By commenter t_co
In many ways, the world’s most important election is happening out of sight. Even though there’s been plenty of coverage on the upcoming 18th CPC National Congress, the Bo Xilai scandal has risked overshadowing the more meaty and substantive issues at hand. Taken together, these issues sum up the what ought to be the raison d’etre for this Congress: What should the China of 2022 look like, and how can China get there?
1. How will China move past an investment-driven growth model without fumbling the ball like Japan in 1990 or South Korea in 1997? How can China move past an investment-driven growth model when, right now, every single important interest group in China is tied to the construction/real-estate/investment triad? Can you teach an old dog new tricks? Can you teach an old dog new tricks without giving the dog a heart attack?
2. Who will bear the pain of an economic transition? Basically, the accounting losses from failed projects have to end up somewhere–if not on seizure of assets from local governments, then as NPLs on bank balance sheets; if not as NPLs, then as a hidden tax on household wealth in the form of negative real interest rates on household savings. each of these forms of losses has a different rhythm and pitch to it–short, sharp pain and the feeling of “冤枉” (unjust punishment) on a crop of rising cadres if you seize assets; Japan-style stagnation if you keep it all as NPLs; the possibility of household capital flight if you further lower the real rate of return available to China’s household savings pool.
3. How will the government bridge the credibility gap it has with the populace? Right now, China’s government has the dubious distinction of having substantial credibility issues with every segment of the people. farmers have land seizures and government price hikes in fuel and fertilizer; the urban poor have general inflation as well as a lack of social mobility; the middle class worry about corruption, an invisible ceiling in advancement caused by nepotism, and food/product safety; the upper class fears arbitrary forfeiture of assets and becoming pawns in political struggles. More than ever, the upcoming leadership needs to build trust not only within the apparatus but also amongst the people.
4. How will China create sustainable and flexible safety valves for discontent? Right now the only common safety valve available is for Chinese rich people to pack up their assets and move abroad. The other safety valves (petitioning, protesting, rioting, making angry posts on sina weibo) are all either ineffectual, highly risky, or both–and people are aware of that, so they are losing their efficiency as safety valves. And even moving assets abroad is more of a curse than anything, as it means that wealthy Chinese increasingly have no stake in their country’s future.
5. How can China build up an internal “infrastructure of trust”? China has done a wonderful job building up physical infrastructure–roads, railways, ports, airports, a world-class telecom network–but the soft infrastructure is missing. Soft infrastructure, meaning things like universities that aren’t viewed as merely second-rate stepping stones to graduate school abroad; accounting firms and ratings agencies that are impartial and trusted; a capital market that allocates capital based on economic viability rather than political connections; consumer protection agencies that actually do their jobs; a media that seeks truth from facts rather than seeking profit from rumor; etc…. resting on the bedrock of a people that actually trust each other. Something needs to be done to build social faith between people and institutions and people themselves, or else nefarious forces will take advantage of that drought of faith to create trouble like the Taiping Rebellion did in the 19th century.
6. How can China assert itself on the international stage without causing its neighbors to ally against it? From 2010 onwards we saw an increasing amount of Chinese power being displayed both in its near abroad, the Western Pacific, and as part of multilateral forces in Somalia. China now has its own fifth generation stealth fighter, its own aircraft carrier, guided ballistic missiles, and a cyberwarfare capacity second only to the United States. In and of themselves, all of these systems are great for expanding Chinese reach and influence; but if they cause all of China’s neighbors to bandwagon against it, they may end up paradoxically weakening China. more than anything, as China’s power increases, Chinese diplomacy must become even *more* polite to offset it. Also, given that the United States has pretty much declared its intention to remain the regional hegemon of the Western Pacific, and has forged a coalition with Australia, Japan, and South Korea in doing so, China needs to formulate a strategic response. Its current course will take it into direct conflict with 4 other countries with much more combined power.
7. A subquestion of #6 is what to do with North Korea. North Korea is a long-running strategic liability for china: dependent on food and fuel aid while angering every single neighbor it has, constantly risking a collapse and an exodus of refugees and wholesale domination by the South. North Korea’s role as a buffer against South Korea and the US is rather illusory given that South Korea/the US could annihilate the North Korean military within months if they chose to accept the loss of Seoul and Inchon to artillery. On the other hand, a unified Korea would be a great counterweight to Japan, and would remove one of the key reasons for a forward-deployed US military presence in the Western Pacific. Furthermore, contrary to what might be expected, a unified Korea would not necessarily be anti-China, either–consider that even though Germany and Russia have at times been the worst of enemies, after Russia let Germany reunify, the two nations became decent allies with many areas of cooperation ranging from keeping Europe addicted to Russian natural gas to sharing weapons technology to coordinating the anti-US half of EU foreign policy.
8. What is the contingency plan for Chinese stability? what if China experiences mass instability–does the administration have a plan that doesn’t involve international embarrassment or a mass reduction in the credibility of the government?
Note that none of these questions relate to what most speculation has tended to focus on–*who* gets the 9 standing committee seats. In the end it matters little which combination of cadres wins, because every one of the candidates has been nominated for their ability to execute on policy. Therefore any policy that comes out of the congress has a decent chance of being executed to the best of the ability of the Chinese government. What *is* important is the party line and policy that comes out of this meeting (even if that policy is hidden from public view).
The one thing to bear in mind about the resulting party line is that a simple focus on “continuing reform” or “maintaining social harmony and stability” will no longer be enough. A superficial and vague policy that comes out of the 18th congress will be the path of least resistance–but also the worst possible outcome for China. Now is *not* the time for singing songs or pithy slogans or a revival of the ideas of the 1960s or the 1980s. Now *is* the time for an actual vision on what the China of 2022 ought to be, and how to get there.
Richard Burger is the author of Behind the Red Door: Sex in China, an exploration of China's sexual revolution and its clash with traditional Chinese values.