of Chinese thinkers of virtually all political persuasions since the 19th century has been the fate of China as a nation, whether the state or the ethnic group, rather than the aspirations of individual Chinese. As Xi has highlighted in numerous comments since the start of his tenure, the aim is to make the country "prosperous and strong", tapping into deep-seated aspirations of China's modern identity. This aim has featured in nationalist motivations since at least the late Qing dynasty, and was highlighted by Deng Xiaoping in the 1980s. It also squares well with China's double identity of a socialist developing country and an emerging power. Realising the "Chinese dream" boils down to China becoming a "socialist welfare state" and a "responsible great power", a feat that can only come to fruition in an peaceful international environment or "harmonious world". On closer examination, the Chinese dream harbours three dreams, which are closely intertwined. First, it is about staging China's revival whilst remaining faithful to its rich cultural heritage and own socialist identity. Second, it is about a stronger China (comprehensive national power) that is to pursue an independent foreign policy and resolutely follow its own road, while at the same time increasing mutual cooperation with other countries, dealing together with global challenges and working hard to make a contribution to global development. Third, it is about a world order where states are equal and trust each other, common security is achieved, diversity of civilizations is maintained and win-win cooperation leads to common prosperity.

Dream 1: From socialist developing country to socialist welfare state China is no longer the developing country it once was and is becoming more prosperous. The Chinese leadership is at the head of the world's most successful economy and its self-confidence has been boosted by three decades of impressive economic. Especially in the past decade the Chinese economy achieved near double-digit growth per year. While in 2003 China's GDP was $1.4 trillion and its per capita GDP reached $1,090, in 2012 its GDP crossed $8 trillion, or about 55 percent of the size of the US economy, and its per capita GDP exceeded $6,000. In 2011 it turned into the second largest economy in the world and since 2013 it is also the largest trading nation in the world. However, all these successes notwithstanding, China's model of development is facing a sea of challenges. Even with all efforts to stimulate domestic consumption, China continues to rely too much on export and fixed asset investment and its economy is still wanting in terms of innovation and steering. Although China made enormous progress since the launch of the economic reforms, it still scores relatively low in terms of GDP per capita – a prime indicator of economic sophistication. In addition, it is facing a widening gap in prosperity levels between different regions, between urban and rural areas, and between the rich and poor. Finally, the ecological degradation of the country is confronting Beijing with a challenge of sorts. In the long run Chinese society can only remain stable if its leadership manages to resolve the many problems of China's domestic development within a reasonable timeframe. The crucial question for the new leadership is to push the economy into a new direction away from overinvestment in export industry and relying for employment on cheap labour. China needs to make a transition from its current export- and investment-driven growth model to one based on domestic consumption. Small and medium seized enterprises, the service sector, and the private sector all need to be further stimulated. The kind of firms in China that can create massive numbers of better-paid jobs quickly are small and medium-sized private enterprises in higher-end manufacturing and services. As they bring in more competition, they are also main drivers of innovation. The main issue is that a sustainable growth model would need sharp reductions in credit expansion and investment so as to increase household wealth and income, thus enhancing domestic consumption. In other words: a sizeable slowdown in GDP growth cannot be avoided, unless Beijing would like to walk the disastrous road of ever-rising debt. A major hurdle to take are the main beneficiaries of imbalanced growth, i.e. the export sector, state-owned enterprises, coastal provinces, the real estate and construction industries, and China's banks. These stakeholders have gathered an ever-stronger influence over economic policy and are most resistant to policy reforms aiming at reducing or reversing household wealth transfers. Much will depend on whether the Chinese leadership is willing and able to muster the required political support for a change-over from export- and investment driven growth to a new growth model, one that is labour intensive, consumption oriented and driven by rapid expansion in the services sector. Judging by the full 60-point "Decision on Several Major Questions About Deepening Reform" the odds are that the new leadership has set out an ambitious agenda to restructure the roles of the government and the market. A major pledge is to give markets a decisive role in key areas of the economy such as pricing of resources and the financial system. And while the reform outline does not challenge state-owned enterprises directly - the leadership clearly does not want get rid of them – it envisages making them more efficient and more profit-oriented, turning them into private-like economic entities. The plan also included steps to boost China's urban population. In Beijing's judgement helping hundreds of millions of rural dwellers migrate to the cities is key inject a more sustained development path in the world's second-largest economy – its advance up the value chain and wealth creation. Already now, many analysts and commentators have suggested the plans are the most significant since Deng Xiaoping's reforms in the late 1970s and the early 1980s that opened up the country to the outside world and set it on course to become one of the world's most successful economies. Most importantly, Xi Jinping's program essentially calls for the government to retreat from its role in allocating the basic resources of capital, energy and land. This is bound to substantially boost economic efficiency, but will come at the cost of depriving the central government of an important tool of macro-economic management, and local governments of treasured channels of patronage. To counterbalance this retreat from direct market interference, the communiqué spells out the areas in which public goods provision by the government must be improved: macro management and regulation, public service delivery, management of social stability, and environmental protection. In short, the vision seems to be for China to move closer to an economy where the government plays a regulatory, rather than a directly interventionist role. In short: a welfare state with Chinese characteristics. The reform program reveals Xi Jinping as a powerful and visionary leader, who has set himself to redefine the basic functions of market and government, and in so doing has chosen to step in the pragmatic footsteps of Deng Xiaoping. The Third Plenum's approval of the formation of two high-level Party bodies, a "leading small group" to coordinate reform, and a State Security Commission to oversee the nation's pervasive security apparatus, indicates that he is adroitly establishing the institutional conditions for overcoming resistance and achieving his aims. Whether Xi Jinping can deliver on these grand ambitions, and whether his approach will be successful in redirecting China's economic model, remains to be seen. But one thing is crystal clear: Xi Jinping has taken up the gauntlet.

Dream 2: From revolutionary power to responsible great power Before China's adoption of the reform and opening-up policy, it regarded itself as a revolutionary power. Its foreign policy was aimed at overthrowing the old world order and constructing a new one. By integrating itself into the international economy and international society through its reform and opening-up policy, it has gradually become an insider of the international system and thus no longer has an interest in radically changing the current international system. The Chinese economy has developed much more rapidly since it joined the World Trade Organisation, eliciting a more positive towards globalization and the current international system. It has been widely recognised that China is a beneficiary of globalisation and the current international system. This transformation of identity is reflected in China's foreign policy orientation and in its behaviour on the world stage. Internationally, the country has adopted a basic policy of cooperation rather than confrontation towards western countries. Regionally, China's behaviour is characterised by attempts to participate increasingly in regional cooperation rather than trying to remould the regional power structure by coercion. With regard to international institutions, China has increasingly chosen for integration, instead of challenging and changing the international institutional system. After all, as a permanent member of the Security Council China occupies a relatively advantageous position in the political security arena within the global institutional system led by the United Nations. Economically, the advantages also outweigh the disadvantages for China. As one Chinese scholar has put it succinctly: "In historical terms, it has been the first time for China to play a positive and comprehensive role in building a world order. It is a great mission that history has entrusted on China." While, as a result of more positive attitudes to the international system among Chinese statespeople, China has increasingly integrated into the international system, there is still a lingering feeling of frustration and unequal treatment remaining because of China's too weak voice in the international arena, lack of agenda-setting capacity and executive capability in building international institutions. That also sheds light on Xi Jinping statement that China will not "abandon its national interests, and while it follows the road of peaceful development, other countries need to as well: only when each country does so can there be common development and peaceful coexistence". China's international responsibility should be defined on the basis of China's national interests, rather than the interests of Western developed countries. These tend to define China's international responsibility from the perspective of their own interests and concerns, claiming that China's responsibility is to uphold and maintain the existing international order together with them. But their interests are not necessarily the same as China's. As the world's biggest and most populous developing country, China's primary responsibility should be to provide a better livelihood for its citizens, who account for one-fifth of the world population. "This is not merely a domestic affair, but also one of international significance. It is the greatest contribution that China makes to humankind by working out solutions to internal problems such as development and stability." For this reason, national interests should be the fundamental factor in determining China's international responsibility. The crux of China's responsibility is to effectively fulfil its domestic responsibilities and not list of obligations imposed by western powers. China has the sovereign right to voluntarily engage in those international and national missions that are in line with its capabilities and practical national conditions. Still, the best option is for China to make full use of the opportunity to play a constructive role in the international system, and participate in the creation of international institutions. After all, China has been developing within the existing system of strongly established international institutions, which it has been making ample use of to sustain its growth. As China is firmly integrated in the current international regimes and benefits from their smooth functioning Beijing actually has a profound interest in seeing that the international rules and institutions keep on functioning effectively.

Dream 3: Harmonious world China needs the rest of the world as much as the world needs China. Beijing can only continue to grow and prosper to the extend that China's regional and world environment remains stable and thus must steer its development and growth in a way to reassure other countries and limit their qualms about China's rise and prevent them from balancing, or even worse, containing China. In other words: China cannot dream alone. The Chinese leadership has a keen interest in strengthening international governance, whether in the present version or an alternative version more to its liking. Whatever way it will choose, Chinese leaders will have to balance between meeting persistent domestic needs and increasing international expectations. We are moving towards a multi-polar world order, which is different from anything in the past. It consists of a highly diversified amalgamation of developed and emerging powers, which are deeply interdependent and therefore sensitive to each other's policies and development. Under such conditions, not only China but also all other powers - both old and new - need to balance between answering persistent strong domestic demands and meeting increasing international expectations. While interdependence has been a feature of economic globalization all along, the rise of the emerging economies has turned global economic interdependence into a new playing field. The outsourcing of production and services from advanced to emerging countries, together with increasing economic exchanges between emerging economies themselves, have markedly diversified and complicated trade and investment patterns in the global economy. The accumulation of huge foreign currency reserves by emerging powers (China in particular) going a par with rising debt of developed countries (most notably the US) has generated structural imbalances which were a major factor in bringing about the 2008 financial crisis. At the same time, this crisis made clear how much trade, fiscal and monetary policies of major economic players - especially the United States, China, and the EU - have become interconnected. All this makes the collective coordination of macroeconomic measures at the global level, that is global economic governance, imperative to sustain global recovery. As the new power constellation emerges, the challenge for all major players is not to slide into another era of great power rivalry. From the historical record we know that such colliding of national interests would severely weaken all players' chances for sustainable domestic development. In spite of all the friction and misunderstanding, all sides need each other if they are to develop an alternative for raw international anarchy – the Hobbesian war of all against all. It is mandatory to work together to enhance security, to guarantee that our policies benefit lasting stability and development, to invest in the safety of our energy supplies, to limit the impact of environmental hazards, to support effective governance, tackle non-traditional security threats, and enhance maritime security. The future global governance arrangements demand for a virtuoso balancing between competition and cooperation – a pragmatic and enlightened blending of national interests within complex networks of bilateral and multilateral partnerships. To be successful these partnerships need to reflect the changing distribution of capabilities and identities, but effective international cooperation also implies that all parties are committed to overcome diverging expectations and try to reach a pragmatic consensus on how to make foreign policies complementary and mutually supportive. Against this backdrop, the Chinese dream will be a dream to be shared with others, an idea that is captured by the earlier concept of a Harmonious World. China's development may still be work in progress its sheer size makes it already to matter a great deal to the rest of the world – in any case much more than any other emerging power. Thirty years ago, China's role in global affairs beyond its immediate East Asian periphery was decidedly minor and it had little geostrategic power. Today, China's expanding economic power has extended its reach virtually all over the globe – from mineral mines in Africa, to currency markets in the West, to oilfields in the Middle East, to agribusiness in Latin America, to the factories of East Asia. All this has increased China's global presence: its extensive commercial footprint, its growing military, its increasing cultural influence or "soft power," its diplomatic activity, and its new prominence in global governance institutions. China's rise is not only changing the distribution of power in the system, it also engenders a change in the distribution of identities. As China is very different in terms of culture, history, economy, political system and stage of development it de facto poses a challenge to the era of Western hegemony at the level of system values and rules of the game. Understandably, the developed world – most notably the US and the EU – would prefer to see China's adaptation of the global governance structures they established and safeguarded in the past few decades and hope for a reproduction of the existing system. After all, China has been developing within the existing system of strongly established international institutions, which it has been making ample use of to sustain its growth. As China is firmly integrated in the current international regimes and benefits from their smooth functioning Beijing actually has a profound interest in seeing that the international rules and institutions function effectively. Yet the question remains to what extend Beijing will use its growing influence to transform the international system and bring its rules and institutions more in line with the country's identity and national interests. In my expectation China is neither dreaming of adopting the "Western" system, nor is its dream about delegitimizing, challenging or replacing it. In line with China's past of cultural authority and exceptionalism, China's dream is about an evolutionary path of gradually accepting more commitments and responsibilities, focusing on domestic development and consolidation, contributing selectively to global governance, and seeking to implement its concept of a harmonious world pragmatically.

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