The road obscured

The road obscured

Opinion piece (Financial Times)
Mark Leonard
11 July 2005

It is pre-modern, the kind of scene that westerners visit and photograph or encapsulate for later conversation: on Hainan Island, off the Leizhan Peninsula and a 50-minute flight south from Hong Kong, Chinese peasants toil in paddy fields. They wear straw hats and use water buffalo to plough the fields.

Then, suddenly, the paddy fields stop and the tropical resort of Boao begins. Hotels stretch out to form an archipelago of luxury with palm trees, manicured lawns, landscaped gardens, swimming pools and golf courses so perfect that they look like computer animations. On the one side not surrounded by the paddy fields and the toiling peasants, sparkles the glorious, emerald South China Sea.

Boao has been, for the past four years, the site of the Forum for Asia, China's attempt to create a Davos-style World Economic Forum for Asia. Its air-conditioned, artificial reality is designed to show that China has made it: that it can reproduce the nowhere-everywhere splendour of the international high-level conference. George Bush Snr was among the guests in 2004; in April this year, it welcomed a slew of world leaders near, if not at, the top of the global hierarchy, including John Howard, the Australian prime minister; Austrian chancellor Wolfgang Schussel and ministers and former leaders from France, the Philippines, Malaysia, Nepal, Kazakhstan, Iran and Korea.

They were there to gaze, with varying degrees of anxiety, upon the new China. What they saw would have depended in part on what they were looking for; but in greater part on what they are given to look at. The China hype coursing through western political and business classes is based on a virtual China: the promise of what the People's Republic could become, rather than what it already is. And there are many promises. The Communist party of China rules, but it is not a monolith; and the battle of ideas for the future has contributed to a long process of hedging, now turned into an art form. This has meant projecting Chinese power while reassuring its neighbours of its peaceful intent; adopting laissez-faire capitalism while maintaining a strong state and talking about equality and green development; encouraging grass-roots democracy and opening up the Communist party while strengthening its grip on society. In an essay published last year, the scholar Joshua Cooper Ramo argued that a "Beijing Consensus" will replace the "Washington Consensus" as the dominant model of global development. That might happen, but not until there is consensus on the Consensus. If the rest of the world doesn't know where China is going, neither does China.

In Boao this year, one possible direction for China was given apparent pride of place. On the day before the conference, a select group was invited to debate the Orwellian-sounding "peaceful rise of China". The theory of heping jueqi (literally, "emerging precipitously in a peaceful way") is the brainchild of Zheng Bijian, a man who stands over 6ft tall, with a manner at once gentle and that of a natural leader. A former vice-chair of the elite Central Party School (when the president of China, Hu Jintao, was its chairman) and a former minister for propaganda, he is as well connected as it is possible to be.

Zheng breaks his plan down into three strategies. First, he calls for a national transcendence of old-style industrialisation and a move to "high technology input, economic efficiency, low consumption of resources, low pollution to the environment, and full play of our advantage in human resources". Second, transcending the old development strategies of rising powers, "China will not take the road of Germany in the first world war, or Germany and Japan in the second world war - using violence to pillage resources and seek world hegemony." Third, China would "go beyond outdated social management modes" to develop a better balance between the rich and poor, and economic and social development in Chinese society.

The theory isn't made up as he goes along. Zheng worked on some 40 case studies, commissioned by the Politburo and carried out by PhD students from Shanghai. Their consensus was that rising powers "which chose the road of aggression and expansion" ultimately fail. But Zheng has given point and force to the conclusion, and made it into a direct rebuttal of the talk of a "China threat", moulding it into the basis for a charm offensive designed to counter the US strategy of encircling China with military bases in central and east Asia, and deepening security relationships with Pacific powers such as Australia, Indonesia, Thailand and Singapore. First launched at the Boao Forum in 2003, the "peaceful rise" theory was met with acclaim. China's president and prime minister picked up the phrase and set off on a tour of Asia preaching its gospel. Chinese policy-makers developed a new grand strategy, based on reassurance.

But since the official adoption of the strategy, Zheng has been under attack. The term "peaceful rise" has been quietly dropped, following bureaucratic in-fighting in the Communist party, and has been replaced with "peaceful development" or "peaceful co-existence". Part of the attack on Zheng's idea came from people who felt that it was wrong to talk about China rising at all, because it fuels ideas of a Chinese threat: as Deng Xiaoping had said, China should "hide its brightness". But the real attack has come from a quite different quarter - that of assertive nationalists in Beijing's universities. These are China's neo-cons: or, considering their formal affiliation, neo-comms.

One of the most vocal of the neo-comms is Professor Yan Xuetong, director of the Institute of International Studies at Tsinghua university, whom I met after this year's conference. "Peaceful rise is wrong," he says, "because it gives Taiwan a message that they can declare independence and we will not attack them." He tells me about the increasingly bitter academic debates between liberal internationalists who support ideas similar to Zheng's, and his colleagues in the realist camp. When I tell him that he has been labelled a Chinese neo-con, he does not demur: "I do not feel very angry about being called a Chinese neo-con, but I prefer to be called a 'realist'."

The reason the neo-con label will stick is because there are so many parallels between Yan Xuetong and his analogues in the US. Yan is almost the mirror image of William Kristol, the editor of the Washington-based Weekly Standard and founder of the "educational" Project for the New American Century. Where Kristol is obsessed with a China threat and convinced that US supremacy is the only solution for a peaceful world order, Yan is obsessed with the US, and convinced that China's military modernisation is the key to stability. Like Kristol, he is a keen admirer of Churchill. Like Kristol, he presents himself as a lone voice in the wilderness. Like Kristol he is media savvy - propagating his ideas through magazines, such as World Affairs, and tapping into a deep seam of popular nationalism.

Yan is angry at the influence that liberal internationalists have had on Chinese foreign policy: "The basic difference between us and them is that they emphasise appeasement and we want containment,che says. "This applies to the US, Japan and Taiwan. Their basic argument is that because China is weak we should make concessions. We think that if you make concessions, they will just ask for more. The problems we are having with Japan and Taiwan are a direct result of two years of appeasement."

He sees the root of the current problems in his belief that Chen Shui-bian, the president of Taiwan, is plotting a timetable for independence - a move Yan blames on the influence of liberals. "People like Churchill and me are always in a minority because appeasement always has high gains and little cost in the short term. The problems then build up and when disaster beckons they turn to us to sort things out. Now things are moving towards containment."

Between these two poles, the political leadership hedges, testing China's new power but trying to reassure the rest of the world at the same time. It has put one of its ablest diplomats, Cui Tiankai, in charge of devising a strategy of Asian regionalism, and has backed up its commitment to multilateralism by authorising the former foreign minister, Qian Qichen, to serve on Kofi Annan's High-Level Panel on UN reform. Yet, at the same time, in its private diplomacy the leadership undermines many of the panel's recommendations. It has authorised double-digit increases in defence spending and an anti-secession law that threatens Taiwan with war; at the same time it has ratcheted up diplomacy, persuading Taiwan's main opposition leader to make an official visit to China for the first time. It shows the same flexibility towards Japan by allowing nationalist flames to be fanned through internet petitions and text messages opposing Japan's bid for a Security Council seat and then, when these things appeared to be worrying the rest of the region, it switched them off and resorted to diplomacy.

The 2005 Boao Forum is a celebration of global capitalism - and China's place in it. Speaker after speaker goes up to the podium to revere China's vital statistics and its tonic effect on the global economy. The forum's sponsors this year include western corporate giants such as TNT, Merrill Lynch and BMW, jostling with a new generation of Chinese companies such as Lenovo (which last year bought the PC-hardware division of IBM) and the Chery Automobile Company, soon to launch several of its models in the US. In booths around the hotel, deals are being forged.

For some Chinese, this is not all good. The rump of orthodox Marxists who opposed Deng Xiaoping's "opening-up policies" have been marginalised, but there is an increasingly influential movement called the "new left" that broadly supports the policy. However, it is critical about some of the side-effects: it wants China to develop its own variant of social democracy, remaining true to its Marxist roots.

Its most high-profile thinker is Wang Hui, professor of literature at Tsinghua and co-editor of the journal Du Shu. He set out his stall in a recent interview with the Seattle journal NPQ: "China is caught between the two extremes of misguided socialism and crony capitalism, and suffering from the worst of both systems... I am generally in favour of orienting the country toward market reforms, but China's development must be more equal, more balanced. We must not give total priority to GDP growth, to the exclusion of workers' rights and the environment."

For 50 years - until the era of "household responsibility", which gave families the chance to manage their own assets - any inequality was (officially) considered a problem. But with the coming of household responsibility in 1978, some people rapidly got richer than others. Deng Xiaoping explained that if the country was going to become rich, the Chinese wouldn't suddenly wake up with lots of money: "Some people must get rich first." This was true of individuals; it was also true of regions. Deng kicked it off by giving a head start to the coastal regions and special economic zones. The net result is that China went from being one of the most equal countries in the world to one of the most unequal. It has a Gini index - a way of measuring economic inequity - of 45, almost on a par with the US score of 46.5. A Chinese Academy of Social Sciences study of the problem identified 12 different social strata - a fourfold increase on the old tripartite division among peasants, workers and intellectuals. China's 786 million peasants comprise 70 per cent of the population, but with average incomes of $318 a year they make up only 39 per cent of domestic consumption.

The new left thinks that China's ongoing economic liberalisation has exacerbated such social inequality by allowing party bigwigs to carve up and plunder the nation's assets under the cover of privatisation. Property that was once taken from the rich and given to the peasants is now confiscated and given to developers. The focus on export-led growth means that more money goes in tax rebates to exporters than on health and education. The new left has put forward a concrete reform agenda that emphasises principles such as abolishing the export tax credit, which skews production away from the domestic market; full-cost pricing, so that producers pay environmental and social costs; dismantling the tax loopholes that benefit the rich; and developing new wage structures to give workers a share of profits.

The new left has a showcase town (though many now think of it as an artefact, not a model): Nanjie, in Henan province. Its leaders have created a synthesis of the market and collectivism as they have moved this town of 3,000 people from agriculture to industry. They have built 26 factories that make everything from instant noodles to plastic wrappers. And the way the place is run is resonant of experiments in ethical capitalism such as Robert Owen's New Lanark in 19th-century Scotland. The workers are paid above-average wages of $50 a month and everyone is given free housing, free healthcare, rations of meat and eggs, and a daily bottle of beer. The authorities also look after the moral welfare of their citizens, with compulsory study-sessions of Mao's philosophy and regular "criticism and self-criticism" of each other's behaviour.

As public anger over the cost of reform grows - with protests by laid-off workers coming together with concern about illegal demolitions, corruption, and unpaid wages and pensions - the ideas of the new left are becoming increasingly influential. President Hu and prime minister Wen Jiabao have taken up much of its rhetoric. Early on in their rule, they interceded on behalf of workers who were not getting paid. They have also tried to slow growth in some of the coastal regions, and to divert investment into the north and west of China.

It's another example of the hedging strategy. Hu and Wen are also trying to move China up the value chain - to create world-beating companies that can take on the west. China is already establishing the same dominance in the PC market that it has in textiles and footwear. And Ma Kai, the powerful leader of the National Development and Reform Commission, has spoken about China trying to become a service economy. These ambitions can only be realised in the coastal regions - as the leaders know. Behind the deployment of new-left rhetoric seems to be a populist tactic - at once a legitimisation of the leadership, and a rationale for a suppression of pro-democracy liberals, which included a concerted crackdown on intellectuals earlier this year.

Democracy is, in fact, the one topic barely mentioned at Boao. Western investors are too polite to mention it, and in any case they are more immediately concerned with the protection of intellectual property and the rule of law. Many of the guests of honour do not themselves have great democratic credentials. One such is the King of Nepal, fresh from ousting the Nepalese government in a military coup. (His spokesperson, Kirti Nidhi Bista, rattles off CPC slogans: socialism with Chinese characteristics; one country, two systems; five principles of peaceful co-existence - then says that "China's growth is a momentous moment for all of Asia. China has been led by a long line of visionaries that started in 1934 with the long journey of Mao Zedong and Zhou Enlai.") Another is the Kazakh deputy prime minister, representing a government whose democratic credentials included shutting down the main opposition party in January, as well as turning a blind eye to the deaths and disappearances of critical journalists.

Yet democracy is becoming an increasingly important cause at a local level in China. When I get back to Beijing, I go to a publisher's office in a slightly down-at-heel neighbourhood. Across the road a grocery store selling fruit and vegetables pours out on to the street; a Chinese greasy spoon is full of local workers breakfasting on red-bean dumplings and eggs. But the shabby exterior contains a powerhouse of innovation: Professor Yu Keping.

Yu is a rising star. Spoken of as an informal aide to the president, he has an easy manner and a formidable command of English, picked up on his many visits to the west (including a spell as a visiting fellow at Duke University). In 2003, he was made head of Beijing University's new Centre for Chinese Government Innovations - part university, part thinktank, and part "McKinsey" for government reform. Its flagship project is an award programme for "innovations and excellence", promoting innovations in local governance and, yes, democracy. Since the programme started, 600 projects have been nominated and 20 prizes handed out. The winners of 2004's awards included "market-oriented reforms of public utilities" in Shenzhen city; "direct election of a township leader" in Buyun township, Sichuan; and "democratic consultation" in Wenling city, Zhejiang.

Yu explains the centre's mission. "Many think-tanks and groups of experts are brainstorming on reform in China, whether inside the Communist party or within government institutions. However, local and spontaneous initiatives are also numerous. We try to survey, assess and compare them. The best ideas are rewarded by prizes. Reform can be carried out in various fields, such as the partial privatisation of a local public service, the grouping of services in neighbouring agencies, or emergency units and improvements in real-estate management by local government."

Yu is a pragmatist - which is why he has not been swept away in any of the crackdowns on liberal intellectuals. At a conference a couple of years ago he argued that too much critical spirit could only lead to failure. He used an old Mao metaphor: "intellectuals are the hair on the skin" - in other words, they rely on the party to deliver their ideas. The pressure for western-style democracy has been on the retreat since Tiananmen Square, when protesters constructed a papier mache Statue of Liberty. China's rising nationalism has been coupled with an anti-Americanism that has further delegitimised Chinese liberals.

Yu's big idea is "incremental democracy", which he distinguishes from both orthodox Marxism and liberalism. In an important article written in 2000, he argues that incremental democracy "is not pre-occupied with one theory or doctrine on democracy... it pays full understanding to the universality of democracy with a good understanding of the particular Chinese situation and traditional culture." Yu argues that it has five characteristics: it holds that democracy is a set of institutions and procedures to guarantee a citizen's freedom, equality and other political rights through a process of participation; it sees an autonomous civil society as a pre-requisite for democracy; it believes in "rule by law rather than rule of man"; it affirms the critical role of government in promoting democracy, rather than seeing democracy as a way of minimising the functions of the state; and it tries to build democracy on the basis of co-operation between governments and citizens, so that the pressure for economic development at a local level comes both from central government and local people.

Lai Hairong, one of Yu's colleagues, conducted a ground-breaking study of elections in Sichuan which found that about 40 per cent of its townships now choose their leaders through semi-competitive elections. In the past, a single candidate would emerge for the position of township governor or vice-governor - but these elections have shaken things up by providing multiple candidates for the post. The vast majority of the elections are, to be sure, restricted to the party's nomenclature, with an electoral college of 150 to 300 making the decisions; plus the candidates have to be party cadres, so that ordinary citizens could neither stand nor nominate candidates; campaigning was forbidden; and candidates had to have a minimum level of education (usually a university degree) and be younger than 45. Yet this is an improvement on the old system which saw five to 10 party cadres making all the decisions, and seems to suggest a movement towards a more popular voting system.

One township on Lai's list was special. Buyun township had a direct election. The citizens were allowed to select the candidates for township leader by direct votes, and the nominees were later submitted to the township people's congress for final voting. The candidates' photos were printed on ballot papers to help illiterate voters, there were secret ballots with booths to protect voter privacy, and a full campaign was run, with public meetings addressed by all the candidates. Yu argues that this election has had a profound impact on local life: "Village voters have clearly recognised their democratic rights... the township leader has a much improved sense of responsibility and accountability... promises made when running for election have largely been realised by the time of the term election." Every month in Buyun there is a "township leader reception day" when people can raise concerns on local issues, and every year - on the eve of the lunar New Year - the township leader gives a progress report to all the citizens of the town.

As we speak, Yu is called out of the room to take part in a political education programme called "Vanguardness of Party Members". Yu's colleagues are allowed to stay behind; one jokes that "they haven't got down to our level yet", as the stated purpose of the movement is to put the party back in touch with its roots - to remind party cadres that they are there to serve the interests of the workers and the peasants, rather than themselves. Zhou Hong, a scholar at the Chinese Academy of Social Sciences, told me later that "many Communist party members are losing their faith in communism. If that happens the system will collapse. The movement is designed to refresh people's faith through courses in Marxism and daily criticism and self-criticism in the work place. It is designed to ask how people work together - and whether their work reflects their principles." Every member of the party is expected to ask themselves each day whether they are thinking of things from an altruistic perspective: whether they are worrying enough about the development of ordinary people's living standards, or comprehensive national power, or the promotion of production force.

Another party member, who asks to remain anonymous, is much more blunt. "Self-criticism and criticism are there for one reason alone: to remind you who is in charge. People mock it and complain about it, but they all turn up. The party wanted to remind people that they are not really in charge of their lives by taking the thing they value the most, the thing which is most precious: time. There was a feeling that people didn't value their party membership enough, so this is designed to make them sit up and take notice. The point of the exercise is not to pass on knowledge but to remind people that they owe their jobs to the party and that what has been given to them can be taken away."

This is the paradox of political reform. On the one hand, the leadership is trying to open up the party and make it more meritocratic - inviting business people to join, creating more open selection procedures and making the party subject to the rule of law. But at the same time, the leadership is trying to increase its grip on society - and rejects attempts to separate the party from the state.

Everyone now knows that China is important. No one knows where it will end up. China's scale means that any changes in its internal politics have vast implications - from global poverty to pollution. China has become so integrated into the global economy that its prospects have immediate effects on the US current account deficit, Japanese growth and the surge in oil prices. But, above all, China is a model for the rest of the world. Its dizzying levels of growth, without liberal democracy, create the biggest ideological threat the west has felt since the end of the cold war.

As the Beijing Consensus threatens the Washington Consensus around the world, people will be studying the fates of Zheng Bijian, Wang Hui and Yu Keping. The battle for China's future could see it become an Asian United States (minus the democracy), with spiralling inequality, resurgent nationalism and unilateral instincts; or an Asian social democracy that is committed to peace and regional integration. But as China's power moves from the realm of the virtual to the actual, the leadership's hedging strategy will be increasingly difficult to follow.

Mark Leonard was director of foreign policy at the Centre for European Reform (2005-2007)