China has rapidly become a ‘rich-poor’ country that defies easy categorization, and the impact of its dramatic but uneven growth has created many challenges. China’s future path appears frustratingly unpredictable to the outside world, but one certainty remains: China will continue to need the rest of the world as much as it needs China.
Since 2001, China has doubled the size of its economy, taking its place as the world’s second largest. Predictions vary about when it might overtake the US to become the world’s largest economy, ranging from 2016 (the IMF) to 2032 (Goldman Sachs). With a growth rate of 11 percent in 2010, its ability to continue its impressive climb well into the next decade, barring catastrophe, looks assured.
What China does with the political and diplomatic power that comes from its economic might is a more complicated issue. This involves internal and external dimensions that cannot be easily separated. Internally, China is caught between viewing itself as a developing country, with a per capita GDP that places it, according to the CIA, 127th in the world, and an economic superpower with $2.7 trillion of foreign reserves in its central bank. As such, it is both weak and strong. The priority of the Communist Party and the government is to continue lifting people from poverty, creating prosperity and improving infrastructure. They are focused in particular on tackling the increasing inequality between social groups who have gained and lost from the reform process that started in 1978, and between coastal, central and western regions which have starkly different levels of development. In coastal Shanghai, GDP stands at $10,000 per capita. In Western Gansu it is around $400.
Despite these dramatic disparities in wealth, the government has chosen to focus on increasing its military expenditure year on year by 17 percent since 2005. Its influence now stretches to Africa and Latin America, where it is a major importer and investor. In Central Asia, it has become a huge trade and investment partner. Its en- ergy and resource hunger has reconfigured geopolitics. From that point of view, despite what the current Chinese leadership says, it looks the opposite of a poor, developing country.
The world’s first ‘rich-poor’ country
The seeming paradox between China being per capita poor, but on aggregate rich, creates a number of competing frameworks within which other countries and actors try to fit the country. The first is to view it as a status quo power: one that, in its own words, wishes to rise peacefully; stands by its principles of non-interference in the affairs of others first announced in 1955 at the Bandung Conference; and does not wish to practice hegemony. The second framework is, on the contrary, to see China as a disruptive power – a country whose huge growth trajectory is almost certain to bring it into conflict over resources in the coming decades, and whose increased military expenditures and historic grievances over a century of humiliation at the hands of industrialized powers (starting from 1839 and the First Opium War, and the devastating impact of the Sino-Japanese War from 1937) give it plenty of reason to seek some form of revenge. Adherents to this latter viewpoint see plenty to worry about given China’s recent assertiveness over its disputed sea borders, and shrill voices of nationalist extremism rising from within. The third and final framework is that China in fact offers a positive model, something for other developing countries to aspire to, an alternative to the capitalist market fundamentalism that has been so badly discredited since the global financial crisis of 2007. In this scenario, China’s rise is win-win. It simply offers a different power center to US-led hegemony.
Beyond easy categorization
China does not fit easily into any category for a number of reasons. The impact of very rapid growth and economic change in the country has thrown up many challenges. It has created sharper divisions in society, leading to increased tensions. There are massive challenges over the very sustainability of the economic model it has pursued. A country the size of Europe, its fragmentation cannot be underestimated. It has huge social, cultural, economic and developmental variety. Finding a coherent narrative within which to fit this combination of already extant complexity – compounded by rapid technical and economic change – has proved difficult not just for outsiders, but for the Chinese and their leadership as well.
All this is about to get even more complicated. From 1978 the key function of the government has been to deliver economic growth. But as China moves toward middle-income status – its stated goal in the next decade – there will be a stronger shift from purely economic targets and outputs to much more complex social and political ones. Already, there have been signs that in the lead up to the party congress in late 2012, where there will be a leadership transition, elite disagreement over the next step in reform has intensified. Leftists want a stronger role for the state. They regard any signs of disunity and challenge to their legitimacy to have a monopoly on power as existentially threatening. In the last two years, the Chinese government has mounted increasingly repressive campaigns against human rights’ lawyers and civil society activists, who it regards as being politically problematic. The liberals, perhaps best represented by Premier Wen Jiabao, recognize that the time has come to talk more about constructing a stronger foundation upon which to build the architecture of legal and judicial reform. They want China’s reform process to deepen, to move away from the purely economic, and to deliver more accountability and public participation in decision making. Recently the Communist Party has looked surprisingly divided. This is unlikely to change in the next year. Who wins the argument between those on the left and the liberal wing of the party will decide the kind of China the world will face in the coming decade and beyond.
For the outside world, a frustrating period lies ahead. In some ways, China’s behavior may become more erratic, as it veers between what is seen as assertiveness and passivity, guided mostly by internal motivations. No dominant narrative or framework can be created easily within which to set the country. Its immense economy means it cannot be ignored. Policymakers will need to be clearer than ever before about the areas of engagement. Their belief that China is a stakeholder in the global order will be tested. The fundamental principle, however, that China needs the world as much as the world needs China, will remain as true in the coming years as it was in 1978 when Deng Xiaoping and the leadership realized that engagement with the outside world was the key to their country’s economic future and political survival. However difficult the dialogue becomes, at the end of the day, China and the rest of the world need to seek an accommodation with which they can both live. The details of that negotiation will be the key diplomatic story of the early decades of the 21st century.
Dr Kerry Brown is Head of the Asia Program at Chatham House.
International Relations and Security Network (ISN)