China’s Search for ‘National Rejuvenation’: Domestic and Foreign Policies under Xi Jinping [1st ed.] 9789811527951, 9789811527968

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China’s Search for ‘National Rejuvenation’ Domestic and Foreign Policies under Xi Jinping Edited by Jabin T. Jacob · Hoang The Anh

China’s Search for ‘National Rejuvenation’

Jabin T. Jacob  •  Hoang The Anh Editors

China’s Search for ‘National Rejuvenation’ Domestic and Foreign Policies under Xi Jinping

Editors Jabin T. Jacob Department of International Relations and Governance Studies Shiv Nadar University Uttar Pradesh, India

Hoang The Anh Institute of Chinese Studies Vietnam Academy of Social Sciences Hanoi, Vietnam

National Maritime Foundation New Delhi, India

ISBN 978-981-15-2795-1    ISBN 978-981-15-2796-8 (eBook) https://doi.org/10.1007/978-981-15-2796-8 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Singapore Pte Ltd. 2020 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the ­publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and ­institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-­01/04 Gateway East, Singapore 189721, Singapore

Dedicated to Prof. Do Tien Sam (1953–2019)

Acknowledgements

Jabin T. Jacob would like to thank his former colleagues at the Institute of Chinese Studies, Delhi, where this project was first conceived and thanks especially, Rajesh Ghosh for his editorial and research assistance. Hoang The Anh would like to thank his colleagues in the Vietnam Academy of Social Sciences for their support and help in editing of the Vietnamese papers.

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Contents

Part I Introduction   1 1 ‘National Rejuvenation’ as Panacea for China’s Domestic and External Challenges  3 Jabin T. Jacob and Hoang The Anh Part II Domestic Developments  21 2 Reform of Party and State Structures in China 23 Nguyen Xuan Cuong 3 Changes in China’s Economic Development Model After the 19th CPC National Congress 37 Nguyen Quang Thuan and Tran Hong Viet 4 Xi Jinping’s Political and Economic Initiatives and the ‘Success Trap’ 49 Manoranjan Mohanty 5 Political Considerations in the Chinese Leadership’s Economic Assessments 63 Jabin T. Jacob

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6 China’s Military Reforms in the Wake of Recent CPC National Congresses 77 Bui Thi Thu Hien Part III Neighbourhood Policies  95 7 Key Markers and Trends in Chinese Foreign Policy in South Asia 97 Prashant Kumar Singh 8 The BRI and the East Sea Disputes in China’s Ties with Southeast Asia115 Hoang The Anh 9 Strategic Competition Between China and the United States in the Indo-Pacific131 Cu Chi Loi 10 Competition and Caution in Chinese Foreign Policy Towards Northeast Asia143 Nguyen Quang Thuan and Hoang The Anh Part IV CPC Propaganda Abroad 155 11 The CPC’s International Department and China’s Party-­Based Diplomacy157 Ngeow Chow-Bing 12 China’s “Great Overseas Propaganda” Under the Belt and Road Initiative169 Roger C. Liu

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Part V Economic Development and Foreign Policy 185 13 China’s Quest for Global Leadership Through Scientific and Technological Innovation187 Nguyen Binh Giang 14 Rural Vitalisation and Foreign Policy199 Prachi Aggarwal 15 China’s State-Owned Enterprises as Agents of Party and State Power215 Aravind Yelery Index231

Contributors

Prachi  Aggarwal  Sanchi University of Buddhist Indic Studies, Sanchi, Madhya Pradesh, India Bui Thi Thu Hien  Institute of Chinese Studies, Vietnam Academy of Social Sciences, Hanoi, Vietnam Cu Chi Loi  Institute of American Studies, Vietnam Academy of Social Sciences, Hanoi, Vietnam Hoang The Anh Institute of Chinese Studies, Vietnam Academy of Social Sciences, Hanoi, Vietnam Jabin T. Jacob  Department of International Relations and Governance Studies, Shiv Nadar University, Uttar Pradesh, India National Maritime Foundation, New Delhi, India Roger C. Liu  FLAME University, Pune, Maharashtra, India Manoranjan Mohanty  Council for Social Development, New Delhi, India Institute of Chinese Studies, New Delhi, India Ngeow Chow-Bing  Institute of China Studies, University of Malaya, Kuala Lumpur, Malaysia Nguyen Binh Giang Vietnam Academy of Social Sciences, Hanoi, Vietnam

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CONTRIBUTORS

Nguyen Quang Thuan  Vietnam Academy of Social Sciences, Hanoi, Vietnam Nguyen Xuan Cuong  Institute of Chinese Studies, Vietnam Academy of Social Sciences, Hanoi, Vietnam Prashant Kumar Singh  Institute of Defence Studies and Analyses, New Delhi, India Tran Hong Viet  Graduate Academy of Social Sciences, Vietnam Academy of Social Sciences, Hanoi, Vietnam Aravind  Yelery  Peking University HSBC Business School, Shenzhen, China

List of Tables

Table 6.1 Table 14.1 Table 14.2

Timelines and contents of national defense and military reforms after the 18th National Congress of the CPC 82 Chinese provinces making foreign agriculture investments 208 Amount of outward direct investment by China, 2003–2016 210

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PART I

Introduction

CHAPTER 1

‘National Rejuvenation’ as Panacea for China’s Domestic and External Challenges Jabin T. Jacob and Hoang The Anh

The 19th National Congress of the Communist Party of China (CPC) in October 2017 is by all accounts a landmark event in the history of the People’s Republic of China (PRC) and of the ruling CPC. The Congress saw the solidification of CPC General Secretary and PRC President Xi Jinping’s personal political authority within the Party as well as set the direction for a series of domestic reforms that have long-term consequences both internally and externally. The Congress is a culmination of the recentralization of power under Xi in the sense that it gave an official stamp to the process by enshrining ‘Xi Jinping Thought’ in the Party constitution. At the same time, it is as much a beginning—hence, J. T. Jacob (*) Department of International Relations and Governance Studies, Shiv Nadar University, Uttar Pradesh, India National Maritime Foundation, New Delhi, India e-mail: [email protected] Hoang The Anh Institute of Chinese Studies, Vietnam Academy of Social Sciences, Hanoi, Vietnam © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_1

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also the reference in Xi’s Report to the Congress to a “new era” in Chinese history—in the sense that the CPC will need fresh measures to both continue and stabilize this process of recentralization of power. Recentralization has been marketed by the CPC as being necessary for the “great rejuvenation of the Chinese nation” (Xi 2017) but “national rejuvenation” is not possible without China tackling both domestic and foreign challenges. In Xi’s words, this requires the CPC to: … conscientiously safeguard the solidarity and unity of the Party, maintain the Party’s deep bond with the people, and strengthen the great unity of the Chinese people of all ethnic groups and the great unity of all the sons and daughters of the Chinese nation at home and abroad. We must unite all the forces that can be united and work as one to progress toward the brilliant future of national rejuvenation. (Xi 2017)

In this statement to the 19th Party Congress, Xi also highlights what he sees as the challenges—maintaining Party unity, the relationship of the Party with the masses, social and ethnic rifts within the population and the need to tap the resources and reach of ethnic Chinese beyond China’s borders. Thus, the reasons and directions for this ‘national rejuvenation’ are derived from internal debilities and contradictions just as the means and ability to sustain the rejuvenation are derived from strengths and competencies built up by the CPC over the course of decades both within the country and outside. What needs to be underlined is the intimate connection between Chinese domestic policies and its external policies and outreach. To underestimate the influence and importance of domestic politics and considerations for the CPC in the formulation of the country’s foreign and security policies as well as the impact of external events on China’s internal political dynamics would be a mistake. This volume attempts to explain each of these aspects if not comprehensively at least substantially across several themes and geographies. The challenges outlined by Xi and the CPC are not new for China and nor is the search for national rejuvenation in the country a new phenomenon. At least in the modern era, it traces its roots to the ‘self-­strengthening movement’ during the Qing dynasty in the middle of the nineteenth century. As the CPC neared victory in the civil war on mainland China in 1949, Mao Zedong declared that the Chinese people had “stood up” and that they had “friends all over the world” (Mao 1949), but, of course,

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there was much that remained to be done in order for China to find what it considered its legitimate place in the world. The reference to “national rejuvenation” in this work refers to this continuing effort by the Chinese Party-state with a focus on the renewed attempts by Xi to carry this process forward. As he puts it, the ‘new era’ … will be an era for the Chinese people of all ethnic groups to work together and work hard to create a better life for themselves and ultimately achieve common prosperity for everyone. It will be an era for all of us, the sons and daughters of the Chinese nation, to strive with one heart to realize the Chinese Dream of national rejuvenation. (Xi 2017)

Thus, the CPC is once again talking about the need for the Chinese people to make sacrifices at the national and individual levels to ensure that China converts its domestic strengths to global standing and leverage. And these sacrifices will be necessary because of the economic difficulties that China faces on both the domestic and external fronts.

Continuing Economic Challenges The global economic situation today is one in which countries appear to be turning inwards and protectionist. This is the result of the global economy slowing and the experiences of a series of economic shocks over the past decade starting with the global financial crisis of 2008 and including such country- or region-specific events such as the anti-corruption campaign in China and demonetization in India. Together with social stresses created by issues such as the flow of migrants/refugees to Europe, for instance, this has resulted in a series of conservative, right-leaning governments taking power or threatening established political consensus on free trade and democratic rights in even many developed economies. A prime case in point is the United States (US) where Donald Trump was elected president with the slogan “Make America Great Again” and under which the US is threatening to wall itself off against immigrants. China has tried to take advantage of the moment by launching the BRI and by attempting to fill the vacuum being created by American/Western withdrawal from the provision of various global public goods. Nevertheless, not only does the US remain a formidable economic, military and political power in the world today but China’s attempts to

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claim the mantle of No. 1 are limited against the backdrop of its own considerable economic challenges, even if Xi (2017) claims that China is “closer, more confident, and more capable than ever before of making the goal of national rejuvenation a reality”. Some of these challenges are old and persistent. Inequality is a major challenge at multiple levels. There is the inequality between the different regions of China—the coastal east, the interior provinces, the western provinces and the northeastern industrial rustbelt—as well as within provinces themselves. Then there is the inequality that exists between urban and rural areas, as well as the huge gaps in income between individuals. While extreme poverty is expected to be eliminated by 2020 (Xinhua 2019), in time for the centennial of the founding of the CPC in 2021, the problem in China is now of relative poverty—of the sense of deprivation that those without too many means feel while observing the lives of the rich, the prosperous and the connected in China. Regional inequalities even play into admissions to China’s top universities (Fu 2018). Meanwhile, despite the Third Plenum Decision of the 18th CPC Central Committee in 2013 which talked about giving a “decisive role in resource allocation” to market forces (Xinhua 2013), Xi has subsequently focused on strengthening state-owned enterprises (SOEs) instead and both promoting them as “national champions” and calling on them to become leaders internationally (Cai 2017). Currently, SOEs hold the greatest amount of unproductive assets and debt and yet get most of the credit from state-controlled banks (Wang and Leng 2018). What is more, Xi has also strengthened the Party’s presence in Chinese private enterprises (Chen 2019; see also The Conversation 2019) as well as foreign ones located in China (Martina 2017) calling into question the distinction between private and public in the Chinese economy. All of this has implications for the efficiency of the Chinese economy, including the viability of the BRI—note that most Chinese companies involved in BRI projects abroad are SOEs and if they carry forward the same lack of environmental standards or business practices from China, then there are reasons for host countries to beware of Chinese investments. Add to these, there are problems within of Chinese officials exhibiting a ‘go slow’ attitude to work, for instance, which has required ever more exhortations from Xi to the CPC to reduce what is euphemistically referred to as “bureaucratism” (Xi 2017). On the positive side of the ledger is the Chinese leadership’s farsighted focus on gaining leadership in both basic and frontier-edge technologies

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from telecom hardware to mobile payment applications to social media and artificial intelligence-based big data applications. This is a new ‘Great Leap Forward’ in Chinese economic history and likely to be far more successful than the first iteration in the late 1950s–early 1960s. At the same time, the coercive economic measures and plain stealing that China has practised in this technological race has invited strong reactions with the US finally reacting to this mercantilist Chinese approach in the form of the trade war and restrictions on technology transfers to China. If the CPC under Xi appears to have some handle on the problems of political unity and reform of governance structures and mechanisms within the country and the Party, resolving the domestic economic situation is a harder task given China’s close integration with the world economy. It could be argued that while transforming the pattern of economic development has been a strategic focus in China’s economic reform process since the 18th CPC National Congress, success has eluded the Party primarily for political reasons of control and incentives available to local leaderships. It is at least partly to address these challenges that the anti-corruption campaign, Xi’s recentralization of power and the renewed emphasis on strengthening of state-owned enterprises as ‘national champions’ have taken place. Several chapters in this volume underline the centrality of the Chinese economy to domestic developments as well as the importance of the economy to China’s larger global ambitions. The Chinese economy is today a major player globally and any impact whether negative or positive on its economy—brought out by political processes and considerations at home and abroad—will have corresponding impact on the global economy.

The ‘China Model’ The grand CPC strategic vision melding the domestic political agenda of unity and maintaining Party supremacy with the goal internationally of increasing Chinese economic might and political influence is exemplified by Xi’s statement at the 19th Party Congress where he defined “socialism with Chinese characteristics for a new era”, as that which “offers a new option for other countries and nations who want to speed up their development while preserving their independence; and it offers Chinese wisdom and a Chinese approach to solving the problems facing mankind” (Xi 2017).

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What this also underlines, however, is that where once the CPC thought it could learn from the outside world and control the consequences at the same time or at least that the consequences would not fundamentally threaten its own existence, today the measures undertaken by Xi suggest that such confidence no longer exists. From the heavy-handed anti-­ corruption campaign to the ever increasing number of directives and instructions underlining limits to debates in universities to the constant drumbeat of state-driven propaganda and adulation of Xi to the extreme surveillance measures used against its own citizens, the Party looks less like it is in charge and more like it is fire-fighting. In fact, under Xi, the CPC has sharpened its battle against Western norms and ideas and is taking this practically to the level of an existential issue. To this end, the CPC is combining its Marxist-Leninist heritage with supposed Chinese traditional values that favour hierarchy and order in society and abroad to try and prevail against Western liberal ideals and the international order dominated by the West. Hitherto, this conflict with the West was evident usually only when reading between the lines of Chinese statements and actions. At the 19th National Congress of the CPC, even if a supposedly domestic affair, Xi appears to have more formally and explicitly acknowledged this challenge to the West by, among other things, “offer[ing] Chinese wisdom and a Chinese approach to solving the problems facing mankind” (Xi 2017). Xi appears to believe the centennial goals of building “a moderately prosperous society in all respects” and “a modern socialist country that is prosperous, strong, democratic, culturally advanced and harmonious” by 2021 and 2049 respectively (Xinhua 2017) can be realized through economic measures, anti-corruption struggles and ‘harmony’ among the people—obedience, in other words, to the diktats of the Party. The dominant narrative of the political centrality of the CPC to China’s future is accompanied by a reduction of space for dissent and pushing of strong and insensitive efforts at homogenization and assimilation of minority ethnic groups. The 2021 goal is of ensuring “that China’s development improves the lives of all its people, particularly those who are below or near the country’s poverty line” (Xinhua 2017). But even China’s ethnic minorities are today reasonably economically well off after four decades of reforms. If there is still poverty in China, it is not entirely due to economic reasons but because of the way economic development is promoted in an unequal manner, and in the case of the minorities, also because it is promoted without sensitivity to their identity or cultural concerns.

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Similarly, the CPC also appears to believe that economic development and the use of technology will ensure the 2049 target of a ‘culturally advanced and harmonious country’. While ‘harmonious’ here is also understood in terms of poverty alleviation, curbing pollution and ensuring ‘sustained and healthy economic and social development’ (Xinhua 2017), it is not clear why a strongly centralized form of government or cultural homogenization are essential to achieving these goals. China’s economic growth is increasingly held up by the CPC and by state organs of the PRC as a model for the rest of the world to emulate but China’s economic growth has come at great cost in terms of the environment, civil liberties and human lives. Xi’s promotion abroad of a Chinese model of economic development and growth should therefore be read as an attempt to justify to his people that the costs incurred were worth it. Without the ambition of trying to become a superpower and the global presence and military might that comes with it, the CPC’s missteps would be shown up to its own people. China is unique in that it tries to portray its global expansion and especially its increasing political influence as something that is non-threatening to the rest of the world. It has sold this as a case of China contributing to regional and global peace and stability. A case in point is its presence in anti-piracy operations in the Gulf of Aden, which however, also conveniently allows the People’s Liberation Army (PLA) Navy opportunities to gain experience of a different ocean from the one that China physically borders. It also allows the Chinese to engage in military diplomacy and exercises with a host of Indian Ocean littoral nations subtly challenging the position of dominant regional powers such as India. This narrative of the ‘global goods’ or ‘public goods’ is of a piece with China’s increasing participation in UN Peacekeeping Operations, for example, where it is the largest contributor among the permanent members of the UN Security Council. However, while other nations seldom, if ever publicly, declare this Chinese naval presence in the Indian Ocean as worrying or threatening, the Chinese regularly accuse other nations exercising freedom of navigation in the East Sea (South China Sea)1 as being inimical to Chinese interests. What is more, China has increased militarization of the features it occupies by putting missiles on them. In mid-2014, there was a major intrusion 1  While this chapter and others use the expression “East Sea”, the more commonly used name internationally is the “South China Sea”. The “East Sea” is the preferred usage in Vietnam.

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into the Vietnamese exclusive economic zone by the Chinese oil platform Haiyang Shiyou 981, which led to significant tensions in the SinoVietnamese relationship. Beijing has been at it again since July 2019 with the Chinese Geological Survey vessel group Haiyang Dizhi 8 repeatedly violating Vietnam’s exclusive economic zone and continental shelf in the south of the East Sea (Vu 2019). These Chinese actions raise the question of whether China really seeks to develop peacefully as Xi stated in his Report at the CPC’s 19th National Congress. At the same time, the strong economic rationale for China’s expanded political and military presence worldwide cannot be denied. China has economic interests including the flow of its energy and other raw materials supplies and trade across the globe that justify its security concerns and the need to build up political and military capabilities to guard against potential threats from unstable polities as well as perceived threats such as the US or India. It is also a fact that that China’s extensive—and illegitimate—claims on various features in the East Sea are the result of the narrative of the ‘century of humiliation’ so heavily promoted by the CPC at home. While in the past, China did not have the capability to enforce these claims, it never actually ever let up on them. It also engaged in substantial diplomacy with the countries of Southeast Asia and with Japan lulling these countries into a false sense of security that somehow China had set aside or was not interested in enforcing these claims. But the ‘century of humiliation’ narrative also has consequences in that the CPC itself cannot now not seek recompense for the ‘humiliation’ or reclaim what is ‘rightfully’ China’s when it actually has the capabilities to attempt to do so. Thus, it is that the Chinese have—as part of the process of ‘national rejuvenation’—illegally occupied and reclaimed and built up several features with the help of its commercial and naval might and appear to have no intention of ever exiting these areas no matter how many freedom of navigation operations the US or other foreign navies might engage in. It is important to note, however, that China does not seek to maintain its claims by force alone. It also works assiduously to shape narratives and histories in its neighbourhood and around the world subtly or otherwise in its own favour. For instance, the great Ming dynasty admiral, Zheng He’s voyages to the Indian Ocean are now recast as peaceful missions of friendship aimed at bolstering trade and cultural ties than viewed as the expeditionary voyages displaying Chinese power that they were in reality. Indeed, for the CPC, all history is political. Historical narratives are con-

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stantly modified and reshaped to achieve political ends of enforcing or reinforcing Chinese claims on distant territories, of promoting the story of China as a great civilization that influenced other kingdoms and peoples and therefore, that China’s rise today is a normal and welcome development. Institutional actors such as the PLA and China’s state-owned and private enterprises too have a role in promoting the ‘Chinese dream’. In fact, they also have strong sectoral interests and motivations in creating and promoting the narrative of the ‘Chinese dream’ for this would also increase their own profile and importance in the Chinese political system and among the Chinese people. For the PLA, for instance, appearing a modern, powerful military force with the latest weapons as well as one that is both engaged in supporting public goods and an efficient war-fighting force is, therefore, an important consideration. China’s rulers see the PLA’s growth and expansion as well as actual permanent physical presence abroad in the form of bases in such locations as Djibouti in the Horn of Africa as an important part of China’s progress to becoming a global superpower. Meanwhile, the close relationship between Chinese enterprises— whether public or private—and the Chinese Party-state needs particular attention, as Chinese state capital and influence are increasingly crossing borders. It is Chinese law that all Chinese enterprises are beholden to the Party-state (see Tanner 2017), and this means that laws of the counties that host them are not as important to these entities as Chinese law itself. In other words, if Chinese enterprises have substantial or controlling stakes in tech and financial companies in other countries or manage foreign port terminals, then if host companies or countries are not careful or are ignorant of China’s domestic political system and its priorities, then everything from personal data to physical security of assets in those countries can become subject to Chinese state control or surveillance. It is for this reason that this volume has placed such an emphasis on studying not just the reforms in China’s governance structures but also its economic reforms and their international implications. Such events as the international contretemps around the global rollout of 5G technology by Chinese private telecom major Huawei is also why this volume has delved deep into issues like China’s scientific and technological innovation that is widely understood as having security implications around the world but also into the state of Chinese agriculture and its external ambitions in this sector which do not receive equal attention.

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Structure of the Book This volume attempts to look at the policies and goals outlined by the CPC in the quest for Chinese national rejuvenation from a distinctly Asian perspective with scholars from across India and Southeast Asia examining a range of issues from China’s governance structures and economic development to its military and its foreign policies towards neighbours and the wider world. It seeks to assess policies in these areas for their impact and influence at home as well as on China’s external policies. At the same time, the book also looks at specific themes like technology, agricultural development, reform of state-owned enterprises and the use of Party bodies to engage in foreign propaganda work among other things to offer examples of the merging of Chinese domestic political and foreign policy interests. In the process, this work offers its readers a better idea of China’s place in the world as the Chinese themselves see it and the implications over time for China, its neighbourhood and the rest of the world. The first major section of the book discusses prominent domestic developments in China over the last several years since the 19th Party Congress while contextualizing them against aims and achievements of the 18th Party Congress. In Chap. 2, Nguyen Xuan Cuong addresses questions of governance reforms in China noting that these have tended to fuse Party and State structures ever more closely. ‘Xi Jinping Thought’ on ‘socialism with Chinese characteristics in the new era’ adopted by the 19th Congress has now been written into the Party constitution, while the 13th National People’s Congress also passed an amendment to Constitution of the Chinese state to this effect. These amendments to the Party and state constitutions indicate the trends and approaches of the reform of Party and state agencies, and the chapter explicates these in some detail with a focus on the anti-corruption campaign. Nguyen Quang Thuan and Tran Hong Viet in Chap. 3 focus on the changes in China’s economic development patterns after the 19th National Congress and the rationale offered for these by the Party. The planned transition of the Chinese economy from a phase of rapid growth to a stage of what is called high-quality development is a pivotal stage for transforming China’s growth model, improving China economic structure and ­fostering new drivers of growth. The chapter looks at the measures and practices China has undertaken in the current period including for integrating the Chinese economy into the world economy. The key change they see is the increased involvement of the Party-state in China’s current

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economic development policies both because of the need to fulfil the centennial goals and because China’s major foreign economic initiatives and strategies require enormous resources and tools for implementation. Manoranjan Mohanty, in Chap. 4, underlines what he calls the ‘success trap’ afflicting China’s and Xi Jinping’s political and economic initiatives. China’s economic successes have been accompanied by enormous social, political and environmental problems, as well as increasing income inequality, regional disparity and corruption. These are systemic problems arising from the economic reforms that started in 1978; but to their credit, China’s leaders have recognized many of these issues over the past decades and initiated some measures to address them. Despite their efforts, problems persist—increasing social and regional inequality, environmental degradation, social alienation, declining freedoms and persistent corruption, among others because China’s current reform path is ultimately incompatible with the type of actions needed to tackle these problems. In Chap. 5, Jabin T. Jacob examines the many political considerations at the centre of the CPC’s economic reforms agenda. The world at large has tended to focus on China’s economic prowess, its large domestic market and of late, its rising international economic heft as expressed in such outreach economic projects as the BRI. But for the CPC itself, the central focus has always been to use its economic strength to ensure domestic stability and the continuation in power of the Party. This chapter, therefore, looks at the Chinese leadership’s views of the Chinese economy as gleaned from prominent reports and speeches and what these say of their views, including apprehensions, about the state of affairs of the Chinese economy and the implications for the position and legitimacy of the CPC. The Chinese military is a key guarantor of the power of the CPC given that the PLA is the Party’s army rather than that of the PRC. In Chap. 6, Bui Thi Thu Hien looks at Chinese military reforms since the 18th CPC National Congress and the additional measures proclaimed at the 19th Congress. She finds that China’s current round of military reforms is dramatic in nature with ambitions of turning the Chinese military into one of the strongest forces in the world, capable of multiterrain combat and of becoming the world’s most powerful naval force in order to control distant waters. The chapter looks at the national and international contexts before China as it carries out a series of policies and measures to strongly promote military reform and also assesses the relationship between the CPC and the PLA in the process. The attempt

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is to clarify if since the 19th Party Congress, it is ‘the Party that controls the gun’, or if the military has gained an edge in the relationship. The next section of the book looks at China’s neighbourhood policies with a specific focus on regions in China’s immediate neighbourhood. The section opens with Chap. 7 in the book on trends in Chinese foreign policy in South Asia by Prashant Kumar Singh. Looking at both the 19th Party Congress in October 2017 and the 13th National People’s Congress in March 2018 together, he argued there is a radical shift in Chinese foreign policy under Xi Jinping in terms of China’s national identity, grand strategic vision and the nature of its international identification with the world. China is finally shedding its old hesitation and staking its claim to a leadership role in the international order. This chapter argues that although it is East Asia that is receiving international attention, with reference to China’s foreign policy assertion under Xi, South Asia has been equally affected by this assertiveness, if not more so. China-South Asia relations have generally been studied within the localized contexts of individual bilateral relationships or India-China relations. However, wider South Asia is also equally a testing ground for China’s grand-strategic vision and ambitions under Xi especially through the BRI, and this in turn has implications for India-China bilateral relations. Hoang The Anh in Chap. 8 argues that the focus of China’s foreign policy actions in Southeast Asia is on implementing the BRI and ensuring that the region is divided in its response to Chinese provocations in the East Sea. Beijing is establishing a global network of partners, and building a so-called ‘community of common destiny’ with Southeast Asia as a central focus. China has continued its tough stance on disputes in the East Sea even as it has used economic diplomacy and soft power to mollify or win over the countries of the region. Given the strong economic dependencies and other socio-cultural factors accompanying the greater economic integration of the region with China, Chinese policies are likely to have far-­ reaching impact on Southeast Asia and the Indo-Pacific in general. Without doubt, China’s relationship with the US is the world’s most important bilateral relationship and Chap. 9 by Cu Chi Loi looks at it  in detail. He argues that with the rapid modernization of its naval forces and the launch of the BRI, China has accelerated disputes with countries in its near seas and unveiled its ambition to control the IndoPacific region. The Donald Trump administration in the US has asserted that China is a strategic competitor, challenging America’s power,

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undermining American security and prosperity and seeking to replace it in Asia. Washington has objected to China’s military strategy in the East Sea of Vietnam, asserted its freedom of navigation in the region and promoted an Indo-Pacific strategy with greater vigour to bring regional states together into a new security network such as the Quadrilateral Security Dialogue, comprising the US, Japan, India and Australia, for example. In addition to security tensions, the US and China have engaged in a trade war where the two sides have targeted each other’s goods with punitive duties. It is this context against which the chapter analyses the recent increase in strategic competition between the US and China in the Indo-Pacific region and their reasons thereof. The chapter also discusses the impact of Sino-US strategic competition on cooperation and development in the wider region. Chapter 10 by Nguyen Quang Thuan and Hoang The Anh examines China’s relations with its neighbours Japan and the two Koreas which form an important part of China’s neighbourhood considerations given the tensions on the Korean peninsula arising out of North Korea’s nuclear weapons and missiles testing and because Japan and South Korea are military allies of the US. While China’s ties with each of these countries have remained largely stable in recent years, Beijing has often been willing to exacerbate tensions for sometimes short-term considerations, especially with Japan. At the other end of the spectrum, however, with the arrival of the Donald Trump administration in the US, that country’s relations with North Korea have undergone a major transformation at least in terms of perceptions and imagery if not quite in terms of substance and have profoundly also affected China’s equations with the countries of Northeast Asia, including North Korea itself. This chapter looks at these dynamics particularly in the contexts of the incipient Sino-US competition, including American military presence on the Korean peninsula. The third section in the volume is a short one but covers the important dimension of the work of CPC itself in projecting Chinese power abroad through propaganda efforts and outreach via the Chinese diaspora. It is a fact that China, or more correctly, the CPC, has certain distinctive e­ lements in its foreign policy work with overlap and close linkages between the foreign ministry on the one hand and propaganda units of the CPC such as

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the International Liaison Department and the United Front Work Department. Chapter 11 by Ngeow Chow-Bing points out that besides its Foreign Ministry, the International Department of the CPC is also an important agency for the conduct of the country’s foreign affairs. The International Department’s role is to interface with other political parties around the world and this chapter discusses its role in the foreign policy process before looking in greater detail at the activities and functions of the Department in recent years. It finally examines how the 19th Party Congress has changed or shaped the Department’s vision and future missions and functions. The principal role of the CPC’s International Department appears to be to promote China’s image and project the country’s soft power abroad. Roger C. Liu in Chap. 12 picks a similar theme when he delineates and traces the development of China’s ‘Great Overseas Propaganda’ strategy in the context of the BRI. He suggests that the CPC’s propaganda campaign has evolved and become more intricate and indirect with the Party in the background. To increase China’s visibility and “to tell a good story” about China, the CPC has used multi-pronged ways, including acquisition of and collaboration with foreign media (especially media entities in BRI countries), increasing appearance via internet-based media and reliance on Chinese social media platforms to indirectly spread propaganda and create positive images of China. The ‘Great Overseas Propaganda’ strategy and BRI are mutually supporting: while infrastructure diplomacy creates the demand for positive news of China either domestically or in the host countries, it also facilitates China’s infrastructure export to other countries. In the final section, the book looks at the close links between China’s economic development and foreign policy. Chapter 13 by Nguyen Binh Giang looks at China’s quest for global leadership through scientific and technological innovation. The country’s dream of becoming a global leader and transforming the global governance system involves becoming a superpower in three realms of the economy, the military and in science and technology. This chapter therefore focuses on exploring China’s strategy of promoting scientific and technological innovation as embodied in the documents of the 19th Congress of the CPC as part of its desire to gain global leadership and advantages. It examines in detail China’s ambition, the relationship between this ambition and the need to promote innovation and the nature of China’s innovation strategy and concludes with an evaluation of the implementation of the strategy so far.

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Agriculture is seldom considered important in China’s foreign policy outreach, but in Chap. 14, Prachi Aggarwal outlines exactly why the world needs to pay greater attention to this aspect. She points out that rural vitalization has been one of the major themes of the 19th CPC National Congress and that, as China seeks to establish its ‘new normal’ in economic growth, it has also established the revival of agriculture as one of its top eight priorities. Food has been an important aspect of the Chinese psyche, which is now being reflected in its political leadership as well. Xi has been vocal in linking Chinese food with Chinese prestige. China has begun to emerge as a major investor in agriculture in other countries, and through the BRI China is attempting to achieve a level of security in food and energy. It remains to be seen, however, if China can utilize its foreign policy ambitions to support its domestic basic needs in the food and agriculture sector and how its overseas investments in agriculture will contribute. In Chap. 15, the final chapter of the volume, Aravind Yelery looks at how reforms in China’s SOEs are being directed by the Party and how these have implications externally. Despite several tribulations, SOEs have remained a central pillar of the CPC ever since the founding of the People’s Republic and provided an effective medium for political socialization and mobilization. However, the role of SOEs had begun to wane over time as the influence of private enterprises grew in the post-reforms era; the private sector’s ability to introduce breakthrough technologies left China’s SOEs looking obsolete. Nevertheless, over the period of the last decade or so, the influence and role of SOEs have been on the rise again with the CPC working at overcoming the shortcomings of SOEs and investing energy in optimizing the distribution of state-owned capital around transformation and upgrading of state-owned assets and improving their efficiency. The CPC’s attempts to turn around SOEs in terms of improving their management and R&D spends have several implications for how China and Chinese companies will operate and be viewed abroad. The goal is of political communication and consolidation of Party control not just at home but also abroad.

Conclusion China’s approach to securing political and security interests globally is based on a whole-of-the-system approach in which the political, commercial, security and diplomatic actors work together. This is not to say that

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the Chinese get it right or things go smoothly for them every time. There are mistakes that are frequently made and often huge financial losses are incurred but there is also a great deal of learning from these mistakes and the ability to quickly adapt as well as change course when the decision is finally made. In any case, no great power ever reached its position or remains in its position without taking risks and making mistakes. Thus, China’s domestic politics and its external actions cannot be studied in watertight compartments but need to be considered together as this volume has tried to do. As China’s influence rises globally and its presence becomes more entrenched across domains of politics, economic activity, traditional and non-traditional security and science and technology, how it proceeds to use this influence vis-à-vis other countries will also be based on the CPC’s confidence and capacities. Given that both the basis of China’s rise in recent decades and the strength of the narrative of the ‘century of humiliation’ have their roots in China’s linkages with the rest of the world, it is also natural to assume that the confidence of the CPC depends also on how it views the international order and China’s place in it as much as on its relations with the Chinese people. In effect, the CPC’s brand of politics is one in which it seeks greater space and acceptance globally of what it deems are Chinese interests on behalf of the Chinese people while at home it increasingly seeks legitimacy on the basis of China’s ability to establish and promote its rights and standing abroad. The problem is that this is an ever-tightening circle in a situation of global economic downturn and rising protectionism that also affect the Chinese economy and where China’s leaders continue to believe that their own political legitimacy vis-à-vis the Chinese people is far from secure. The consequences of these developments and realities in China and the world and the perceptions that arise from them for the Chinese people and their leaders and their responses need to be understood better for they will also increasingly impact the rest of the world.

References Cai, Jane. 2017. “Forget privatisation, Xi has other big plans for bloated state firms”, South China Morning Post. 6 September. https://www.scmp.com/ news/china/economy/article/2109943/how-china-making-its-state-firmdinosaurs-bigger-and-richer

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Chen, Lulu Yilun. 2019. “China Boosts Government Presence at Alibaba, Private Giants”, Bloomberg. 23 September. https://www.bloomberg.com/news/articles/2019-09-23/china-steps-up-government-presence-at-alibabaprivate-giants Fu, Yiqin. 2018. “Data Analysis: Regional Inequalities in Chinese College Admissions”, 7 June. https://yiqinfu.github.io/posts/china-college-admissionsregional-inequalities-tsinghua/ Mao Zedong. 1949. “Selected Works of Mao Tse-tung: The Chinese People Have Stood Up!”, Marxists.org. 21 September. https://www.marxists.org/reference/archive/mao/selected-works/volume-5/mswv5_01.htm Martina, Michael. 2017. “In China, the Party’s push for influence inside foreign firms stirs fears”, Reuters. 24 August. https://www.reuters.com/article/uschina-congress-companies/exclusive-in-china-the-partys-pushfor-influence-inside-foreign-firms-stirs-fears-idUSKCN1B40JU Tanner, Murray Scot. 2017. “Beijing’s New National Intelligence Law: From Defense to Offense”, Lawfare. 20 July. https://www.lawfareblog.com/ beijings-new-national-intelligence-law-defense-offense The Conversation. 2019. “Huawei founder’s protests mean nothing—independent Chinese companies simply don’t exist”. 17 January. http://theconversation. com/huawei-founders-protests-mean-nothing-independentchinese-companies-simply-dont-exist-109972 Vu, Khanh. 2019. “Vietnam demands Chinese ship leaves its exclusive economic zone”, Reuters. 16 August. https://www.reuters.com/article/us-vietnamchina-southchinasea/vietnam-demands-chinese-shipleaves-its-exclusive-economic-zone-idUSKCN1V61CO Wang, Orange and Sidney Leng. 2018. “Chinese President Xi Jinping’s show of support for state-owned firms ‘no surprise’, analysts say”, South China Morning Post. 28 September. https://www.scmp.com/economy/china-economy/article/2166261/chinese-president-xi-jinpings-show-support-state-owned-firms Xi Jinping. 2017. “Secure a Decisive Victory in Building a Moderately Prosperous Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a New Era”, 19th National Congress of the Communist Party of China. Xinhua. 18 October. http://www.xinhuanet. com/english/download/Xi_Jinping’s_report_at_19th_CPC_National_ Congress.pdf Xinhua. 2013. “China Focus: 19th CPC Central Committee 3rd plenum issues communique”, 1 March. http://www.xinhuanet.com/english/201803/01/c_137006746.htm Xinhua. 2017. “CPC Q&A: What are China’s two centennial goals and why do they matter?”, 17 October, http://www.xinhuanet.com//english/201710/17/c_136686770.htm Xinhua. 2019. “China steps up policy support to areas of extreme poverty”, 26 June. http://www.xinhuanet.com/english/2019-06/26/c_138175467.htm

PART II

Domestic Developments

CHAPTER 2

Reform of Party and State Structures in China Nguyen Xuan Cuong

As the world moves into the third decade of the 21st century, the national governance of China, especially after the 18th National Congress of the Communist Party of China  (CPC), has undergone numerous adjustments with the emergence of new concepts such as “core leaders”, “strategic layout” and several new development strategies. “Xi Jinping thought on socialism with Chinese characteristics in the new era” was affirmed in the Party’s statute (at the 19th Congress) and inscribed in the National Constitution after the 2018 session of the National Assembly. It provides a basis for the coordination of major relationships between the Party, the State and society; between economic, political and social factors; between domestic and foreign affairs. It later became the guiding ideology of the Party and the State of China. China’s national governance system has been significantly transformed with the reform of Party and State agencies, especially with the formation of the National Supervisory Commission. China’s national governance also participates and works in

Nguyen Xuan Cuong (*) Institute of Chinese Studies, Vietnam Academy of Social Sciences, Hanoi, Vietnam e-mail: [email protected] © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_2

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coordination with global governance. National governance reflects the operation of the Chinese political system  working towards its goal of becoming a powerful nation.

Governance in China After the 18th Congress Governance comprises all facets from the guiding ideology, the political decision–making mechanism, and the operation of the political system, to the mobilization and allocation of resources. It deals with the relationships between the State, the market and society; between the Party, the State and society and between domestic and foreign affairs. National governance clearly demonstrates the functioning of the political and social system. In China today, the fundamental and most important mechanism for national governance is based on the leadership of the CPC. That is, the governance of the State and the participation of society. After the 18th Congress, the CPC, with “the core leadership” of Xi Jinping as General Secretary, has changed its approach towards national governance and leadership. Xi has promoted and raised the flag of the “Chinese Dream”, while fine-tuning the relationships between the Party, the State and society, and between economic, political and social factors to strongly facilitate the process of China’s goal of becoming a superpower. After the CPC’s 18th Congress, there has been a push for a comprehensive reform programme. The Party considered the strategic adjustment of the economic structure as the foremost and dominant method of accelerating the transformation of the means to achieve economic development. It also viewed advancement and creativity in science and technology as key pillars, while improving people’s lives and the construction of society with a resource-saving and environmentally-friendly model as important efforts. And the reform and opening up process was seen as a powerful engine to accelerate structural changes for economic growth (China.com 2012). The 3rd Plenary Session of the 18th Central Committee of the Communist Party of China proposed a comprehensive and extensive reform policy for China in which “the modernization of China’s system and the capacity for national governance” (Gov.cn 2013) was to be an important solution. The 4th, 5th and 6th Plenary Sessions of the 18th Central Committee established the strategic layout of “The Four

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Comprehensives” (People.com 2017a), or the Four-pronged Comprehensive Strategy, to steer the country towards the goal of “the great renaissance of the Chinese nation”. The fifth generation of leaders of the CPC has introduced many new policies and views on national governance. The decision-making mechanism was changed with the introduction of the Central Leading Group for Deepening Overall Reform and the “top-­ level design” approach (Development Research Center of the State Council (n.d.)), which is being implemented to guide and promote reform for the new era in China. The political and social situation has been remarkably transformed through the Party’s fierce fight against corruption, and the capacity for national governance significantly enhanced with law enforcement being expected to be in full compliance with “the cage of regulations” (Gov.cn 2016). At the 6th plenum of the 18th Central Committee, Xi Jinping said that “in order to solve all the problems of China the key lies in the Party. The Party must be capable of managing itself. The management of the Party must be disciplinary” (Sina.com 2016). The core strength of the Party is the leadership and governance of the country, and the pioneering and exemplary role models of party members as civil servants and public officers. “The key only lies in a few (officials and party members)” (Gov.cn 2015). “To forge iron one must be strong” and Party members and party organizations must strictly abide by the “eight regulations” (ba xiang guiding 八项规定) (Xinhua Wang 2012) and get rid of the “four undesirable work styles” of formalism (xingshizhuyi 形式主义), bureaucratism (guanliaozhuyi 官僚主义), hedonism (xianglezhuyi 享乐主义) and extravagance (shemi zhifeng 奢靡之风). Officials and party members must also comply with the “norms of political life within the Party under current conditions” and “the regulations on intra–party supervision” (Sina.com 2016). Strengthening the execution of inspection and supervision practices within the Party is considered as an important guideline and critical solution to preventing the degradation of political ideology and ethics of life, as well as to combat corruption and the abuse of power, notably the supervision and inspection tours (xunshi 巡视) of the Central Committee of the Party. By June 2017, the CPC had conducted 12 rounds of inspections. The issue of “ensuring fair justice, enhancing the effectiveness of the judiciary and the trust of the people in the judicial system” (Xinhua Wang 2016b) became the overall target of the judicial reform programme after the 18th Congress.

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China has promoted the development and implementation of a new governance regime in which power is restricted to “the cage of regulations”, aiming to further transform the government from an “infinitely powerful and multi-functional” system into a model of authority with strict limits on the arbitrary power of the State referred to as “constrain power within the cage of the system” (ba quanli guan jin zhidu de longzi li 把权力关进制度的笼子里) (Xinhua Wang 2016a). Authorities need to closely follow the “cage of regulations” prescribed by the constitution and the law. The establishment of a constitutional government in China covers: the comprehensive implementation of all government functions in accordance with the law; the consolidation of the policy-making mechanism in accordance with the law; and the strengthening of compliance and supervision practices of administrative powers towards effectively delivering the nation’s development goals. China also focuses on pushing the modernization of the governance system and enhancing the capacity for national governance. After the 18th Congress, anti-corruption campaigns such as “killing tigers” (da hu 打虎), “hunting foxes” (lie hu 猎狐) and “swatting flies” (pai ying 拍蝇) (Xinhua Wang 2016b) (against high, medium and low-­ level corruption cases) were carried out very drastically with massive support from the public. The prevention of corruption, along with the comprehensive and strict management of the Party, is a prerequisite and an important basis for the development of the Party as well as national governance. National governance, besides the concept of “core leadership”, is basically a policy-making mechanism. It was significantly changed after the formation of the Central Leading Group for Deepening Overall Reform and other central leading groups, and with the “top-level design” approach that is being implemented to direct and promote reform for the new era in China. The political and social landscape has been transformed through the Party’s fierce anti-corruption campaign, aiming at interest groups that were formed over 30 years of reform and opening up. From an economic angle, China has focused on transforming the means to achieve economic growth. It is now moving into a “new normal state” characterized by a declining growth rate and increasing quality and efficiency of development, while seeking new motivations for growth. The strategic idea of the Belt and Road Initiative (BRI or the “one belt, one road”) is China’s new test for the country’s domestic and foreign policies. The BRI is also a way for China to participate in global governance.

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Nevertheless, China has to deal with a series of complex and intertwined instabilities and challenges, especially the state of unbalanced and unsustainable development. As far as foreign relations are concerned, the difficulties lie in the growing competition among major countries and the suspicions other countries have about China’s intentions.

National Governance in China After the 19th CPC Congress Xi Jinping Thought on Socialism with Chinese characteristics for “a new era” was affirmed in the Party’s constitution at the 19th National Congress in October 2017 and at the 2018 session of the National People’s Congress by being inscribed in the National Constitution. Xi Jinping Thought has now become the guiding ideology of the Party and the State of China as well as the main guideline for the reform, opening and modernization process of achieving China’s goal of becoming a superpower. Xi Jinping Thought Xi Jinping’s thought on socialism with Chinese characteristics is acknowledged by law and institutionalized to become the guiding ideology of the reform and modernization process in China. The “Xi Jinping Thought” is being thoroughly studied and interpreted and dramatically implemented to achieve China’s goal of basically completing its modernization process by 2035 and becoming a superpower by the middle of the 21st century. The 19th Congress of the Chinese Communist Party advocated the slogan “the Party leads everything” (dang lingdao yiqie 党领导一切) (People.com 2017b). This idea of the Party’s comprehensive leadership especially emphasizes the overall direction and coordination provided by the CPC. The Central Leading Group for Deepening Overall Reform has become a comprehensive and far-reaching reform committee, while continuing its role as an agency responsible for directing “top-level design” reforms, issuing and coordinating major policy decisions of China. Amendment of the Constitution On 26 January 2018, the CPC  Central Committee sent “A petition to amend some contents of the Constitution” (Xinhua Wang 2018c) to the

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National Assembly. At the first session of the National Assembly, the “Draft amendment to the Constitution of the People’s Republic of China” (Xinhua Wang 2018b) was discussed and approved. It expressed some important changes as follows: In the Introduction of the constitution, the paragraph “…under the direction of Marxist– Leninism, Mao Zedong’s thought, Deng Xiaoping’s theory, the important thought of Three Represents” was changed to “…under the direction of Marxism–Leninism, Mao Zedong’s thought, Deng Xiaoping’s theory, the important thought of Three Represents, the viewpoint on scientific development, Xi Jinping’s thought on Socialism with Chinese characteristics for a new era”. Thus, the thought of Xi Jinping was officially affirmed in the Constitution and the historic position of Xi Jinping was placed on par with Mao Zedong and Deng Xiaoping. In Clause 2, Article 1, after the line “the socialist system is the basic system of the People’s Republic of China” (Gov.cn 2018c), the line “the leadership of the Communist Party of China is the most characteristic feature of Socialism with Chinese characteristics” was added. Thus, the leadership role of the CPC is embodied in the Constitution. Chapter 3 of the Constitution (about the State apparatus) added Section 7 and five articles (Articles 123–127) on the organization and powers of the National Supervisory Commission. In particular, it says “The National Supervisory Commission of the People’s Republic of China is the supreme watchdog”. This oversight body was set up in addition to other State agencies such as administrative agencies, courts and procuratorates. It is responsible to the National People’s Congress, which also appoints the director of this agency. Clause 3 of Article 79 of the 1982 Constitution, which stated “The President and Vice-President of the People’s Republic of China cannot serve more than two consecutive terms”, was also removed. This establishes the legal conditions for the current President to continue to be elected as the President of the country for a third term as well as subsequent terms after his second term of office expires in 2023. Reforming Party and State Apparatuses In recent years, the supervision regime under the CPC has been strengthened with the establishment of a system of supervisory bodies from central to local levels, which was implemented under the Supervision Law of the

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People’s Republic of China. This Law was approved at the 13th National People’s Congress of China in March 2018. The reform of the supervision regime China shows the determination of the Chinese leadership in national governance and the fight against corruption. Regarding the reform of the apparatuses of the Party and State, over the years China has conducted seven rounds of reform to renovate the government apparatus and transform the functions of the government. Yet, the results were not as desirable as expected and the level of efficiency was not so high (Caixin 2018). Meanwhile, the current reform has been undertaken in a more systematic, comprehensive and thorough manner, combining reforms of the apparatuses of the Party, government, National Assembly, the Fatherland Front, the judiciary system, the national army, functional departments, public groups and social organizations. It re-­prescribed the responsibilities, competencies and relationships between relevant departments in a clearer and more transparent way. The focus of this reform has been on enhancing the overall leadership of the Party, integrating critical focal points, improving efficiency and reinforcing rules of supervision. This reform of the Party and the State organs demonstrates the comprehensive leadership of the Chinese Communist Party, the improvement of the national governance system and the enhancement of the people’s interests that are beneficial for the long-term leadership and governance of the Chinese Communist Party. At the first session of the 13th National People’s Congress, Chinese Premier Li Keqiang submitted a plan to reorganize the government structure with 26 ministries and an equal number of departments. This plan was later approved by the NPC (Gov.cn 2018a). National Supervisory Commission and the System of Supervisory Bodies in China The Report of the 19th Congress of the Communist Party of China clearly expressed a need “To establish a supervision system uniformly and consistently coordinated by the Party with its comprehensive coverage, effective powers and thorough connection between intra-party supervision and government bodies for national supervision, democratic supervision, judicial and public oversight, public opinion supervision, and enhancing overall capacity for supervision” (People.com 2017b). This essentially shows the trend of structurally reforming the apparatus of supervisory organs, which have been uniformly executed from central to local levels as an urgent need of the institutional reform process in China.

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In the past, China’s conduct of supervision practices focused on various government bodies such as the Central Commission for Discipline Inspection of the CPC, the Ministry of Supervision (a Cabinet–level department of the State Council) and the Supreme People’s Procuratorate which is responsible for both prosecution and investigation. Furthermore, the Standing Committee of the National People’s Congress also has the function of supervising the performance of State agencies, such as the State Council, the courts and the procuratorates. Hence, it can be concluded that, in the past, China’s supervisory bodies were divided into oversight organs of the Party, the State and the prosecution, investigation and supervision system of the Chinese people, which was represented by the People’s Congress. The newly adopted constitution of China states that “The National Supervisory Commission of the People’s Republic of China is the supreme watchdog of the country. The National Supervisory Commission will lead the performance of local supervisory commissions” (Article 125) (Gov.cn 2018c). As such, supervisory commissions will be organized from central to local levels, appointed by and accountable to the corresponding People’s Congress seat of each locality (Article 3, Clause 3) (Gov.cn 2018c). The Supervisory Commission is defined as a specialized body that performs the exclusive function of supervising State organs in cooperation with the Central Commission for Discipline Inspection of the Chinese Communist Party. This is intended to signify a high level of unity between the Party and the people. Thus, the “Supervisory Commission is a political structure that conducts the practice of self-monitoring of the Party and the State, not as an administrative or judiciary organ, but based on law to exercise the right of supervision” (Sina.com 2018). The Supervisory Commission is placed under the direct leadership of the Party, representing the Party and the State to supervise all cadres and civil servants who wield public power while investigating whether those personnel commit any unlawful or criminal acts. The Supervisory Commission has distinctive powers and functions compared with corresponding judiciary and law enforcement agencies. According to the provisions of the constitution and the Supervision Law, all provinces, cities and districts across China will establish a supervision system at three levels: central, provincial (city), and communal (at district-level cities) levels. At the central level, the name of the oversight body will be the National Supervisory Commission, reflecting the shift from “low-level supervision”, for example, administrative supervision, to

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“high-level supervision”, such as State supervision and representing the highest position of a state agency in the field of supervision (Sina.com 2018). Local supervisory commissions will be called by local a­ dministrative names. For example, the oversight bodies of Guangdong and Guangxi will be called the Supervision Commissions of Guangdong and Guangxi. The Director of each Supervisory Commission will be appointed by the People’s Congresses of the corresponding level. In the past, in order to ensure a strong and consistent leadership of the Party’s anti-corruption work, the Central Commission for Discipline Inspection of the Chinese Communist Party had to perform two functions: disciplinary inspection and supervision. However, now the supervision function will be carried out by a separate system of supervisory commissions from central to local levels. In case of major and serious cases, the decisions will be approved by the corresponding Party Committees. The National Supervisory Commission leads the work of the supervisory commissions at the local level. The subordinate supervisory commission is accountable to the supervisory commission at the higher level and the latter will oversee the work of the former. In order to ensure the legitimation of the functions and duties of the supervisory commissions, the amended constitution of the People’s Republic of China clearly stipulates that the supervisory commissions independently perform the functions of supervising, investigating and handling of corruption cases on the basis of the legal framework. No administrative bodies, social organizations or individuals have the right to intervene. At the same time, relevant agencies and individuals need to actively cooperate with the supervisory commissions for it to execute its supervisory power. In the constitution, this relationship is institutionalized and legalized to ensure that the supervisory power is properly implemented in accordance with the law and subject to the supervision of related organs as described above.

National Governance in China in the Second Decade of the 21st Century Xi Jinping’s thought on Socialism with Chinese characteristics for a new era was affirmed in the Constitution and became the guiding ideology of the Party and the state of China. Moreover, Xi Jinping’s thought was also confirmed by law and institutionalized to become the guiding ideology of

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the reform and modernization process in China. The historic position of Xi Jinping is now placed on par with Mao Zedong and Deng Xiaoping— the 1954 Constitution marked the era of Mao Zedong; the 1982 Constitution marked the era of Deng Xiaoping; and the Constitution ratified in 2018 now marks the era of Xi Jinping. “Xi Jinping thought” has been thoroughly studied, interpreted and implemented to realize China’s goal of completing its modernization process by 2035 and becoming a superpower by the middle of the 21st century. Supply-side reform is an idea developed from Chinese political-­economy theory. It has been adopted as the practical and theoretical basis for Xi Jinping’s economic thought. Over time, the Chinese economy has been struggling to shift from quantity to quality of growth while trying to satisfy other urgent needs such as promoting upward movement in the industrial value chain and economic structural adjustment to establish new industries, develop a modern service sector to support different professions, and generate more innovation-based development achievements. After the 19th Congress, China’s Central Economic Work Conference in December 2017, for the first time, proposed the concept of “Xi Jinping Thought on Socialism with Chinese characteristics for a new era”. In particular, Xi’s economic thought focuses on transforming the means to achieve economic development, plus improving the quality and efficiency of development. Xi’s economic thought is demonstrated more concretely through the eight key tasks and the three critical battles. The first of the eight key tasks is to focus the country’s economic work on advancing supply-side structural reform. The second task is to activate the powers of market participants. The third is to implement the strategy of revitalizing rural areas, while the fourth focuses on promoting rational strategies for “harmonious development” of the country. The fifth task is to facilitate new prospects for comprehensive opening-up, the sixth, to continuously guarantee and improve high-quality living standards and the seventh, to accelerate the construction of a housing system that ensures supply through multiple sources and multiple guaranteed channels, with both rental housing and purchase. The eighth and final task is to promote the construction of an “ecological civilization” (People.com 2017b). The requirements set in 2018 for China’s economic performance will face three major battles, which are the prevention and overcoming of major risks, proper poverty reduction and the prevention of environmental pollution (People.com 2017c).

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The Report on the government’s work in 2018, in the spirit of the Resolution of the CPC’s 19th Congress and Xi Jinping’s economic thought, has prioritized transforming the means to achieve economic development, finding new motivations for growth, improving the quality and efficiency of the economy, and moving from “a high growth rate” to “high quality” through the main route called “supply-side reform” (Gov. cn. 2018b). Premier Li continued to emphasize the policy guidelines and solutions for 2018 in the government’s report. It included: promoting supply-side structural reform; speeding up the development of the national innovation system; deepening reform in important areas; winning the three critical battles; implementing the strategy of revitalizing rural areas and strategies for regional cooperation and development; expanding the scale of consumption and promoting effective investment; facilitating the new context of comprehensive opening-up, especially the BRI. And setting an economic growth target of 6.5 percent for 2018 (Gov.cn. 2018b). The 18th National Congress of the Communist Party of China affirmed the regime to be implemented in social governance, which “is led by the Party, governed by the State and secured by law with strong social inclusion and public participation” (dangwei lingdao, zhengfu fuze, shehui xietong, gongzhong canyu 党委领导、政府负责、社会协同、公众参与) (Renmin Chubanshe 2012). The 19th National Congress of the Chinese Communist Party (CCP) stressed the “people-centered” philosophy to carry out extensive and comprehensive reform. This can be considered as a remarkable milestone in China’s reform. Social democracy is still a heavy task and a major goal of China. However, the biggest problem posed to China’s economy today is probably the quality of China’s economic growth. The country’s economic growth, while facing numerous challenges, has brought about imbalanced and unsustainable outcomes. The issues arising from heavy public debt and prolonged overcapacity remains unresolved. As the country has experienced an abnormally high growth rate over a long period of time, many consequences for the Chinese economy have not been addressed thoroughly and adequately yet. For example, the depletion of natural resources, environmental pollution, inequality between the rich and the poor, unbalanced development, among others. Therefore, though China’s political leaders want to overcome the “middle income trap” and head towards a higher level of average income and high-quality growth, the country’s economy is still facing big challenges. This is a

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medium and long-term goal. China must deal well with major pairs of relationships, such as between supply and demand; the state and the market; input and output; domestic and foreign affairs; equality and efficiency. In particular, it needs to eliminate potential risks of crises, in which financial risk is ranked first. Fielding Chen and Tom Orlik have estimated that China’s total debt would reach 327 percent of GDP by 2022. That would make China one of the biggest debtors in the world (Bloomberg 2017).

Conclusion China has long promoted drastic reforms in the context of a rapidly changing world and unstable regional conditions, especially with the emergence of the opposite trends of supporting and opposing economic globalization, plus the rise of trade protectionism, nationalism and populism. Meanwhile, the geopolitical situation around China still creates several obstacles for it. These include the nuclear crisis on the Korean Peninsula, relations across the Taiwan Strait, maritime disputes with some East Asian countries, and especially the competition among major countries in the region and around the world, in which the competition between China and the US is creating numerous uncertainties. With respect to its foreign policy, China expresses great confidence and determination, while actively participating in global governance and deploying diplomatic relations with major countries based on “head-of-state diplomacy” to gain a more active role in dealing with foreign affairs. However, the US-China trade war is the biggest challenge for China since the 19th National Congress. This requires China to adjust its domestic reforms while seeking solutions in its foreign relations.

References Bloomberg. 2017. “China’s Debt Surge May Increase Risk of Financial Crisis”. November 21. https://www.bloomberg.com/news/articles/2017-11-21/ china-s-debt-surge-may-increase-risk-of-financial-crisis Caixin. 2018. “Gaige kaifang yilai qici Guowuyuan jigou gaige huigu” (改革开放 以来其次国务院机构改革回顾) [A Review of Institutional Reforms of the State Council Since Reform and Opening Up]. March 13. http://topics.caixin. com/2018-03-13/101220535.html China.com. 2012. “Hu Jintao shibada baogao” (胡锦涛十八大报告) [Hu Jintao’s Report to the 18th Party Congress]. November 20. http://news.china.com. cn/politics/2012-11/20/content_27165856.htm

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Development Research Center of the State Council. n.d. “Guanyu dingceng sheji de sikao” (关于顶层设计的思考) [Thinking About Top-Level Design]. http:// www.dr cnet.com.cn/www/TrainInter view/TrainInter viewDetail. aspx?interviewid=83 Gov.cn. 2013. “Zhonggong Zhongyang guanyu quanmian shenhua gaige ruogan zhong da wenti de jueding” (中共中央关于全面深化改革若干重大问 题的决定) [Central Committee of the Communist Party of China’s Resolution on Some Important Questions Regarding Comprehensive Deepening of Reforms]. November 15. http://www.gov.cn/jrzg/2013-11/15/content_2528179.htm Gov.cn. 2015. “Shengbuji zhuyao lingdao ganbu xuexi guanche shibajie si Zhongquanhuijingshen” (省部级主要领导干部学习贯彻十八届四中全会精神) [Leading Cadres at the Provincial Level Must Study and Carry Out the Spirit of the Fourth Plenary Session of the 18th Central Committee of the Communist Party of China]. February 7. http://www.gov.cn/xinwen/2015-02/07/content_2816078.htm Gov.cn. 2016. “Guowuyuan wei gongting yinfa Guowuyuan bumen quanli he zeren qingdan bianzhi shidian fang’an de tongzhi” (国务院为公厅关于印发国务院部门 权力和责任清单编制试点方案的通知) [Notice on Drawing Up a Pilot Program Regarding State Council’s List of Rights and Responsibilities]. January 5. http:// www.gov.cn/zhengce/content/2016-01/05/content_10554.htm Gov.cn. 2018a. “Guowuyuan jigou gaige fang’an” (国务院机构改革方案) [Plan For Institutional Reform of the State Council]. March 17. http://www.gov. cn/guowuyuan/2018-03/17/content_5275116.htm Gov.cn. 2018b. “Zhengfu gongzuo baogao” (政府工作报告) [Work Report of the Government]. March 3. http://www.gov.cn/zhuanti/2018lh/2018zfgzbg/ zfgzbg.htm Gov.cn. 2018c. Zhonghua Renmin Gongheguo Xianfa (中华人民共和国宪法) [Constitution of the People’s Republic of China]. March 22. http://www.gov. cn/guoqing/2018-03/22/content_5276318.htm People.com. 2017a. “‘Si ge quanmian’ zhanlüe buju” (四个全面战略布局) [Strategic Layout of ‘Four Comprehensives’]. September 6. http://theory. people.com.cn/n1/2017/0906/c413700-29519344.html People.com. 2017b. “Xi Jinping zai Zhongguo Gongchandang di shijiu ci quanguo daibiao dahui shang de baogao” (习近平在中国共产党第十九次全国代表大会 上的报告) [Xi Jinping’s Report of the 19th Congress]. October 28. http:// cpc.people.com.cn/n1/2017/1028/c64094-29613660.html People.com. 2017c. “Zhongyang jingji gongzuo huiyi beijing ju xing” (中央经济工 作会议在北京举行) [Central Economic Work Conference Organised in Beijing]. December 21. http://politics.people.com.cn/n1/2017/1221/ c1001-29719813.html

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Renmin Chubanshe. 2012. Zhongguo Gongchandang di shiba ci quanguo daibiao dahui wenjian huiban  (中国共产党第十八次全国代表大会文件汇编) [Compilation of 18th Congress Documents]. Beijing. Sina.com. 2016. “Zhongguo Gongchandang shiba jie liu zhong quanhui gongbao” (中国共产党十八届六中全会公报发布) [Communique of the Sixth Plenary Session of the 18th Central Committee of the Communist Party of China]. October 27. http://news.sina.com.cn/c/nd/2016-10-27/doc-ifxxfuff6960217.shtml Sina.com. 2018. “Li Jianguo zuo guanyu jiancha fa caoan shuoming” (李建国 作关于监察法草案说明), [Li Jianguo’s Explanation of the Draft Supervision Law]. March 13. http://news.sina.com.cn/c/nd/2018-03-13/doc-ifyscsmv0856085.shtml Xinhua Wang. 2012. “Zhonggong Zhongyang Zhengzhiju zhaokai huyi” (中共 中央政治局召开会议) [Political Bureau of the Central Committee of the Chinese Communist Party Convenes a Meeting]. December 4. http://www. xinhuanet.com/politics/2012-12/04/c_113906913.htm Xinhua Wang. 2016a. “Guanyu xin xingshi xia dangnei zhengzhi shenghuo de ruogan zhunze” (关于新形势下党内政治生活的若干准则) [Some Guidelines on Political Life in the Party Under the New Situation]. November 27. http:// www.xinhuanet.com//politics/2016-11/02/c_1119838382.htm Xinhua Wang. 2016b. “Shibada hou fanfu zouguo san nian: Yadaoxing taishi zheng xingcheng” (十八大后反腐走过三年:压倒性态势正形成) [Combating Corruption in the Three Years Following the 18th Congress: Overwhelming Rectification of the Situation]. January 15. http://www.xinhuanet.com/ politics/2016-01/15/c_128630563.htm Xinhua Wang. 2018a. “Shisan jie Quanguo Renda dici huiyi kaimu hui” (十三届 全国人大一次会议开幕会) [Opening Ceremony of the First Session of the 13th National People’s Congress]. March 5. http://www.xinhuanet.com/ politics/2018lh/zb/20180305b/wzsl.htm Xinhua Wang. 2018b. “Zhongguo Gongchandang Zhongyang Weiyuanhui guanyu xiugai xianfa bufen neirong de jianyi” (中国共产党中央委员会关于修 改宪法部分内容的建议) [Central Committee of the CCP’s Proposal on Amending Parts of the Constitution]. February 25. http://www.net.com/ politics/2018-02/25/c_1122451187.htm Xinhua Wang. 2018c. “Zhonghuo Renmin Gongheguo xianfa xiuzheng an” ( 中华人民共和国宪法修正案) [Amendments to the Constitution of the People’s Republic of China]. March 11. http://www.xinhuanet.com/ politics/2018lh/2018-03/11/c_1122521235.htm

CHAPTER 3

Changes in China’s Economic Development Model After the 19th CPC National Congress Nguyen Quang Thuan and Tran Hong Viet

The transformation of China’s economic development pattern was proposed by the Communist Party of China (CPC) in the context of major changes in the world economy, especially after the global financial crisis of 2008–2009. The “prosperous” period of continuous economic growth in the world had gradually come to an end, and the “flat world” model, bringing in highly specialized allocation along with continuous capital flows to everywhere in the world, had become ineffective. Within China, consequences of the global economic crisis, as well as the internal shortcomings of the “hot” development process have created risks to sustainable development of the economy. The “miraculous” growth based mainly on cheap labour, foreign investment, and so on has lost its advantage. China, in that context, is forced to reform in many aspects to better adapt to the new playfield of integration and to continue enhancing its global competitiveness, securing its position as the world’s second-largest economic power.

Nguyen Quang Thuan (*) Vietnam Academy of Social Sciences, Hanoi, Vietnam Tran Hong Viet Graduate Academy of Social Sciences, Vietnam Academy of Social Sciences, Hanoi, Vietnam © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_3

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The 18th National Congress in November 2012 identified the target focus in the new term as “deepening reform in all areas, attached to the transformation of economic development patterns”, and considered this transformation as a “strategic option related to the entire development of China” (Hu 2012). This strategy focuses on policy reforms, economic reforms, transformation of patterns and growth models for sustainable development. At this point, the implication of “the transformation of economic development patterns” includes “the transformation of economic growth patterns”. This not only requires increasing economic output but also optimizing the economic structure and improving the quality of the economy. It not only involves abiding by economic laws but also the rules of social development as well as values and attempts to combine social and economic relations in a comprehensive way (Nguyen Huy Quy 2015). In the five years from 2012 to 2017, China has stepped up its policy adjustment, focusing on economic structural reform from several directions. First, there was a transition from a growth model based on investment and exports to a more balanced growth model, mainly based on domestic consumption and services; the new urbanization strategy is seen as an effort to expand domestic demand and create new momentum for economic growth. Second, there was the acceleration of economic structural reform, stabilizing the macro-economy, especially financial and monetary markets, adjustment of the growth rate to a reasonable level, while concentrating on developing key economic sectors, service sectors and prioritizing the development of high technologies. Third, the focus was on resolving the latest economic problems, notably excess production, rising public debt and real estate bubbles. Fourth, the strengthening of social security policies to maintain political stability was considered a basis for economic development with a focus on solving employment problems, distributing income to close the gap between the rich and the poor and increasing the budget for education and health. Fifth, there was the promotion of foreign economic relations, implementing positive open-door strategies, diversifying offshore investment, internationalizing the Renminbi and developing the maritime economy. After five years of adjusting policies and transforming the development model, the Chinese economy has achieved certain important results. Macro-economic stability has been maintained despite a decline in GDP growth and inflation rate was firmly kept at less than 3%, while sustaining a high level of foreign currency reserves, thus contributing to improving the position and potential of the economy. The economic structure

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changed in a positive direction with domestic consumption increasing, while investment tended to decrease. Attempts were made to control and resolve real estate bubbles and bad debt. The fundamental changes in the growth structure during 2012–2017 with the consumer economy and service economy accounting for a large proportion of China’s GDP growth, supports the CPC assertion that the life quality of people is improving in parallel with the country’s economic growth. In the Government Work Report presented by Prime Minister Li Keqiang at the opening session of the 13th National Assembly’s First Meeting on 5 March 2018, the Chinese government acknowledged new development steps in the country’s economic strength. In five years (2013–2017), gross domestic product (GDP) rose from RMB54 trillion to RMB82.7 trillion, with an average increase of 7.1% per year, that is, from 11.4% to around 15%, respectively, in the world economic share, and the contribution rate to the world economic growth exceeded 30%. Budget revenue increased from RMB11.7 trillion to RMB17.3 trillion renminbi. The consumer price index rose by just 1.9%, maintaining a low level. More than 66 million new jobs were created in urban areas, helping to improve the country’s employment rate (Li 2018). China’s economic growth reached 6.9% in 2017, exceeding the government’s target of 6.5%, with retail sales to economic investment, and industrial production to domestic consumption, all surpassing forecasts. Notably, it was consumption that contributed 63.4% to the GDP growth (Tran Tien Dung 2018). In general, the transformation of economic development patterns has gradually contributed to fundamentally altering China’s quality of growth, creating sustainability, and gradually approaching the growth quality of developed economies in the world. However, these important achievements apart, the desired results of China’s economic development in the recent period have not been entirely achieved. The economy still faces many difficulties and challenges, namely, imbalance, uncertainty and instability, as highlighted in the 18th National Congress documents or imbalance and inadequacies as noted in the 19th National Congress documents, evident in the development gap—the gap between the rich and the poor (Eastern and Western regions), between urban and rural areas, and between different classes in society. Development quality and efficiency are not high, and the environment is seriously threatened, while industrial overcapacity, specifically in cement, iron and steel, together with the risks of public debts, especially those of local governments, continue as serious problems. If these are not controlled and managed, then it is easy for macroeconomic instability or even social unrest to occur.

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There are many reasons leading to the above situation, but in theory, the handling of the relationship between the State and the market has had problems. The awareness of market economy rules is inadequate and the “socialist” market economy institution is incomplete (Do Tien Sam 2018b). Besides, the government still has too much involvement in market operations, many loopholes remain in financial monitoring, management and regulation, and interest groups continue to slow down the process of deepening reforms. Thus, quality and efficiency of growth are not as high as expected. All of these issues require China to make new adjustments to accelerate the transformation of economic development patterns, in order to realize its goal of successfully developing a “well-off” society by 2020, as put forward by the 19th National Congress.

 Perspectives on Economic Development in the 19th National Congress Report The 19th National Congress of the CPC in October 2017 marked the beginning of the second term of the General Secretary and PRC President Xi Jinping, and had taken place in the context when Chinese special socialism had entered a “new era”, a period of major changes in the country’s development strategy in general and in the transformation of China’s economic development patterns, in particular. Reviewing the results after five years of implementing the deepening reform strategy, attached to the transformation of economic development patterns from the 18th National Congress, the CPC in its documents stated that “the main conflict of Chinese society has transformed into a contradiction between the growing demand of the people for a good life and the development of imbalance and inadequacies” (Xi 2017). In terms of the economy, the 19th National Congress documents specified that the Chinese economy had shifted from a high growth phase to a high-quality development period. China’s economy is at a critical stage of changing development patterns, optimizing economic structures and transforming growth dynamics. Therefore, building a modernized economic system is an urgent need and is a strategic goal in China’s development. There are several new imperatives on the development of modern economic institutions that have emerged. First is the need to persist with quality, prioritize efficiency and to take supply-side structural reforms as the main line to foster development for better quality, higher efficiency

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and with more robust drivers, thereby improving the productivity of related elements. Second is the need to speed up the production system of the real economy, advance science and technology innovation, establish a modern monetary and financial system and to “harmoniously” develop human resources. The 19th CPC Congress also attaches great importance to the development of economic institutions in the direction of more effective market mechanisms and sound macro-regulation. Finally, there is the focus on the need to continuously strengthen the innovation capacity and competitiveness of China’s economy. From the above points of view, six main solutions have been identified in the 19th National Congress documents as follows: Deepening structural reforms of the supply system; accelerating the creation of innovative state models; implementing the strategy of rural revitalization; applying balanced development strategy among the regions; swiftly completing the institution of the “socialist market economy” and facilitating the formation of a new open-door foreign policy. A key point in China’s economic development model after the 19th CPC National Congress is that economic reforms will follow the approach of “large state, small market”. This carries an apparently strong message of economic reforms, but it will be the State that leads the process with no massive marketization. Political stability and national interests are China’s priorities, compared to the setting up of market economy principles. This is fundamentally different from the approach at the CPC’s 18th National Congress. There are two reasons for the intervention of the State in China’s current economic development policies: First, China must fulfill its first goal (out of the two) of the century, which Xi Jinping has stated in his first term, of GDP per capita in 2020 doubling from that of 2010. This requires the State to have stronger economic policies or instruments to intervene in case the private sector declines or fails to maintain the pace of growth. Second, China’s major foreign economic initiatives and strategies require enormous resources and tools for implementation. As a result, it is state-­ owned enterprises (SOEs) rather than private corporations with their close ties to the government that are often given policy incentives and access to resources to achieve the objectives pursued by the Chinese government.

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Developing an Economic Development Model with Specific Chinese Characteristics

The message on economic development model after the 19th National Congress, as underlined by Xi, is that China will combine the State’s deepening involvement with the market to achieve the goal of having a modern and influential economy. In essence, this is similar to the model of State capitalism (Pham Sy Thanh 2017). To engage, the State will use both orientation policies and the tool of SOEs. In China, SOEs as the main driver of national economic development play a leading role in the supply-­ side reform and assume the role of positioning this reform pattern and pioneering the major forces of the reform. Particularly, along with the Belt and Road Initiative (BRI) and the “Made in China 2025” strategy,1 private businesses are selected or designated as beneficiaries of the Government’s incentives to implement predefined goals. It can be seen that, in recent times, China’s private technology giants such as Alibaba, Baidu, Tencent are becoming huge forces in the global economy. It was at first due to the advantages of domestic markets and resources and then followed by large incentives and investments in the area of science and technology from the Chinese government. These companies are assigned the task of developing new and high technology industries based on big data, cloud computing, digital payment, robotics and so on, thereby enhancing the national capacity of competitiveness and affirming the leading position of China’s technologies. In the process of exerting influence abroad, China not only promotes capital exports and labour exports but also exports its own “development patterns”. Apart from the BRI being brought into the Party’s constitution, Xi has also introduced new concepts and argued for “Chinese wisdom” and Chinese projects at the 19th National Congress for countries aiming to both develop rapidly and avoid the crisis of the free market economy. This is considered a model for nations and peoples who want to accelerate their development while remaining independent and unaffected by the interference of other nations. The “Chinese model” or the “Chinese 1  “Made in China 2025” (released in May 2015) is China’s ten-year industrial development plan, described as an initiative to “completely upgrade” Chinese industries. Targets include increasing the proportion of domestic products in key industries to 40% by 2020 and to 70% by 2025. This plan focuses on high-technology areas, including the pharmaceutical industry currently controlled by foreign companies.

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solution” is development patterns with Chinese characteristics, with features of political stability and safe living environment—which can become a reference model for other countries (Fukuyama 2016). However, there are still doubts about development models with Chinese characteristics, as these models could work well in China at present (mainly thanks to the Chinese authorities’ control over the political environment), but not necessarily in a foreign country—where instability, conflicts and corruption could hamper the model’s goals. On the other hand, through the export of development models, China also shows its willingness to take on new international roles as a leading country promoting new economic trends. 

Supply-Side Adjustment as Main Focus of the Economic Reform Process

China’s economic restructuring and development model transformation is defined as a comprehensive process, closely linked to supply-side adjustments through measures, such as: (i) decreasing redundancy of outputs; (ii) reducing inventories; (iii) lessening financial leverage ratio; (iv) support for poor and difficult areas; (v) lowering capital expenditures. Supply-­ side adjustment in economic restructuring can be essentially understood as a risk-control measure before making necessary reforms to the economy. However, tightening budget constraints will slow down investment and growth. To ensure the targeted GDP growth, the Chinese government could prioritize monetary policy reforms to prevent financial risks, especially a debt crisis; at the same time, the government advises SOEs to increase investment in the designated areas. To transform the development patterns, China must promote monetary and financial policy reforms in the years ahead. However, this needs to be carried out with caution, avoiding negative impacts on the development of the economy in general. Therefore, comprehensive reform of monetary and financial policy will take place under conditions where the State has sufficient policy tools to avoid negative impacts on quality and pace of growth. These tools include large domestic reserves, substantial public sector assets and low level of foreign debts. Monetary and financial policy reform measures taken after the 19th National Congress, include: (i) abandoning fixed GDP growth target to move on to the “GDP zone” target; (ii) reducing pressure on the implementation of open monetary and fiscal policies, facilitating the reform of finance and banking sector;

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(iii) closely monitoring competition and regulation of securities, interest rates, capital and credit markets; (iv) prioritizing drastic debt reduction for SOEs. Supply-side structural reform is in fact a long-term plan to intervene in the economy through SOEs. In the final years of Xi’s first term, the trend of SOE reforms to promote and encourage mixed ownership and public-­ private partnerships instead of antitrust has become mainstream. The Chinese government has determined that ineffective SOEs should go bankrupt or be merged. At the 19th National Congress, the CPC has further pursued SOE reforms, continuing to implement key measures taken since the 18th National Congress’ economic restructuring process, affirming the leading role of the State in the operation of both SOEs and markets. A number of measures are being proposed for implementation from 2017 to 2022. These include only increasing private equity but not accepting privatization; using the State’s capital investment companies as the main gateway to reform the ownership regime for SOEs; and rapidly merging large-scale SOEs and promoting these as multinational companies to work on a global scale. BRI as Foundation for China’s New Foreign Economic Relations At the 19th National Congress, there were a number of important additions to the Party’s constitution, in which the most important point was the addition of “Xi Jinping’s Thought” and the BRI. Although the whole process of policy-making and implementation of the BRI began in 2013, it has, however, not been really effective and has been met with considerable suspicion and opposition abroad. Though institutionalized within China, and intensively promoted on an international scale, the implementation of the BRI remains short of transparency, strategies and clear operational framework. Therefore, the introduction of the BRI into the Party’s Constitution has institutionalized it at a high political level, creating legal foundation and mandatory policies at the highest level. China now has the opportunity to fully reassess the BRI as regards goals, focus, partners and implementation methods, thereby creating a new platform for China’s policies on foreign economic relations in the coming time.

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New Challenges After the 19th National Congress By highlighting “socialism with Chinese characteristics in the new era” in the opening speech at the 19th National Congress, Xi has sent out the message that “the development of China has gone beyond the era of Mao Zedong’s thought and Deng Xiaoping’s theory” (Pham Sy Thanh 2017). The immediate goal is to develop a complete well-off society by 2020, at the same time shaping China’s development direction until the middle of this century (including milestones for 2035 and 2050), becoming a great modernized socialist country that is “prosperous, democratic, culturally advanced, harmonious and beautiful”. The 19th National Congress has affirmed that China’s goals are to become an economic power, leading the world in a number of economic and scientific areas, actively participating in global economic governance, participate in and promote economic globalization. Chinese leaders believe China will even be stronger over the next several years (in the period of 2020–2035), given that it is the second-largest economy in the world by nominal GDP measured in US dollars since 2010. Likewise, China has become the largest global trading value country, with an ever-­ expanding network of trading partners since 2013. China has also become the world’s largest economy by purchasing power parity (PPP) since 2014. At present, China is playing an important role in the new international division of labour and is a high-technology power and price determiner in many world markets (Nguyen Binh Giang 2018). As regards the outlook for the period of 2017–2022, China’s economy is forecast to continue to recover, and the growth rate is expected to enter the “7% era” (or hover around the 7% mark). This calculation is based on the fact that China’s economy has gradually stabilized and that the process of restructuring associated with the change of development pattern is still effective. China has many internal advantages such as high domestic demand, a 700 million-strong labour force, with increasing number of skilled workers; favorable political regime, strong administration and a stable business environment. Besides, China also has the advantage of a fully constituted national economic system, making the most of its role in ensuring national economic security. Therefore, China is quite capable of achieving its objectives within the next five years (Ouzhou Shibao 2017). In the Government Work Report presented by Premier Li, China’s pace of economic growth in 2018 was expected to be about 6.5%. If the

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average growth rate in the period of 2017–2022 is successfully maintained at 6.5%, by 2021, the country’s total economic output can reach RMB113 trillion (around US$17 trillion), about three-fourths of the United States (US) economy (Do Tien Sam 2018a). In terms of contribution to world economic growth, since the Chinese economy continues to maintain steady growth, it will contribute about 40%, with its share of imports and exports in global trade expected to reach about 20%, making it the largest trading partner in most parts of the world. In this context, the internationalization level of the renminbi will also increase. Therefore, it is possible that the renminbi, along with the US dollar and the Euro, will form a “tripod” in the world’s monetary system. However, there are also viewpoints that China, after a long period of high and stable economic growth, from 2020 will enter a slowdown cycle, or even a recession. Further, China still faces internal challenges such as huge resource pressures for economic growth, issues with the competitiveness of the Chinese economy, unequal income distribution, development disparities and an ageing population and the lack of social security. The 19th National Congress of the CPC has stressed that the main conflict in the Chinese society has transformed into a contradiction between the increasing demand for better life of the people and unbalanced, inadequate development. In order to promote economic development, China must improve with regard to institutions, focusing on three issues: promoting quality development, focusing on “three big hurdles” of development pattern, economic structure and growth drivers and finally, rapidly developing a modern economic system that prioritizes quality and efficiency. In terms of the international economy, the rise of trade protectionism has had great impact on global economic growth and cooperation among economies. The US-China trade war, which began in mid-2018, has certainly had a huge impact on the world economy in general and on the Chinese economy in particular, posing many challenges to the country’s development model in the next stage. There are views that China’s “miraculous” growth over the years was dependent on the prosperity of other countries, where its products are consumed, including the US and Western countries (Tuan Anh 2018). As a result, in the context of possible US-China trade war, China is forced to make necessary adjustments to its strategies, and the first one is to further enhance the state’s control over the economy. The state will more closely control information, assets and economic activities, which will help Chinese leaders to manage trade

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war impacts, preventing external threats and pressure on the economy. China will also step up internationalization of the renminbi, creating opportunities for many nations sanctioned by the US to “avoid” sanctions by exporting their products to China and getting paid in renminbi. At the same time, China is strengthening cooperation with countries in the region, especially Russia, Japan and the ASEAN, to resolve the problem of surplus domestic supply. The immediate objective of creating markets for Chinese products can be achieved by exporting more to a third country where American products are taxed (Phuong Anh 2018). In general, though facing many difficulties and challenges, it is clear that in the coming years, with its increasing influence, China will still be able to maintain a moderately high pace of economic growth. The period from 2017 to 2022 will be a critical period for China’s development. China will be expected to fulfill its first centennial  goal of developing a “well-off” society by 2020 as well as lay the foundations to realize its second centennial  goal of becoming a modernized country by 2035 and achieving the “Chinese Dream” by 2050. These will be important driving forces for China to mobilize all resources and creative potential in society for the purpose of high-quality development in the new era.

References Do Tien Sam. 2018a. “Dinh huong kinh te Trung Quoc giai doan 2017–2023 va nhung tac dong den Viet Nam” [China’s economic direction in the period of 2017–2023 and its implications for Vietnam], Tai chinh. 23 March. http:// tapchitaichinh.vn/nghien-cuu-trao-doi/dinh-huong-kinh-te-trung-quoc-giaidoan-20172023-va-nhung-tac-dong-den-viet-nam-137125.html Do Tien Sam. 2018b. “Trien vong phat trien kinh te cua Trung Quoc sau Dai hoi XIX” [China’s economic development outlook after the 19th National Congress], Tai chinh. 14 February. http://tapchitaichinh.vn/tai-chinh-quocte/nhan-dinh-du-bao/trien-vong-phat-trien-kinh-te-cua-trung-quoc-sau-daihoi-xix-135464.html Fukuyama, Francis. 2016. “Exporting the Chinese model”, Project Syndicate. 12 January. https://www.project-syndicate.org/onpoint/china-one-belt-oneroad-strategy-by-francis-fukuyama-2016-01 Hu Jintao. 2012. “Firmly March on the Path of Socialism with Chinese Characteristics and Strive to Complete the Building of a Moderately Prosperous Society in All Respects”. Report delivered at the 18th National Congress of the Communist Party of China, on 8 November 2012. People’s Daily. 17 November. http://en.people.cn/90785/8024777.html

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Li Keqiang. 2018. “Zhengfu gongzuo baogao” (政府工作报告) [Government Work Report], Opening Session of the 18th National Assembly’s First Meeting, Gov.cn. 5 March. http://www.gov.cn/zhuanti/2018lh/2018zfgzbg/ zfgzbg.htm Nguyen Binh Giang. 2018. “The va luc ve kinh te cua Trung Quoc hien nay” [Position and strength of Chinese economy at present], Chinese Studies Review, No. 1. 3–14. Nguyen Huy Quy. 2015. “Kinh te Trung Quoc trong qua trinh chuyen doi phuong thuc phat trien hien nay” [China’s economy in the transition of current development pattern], Communist Review, No. 10. 16 October. http://www. tapchicongsan.org.vn/Home/The-gioi-van-de-su-kien/2015/35662/Kinhte-Trung-Quoc-trong-qua-trinh-chuyen-doi-phuong-thuc-phat.aspx Ouzhou Shibao (欧洲时报). 2017. “Jingji Guancha: Weilai wu nian, Zhongguo jingji zou ruhe?” (经济观察:未来五年,中国经济走如何) [Economic Observer: Where will China’s economy be in the next five years?]. 28 October. http:// www.oushinet.com/wap/china/chinanews/20171028/276386.html Pham Sy Thanh. 2017. “Dinh hinh kinh te Trung Quoc sau Dai hoi 19” [Shaping China’s economy after the 19th National Congress], Saigon Economic Times. 27 October. https://www.thesaigontimes.vn/165944/dinh-hinh-kinh-tetrung-quoc-sau-dai-hoi-19.html Phuong Anh. 2018. “Duong dai moi biet ngua hay: Chien tranh thuong mai dang tang suc manh cho dong tien Trung Quoc?” [A long road tests a horse’s strength: Is the trade war strengthening the Chinese currency?], VTCNews. 10 September. https://vtc.vn/duong-dai-moi-biet-ngua-hay-chien-tranh-thuong-mai-dang-tang-suc-manh-cho-dong-tien-tien-trung-quoc-d425499.html Tran Tien Dung. 2018. “Nhung thay doi can ban cua kinh te Trung Quoc trong thoi ky nha lanh dao Tap Can Binh” [The fundamental changes of the Chinese economy during the Xi Jinping’s administration]. 7 April. http://tapchitaichinh.vn/tai-chinh-quoc-te/nhung-thay-doi-can-ban-cua-kinh-te-trung-quoctrong-thoi-ky-nha-lanh-dao-tap-can-binh-137423.html Tuan Anh. 2018. “Trung Quoc lo diem yeu, muon tranh chien tranh thuong mai voi My?” [Showing weaknesses, China wants to avoid trade war with the United States]. Vietnamnet. 8 June. http://vietnamnet.vn/vn/the-gioi/binh-luanquoc-te/trung-quoc-lo-diem-yeu-muon-tranh-chien-tranh-thuong-maivoi-my-455532.html Xi Jinping. 2017. “Secure a Decisive Victory in Building a Moderately Prosperous Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a New Era”, Report delivered at the 19th National Congress of the Communist Party of China, Xinhua. 18 October. http:// news.xinhuanet.com/politics/19cpcnc/2017-10/27/c_1121867529.htm

CHAPTER 4

Xi Jinping’s Political and Economic Initiatives and the ‘Success Trap’ Manoranjan Mohanty

As Xi Jinping reaches the mid-point of his second term, one should ask how he has dealt with the systemic problems that China has experienced at the end of four decades of reforms, even as its successes in crucial areas are recognised widely. In achieving significant improvement in people’s livelihood and reduction of poverty, setting up modern urban infrastructure, becoming the world’s second-largest economy and emerging as an influential world power are no doubt remarkable achievements. But they have come at some cost. Increasing social and regional inequality, environmental degradation, social alienation, curtailment of freedoms and persisting corruption are some of the problems. This indeed is China’s ‘Success Trap’ (Mohanty 2018)—that Xi Jinping inherited. While recognising the successes and the problems, we should ask, why is China unable to overcome the trap? Even though the problems were acknowledged clearly during the regime of Hu Jintao and steps were initiated then and intensified under Xi Jinping, one must assess to what extent the ‘Success Trap’ has been tackled. Xi Jinping’s leadership of contemporary China embodies a

M. Mohanty (*) Council for Social Development, New Delhi, India Institute of Chinese Studies, New Delhi, India © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_4

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number of initiatives affecting practically every sphere of Chinese polity, economy, society and external affairs, which not only address such problems but also set new goals. As the political scenario evolves following the 19th Congress of the Communist Party of China (CPC) and as the first centenary celebration in 2021 draws closer, it has become clear that Xi is pursuing a three-pronged strategy to consolidate his leadership. First, through a focus on people’s day-to-day problems of livelihood; second, invoking the Chinese nation and its long tradition; and third, the projection of a rising China launching global initiatives. Using these three sets of initiatives, Xi also launched his anticorruption campaign, built himself as the ‘core’ of the Party, established his command over the People’s Liberation Army (PLA) and ended term limits for the positions of the  President and the Vice-President  of the People’s Republic. Stressing a new development philosophy and launching the Belt and Road Initiative (BRI) among his many bold initiatives should be seen in this perspective. He has put all his policy initiatives into one package by announcing the arrival of China in a ‘New Era’ and declaring ‘Xi Jinping Thought on Building Socialism with Chinese Characteristics for a New Era’ and putting them into the Party, as well as the State Constitutions. Right from his first press statement on taking over as General Secretary of the CPC in October 2012, Xi Jinping has cultivated an image of caring for common people’s everyday problems. This saw him emphasise on the role of cadres to be ‘people-friendly’, honest and non-corrupt, rather than show achievement of high growth rates and profits in their unit. Jobs, health facilities, education, elderly care and clean environment, as well as making life easier for urban residents and migrants have been his major initiatives. More than all other measures Xi’s poverty-eradication initiative has borne his personal stamp. One of his early publications after taking over were his speeches on his work in fighting poverty in Fujian Province, where he had served as Party Secretary. Describing poverty eradication as one of the ‘three critical battles’—the other two being managing financial uncertainties and handling environmental problems—Xi declared his goal of eliminating absolute poverty by 2020. Holding annual work conferences to monitor poverty eradication and announcing specific targets in the Premier’s Work Report at the National People’s Congress (NPC) and frank admission of weaknesses in implementation of some of the policies are some of the notable features of the Xi regime’s anti-poverty strategy. These were all reiterated in Li Keqiang’s Work Report to the Second Session of the 13th NPC in March 2019, which mentioned that 13.86 million were lifted out of extreme poverty and the target for 2019 was another ten million (Li 2019).

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The National Development and Reform Commission’s (NDRC) 2019 Report gave details of the approach that focused on three regions and three prefectures—mostly minority nationality areas—where poverty was concentrated. Rather than define poverty in income terms, even though there was a figure for this—RMB5000 per year as of 2017—the approach was to provide access to food, clothing, education, basic medical services and housing along with care for the disabled and the elderly. Granting central subsidies to local industries and regions to provide employment, education, health, social security, ecological conservation and strictly enforcing responsibility in implementation has seen an unprecedented momentum. Helping in finding jobs for 3.88 million poor people and relocating 2.8 million of the population from places where inhospitable natural conditions hampered their livelihood and tackling the problem of some people slipping back into poverty, have been distinct features of the current poverty eradication drive (National Development and Reforms Commission 2019). Xi’s focus on precision-targeting in tackling poverty is yet another important aspect. One can see a successful realisation of this target by 2020 when the last of the less than ten million poor would have been lifted out of extreme poverty. Besides Xi Jinping’s anti-poverty drive there have been other measures to showcase the regime as caring for the day-to-day problems of ordinary people. Universalising health insurance—covering over 90 per cent of the population—enhancing the quality of educational facilities, expanding enrolment in higher education, relaxing the hukou rules and making migrant population eligible to have education, health and housing entitlements in many intermediate level cities are part of this package. Of course, the change in the one-child policy allowing couples to have two children was welcomed by all. These measures were intended to maintain and expand the legitimacy of the regime and enable it to pursue its governance strategy. All this has been a major source of building popular support for the current Party leader who is in his second term and may go for a third term which, while against the norm, seems to have now become a possibility as the state constitution has been amended doing away with term limits for the presidency. While the pro-people image has provided one source of legitimacy, a second source in Chinese nationalism has also been consciously built up. Soon after taking over as the Party leader, Xi Jinping declared in November 2012, that the goal of the Chinese people was realising the ‘Chinese Dream of National Rejuvenation’ (Wu and Yan 2012). This call electrified

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the imagination of the common people and it acquired a special relevance given two important centenaries on the horizon of the Party leadership— the centenary of the founding of the CPC in 2021 and that of the PRC in 2049. The stress on a supposed 5,000-year old civilisational history and the reference to the humiliation suffered by China at the hands of imperialism for over one hundred years have become a regular part of the new discourse (Tan 2017, 2019). Policies of the Party centre in order to achieve the stated goals of 2020, namely, achieving a ‘moderately well-off society in all respects’ and maintaining stability in society to carry forward the agenda have now been advanced as a nationalist project. All the policies, especially the shifts from a high rate of growth to quality of development are now put in this perspective. Thus, the talk of China having entered a new era where the basic economic targets of the forty years of reforms since 1978 have been accomplished and China, now having to perform new tasks at home and in the global arena. And as the leader, Xi Jinping is in charge of carrying a rising China forward with a new mission. Thus, the nationalist platform has been studiously built up to stress conditions of stability for pursuing the agenda for the ‘new era’, also helping consolidate Xi’s leadership. Therefore, abolition of the term limits is not an unusual development. Initiatives in the global arena have, therefore, been projected as a part of the mission in a new era. Promoting a ‘new type of big power relations’ in the 21st century, a new security doctrine, the BRI and the concept of the ‘community of common destiny’, and defending the basic tenets of economic globalisation now constitute Xi Jinping’s diplomatic strategy (Rana 2019). Each one of them is connected to domestic policies and realities, while shaking off the Deng Xiaoping line of ‘lying low and bide your time’, and are part of an activist, assertive international line (Acharya 2019). Seen as a whole the legitimation and governance strategy embodied in Xi Jinping’s leadership has more elements than that of either Jiang Zemin or Hu Jintao. While Jiang focused on growth with a subdued foreign policy, Hu stressed on social and ecological development also, with a less than an activist international line. In many ways Xi has gone beyond Deng’s framework of institutional functioning. We can see this in the three-pronged legitimation and consolidation strategy in some specific aspects and try to assess their long-term implications.

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The ‘New Era’ According to Xi Jinping, China has entered a new stage of ‘national rejuvenation’, which is about the Chinese Dream. When Mao Zedong declared from the ramparts of Tiananmen Squire on the inauguration of the People’s Republic of China on 1 October 1949, ‘The Chinese people have stood up!’ (Zhongguo zhanqi lai! 中国站起来!), he meant that China had achieved national independence and could not be bullied by imperialism any more. Deng Xiaoping led the ‘great new revolution of reform and open door’, which achieved a moderately prosperous society. The popular formulation on this is that because of the reforms ‘China had become a rich country’ (Zhongguo fuqilai! 中国富起来!). The new era now referred to ‘building China as a strong country’ (Zhongguo qiang qilai, 中国强起来). Changing with the times has been a constant refrain of Xi Jinping’s addresses right from the time he took over. To face the new challenges before China, he has put great emphasis on the role of the CPC and, therefore, Party-building has been one of his main preoccupations. The anti-corruption campaign is meant to make the party an efficient instrument to play this new role in full conformity with the new line of thought. In the Political Report, he again and again spoke of the ‘great mission’ of the Party to accomplish the goals of the new period. Changing with the times and facing the tasks of a new era has become the recurrent theme of all discourses from the 19th Party Congress right through the months leading to the convening of the 13th NPC the following year. Analysing the Political Report we can discern three features of this new era. First, an acknowledgement that China had realised the goal set for 2020, namely ‘well-off or prosperous society in all respects’. This happens to be on the eve of the first centenary of the foundation of the CPC, and, therefore, has much ideological and political significance. The second feature is the agenda for achieving the goal for the second centenary—the 100th anniversary of the founding of the PRC.  That goal was to make China a ‘great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful’ (Xi 2017). This goal had been the focus of the 19th congress with a two-phase plan—one from 2020 till 2035 and another for the period till 2049. Here, out of all the descriptions of the projected goal of building a ‘strong China’, economically and militarily using innovation, technology and people’s mobilisation in the cyber era has drawn prominent attention. Efforts on all fronts are to be geared towards these goals.

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The third feature is the detailed analysis of the challenges that the party faced domestically and externally in the Political Report. Domestic challenges were captured in the articulation of the new ‘principal contradiction’ between ‘unbalanced and inadequate development and people’s rising needs’. This acknowledged the existence of many problems not only in various sectors of the economy but also in society, culture and, above all, in the environment. The ‘four comprehensives’ and a series of specific measures to improve governance are in response to these. The external dimensions, namely, global challenges and the strategy to cope with them, were also highlighted at the 19th Congress. In earlier party congresses, the foreign policy and initiatives on global issues were a much smaller component and were never the focus. In the 19th Congress, Xi clearly wanted the Chinese people to consciously see themselves as citizens of a rising nation, with the aim of becoming a leading power by the mid-21st century and sent the message to the world accordingly. Many of the foreign policy doctrines, which were announced from time to time during the first five years by Xi, were refined and presented at the 19th Party Congress. The three most conspicuous of these that now form what is called the ‘new type of international relations’ or the diplomatic line during the ‘new era’ are—major country relationships in the 21st century, working for the “common destiny of humankind” and the BRI. What is significant is the thrust given to the ‘new era’ tasks. Xi emphasised that the old mindset would not do and, everyone, every institution, must be determined to ‘emancipate their thought’, cope with the challenges of the ‘new era’ and show performance. It was like Deng Xiaoping’s drive in the first years of reforms to eliminate the ideological impact of the Cultural Revolution-era doctrines. While acknowledging the great achievements of the past four decades—calling the ‘reform and open door’ as the second great revolution—he squarely pointed out how there were many things ‘long on the agenda but not done’ and that his regime had accomplished them. This sets the tone for the performance criteria for the ‘new era’. Do the formulations at the 19th Party Congress adequately comprehend the main features of the ‘new era’ or the manifest and latent issues in contemporary China and the world and the near future of the next three decades? This is open to debate, at least, on three grounds. First, domestically, the causes of alienation of the people are economic, political, cultural and ecological. Second, the key feature of the global process is the

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affirmation of autonomy of people, nations and cultures all over the world. The economic and political doctrines in the new global perspective announced in the 19th Congress did not seem to seriously address this aspect. The third, and perhaps, the most significant issue globally, is the environmental challenge of the anthropocene era with serious policy implications for domestic policies and international relations.1 The 19th Congress will, however, be remembered for its proclamation of the recognition of a ‘New Era’ and it might be argued that it is to face the challenges of the New Era that the 19th Congress announced the formulation of ‘Xi Jinping Thought’.

‘Xi Jinping Thought’ Interestingly, neither Mao Zedong Thought nor Deng Xiaoping Theory was ever spelt out in such detail as ‘Xi Jinping Thought’ was in the Political Report at the 19th Congress. It “makes clear” eight affirmations and then states 14 points to guide policies on various fronts, thus presenting a comprehensive framework of theory and practice for the new era (Mohanty 2019). The eight clarifications are in the nature of statement of principles guiding policies and had been talked about in bits and parts on various occasions during the past five years. They are stated as follows in the Political Report, section III, and can be put in a summary form along with some important quotes, as follows: 1. A two-step approach to build ‘a great modern socialist country’ (till 2035 and then till 2049) 2. The ‘principal contradiction’ is ‘between unbalanced and inadequate development and the people’s ever-growing needs for a better life’; promote people-centred, well-rounded human development 3. The five-sphere integrated plan (economic, political, social, cultural and ecological), and the four-pronged comprehensive strategy (comprehensively achieve well-off society, deepen reforms, promote rule of law and enforce strict self-governance of the Party) 4. Deepen reform in every field 5. Promote socialist rule of law 1  For a detailed discussion on the multidimensional environmental crisis in the Anthropocene era see, Falk et al. (2017).

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6. Build a strong military, world-class forces that obey the Party’s command, can fight and win 7. Major country diplomacy with Chinese characteristics aims to foster a new type of international relations and build a community with a shared future for mankind 8. Party leadership is the highest force for building socialism with Chinese characteristics in the ‘new era’. These eight principles are clearly stated as the constituent elements of Xi Jinping Thought, which, as the Political Report puts it, ‘represents the latest achievement in adapting Marxism to the Chinese context and encapsulates the practical experience and collective wisdom of our Party and the people’ (Xi 2017) (emphasis added). This resonates with the way Mao Zedong Thought has been presented in the past. It may be recalled that the first time mention was made of the Political Thought of Mao Zedong was at the Seventh Congress of the CPC in 1945 and that formulation continued till the Cultural Revolution when the drive to build a political and ideological cult of Mao reached its peak. At that time the formulation Mao Zedong Thought (Mao Zedong sixiang) was put into the CPC Constitution and it has stayed as such since.2 None of Mao’s successors adopted ‘thought’ for their contribution—Deng Xiaoping’s major ideas on reforms were referred to as ‘theory’ (lilun). The eight principles of Xi Jinping Thought are complemented by a set of 14 points, which further clarify the meaning of the guiding principles and are perhaps intended to facilitate implementation of them on the ground. These are: 1. Ensuring Party leadership over all work 2. Committing to a people-centred approach 3. Continuing to comprehensively deepen reform 4. Adopting a new vision of development that is innovative, coordinated, green and open development that is for everyone 5. Ensuring that the people run the country—uphold the organic unity of Party leadership, people-centred and law-based governance

2  Lin Biao had asserted in 1967, “The ever-victorious thought of Mao Tse-tung is MarxismLeninism in the era in which imperialism is heading for total collapse and socialism is advancing toward worldwide victory” (Lin 1967).

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6. Ensuring that every dimension of governance is law-based, that is, socialist rule of law with Chinese characteristics 7. Upholding core socialist values of ‘…creative evolution and development of fine traditional Chinese culture, revolutionary culture, and develop an advanced socialist culture, cherish our cultural roots, draw on other cultures, and be forward-thinking, foster a Chinese spirit, Chinese values, and Chinese strength to provide a source of cultural and moral guidance for our people.’ 8. Ensuring and improving living standards through development ‘… promote social fairness and justice, make steady progress in ensuring people’s access to childcare, education, employment, medical services, elderly care, housing, and social assistance.’ 9. Ensuring harmony between humans and nature ‘… building an ecological civilization... fundamental national policy of conserving resources and protecting the environment... develop eco-friendly growth models and ways of life... sustainable development featuring increased production, higher living standards, and healthy ecosystems... continue the Beautiful China... and play our part in ensuring global ecological security.’ 10. Pursuing a holistic approach to national security ‘Ensure both development and security... put national interests first, take protecting people’s security as the mission and safeguarding political security as a fundamental task, and ensure both internal and external security, traditional and non-traditional security, and China’s own and common security… enhance capacity-­ building for national security, and resolutely safeguard China’s sovereignty, security, and development interests.’ 11. Upholding absolute Party leadership over the people’s armed forces ‘Building people’s forces that obey the Party’s command, can fight and win, and maintain excellent conduct is strategically important to achieving the two centenary goals and national rejuvenation.’ 12. Upholding the principle of “one country, two systems” and promoting national reunification 13. Promoting the building of a community with a shared future for mankind ‘The dream of the Chinese people is closely connected with the dreams of the peoples of other countries; the Chinese Dream can be realized only in a peaceful international environment and under

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a stable international order… foster new thinking on common, comprehensive, cooperative, and sustainable security. We will pursue open, innovative, and inclusive development that benefits everyone... safeguard world peace, contribute to global development, and uphold international order.’ 14. Exercising full and rigorous governance over the Party ‘We must focus on oversight... over leading officials... uphold democratic centralism... impose strict Party discipline, and strengthen internal oversight... develop a positive and healthy political culture in the Party... resolutely correct misconduct in all its forms, and show zero tolerance for corruption’ (Xi 2017). These fourteen ‘points’ together with the eight ‘clarifications’ present what may be called the guiding principles of the many policies that have emerged under the leadership of Xi Jinping. Some ‘clarifications’ such as enforcing overall leadership of the Party, are further stated among the ‘points’. Since the Sixth Plenum in 2016, this aspect has been stressed. Some statements like the ones on environment, security and culture had already been basis of specific policies for many years. Similarly, the concept of ‘one country, two systems’ goes back to the mid-1990s. Together, the Eight-Fourteen framework proclaimed as Xi Jinping Thought presents a policy package carrying his distinct stamp and aim to address China’s ‘success trap’ and achieve the goals associated with the centenaries of CPC and the PRC.

The Policy Package Xi Jinping’s many new initiatives taken during recent years can be summarised into three sets of policies: political, economic and international. Politically, his anti-corruption campaign has no doubt created an atmosphere of accountability and transparency to a large extent. Together with the accent on ‘rule of law’ and the Party’s strict governance in accordance with his ideas and directives on governance—two of the four comprehensives are major political interventions in this respect. The assertion of the Party’s leadership in all affairs of governance and social management, announced at the 13th NPC, made it even more explicit. Xi’s own control over the military through affirmation of the traditional doctrine—‘party shall command the gun and the gun shall never be allowed to command the party’—and a revamped command structure has put in place a freshly

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tightened system of rule under a powerful leader. This is undoubtedly a bold initiative in governance. Under Xi, the Party-led State apparatus in charge of formulating and implementing the development strategy is sought to be made more effective and more legitimate than before with the ‘Chinese Dream’ slogan of nationalist mobilisation and vision of the ‘new era’ added to the legacy of the Chinese civilisation and Chinese revolution. Xi has made it crystal clear that China has opted for its own political form and did not intend to move towards becoming a Western-style democracy. This has re-energised and in a way reinvented the agency of Party-led governance and allows pursuit of the economic strategy even more vigorously to achieve the two centenary goals. Nevertheless, the tightened system has many loose aspects on the ground. The transparency is selective and secrecy at every level of decision-making still persists. Accountability is still limited mainly to inner-party procedures and while the anti-­ corruption campaign did reach a ‘crushing momentum’ as was announced in 2017, in practice, not only has the number of cases of corruption remained high even according to official reports, many of the cases also seemed to involve settling scores with political rivals. The ‘rule of law’ is yet to be translated into institutions and procedures in many areas. The new law on National Supervision establishing a National Supervision Commission to investigate and prosecute officials in  the Party, government and other sectors has much potential in this respect. Its implementation in the coming months and years will show how far rule of law in China is in place. Wang Qishan, who had previously steered the Party’s anti-corruption campaign, may monitor this too, as the Vice-President of the PRC. Thus, the new stress on governance under Xi is more likely aimed at implementing the growth-centric economic strategy that produced China’s success story even more efficiently than before. But this is also the strategy that has placed China in ‘the success trap’. Under Xi’s economic strategy, there is a clear shift from high rate of growth to medium-to-high, that is, from double digits to between 5 and 8 per cent growth described as the ‘new normal’. According to the leadership, this is to make a transition from high-quantity growth to ‘high quality development’. Xi has proclaimed a ‘new development philosophy’ that makes development ‘innovative, coordinated, green, open and shared’. The two formulations are extremely meaningful. Simultaneous development must take place in five sectors—‘economic, political, social, cultural and ecological’, a perspective that seeks to move away from exclusive focus

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on economic development. Similarly, the ‘four comprehensives’ strategy of comprehensively building a well-off society by 2020, deepening reforms, practising rule of law and strict Party governance are major initiatives to address corruption, alienation, social discontent as well as environmental degradation and orient Party work to satisfy people’s needs in day-to-day life. In Xi’s economic strategy, there is accent on three aspects: giving full play to both the public and the private sectors, orienting production to domestic demand through supply-side structural reforms and focussing on building a digital China to achieve high-tech innovation of world standards and even to lead in this. These are significant interventions to maintain the tempo of economic growth. In theory, there is an attempt to maintain a balance between growth, equity and sustainability, but the goal of building a ‘strong and prosperous country’ by 2050 makes growth, even at the ‘new normal’ of medium rate, the central focus. For this, the role of Chinese entrepreneurial class and the middle class, which are already globalised and fairly powerful in Chinese society, will not allow any change in the growth focus having emerged as the major social forces in the course of the reforms and ultimately becoming the drivers of China’s reform strategy. This reality also shapes China’s new global strategy under Xi. The BRI, Xi’s signature programme, with an allocation of some US$1 trillion, has unfolded as a China-initiated framework for a new model of international cooperation. It is more than a connectivity project, but allows Chinese capital to invest abroad, through which process Chinese manufactures and modern digital products will cater to the world market with even more attractive terms than those from the West. Geostrategic features as in case of the China-Pakistan Economic Corridor are bound to invite a variety of reactions. The ‘new type’ of international relations that Xi advocates defends economic globalisation for open trade and investment which has worked to China’s advantage during the past three decades. Rather than transforming the current unequal international political and economic order, China now defends the present system. This Chinese model of state-led market economy following an independent path was recommended by Xi for other countries in his address at the 19th Party Congress. Indeed, while under the ‘common destiny of humankind’, Xi has put forth many laudable elements, it is likely to produce the same kind of results in other countries that emulate the Chinese model—economic success with social and environmental problems. In fact, that is the historical experience globally with this pattern of industrialisation and urbanisation.

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Thus Xi’s global vision, lofty as it may be, is very much based on the Chinese reform model that has produced the paradox of success and the problems associated with it (Mohanty 2018). As mentioned earlier, there are remarkable indications of success in the course of some 40 years of reforms. But there are also serious problems that are admitted by the regime and are part of the policy discourses in China. The Chinese regime did recognise these problems and many significant measures have been taken to ameliorate them. The argument here, however, is that despite recognition of the problems and many sincere, serious and innovative policies formulated and implemented to address these problems, they continue to remain as substantial challenges at this point. Income inequality, urban-rural gap, regional disparity, greenhouse gases emission and uneven access to health, education and housing for different social groups, evidence of alienation and continuing corruption are all well-documented. Ethnic alienation has grown further as evident from the ‘re-education camps’ in Xinjiang. In other words, there is a situation in which the economic and allied successes continue, while problems persist in spite of interventions by the Party and government. This is because the Party believes that the main reform path, which produced so much success, must not be altered. It believes that it can effectively address the problems with innovative measures and better governance. My thesis is that the structural logic of the growth-centric reform path—even with all the high quality dimensions added under Xi—do not allow adequate solution to the problems and China is already in a ‘success trap’ that is likely to continue for a long time. This long-term scenario of successes and problems nevertheless only further strengthens the Party leadership’s resolve to continue to expand its present strategy of legitimation and enhancing its governance capacity. This, in turn, only exacerbates the ‘success trap’.

References Acharya, Alka. 2019. ‘Bridging the Domestic and the Global: Deconstructing Xi Jinping’s Perspective’. In Manoranjan Mohanty (Ed). China at a Turning Point: Perspectives after the 19th Party Congress. New Delhi: Sage. 128–139. Falk, Richard, Manoranjan Mohanty and Victor Faessel (Eds). 2017. Exploring Emergent Global Thresholds. New Delhi: Orient Blackswan.

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Li Keqiang. 2019. ‘Report on the Work of the Government’, Xinhuanet. 16 March. http://www.xinhuanet.com/english/2019-03/16/c_137899705.htm Lin Biao. 1967. ‘Speech at the Peking Rally Commemorating the 50th Anniversary of the October Revolution’. 6 November. https://www.marxists.org/reference/archive/lin-biao/1967/11/06.htm Mohanty, Manoranjan. 2018. China’s Transformation: The Success Story and the Success Trap. New Delhi: Sage. Mohanty, Manoranjan. 2019. ‘Xi Jinping Thought and China’s New Era: Ideological Line of the 19th Party Congress’. In Manoranjan Mohanty (Ed). China at a Turning Point: Perspectives after the 19th Party Congress. New Delhi: Pentagon. 291–308. National Development and Reforms Commission. 2019. ‘Report on the Implementation of the 2018 Plan for National Economic and Social Development and on the 2019 Draft Plan for National Economic and Social Development’, Xinhuanet. 17 March. http://www.xinhuanet.com/ english/2019-03/17/c_137901686.htm Rana, Kishan. 2019. ‘Xi Jinping’s Diplomatic Strategy’. In Manoranjan Mohanty (Ed). China at a Turning Point: Perspectives after the 19th Party Congress. New Delhi: Pentagon. 113–127. Tan Chung. 2017. China; A 5000 Year Odyssey. New Delhi: Sage. Tan Chung. 2019. ‘Understanding Xi’s China through the Civilisational Prism’. In Manoranjan Mohanty (Ed). China at a Turning Point: Perspectives after the 19th Party Congress. New Delhi: Pentagon. 322–333. Wu Gang and Yan Shuang. 2012. Xi Jinping pledges ‘great renewal of Chinese nation’, Global Times. 30 November. http://www.globaltimes.cn/content/747443.shtml Xi Jinping. 2017. ‘Secure a Decisive Victory in Building a Moderately Prosperous County in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics in a New Era,’ Political Report to the 19th Congress of the CPC. China Daily. 4 November. http://www.chinadaily.com.cn/china/1 9thcpcnationalcongress/2017-11/04/content_34115212.htm

CHAPTER 5

Political Considerations in the Chinese Leadership’s Economic Assessments Jabin T. Jacob

The world at large when focused on China has tended to focus on its economic prowess, its large domestic market and of late, its rising international economic heft as expressed in such outreach projects as the Belt and Road Initiative (BRI). However, for the Communist Party of China (CPC) itself, the central focus has always been to use economic capacity to ensure domestic stability and the continuation in power of the Party. This chapter, therefore, looks at the Chinese leadership’s views of the Chinese economy as gleaned from select reports and speeches and what these say of their views, including apprehensions, about the state of affairs of the economy and the implications for the position and legitimacy of the CPC. While the Party seeks control as evident from General Secretary Xi Jinping’s strongly centralizing measures, there is in reality a great deal of dynamism in the process of economic decision-making and policy formation even in such a situation (He 2018). The focus in this chapter,

J. T. Jacob (*) Department of International Relations and Governance Studies, Shiv Nadar University, Uttar Pradesh, India National Maritime Foundation, New Delhi, India e-mail: [email protected] © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_5

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however, is not so much on the structural issues or process of economic decision-making (dealt with in other chapters in this volume) as much as on the political concerns that animate discussions on policies. Given that political objectives of control and stability are paramount in dealing with China’s economic situation at home and abroad, it should not be surprising that there is a certain uniformity of approaches that emerges out of the nature of the top Chinese leadership’s view—or at least of a section led by Xi himself—of how economic problems need to be tackled. Thus, issues of data accuracy—the correct figure for GDP growth, for example—or the space for debate and discussion on economic matters are connected issues. The objective here, therefore, is to look at the politics of economic reform and management. The opening section of the chapter looks at some of the ‘contradictions’ identified by Xi in his Report to the 19th CPC National Congress in October 2017 while the next looks at the specific case of China’s GDP growth rate and the political implications of confusion or debate over what this actually is. The final two sections put these aspects together to show how the Party’s actions in the economic sphere reveal its assessment of its hold over the economy and the country.

Unstable Economic Foundations The heart of Xi’s campaign for the consolidation of the Party’s power rests on his and the CPC’s ability to ensure that the Chinese economy grows at a rate that both avoids overcapacity and allows for a continuing improvement in the standards of living of its citizens, including environment-­ friendly growth as well as greater income equality. These objectives—the roadmap for which has been laid out in the 13th Five-Year Plan (NDRC 2016)—have to be achieved while ensuring accumulation also of sufficient capital and other resources to meet the Party’s larger political and international goals of, for example retaking Taiwan, and achieving global military standing and prowess among other things. But how has the Chinese economy actually been performing? Or more to the purposes of this essay what is the Party’s view of the Chinese economy’s performance under Xi? In his Report to the 19th Party Congress in October 2017, CPC General Secretary Xi Jinping redefined the ‘principal contradiction’ for the CPC as the ‘contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life’ (Xi 2017). He

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was no doubt referring to the effects of the Chinese economic development model that had also led to rising income inequalities between individuals and between regions in China, as well as massive environmental damage across the country. In declaring that this would result in ‘many new demands for the work of the Party and the country’, Xi (2017) was also setting the priorities of his administration and future ones for the coming years. Income inequality in China both at the regional and individual levels is one of the biggest economic and political problems facing the CPC. In a section of the 2017 Report titled, ‘Applying a New Vision of Development and Developing a Modernized Economy’, Xi vows to … devote more energy to speeding up the development of old revolutionary base areas, areas with large ethnic minority populations, border areas, and poor areas. We will strengthen measures to reach a new stage in the large-­ scale development of the western region; deepen reform to accelerate the revitalization of old industrial bases in the northeast and other parts of the country; help the central region rise by tapping into local strengths; and support the eastern region in taking the lead in pursuing optimal development through innovation. (Xi 2017)

Chinese Premier Li Keqiang uses practically similar language in his Work Report to the 13th National People’s Congress the following year but is also willing to offer more specifics saying that ‘some regions still face considerable downward economic pressure’ and goes on to add later that ‘The central government will increase general transfer payments to local governments by 10.9 percent, to strengthen local finances, especially (emphasis mine) in the central and western regions’ (Li 2018). However, at the end of the day, such transfers actually can only be stopgap measures, which end up solidifying the inherent hierarchy between richer and poorer provinces, as long as structural factors perpetuating the inequality are not addressed. These include the lack of the necessary political and economic reforms, such as for example, minority rights in China’s far western provinces. Despite Xi’s strong centralizing efforts since coming to power, Beijing’s problem of managing centre-local relations remains significant. The 13th Five-Year Plan noted that

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Local governments should, in their development plans, ensure that their development strategies, main targets, key tasks, and major projects are in coordination with those defined in the national plans and implement the unified arrangements provided for in these plans (NDRC 2016).

It also called on local governments and government departments to ‘work hard to organize, coordinate, and guide the implementation of this plan’ (NDRC 2016). This suggests that central government strictures against local government excesses and attempts to change the incentive system for leaders at the local level have not quite succeeded and that its rules are seldom easy to implement in practice. One of the consequences of this gap between strictures and practice— and perhaps one of the biggest headaches for the central government—has been rising domestic debt. Total Chinese government debt at the end of 2016 stood at 27.33 trillion yuan (US$4.17 trillion), or 36.7% of Gross Domestic Product (GDP), according to data from the Chinese Ministry of Finance. Regional and local governments accounted for 15.32 trillion yuan (US$2.33 trillion) of this debt, which in turn was 80% of their total income, including fiscal revenues, earnings from land sales, and payment transfers from the central government (Yu et al. 2017). Traditionally, each Party leader of an administrative unit has had his promotion tied to the economic growth of his jurisdiction. However, this situation is also responsible for China’s present difficult situation including environmental damage, social conflict, and of course, infrastructure overcapacity. Over the years, the Chinese central government has tried to fight such local tendencies by emphasizing for example, environmental protection and economic rebalancing over breakneck growth. In a December 2017 move, Beijing declared that it would no longer secure irregular loans taken out by local and regional governments noting also the tendency of local cadre to seek ‘political achievements’ (cited in Wang and Pan 2017), essentially code for ignoring central government directives and seeking to paint a picture of a successful tenure by ensuring high rates of economic growth. While it was reported that as investment growth declined in recent years in reaction to government measures—including a wide-­ ranging anti-corruption campaign—and the rise in indebtedness had also stopped (Wolf 2018; Bloomberg 2018b), the American decision to engage in what is to all intents and purposes a trade war with the unprepared Chinese, has led to Beijing returning to old methods of promoting capital investments to keep the economy going (Bradsher 2018).

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Growth Numbers and Political Implications The 2018 Central Economic Work Conference (CEWC)—an annual exercise that lays down economic policy priorities for the coming year— followed Xi’s economic reforms anniversary speech from 19–21 December. The 2018 CEWC was in tone far more pessimistic than was the case the previous year (Trivium Newsletter 2018). In 2017, it was claimed that ‘Economic restructuring has continued to advance, and the economy has become more dynamic and resilient’ as well as that ‘People’s sense of attainment and well-being has increased markedly’ (Trivium Newsletter 2018). At the 2018 CEWC, the effect of a trade war with the United States (US) was apparent with Xi noting that the ‘The achievements we’ve made have not come easily’. He underlined the point stating, ‘we must see that there are new and worrisome developments amid generally steady economic operation, the external environment is complicated and severe, and the economy faces downward pressure’ (Xinhua 2018c). In the 2018 speech, Xi continued to stress that ‘the country must uphold the centralized and unified leadership of the CPC Central Committee’ while also calling for assessing the ‘current circumstances from a long-term perspective’ (Xinhua 2018c), suggesting that the economy had to ready itself for more pain and less handholding than in the past. One indicator of this might be in the fact that despite the aforementioned ‘downward pressure’—the month of November 2018, for example, saw weakening retail sales (indicating lower consumer demand/incomes) and industrial production (indicating also lower exports) (Bloomberg 2018b)—Chinese authorities appeared to be holding off another stimulus package. This approach is likely to continue even though the CEWC promised that more credit would be made available to local governments (China Economic Review 2018; Bloomberg 2018a). Perhaps of still greater political consequence is  the debate about what China’s GDP numbers actually are. This rate for 2016 was 6.7% (Xinhua 2017a) but analysts of the Chinese economy have noted how this number does not seem to reflect the widespread reports also of a slowdown in the Chinese economy. One report argues that China’s GDP numbers actually only reflect investments without acknowledging depreciation of assets (Barbera and Hu 2018). And since there is widely reported investment in assets that are unproductive—overcapacity, in other words, that has also driven the BRI—the GDP numbers are plain wrong. This trend has been particularly severe since 2009 following the global financial crisis, whose

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‘profound impact’, Chinese authorities had noted ‘will continue to be felt for a considerable time to come’ with ‘the world economy… experiencing anemic growth and zigzag recovery…’ (NDRC 2016). The government responded to the financial crisis with massive stimulus packages, but which also led to the creation of the unproductive assets (Barbera and Hu 2018). While the stimulus was also politically driven by the need to maintain social stability, including protecting jobs, there is also strong rationale for Chinese authorities to refrain from another stimulus package despite pressure from the trade war with the Americans because continuing with the trend would only increase the country’s unproductive assets, with consequences further down the line. Debt-to-income ratio is already officially acknowledged at 242% of GDP at present (Xinhua Finance Agency 2018), but another report estimated it touching 400% (Barbera and Hu 2018). Hence, Xi’s blunt talk at the 2018 CEWC. So what explains the timing and stress of Xi’s remarks and what then is the actual GDP figure? The answer to both questions might lie in a revelation by a Renmin University professor on 16 December 2018 saying that an internal report at an important government institution provided two different calculations of China’s 2018 GDP growth rate, using statistics from the National Statistics Bureau. One figure stood at 1.67% while the other was in negative territory (Xiang 2018). The political implications are obvious. One, if the GDP is not what it is, there is no easy way for the authorities to show the true lower figures without also losing the perception battle and acknowledging that the trade war with the US has had a severe impact. It was already quite a challenge for the authorities to come out with the ‘new normal’ figure of limiting GDP growth to 6.5% as a way of controlling speculation and overcapacity at the local levels. For the present, even if not everything can be blamed on the trade war, the timing is such that the Chinese authorities will be forced to keep up appearances while trying desperately to ensure that other measures will work in balancing the economy. Two, the measures the Chinese seek to employ come with contradictory pressures. Note for instance, Xi’s call at the 2018 CEWC for the ‘clean-up of “zombie” enterprises’, for more exports and imports and for a ‘healthy’ property market, among other things (Xinhua 2018e). The first is part of the strengthening process of SOEs but this is easier said than done given job retrenchments involved and the political costs of this especially for local authorities where these enterprises and industries

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are located. This then puts pressure on the centre from the regions and localities. The second call for increased exports and imports is also not an easy task given that a market the size of the US is not easily replaced and even if as has been the case, truces in the trade war have occurred, it seems clear from the contretemps over the arrest and detention of the Chief Financial Officer of a major Chinese enterprise, Huawei, in Canada at American behest that Chinese leaders will no longer trust the US to offer a reliable market or to not work aggressively against what Washington perceives as unfair and illegal Chinese trade practices. If, however, China has to reform away from dependence on American and other Western export markets and have to wait for consumer demand to build up in the BRI or other less-developed countries, then it seems obvious that there will be some degree of pain that its economy and workers will have to take, including further job losses and pressures on local governments to take up the welfare slack, which in turn increases local government temptation to engage in traditional forms of raising capital—land acquisition and sales, and encouraging the construction of housing, and property speculation. Under such pressures, compliance with central government rules tends to break down, unless Beijing itself shows greater flexibility. The third issue flagged by Xi of the ‘sound development of the real estate market and adhering to the principle that “housing is for living in, not speculation”’ (cited in Xinhua 2018e) is a case in point. The fact is that the 2017 CEWC appeared more determined to tackle the problem and listed improving the property market as a specific task. The 2018 CEWC, however, failed to do this, indicating flexibility (Trivium Newsletter 2018), if not a softening (Bloomberg 2018a) of property policy under current economic pressures. It then looks like Xi is not all in control no matter the rhetoric. And it needs to be seen how long it will be before the message gets out to a wider audience within China despite the efforts of the censors. In any case, even with the censors, it will be increasingly difficult to mask the realities of economic slowdown in China in daily life. This has not stopped the CPC from trying though, to reinforce its own decision-making and implementing capacities or, in other words, to promote a political approach to economic policymaking. Xi Jinping today heads up to seven leading small groups focused on economic decision-­ ­ making. The Central Leading Group for Comprehensively Deepening Reform and the Central Leading Group for Financial and

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Economic Affairs have essentially taken over from the State Council, in the process underlining centralization of powers under Xi and what is known as ‘top-­level design’ for reform (He 2018).

The Party in Command? In the early months of the celebrations for the 40th anniversary of ‘reform and opening up’ in China, there appeared to be a de-emphasizing of Deng Xiaoping’s role in the process and elevation of Xi’s career and role in the reform era. This was met with some sharp reactions on Chinese social media and in intellectual circles. Perhaps, taking a cue, Xi was considerably more careful in his 18 December 2018 speech commemorating the 40th anniversary. He mentioned Deng seven times in the speech more than any other Chinese leader including Mao Zedong (five times) (Qian 2018). That the references to Deng in Xi’s speech was nothing more than a temporary respite is clear from the fact that the next-highest mentioned individual was Karl Marx at 12 times with ‘Marxism’ and ‘Marxism-­ Leninism’ occurring ten times and twice respectively (Qian 2018). Even on Mao, while the references were limited in number they were fairly consequential. And as analyst Qian Gang has pointed out, Xi as General Secretary of the CPC has consistently refrained from criticizing Mao. This is particularly noteworthy in the present context given that Deng launched the reforms and opening up also in order to recover from the chaos of the Cultural Revolution and take the country in a direction different from where Mao’s politics would have driven it. Note also that for Xi ‘the leadership of the [CPC] is the most basic character of socialism with Chinese characteristics’ and that he used Maoist era phraseology from the Cultural Revolution to amplify the point, saying, ‘The Party, the government, the military, the people, the schools, east, west, south and north, the Party leads it all’ (cited in Qian 2018). It could be argued that through the anticorruption campaign and his consolidation of Party (and personal) power over the gun, Xi is preventing the emergence of the equivalent of a ‘military-industrial complex’ and insidious corporate-driven political lobbying that is evident in the US, or of a ‘deep state’ that is evident in Pakistan. He is also, no doubt, aiming to prevent any collapse of the CPC and the People’s Republic of China (PRC) due to the lack of sufficient economic resources under their control, as was the case with the Soviet Union.

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Whether Xi’s alternative will be better can be debated, but what is important to note is that the foundation of the Party’s/Xi’s continuing ability to maintain such power or prevent the above-mentioned eventualities lies in the Party also being able to control and regulate market forces. While the state in George Orwell’s 1984 was an inefficient one in economic terms and of questionable military competence, the present Chinese state under the CPC is attempting to be Big Brother without sacrificing economic capability and efficiency. This then also leads to politics in economic management. And it has been evident for some years now that in the economic sphere too, the emphasis is on the Party’s leadership. While the Third Plenum of the 18th CPC Central Committee had come out with a 60-point Decision, the core of which was to allow the market to play a ‘decisive role’ in the allocation of resources (China.org.cn 2014), this was almost soon forgotten with Xi, for instance, pushing SOEs to take on greater responsibilities and the leading role in the economy. The central SOEs have undergone a series of mergers with the idea being one of consolidating and strengthening capacity in order to compete globally. And with the BRI running into heavy weather and Xi’s natural instinct being one of staying determinedly on course, SOEs that are capable of bearing losses over at least the short term, perhaps another five years or so, will be necessary to ensure that the BRI will at least look like it is succeeding for the most part. While the call for a decisive role for the market has been repeated at the Third Plenum of the 19th CPC Central Committee, this time it was couched within the ‘need to transform government functions and… to remove institutional barriers’ (Xinhua 2018a) shifting from a focus on ‘enterprises enjoy[ing] independent management and fair competition’ (China.org.cn 2014) to greater government consolidation. Indeed, the 19th CPC Central Committee’s Third Plenum was rather more political in content and thrust than Third Plenums are traditionally wont to be. The Party does not seem to fear monopolies or excessive corporate influence within the country as a result of such consolidation, perhaps believing the anti-corruption campaign is effective. If anything, changes in the economic structure have so far proceeded somewhat more slowly than the sharpening of the instruments of Party power and domination supporting the anti-corruption campaign such as the creation of a National Supervisory Commission in March 2018 at the first session of the 13th National People’s Congress. The National Supervisory Commission is the state counterpart of the CPC’s Central Commission for Discipline

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Inspection (CCDI) and fills an important vacuum in dealing with problems of corruption that went beyond the remit of the Commission. In particular, it brings all aspects of Chinese society and economic structures under the scanner where before the CCDI could only target Party members caught doing wrong (Xinhua 2018d). It should, therefore, not be surprising that China’s private enterprises are now becoming willing to do the Party’s bidding with Party Committees taking on a more active role in the larger ones (Chen 2019). Jiang Zemin’s concept of ‘Three Represents’, one of which stated that the Party had to represent ‘advanced productive forces’ was a signal opening up Party membership to China’s rich entrepreneurs but this  led to a system in which corruption continued perhaps in a more institutionalized form with the Party benefiting from access to private entrepreneurial skills and resources and the ‘red capitalists’ benefiting from access to the Party that both protected and promoted their pursuit of profit. Xi’s actions now seek to clean up the system and establish a clear hierarchy of relationships in which the Party is unquestionably in charge.

Or a Party in Crisis? And yet, the Party does not appear to believe that its authority is entirely unchallenged if Xi’s statements in his political report at the 19th Party Congress are parsed carefully. In the Report, he mentioned the two centennial goals aimed at 2021 and 2049—the 100th anniversaries of the founding of the CPC and of the PRC, respectively. These are expressions of political goals in terms of economic achievements. These goals to ‘build a moderately prosperous society in all respects’ by 2021 and to ‘build a modern socialist country that is prosperous, strong, democratic, culturally advanced, and harmonious’ by 2049 (Xinhua 2017b) would not be possible without the launch of the economic reforms in 1978 and the greater degree of civil society freedoms and political openness that followed and continued even post the 1989 Tiananmen Incident. While this political openness was never as extensive as in democratic societies, it was nevertheless essential to whatever economic growth and innovation China has achieved since 1978. However, in the wake of Xi’s ascension as General Secretary of the CPC, political space for debate appears to be shrinking further even as he declares grander goals for China to achieve in terms of innovation in eco-

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nomic sectors, including industry and technology. Going forward, therefore, the question for China is whether the centennial goals can be achieved or sustained in the current political climate in China. And the confident articulation of these goals cannot mask the fact that the state of health of the Chinese economy is a major cause of concern for China’s leadership for not just economic reasons but political ones as well. The fact that the CPC under Xi finds it necessary to underline that ‘[t]he Chinese Dream of the rejuvenation of the nation and the core socialist values have gained a firm place in people’s hearts’ (NDRC 2016) or to declare the infallibility of the Party and to enshrine it into the PRC constitution—the precise formulation being ‘the leadership of the Communist Party of China is the defining feature of socialism with Chinese characteristics’ (Xinhua 2018b)—suggests a lack of confidence within the Party about its role and capabilities. From the heavy-handed anti-corruption campaign to instructions to universities about red lines not to be crossed to constant propaganda and adulation of Xi to extreme surveillance measures used against its own citizens, the Party looks less like the ruling party that it is and more like it is trying to stave off some imminent crisis.

References Barbera, Bob and Yingyao Hu. 2018. “China’s Slowdown: More There than Meets the Eye”, Center for Financial Economics. 16 December. https://cfe. econ.jhu.edu/chinas-slowdown-meets-eye/ Bloomberg. 2018a. “China Pledges More Stimulus in 2019 as Economy Seeks Bottom”. 21 December. https://www.bloomberg.com/news/articles/2018-12-21/china-says-more-tax-cuts-coming-signalseasier-monetary-policy Bloomberg. 2018b. “China’s Alarming Debt Pile Could Finally Stabilize This Year”. 3 April. https://www.bloomberg.com/news/articles/2018-04-03/ china-s-alarming-debt-pile-seen-finally-stabilizing-this-year Bloomberg. 2018c. “China’s Economy Still Slowing as Policy Makers Form 2019 Plans”. 14 December. https://www.bloomberg.com/news/artic l e s / 2 0 1 8 - 1 2 - 1 4 / c h i n a - s - e c o n o m y - s l o w e d - a g a i n - i n - n o v e m b e reven-as-investment-rose Bradsher, Keith. 2018. “As Trade War Intensifies, China Moves to Bolster Its Economy”, The New  York Times. 23 August. https://www.nytimes. com/2018/08/23/business/china-economy-trade.html Chen, Lulu Yilun. 2019. “China Boosts Government Presence at Alibaba, Private Giants”, Bloomberg. 23 September. https://www.bloomberg.com/news/articles/2019-09-23/china-steps-up-government-presence-at-alibaba-private-giants

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China Economic Review. 2018. “Leaders stick to policy line at Central Economic Work Conference”. 24 December. https://chinaeconomicreview.com/leaders-stick-to-policy-line-at-central-economic-work-conference/ comment-page-1/ China.org.cn. 2014. “Decision of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform”. 16 January. http://www.china.org.cn/china/third_plenary_session/2014-01/16/content_31212602.htm He, Alex. 2018. “The Emerging Model of Economic Policy Making under Xi Jinping: Literature Review, Theoretical Frameworks and Methodologies”, Centre for International Governance Innovation, CIGI Papers, No. 180. July. https://www.cigionline.org/sites/default/files/documents/Paper%20 no.180web_1.pdf Li Keqiang. 2018. “Full Text: Report on the Work of the Government”, delivered at the First Session of the 13th National People’s Congress of the People’s Republic of China, People’s Daily. 3 April. http://en.people.cn/ n3/2018/0403/c90000-9445262.html National Development and Reform Commission (NDRC), People’s Republic of China. 2016. “The 13th Five-Year Plan for Economic and Social Development of the People’s Republic of China 2016–2020”, translated by Compilation and Translation Bureau, Central Committee of the Communist Party of China, Beijing, China. 7 December. http://en.ndrc.gov.cn/newsrelease/201612/ P020161207645765233498.pdf Qian Gang. 2018. “Reading Xi’s Reform Anniversary Speech”, China Media Project. 18 December. http://chinamediaproject.org/2018/12/18/ reading-xis-reform-anniversary-speech/ Trivium Newsletter. 2018. “The Tip Sheet”. 22 December. Wang Xiaoxia and Pan Che. 2017. “Central Authority Vows No Bailouts for Illicit Loans”, Caixin. 25 December. https://www.caixinglobal.com/2017-12-25/ central-authority-vows-no-bailouts-for-illicit-loans-101189457.html Wolf, Martin. 2018. “The Chinese economy is rebalancing, at last”, Financial Times. 3 April. https://www.ft.com/content/b54cda40-3659-11e8-8b982f31af407cc8, Bloomberg News. 2018. Xi Jinping. 2017. “Secure a Decisive Victory in Building a Moderately Prosperous Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a New Era”, delivered at the 19th National Congress of the Communist Party of China, Xinhua. 18 October. http://news.xinhuanet.com/politics/19cpcnc/2017-10/27/c_1121867529.htm Xiang Songzuo. 2018. “A Great Shift Unseen Over the Last Forty Years”, (translated) China Change. 28 December. https://chinachange.org/2018/12/28/ a-great-shift-unseen-over-the-last-forty-years/

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Xinhua Finance Agency. 2018. “Recessive Debts of local governments drop”. 19 September. http://en.xfafinance.com/html/Dont_Miss/2018/363980.shtml Xinhua. 2017a. “China’s economy grows 6.7 pct, remains global growth driver”. 20 January. http://www.xinhuanet.com/english/2017-01/20/c_136000063.htm Xinhua. 2017b. “CPC Q&A: What are China’s two centennial goals and why do they matter?”. 17 October. http://www.xinhuanet.com//english/201710/17/c_136686770.htm Xinhua. 2018a. “China Focus: 19th CPC Central Committee 3rd plenum issues communique”. 1 March. http://www.xinhuanet.com/english/201803/01/c_137006746.htm Xinhua. 2018b. “China Focus: China’s national legislature adopts landmark constitutional amendment”. 11 March. http://www.xinhuanet.com/ english/2018-03/11/c_137032165.htm Xinhua. 2018c. “China holds key economic meeting to plan for 2019”. 21 December. h t t p : / / w w w. x i n h u a n e t . c o m / e n g l i s h / 2 0 1 8 - 1 2 / 2 1 / c _ 137690157.htm Xinhua. 2018d. “China inaugurates national supervisory commission”. 23 March. http://www.xinhuanet.com/english/2018-03/23/c_137060883.htm Xinhua. 2018e. “Highlights of China’s 2019 economic work plans”. 22 December. http://www.xinhuanet.com/english/2018-12/22/c_137691456.htm Yu Hairong, Leng Cheng and Zhang Qizhi. 2017. “Hidden Debts Accumulate at Local Levels”, Caixin. 27 December. https://www.caixinglobal.com/201712-27/hidden-debts-accumulate-at-local-levels-101190348.html

CHAPTER 6

China’s Military Reforms in the Wake of Recent CPC National Congresses Bui Thi Thu Hien

China’s military reform process began in 2013 as the country continued to promote deeper institutional reform. According to many foreign scholars, this is a dramatic reform, with the ambition of developing the Chinese military into one of the most capable forces that can be deployed in multiple terrains, with high-level techniques and technologies, striving to be the world’s best naval force and capable of dominating offshore areas. This chapter analyzes China’s national and international contexts as the country embarks on a series of measures to accelerate military reforms. Besides, this article also analyzes and evaluates the relationship between the Communist Party of China (CPC)  and the People’s Liberation Army (PLA) in the reform process from the 18th National Congress onwards. What the author thus hopes to clarify is whether “the Party controls the gun” or “the gun controls the Party” in China since the 19th National Congress. The chapter also draws implications of China’s military reform process for regional peace and security.

Bui Thi Thu Hien (*) Institute of Chinese Studies, Vietnam Academy of Social Sciences, Hanoi, Vietnam © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_6

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National and International Contexts Prior to PLA Reforms In 2012, the 18th CPC National Congress witnessed the transition of the fourth generation to the fifth generation of leaders under the leadership of General Secretary Xi Jinping. This has happened in a context where the world’s economy is entering a transition period of its own, and the external economic factors are not yet fully stable. For 10 years, China’s economy has experienced an average annual growth of 10.7 per cent (China. com 2012b), becoming the world’s second-largest economy (Sina.com 2011) and its urbanization rate has reached over 50  per cent (Renmin Ribao 2012). With its rapid economic scale and urbanization speed, China has officially entered a new period with urbanized social structure. Possessing the world’s largest social security system (Caijing 2012), people’s living standards have improved significantly, and yet China has also entered the “most severe social conflict” stage (Yao et al. 2011). The violent incidents of Kunming on 1 March 2014 (Shen-Gang Zaixian 2014) or Xinjiang on 5 July 2009 (People.com 2009) showed that China’s security conditions have started to evolve complicatedly and unpredictably. Besides, the issues of separatism such as the demand for independence of Xinjiang, of Tibet, or the targeted reunification of Taiwan have also left China facing a lot of pressure to undertake reform of its military. In the East Sea, China has begun to expand its unfounded claims of sovereignty after filing its U-shaped sovereignty claims in the area  to the United Nations. Together, these are considered driving forces to strongly speed up military reforms, especially naval forces and air forces. The 18th National Congress of the CPC took place in the context of universal continuation of globalization as well as escalation of regional economic integration. The United States (US), under the second term leadership of President Barack Obama, continued to promote the global economy. In addition, the US also continued its “Asia rebalance” strategy with increasing levels of interest toward the Asia-Pacific region. Then US Secretary of State Hillary Clinton, in her statement in Hanoi, said: “The United States, like every nation, has a national interest in freedom of navigation and of aviation in Asia” (de Castro 2011). The Philippines, under the administration of then President Benigno Aquino III also “pursued a tough policy in the East Sea by strengthening its alliance with the United States to prevent Beijing from violating its interests” (Pham 2016). Elsewhere in the Asia-Pacific region, India too, has strongly furthered its

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Look East policy by strengthening its many-sided cooperation with Southeast Asian countries. As regards the East Sea issue, India has built its bases in Andaman and Nicobar Islands, creating a security belt across the islands of the Far East. Also, India has conducted many joint exercises with countries in the region such as Singapore, Malaysia or Indonesia (Nguyen and Nguyen 2016). Sino-Japanese relations have become cold after the disputes over the Senkaku/Diaoyu Islands and joint exercises between Japan and its allies in the region. The US and Japan even held military exercises on the opening day of the 18th National Congress of the CPC.  Besides, with “70% of imported oil volume and up to 45% of exported goods volume being annually shipped through the East Sea” (Mai 2015), China has thus had equally  great concerns about freedom of navigation and aviation in the area. In the national and international contexts of complex and rapid developments, as well as the continuous expansion of military information technology, China has realized that many conflicts, such as in Afghanistan, Iraq, Syria, and so on, are all through new warfare methods, with new military applications based on advances  in science and technology. As a result, China has speeded up its military reforms in the direction of developing modern national defence and military forces.

Objectives and Content of PLA Reforms Since the 18th CPC National Congress The Report of the 18th CPC National Congress indicated that it was necessary to “thoroughly understand the military strategy of the new period, strengthening the guidance on military strategies…” (China.com 2012a). This report started a new era of vigorous reforms on all sides in China, including military reforms. Certain key contents of the political report of the 18th National Congress of the Communist Party of China on accelerating the modernization of national defence and military forces can be described as follows: Focus on Military Development Developing and modernizing national defense and military forces, following Mao Zedong’s military approach, Deng Xiaoping’s new military development philosophy, Jiang Zemin’s mindset of national defence and

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military development, taking the Party’s leadership thinking toward national defense and military development as a guideline (China. com 2012a) Military Missions in the New Period Adopting the new guidelines of military strategy in the new period; strengthening the guidance on military strategies; paying special attention to cyber security, aviation and naval security; accumulating and applying military theories in peacetime; regularly expanding and deepening military reforms; and achieving victory in localized war in the context of informatization (China.com 2012a) Strategic Steps Taking national security focus as the general direction, aligning national defence and economic goals based on the “three steps” of strategic thinking to develop military and national defence modernization, in order to complete the tasks of mechanization and informatization by 2020 (China. com 2012a) Revolutionization Unwavering acceptance of the Party’s absolute leadership over the military, persevering in the theoretical institution of the entire Socialist Republic military forces with Chinese characteristics, especially fostering core values and contemporary revolutionary soldiers, developing advanced military culture, and preserving personality, identity, military manners and customs (China.com 2012a) Modernization Persisting in taking informatization as the guideline for development of military modernization, speeding up informatization, intensifying development of high-tech military equipment and weapons, accelerating comprehensive development of modernization logistics, fostering large numbers of new-generation military talent, expanding the development of military combat in informatization environments and information technology, strengthening the capacity of informatization

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systems, striving to improve technologies used for  national defence, shaping the organization of military modernization, and developing a theoretical system of modern military with Chinese characteristics (China.com 2012a) Formalization Strengthening strategic planning and formulation  of legal documents, mechanisms and institutions to develop mixed militias, speeding up the development of military modernization, raising national defence awareness, enhancing quality, developing logistics, strengthening military management by laws, and reinforcing the formalization of advanced development (China.com 2012a) As a consequence, it can be said that the goal of military reforms has been put forward by Chinese leaders since 2012. Table 6.1 highlights the contents and the roadmap for implementation of reforms. Apart from the restructuring of battle zones and military units in the People’s Liberation Army, China has conducted many exercises, especially naval exercises. In April 2018, China held its first largest ever maritime military parade with the participation of 46 warships, 76 fighters and more than 10,000 soldiers and officers. The Central Military Commission Chairman Xi Jinping made a speech at this event to “thoroughly affirm the philosophy of developing a strong army in the new era to turn the Chinese navy to the world’s best” (China.com 2018). This is the largest ever maritime military parade since the inauguration of China and the fifth naval parade after the previous ones in 1957, 1995, 2005, and 2009, with the participation of “two forces” (naval forces and air forces) instead of “a single force” before, and the number of battleships has also increased significantly. In line with military reforms, China has also strengthened its forces, building military bases at sea in the areas occupied by Chinese military forces, namely, the Spratly and Paracel Islands of Vietnam. According to reports from the US Department of Defense, China “has expanded its occupied areas of ​islands in the East Sea to around 400 times, equivalent to 800 hectares since January 2014, of which three quarters of the areas are occupied from early 2015 until now” (Le 2016).

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Table 6.1  Timelines and contents of national defence and military reforms after the 18th National Congress of the CPC No. Date 1

2

3 4

5

6 7

8

9

10

11

12

13

Contents

15/11/2013

Setting the objectives, tasks, and requirements of national defence and military reforms in “making decisions on important issues in the comprehensive reform proposed by the Central Committee of the Chinese Communist Party” (Shehui Fazhan Xueyuan 2017) 15/03/2014 Establishing a leading team for national defence and military reforms to convene the first Plenary Meeting, reviewing the assignment plan and reform roadmap, entering the stage of quality advancement (Zhongyang Zhengfu Menhu Wangzhan 2014) 27/01/2015 Convening the second meeting on military reforms, prioritizing reform options (Yangguang Wang 2015) 14/07/2015 Concluding the third meeting by “developing a comprehensive plan for national defence and military reforms” (Guanchazhe 2015) 22–29/07/2015 Xi Jinping convened the Central Political Bureau’s Standing Committee meeting, Central Military Commission’s Standing Committee meeting to review decision on the “General plan” (Sina.com 2016a) 03/09/2015 Xi Jinping announced a reduction of 300,000 troops (Sohu 2015) 16/10/2015 The Central Military Commission’s Standing Committee agreed to adopt the “Proposal for a comprehensive plan for national defence and military reforms” (Guanchazhe 2017) 24–26/11/2015 Convening the fourth meeting, pinpointing specific measures and processes for military reforms, and entering the implementation phase (Zhongguo Gongchandang Xinwen Wang 2015) 31/12/2015 Establishing the leadership structure of ground forces, missile forces and reinforcements, creating strategies, implementing leadership management institutions, improving joint combat command structures (Xinhua Wang 2016) 01/01/2016 Implementing reform of the Central Military Commission, from 4 military headquarters to 15 inter-functional units (3 commissions, 6 departments, 1 office, and 5 affiliated agencies)a (Cntv.news 2016) 01/02/2016 Forming five main theater commands/battle zones under the joint operation command structure of these zones’ armiesb (Sina. com 2016b) 20/04/2016 The Central Military Commission Chairman Xi Jinping assumed the position of commander-in-chief commanding the joint operation command center of the Central Military Commission, receiving reports and commanding at all events relevant to the five battle zones (Ifeng.com 2016) 13/09/2016 Establishing the Joint Logistics Support Force of the Central Military Commission (Zhongguo Gongchandang Xinwen Wang 2016) (continued)

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Table 6.1  (continued) No. Date

Contents

14

15/02/2017

15

18/04/2017

Two units of ground forces were converted into marines units (An 2016) 18 army corps were merged into 13 with new codes (Sohu 2017)

Discipline Inspection Commission, Political and Legal Affairs Commission, Science and Technology Commission; Joint Staff Department, Political Work Department, Logistics Support Department, Equipment Development Department, Training and Management Department, National Defense Mobilization Department; General Office; Strategic Planning Office, Reform and Organizational Structure Office, International Military Cooperation Office, Audit Office, Agency for Offices Administration b The Eastern Theater Command covers the eastern coastal areas of China, including the provinces of Jiangsu, Shanghai, Zhejiang, Fujian, Jiangxi, and Anhui. The battle zone is located in Nanjing, the Ground forces headquarter is located in Fuzhou, capital city of Fujian province The Southern Theater Command includes the southern coastal provinces of China: Hunan, Hubei, Guangdong, Guangxi, Hainan. The battle zone is located in Guangzhou, the Ground forces headquarter is located in Nanning, capital of Guangxi province The Western Theater Command consists of western Chinese mainland provinces, including Xinjiang, Tibet, Qinghai, Gansu, Ningxia, Shaanxi, Sichuan, Chongqing, Yunnan and Guizhou. The battle zone is located in Chengdu, the Ground forces headquarter is located in Lanzhou, capital of Gansu province The Northern Theater Command covers the northern provinces of China: Heilongjiang, Jilin, Liaoning, Inner Mongolia. The battle zone is located in Shenyang, the Ground forces headquarter is located in the Shandong, capital of Jinan The Central Theater Command consists of the provinces around Beijing: Beijing, Tianjin, Henan, Hebei, Shandong, Shanxi. The battle zone is located in Beijing, the Ground forces headquarter is located in Hebei province, capital of Shijiazhuang A Commander and Political Commissar head these battle zones. The locations of the battle zones and Ground forces headquarters “are mainly chosen to take full advantage of the relatively completed information systems of the military region offices for better deployment of missions”. It is easy to realize the clear positioning of the five battle zones, in particular: The Eastern Theater Command mainly responds to issues originating from Japan and Taiwan. The Southern Theater Command is aimed at protecting the South China  Sea  (East Sea) and security on maritime routes. The Northern Theater Command is to respond to military conflicts from North Korea and Russia. The Western Theater Command aims to deter international terrorists. The Central Theater Command has the responsibility of protecting the central government and may also provide additional support to the four other battle zones a

Relationship Between the CPC and the PLA After the 19th National Congress From the objectives and contents of China’s military reforms since the 18th National Congress, it can be seen that the relationship between the Chinese Communist Party and the People’s Liberation Army has changed significantly in comparison with previous stages.

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First, at the 19th CPC National Congress, along with the process of promoting military reforms, the leadership’s approach toward the PLA was more focused than before. The Central Military Commission Chairman Xi Jinping concurrently holds the position of Chairman, and joint operations Commander-in-Chief of the Central Military Commission, directly commanding the operation of the five battle zones and the armed services. “Through military reforms, China has changed from indirect leadership to direct leadership of the Central Military Commission” (Zhang 2017). Previously, policies of the Central Military Commission were executed by the four military headquarters, but now, the 4 military headquarters have been reorganized and divided into 15  units that are directly led by the Central Military Commission. At the same time, the Central Military Commission is  also the commanding unit of strategic joint operations, directing joint operation command units of the theater commands. This organizational structure is designed for extensive, direct commanding purpose (Zhang 2017). Second, through military reforms, China has separated operations from management. Along with the Central Military Commission’s direct leadership, there is a joint management unit for both processes. There are two systems at the lower level: joint operations command system and management system. From the structural perspective of the military, we can figure out that the structure of military commission that deals with troops under the theater commands is called the combat command system, while that dealing with troops under the respective services headquarters is called the management command system. Based on the separation between combat operations and management, China has divided its resource supply and resource use. The army is equipped with modern equipment, gradually replacing backward ones, and step by step become more professional. However, there are opinions that “from the political viewpoint, power is concentrated in the hands of the country’s leaders, forming the phenomenon of “the Party controls the gun”, which will lead to conflicts between the government and the army” (Zhang 2017). Third, in response to the need of joint operations, China has reorganized its seven military regions into five theater commands (or battle zones): Eastern Theater Command, Western Theater Command, Northern Theater Command, Southern Theater Command, and Central Theater Command. Each battle zone has a headquarters of joint combat operation, performing joint combat actions for each operation and containing subordinate armed services: ground forces, naval forces (available

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in all battle zones, except the Western Theater Command), air forces, and missile forces (including armed police) (Wang 2017). Therefore, along with the military reforms process, this time, the role of naval forces is especially a focus. China has attempted to speed up the construction of aircraft carriers and large battleships to equip offshore naval forces. From the perspective of personnel mobilization, on 20 January 2017, during the military rank promotion ceremony for the naval forces, China appointed Lt. Gen. Shen Jinlong (former commander of the South Sea Fleet) as Admiral to replace Adm. Wu Shengli (formerly an officer who had participated in the naval battle on 14 March 1988 between Vietnam and China).1 All these moves allow us to presume what China’s strategies in the East Sea in the past were and what they will be in the future. Fourth, the principle of “the Party controls the military”, as well as the principle of military personnel managed by the political commissar, had already existed before these military reforms, but has been emphasized particularly since the 18th National Congress and especially since the 19th National Congress. By reviewing the handing over process of the Central Military Commission Chairman position from Jiang Zemin to Hu Jintao, we have the most accurate assessment of this principle. Although the 16th National Congress of the Chinese Communist Party elected General Secretary Hu Jintao, it was only at the 4th Plenum of the 16th Central Committee, that  Hu could assume the position of Central Military Commission Chairman from Jiang Zemin (Chinanews 2004). This shows us that the process of transferring power in China at this stage is not as easy as it was in the 18th National Congress of the Chinese Communist Party. In addition, during the previous period (before the 18th National Congress), the process of personnel promotion for the Central Military Commission was also carried out within the military. Also, Xu Caihou, former Secretary of the Commission for Discipline Inspection, Head of the General Political Department, was then promoted to the position of Vice Chairman of the Central Military Commission, mostly managed and promoted by military circles. In the current military reforms, the principle of “the Party controls the military” has  not changed, but the PLA had established its own Discipline Inspection Commission, Political and Legal Affairs Commission, Military Court, Audit Bureau to easily control assets 1  Details available in paper titled, “The post-reform status and achievements of the Chinese People’s Liberation Army” presented at a workshop, “Studies on mainland China in 2017 and outlook to 2020”, organized by Nanhua University, Chiayi, Taiwan in 2017.

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of military officials. This is to apply the principle of military management by laws, which is emphasized by the Central Military Commission Chairman Xi Jinping. Fifth, in these military reforms, China has announced a reduction of 300,000 troops, decreasing non-combatant systems. Apart from adjusting its personnel, China has also declared that the military would not be engaged in business (Law-lib 1999), reducing the military’s commitment in social duties, lowering the ratio between officers and soldiers. In line with the reduction of military involvement in economic activities, China has shown that the issue of military corruption is rooted in economic activities of the PLA itself. In order to fight corruption thoroughly in the military, China is forced to prohibit its military units from involving in economic activities. Besides, through anti-corruption activities in the military, President Xi Jinping’s power has also been strengthened since two of the three Central Military Commission Vice Chairmen, namely, Xu Caihou and Guo Boxiong, were disciplined for being involved in corruption. In summary, along with accelerating Chinese PLA reforms and promoting the fight against military corruption, the leadership of Xi Jinping as well as of the Communist Party toward the military has been increasingly consolidated. It can be affirmed that through the 19th National Congress, “the Chinese Communist Party has thoroughly controlled the gun”, meaning that the CPC will continue to underline its unique leadership position toward the country’s armed forces. Owing to strong military reforms, especially of naval forces, the regional situation of peace and stability will be constantly challenged by China’s unfounded sovereignty claims in the East Sea.

Assessment of the Impact of PLA Reforms on Regional Peace and Stability The issue of military reforms is a very normal process as China continues to deepen institutional reforms to further its development. Particularly, in the international context of complex and rapid changes, plus signs of domestic security threats to China’s political stability, it becomes necessary to speed up military reforms. However, along with the strengthening of China’s military reforms, the situation in the region has started to evolve complicatedly and unpredictably, posing direct threats to peace and stability in the region, especially in the East Sea.

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First of all, alongside the process of promoting military reforms, China has intensified a series of military exercises in the East Sea area, which is an important international maritime route in the world’s trade activities. According to incomplete statistics, such incidents are carried out by China in the East Sea dozens of times each year. Military exercises with live ammunitions, with aircraft carriers or battleships often undisclosed to neighboring countries, have constituted threats to regional peace and stability.2 More seriously, China has also conducted live firing exercises in the waters of the exclusive economic zone and continental shelf of Vietnam, causing serious instability and violating the sovereignty of the East Sea coastal countries. The spokesman of Vietnam Ministry of Foreign Affairs has repeatedly demanded China respect the provisions of international law, especially the 1982 UN Convention on the Law of the Sea, not complicate the situation and maintain peace and stability in the region (Son 2017). Apart from the reform of naval forces, China has continued to develop unmanned equipment such as unmanned motorboats, unmanned aerial vehicles, unmanned underwater drones, or radar jamming systems that were tested and installed on artificial islands illegally constructed in the East Sea area (Phuong 2018). This poses direct threats to the freedom of navigation and aviation in the East Sea, besides  violating the principles of UNCLOS. In addition, aside from strategic competition between China and the US in the East Sea area, many incidents have been reported between American and Chinese naval forces in recent years, such as the Lanzhou battleship passing  dangerously close to the American destroyer Decatur (Nguyen 2018), American B-52 bombers flying in the East Sea (Khanh 2019), or China’s seizure of an American underwater drone (Phuong 2016). These incidents are implicit threats, and can easily ignite dangerous military conflicts, directly threatening peace and stability in the East Sea. Finally, with the strong development of its naval forces, China’s unjustified claims in the East Sea have toughened in recent years. In 2014, with the assistance of naval forces, naval police, and air support, China abruptly  In 2018, China conducted many exercises in the East Sea region, including many largescale ones such as a naval parade involving both naval and air forces. This involved the participation of more than 10,000 personnel under the direct command of the Central Military Commission Chairman Xi Jinping in April and a live ammunition military exercises in the Paracel Islands from 22 to 24 March. 2

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moved the HD 981 drilling rig into the exclusive economic zone and continental shelf of Vietnam (Nguyen and Hoang 2014). This act of sovereignty infringement has caused severe reactions from Vietnamese people both at home and abroad (Dan Tri 2014). Such action is contrary to the Chinese leaders’ pledge of peace and stability and seriously violates the legitimate interests of Vietnam. This incident has most heavily damaged the relationship between the two countries since the normalization  of ties in 1991 (Phuong 2015). In a nutshell, the reforms of the Chinese PLA has picked up pace after China’s fifth generation of leaders, led by Xi Jinping, came to power. After the 18th National Congress, China embarked on military reforms responding to the national and international contexts of complex security developments and national interests. On the other hand, by considering the issues of the East Sea as “core interests” (Van 2015) and important stepping stones for China to advance to the Pacific and Indian Oceans, China has aimed at developing military forces, especially as an influential naval power in the world. In the course of reforms, the leadership roles of the CPC and of General Secretary Xi have been constantly strengthened and enhanced. By amending the Party constitution at the 19th Party Congress, it is very likely that Xi will continue holding power even after the next Party Congress. If that is the case, China’s military reforms will continue to be accelerated. In the context that military reforms have become one of the focal tasks in the process of Chinese “national rejuvenation” and the implementation of the “Chinese dream”, China’s military growth and its pursuit of illegal sovereignty claims in the East Sea will be destabilizing factors for peace and stability in the region. Military reforms in China in the wake of the 19th National Congress continue to be under the leadership of the CPC. In other words, the Party will continue to control the gun in the development of a “strong army” in the future.

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towards Strong Military’ is the goal of ongoing military reforms: Central Military Commission Scientific Research Steering Committee established]. 25 July. https://www.guancha.cn/gczhengjing/2017_07_25_419753_s.shtml Ifeng.com. 2016. “Gaosu ni chenue shi Junwei lian zhi zong zhihui” (告诉你什么 是军委联指总指挥) [Let me tell you who is the commander-in-chief of the CMC Joint Operations Center]. 21 April. http://news.ifeng. com/a/20160421/48534180_0.shtml Khanh An. 2019. “My dieu may bay B-52 den Bien Dong” [The US dispatches B-52 bombers to the East Sea], Thanh Nien. 6 March. https://thanhnien.vn/ the-gioi/my-dieu-may-bay-b-52-den-bien-dong-1057644.html Law-lib. 1999. “Guojia gongshang xingzheng guanli ju Zhongguo Renmin Jiefangjun Zonghouqinbu guanyu yanjin liyong jundui, Wujing Budui mingyi congshi jingying huodong de tongzhi” (国家工商行政管理局中国人民解放军 总后勤部 关于严禁利用军队、 武警部队名义从事经营活动的通知) [Circulars of the State Administration for Industry and Commerce, the General Logistics Department of the People’s Liberation Army on prohibition of using the capacity of the military and the People’s Armed Police to conduct business activities]. http://www.law-lib.com/law/law_view.asp?id=69189" Le Quy Quynh. 2016. “Trung Quoc boi dap, ton tao trai phep cac cau truc dia ly tren Bien Dong: Dau tranh cua Viet Nam va phan ung cua cong dong quoc te” [China illegally reinforces the geographic structures in the East Sea: Vietnam’s struggle and the response of the international community], Nghien Cuu Bien Dong. 26 June. http://nghiencuubiendong.vn/nghien-cuu-vietnam/5944trung-quoc-boi-dap-va-ton-tao-trai-phep-cac-cau-truc-dia-ly-tren-bien-dong Mai Hoa. 2015. “The strategic position of the East Sea and the issues of Vietnam’s sovereignty in the East Sea”. Journal of Democracy and Law (electronic version). http://tcdcpl.moj.gov.vn/qt/tintuc/Pages/xay-dungphap-luat.aspx?ItemID=83 Nguyen Dong and Hoang Thuy. 2014. “Trung Quoc tang luc luong bao ve gian khoan 981” [China increased protection of the HD 981 drilling rig], Vnexpress. 15 May. https://vnexpress.net/thoi-su/trung-quoc-tang-luc-luong-bao-vegian-khoan-981-2991181.html Nguyen Hoang. 2018. “My cong bo anh tau chien Trung Quoc ap sat khu truc ham o Truong Sa” [The US publishes image of a Chinese warship approaching USS destroyer in the Spratly Islands], Vnexpress. 3 October. https://vnexpress. net/the-gioi/my-cong-bo-anh-tau-chien-trung-quoc-ap-sat-khu-truc-ham-otruong-sa-3818483.html Nguyen Ngoc Ha and Nguyen Ngoc Mai. 2016. “‘Chinh sach Huong Dong’ cua An Do trong quan he hop tac voi ASEAN” [India’s Look East policy in relations with ASEAN], The Center for Indian Studies, Ho Chi Minh National Academy of Politics. 29 November. http://cis.org.vn/article/1753/chinhsach-huong-dong-cua-an-do-trong-quan-he-hop-tac-voi-asean-phan-2.html

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People.com. 2009. “Wulumuqi ‘7.5’ shijian tai qian muhou” (乌鲁木齐“7·5”事件 台前幕后) [Behind the scenes of the Urumqi incident on July 5]. 16 October. http://politics.people.com.cn/GB/14562/10201961.html Pham Duy Thuc. 2016. “Dieu chinh trong Chinh sach Bien Dong cua Chinh quyen Tong thong Philippines Rodrigo Duterte” [Adjustments in the East Sea policy of the Philippine President Rodrigo Duterte’s administration], Nghien Cuu Bien Dong. 11 August. http://nghiencuubiendong. vn/y-kien-va-binh-luan/6208-dieu-chinh-trong-chinh-sach-bien-dongcua-tong-thong-philippine-duterte Phuong Nguyen. 2015. “Tu su kien gian khoan nhin lai Trung Quoc va quan he Viet–Trung” [A review of China and Vietnam-China relations since the HD 981 drilling rig incident]. Chinese Studies Review (electronic version). http:// vnics.org.vn/Default.aspx?ctl=Introduce&aID=501 Phuong Thao. 2016. “Trung Quoc thu thiet bi khong nguoi lai cua My o Bien Dong” [China seizes the US underwater drone in the East Sea], Zing.vn. 16 December. https://news.zing.vn/trung-quoc-thu-thiet-bi-khong-nguoi-laicua-my-o-bien-dong-post706434.html Phuong Thao. 2018. “Trung Quoc tap tran ten lua, dieu may bay khong nguoi lai ra Bien Dong’ [China holds missile drills, sending unmanned aerial vehicles into the East Sea area], Zing.vn. 15 June. https://news.zing.vn/trung-quoctap-tran-ten-lua-dieu-may-bay-khong-nguoi-lai-ra-bien-dongpost851775.html Renmin Ribao. 2012. “Zhongguo chengzhenhua lü tupo 50% xingfu zhishu dafu tigao” (中国城镇化率突破50%幸福指数大幅提高) [China’s urbanization rate has exceeded 50%, and the happiness index has increased substantially]. 4 November. http://news.ifeng.com/mainland/detail_2012_11/04/18810512_0.shtml Shehui Fazhan Xueyuan. 2017. “Shiba jie san Zhong Quanhui: Zhonggong Zhongyang guanyu quanmian shenhua gaige ruogan zhongda wenti de jueding” (十八届三中全会 ‘中共中央关于全面深化改革若干重大问题的决定’) [The 3rd Plenary Session of the 18th Central Committee meeting: The Decision of the Central Committee of the Chinese Communist Party on several major issues concerning comprehensively deepening reform]. http://shfz.xhu. edu.cn/77/12/c4122a96018/page.htm Shen-Gang Zaixian (深港在线). 2014. “Kunming 3.01 bao kong an gao po: san ming taofan luowang” (昆明3.01暴恐案告破:三名逃犯落网) [The riot case on March 1 in Kunming: three fugitives arrested]. 12 March. http://news.szhk. com/special/kmkbxj/k Sina.com. 2011. “Riben gongbu 2010 nian GDP shuji bei Zhongguo ganchao tuiju shijie di san” (日本公布2010年GDP数据被中国赶超退居世界第三) [Japan’s 2010 GDP falls below China’s to third place in the world]. 14 February. http://finance.sina.com.cn/j/20110214/08519369574.shtml

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Sina.com. 2016a. “The introduction of the military reform plan: Xi Jinping summoned the reform group meeting of the Central Military Commission, approved by the Standing Committee of the Political Bureau” (军改方案出台 过程公布: 习近平三开军委改革领导小组会议 政治局常委会审定). http:// mil.news.sina.com.cn/2016-01-01/doc-ifxncyar6151681.shtml Sina.com. 2016b. “Guofangbu tan wu dazhanqu jibie gui shei lingdao jun she san junzhong jiguan” (国防部谈五大战区级别归谁领导 均设三军种机关) [The Ministry of National Defense talks about who is leading the five major theaters, restructuring the three armed forces]. 2 February. http://mil.news.sina.com. cn/china/2016-02-02/doc-ifxnzanh0547860.shtml Sohu. 2015. “Xi Jinping: Zhongguo xuanbu caijun 30 wan” (习近平: 中国宣布裁 军30万) [Xi Jinping: China will reduce 300,000 troops]. 3 September. http:// mil.sohu.com/20150903/n420362932.shtml Sohu. 2017. “Lujun 18 ge jituanjun tiaozheng wei 13 ge xin fanhao gongbu” ( 陆军18个集团军调整为13个 新番号公布) [Downsizing of 18 group armies to 13 units announced]. 27 April. http://news.sohu.com/20170427/ n490945574.shtml Son Duan. 2017. “Trung Quoc tap tran ram ro o Bien Dong” [China holds massive military exercises in the East Sea], Thanh Nien. 1 September. https:// thanhnien.vn/the-gioi/trung-quoc-tap-tran-ram-ro-o-bien-dong-871278.html Van Khoa. 2015. “Trung Quoc xem Bien Dong la ‘loi ich cot loi’” [China considers the East Sea as core interest], Thanh Nien. 4 July. https://thanhnien.vn/ thoi- s u/quoc -p h o n g / t r u n g-q u o c -x em -b ie n-dong-l a -l oi -i c h-c otloi-581276.html Wang Shuai. 2017. “A study on Xi Jinping’s military management ideology”. National Defense University (NDU), Master’s degree thesis, March. Xinhua Wang. 2016. “Chengli lujun lingdao jigou youzhu yu lujun xiang quan yu zuozhan zhuanxing” (成立陆军领导机构有助于陆军向全域作战转型) [Establishment of the armed forces’ leadership mechanism will be conducive to the comprehensive transformation of the army’s warfighting]. 27 November. http://www.xinhuanet.com/talking/2016-11/27/c_129380188.htm Yangguang Wang. 2015. “Xi Jinping dui jun gai fang’an qinbi zuo zhongyao xiugai zhuzizhuju shenyue” (习近平对军改方案亲笔做重要修改 逐字逐句 审阅) [Xi Jinping personally revises important contents of the military reform plan].  31 December.  http://news.cnr.cn/native/gd/20151231/ t20151231_520985819.shtml Yao Liang (姚亮), Lü Dongxia (吕东霞), Lin Yongqiang (林永强). 2011. “Xianjieduan Zhongguo de shehui maodun tezheng fenxie” (现阶段中国的社 会矛盾及特征分析) [Analysis of social contradictions and characteristics in China at present], Dang-Zheng Ganbu Xuekan (党政干部学刊). No. 6.

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Zhang Mingrong. 2017. “Strong army dream – The process and signification of China’s military modernization”. The International Journal of Taiwan Studies, No. 2. Zhongguo Gongchandang Xinwen Wang. 2015. “Xi Jinping tan guofang he jundui jianshe: gaige shi jueding jundui weilai de guanjian yi zhao” (习近平谈国防和 军队建设: 改革是决定军队未来的关键一招) [Xi Jinping talks about the development of national defense and the armed forces: reform is a key determining factor for the future of the military]. 27 November. http://cpc.people.com. cn/xuexi/n/2015/1127/c385475-27863649.html Zhongguo Gongchandang Xinwen Wang (中国共产党新闻网). 2016. “Junwei jiguan tiaozheng zujian renwu jiben wancheng zongbu zhi gaiwei duobumen zhi junwei jiguan she 15 ge zhineng bumen” (军委机关调整组建任务基本完成 总部制改为多部门制 军委机关设15个职能部门) [Central Military Commission headquarters restructuring establishes a coordinated multi-­sectoral system. The CMC now includes 15 functional departments]. 12 January. http://theory. people.com.cn/n1/2016/0112/c40531-28040741.html Zhongyang Zhengfu Menhu Wangzhan. 2014. “Xi Jinping zhuchi Zhongyang Junwei shenhua guofang he jundui gaige lingdao xiaozu di yi quanti hui” (习 近平主持中央军委深化国防和军队改革领导小组第一次全体会) [Xi Jinping presides over the 1st Plenary Session of the Central Military Commission group to deepen the national defense and military reform]. 15 March. http://www. gov.cn/xinwen/2014-03/15/content_2639427.htm

PART III

Neighbourhood Policies

CHAPTER 7

Key Markers and Trends in Chinese Foreign Policy in South Asia Prashant Kumar Singh

China-South Asia relations have generally been studied within the localised context of South Asia—that is, with reference to India-China relations. This chapter argues that although the Chinese shadow has always fallen across South Asia, the geo-economic framework of the  Belt and Road Initiative (BRI)—the new “organising principle” of China’s foreign policy—is redefining the terms of China’s engagement with South Asia and has furthered its interests in the region discernibly, posing a definite challenge to the perceived pre-eminence that India has enjoyed in the region, for mainly historical and geographic-locational reasons. Hence, this chapter

This chapter forms part of the author’s project “Foreign Relations and Security in Xi Jinping’s ‘Chinese Dream’” and a revised and updated version will appear in the project publication. The chapter has evolved from the author’s paper “‘Chinese Wisdom’ in South Asia: Implications for India-China Relations”, which was presented in absentia at The 60th American Association for Chinese Studies (AACS) Conference (Social, Economic, and Political Change in China and Taiwan), University of Maryland, Baltimore, Maryland, USA, 5–7 October 2018.

P. K. Singh (*) Institute for Defence Studies and Analyses, New Delhi, India © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_7

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analyses the developing China-South Asia relations with reference to the BRI that operationalises Communist Party of China (CPC) General Secretary Xi Jinping’s vision for China’s place in the world. It also underlines the implications of the change for India and its options for meeting the challenges. The takeaway this chapter offers is that domestic developments relating to the reaffirming of Xi’s unconstrained paramount position and the new foreign policy bearing his personal stamp suggest that India will have to confront the resultant challenges posed by the BRI foreign policy in the coming years. However, this strategic situation is also an opportunity for India to re-envision its own role in regional affairs.

The BRI as the New “Organising Logic” of Chinese Foreign Policy The BRI as a new foreign policy framework for China has picked up from where its “peaceful rise” discourse left off. It softens China’s demand for “a new type of major power relations”, another pronouncement made by Xi, but clearly still suggests that China seeks a greater say in international relations. The BRI in its bare essential form is an economic initiative. To overcome the problem of excess capacity and market saturation in China, it seeks to transform the Chinese economy, from being export-led to overseas investment-led, and connects China’s economic development with global development. However, a narrative of international cooperation, collaboration and connectivity has been woven around this initiative. This narrative projects China as a stakeholder in global well-being, growth and development by becoming the provider of much-needed investments to the international community (Luft 2016). It purports to promote an open regionalism by proposing policy coordination for upholding free trade and investment and soft borders, without ideological preconditions, and calls for connectivity, with its wider connotations of commercial, cultural and transport connectivity (The State Council of the PRC 2015). But its focus on transport connectivity, more especially, is meant to ignite the desire for soft borders across the region. On the whole, the BRI is designed to project China as the alterative leader of a liberal economic order (The State Council Information Office of the PRC 2017), while remaining sotto voce unconcerned about the political aspects of a liberal order. Thus, the BRI exports prosperity as a value and a reason for international collaboration. Separately, a subtle economy-security integration can

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also be perceived in this, both in terms of identifying the lack of development as the root cause of insecurity, as well as ensuring the security of China’s overseas interests, as part of its security strategy (Ministry of National Defence of the PRC 2015). China’s foreign policy moves informed by the BRI are designed to bring China’s individual bilateral relations in South Asia within a common operational framework of intensified economic collaboration while encouraging multilateral, particularly trilateral, cooperation with India (PK Singh 2018; The Economic Times 2015). The interaction during this period has deepened China’s economic as well as political engagement with South Asia, taking it much beyond Pakistan and posing serious challenges for India.

Analysing China’s Economic Interactions with South Asia Even though China-South Asia economic ties have an extremely low base and are relatively insignificant, in China’s overall international economic cooperation, statistics, however, show that in absolute terms, its interaction with the region has increased substantially. The eight regional countries may not rank high in China’s data of trade and investment, but China has emerged as the number one trading partner for many of them and an important source of Chinese Overseas Foreign Direct Investment (OFDI) for many regional countries. A closer look at the statistics suggests that from around 2008 onwards, China-South Asia economic ties appear to have moved beyond their earlier focus on India—a development that helps us understand the changing contours of China’s strategic engagement with the region, which are perceived to be detrimental to India’s interests, parallel with the BRI. China’s Trade Travels Beyond India Even with this low base, it is possible to discern some trends in China’s bilateral trade with the region. From 1997 to 2008, India’s share of this trade steadily increased from 45.70 per cent to 78.72 per cent. Thus, India gradually emerged as the regional driver of this trade. However, from 2009, India’s share began to decline. Since then, it has gone down to 63.39 per cent in 2016. In the late 1990s and early 2000s, when the trade distribution in the region was much more even, the volume of trade was

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also abysmally low, being US$3917.34 million in 1998. Trade again became relatively broad-based towards 2016 when its volume was US$110,710.60 million, and the increasing share of other countries assumed greater significance. Since around 2010, Pakistan and Bangladesh have emerged as the new boosters of trade with China, whereas India’s share, though still the largest, has plateaued. Pakistan’s trade with China has risen from US$8668.62 million to US$19,147.06 million in 2016. Bangladesh’s trade went up from US$7057.70 million to US$15,171.63 million during the same period. The figures for India went from US$61,761.20 million to US$70,179.47 million for the corresponding period. China-Sri Lanka trade reached US$2097.12 million in 2010, doubling to US$4561.77 million in 2016. Notably, China’s trade with Afghanistan, and particularly Maldives, has risen in recent years. China’s trade with Maldives, which remained negligible for the large part of the period covered here, has registered decent numbers, since 2013. China registered US$97.83 million worth trade with Maldives in 2013, which increased to US$321.18 million in 2016. China-Afghanistan trade figures are somewhat better. Their trade picked up much earlier and has been steadier, touching the US$100.67 million mark in 2006 and going up to US$435.83 million in 2016. The only exception is Nepal. China-Nepal trade was US$742.67 million in 2010, which touched US$2330.65 million in 2014, but tumbled to US$864.71 million in 2015, marginally recovering in 2016 to US$888.68 million. This seems to be the result of the massive earthquake and the political instability in 2015 in Nepal (China Statistical Yearbook various years). Finally, it is natural for India as the sixth largest economy in nominal terms, the third ranking in terms of purchasing power parity and featuring among the top 20 trading countries, to account for the largest share. However, what cannot be ignored is that its share declined from an all-­ time high of 78.2 per cent to 63.39 per cent in 2016. Again, this is difficult to ignore because during the period covered, significant political shifts have been noticed in the region with reference to China. Pakistan Emerges as a Favoured Destination for Chinese OFDI Similarly, Pakistan enjoys a clear advantage over India with regard to OFDI from China. Between 2007 and 2014, the period for which this author could access the comparative data, China’s OFDI flows in Pakistan were significantly higher than the inflows to India, except for 2012. In

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2014, it received 3.19 times more investment than India. Pakistan received US$1014.26 million while India received US$317.18 million in Chinese OFDI in that year. Separately, even though the numbers are low, Chinese OFDI in Sri Lanka and Maldives is noteworthy. The OFDI flows to Sri Lanka fluctuated between 2010 and 2014, but even so the figure was a substantial US$85 million in 2014 compared to the US$28.21 million in 2010. Maldives’ appearance on the Chinese OFDI map is significant for strategic reasons, even though the data is still in the negligible zone— largely because of its limited capacity to absorb the OFDI, due to its tiny population and area. Maldives received US$1.55 million in 2013 and US$0.72 million in 2014 as Chinese OFDI inflows. The examples of Sri Lanka and Maldives are relevant because of their perceived importance in China’s maritime strategy. Likewise, the OFDI has registered an increase in Nepal as well—another South Asian country where the “India-China strategic tension” is palpable. Nepal received only US$00.86 million in Chinese OFDI in 2010, which went up to US$45.04 million in 2014. On the other hand, the influx of Chinese OFDI in Bangladesh has remained slow, going up to US$25.02 million in 2014 from US$ 7.24 million in 2010, with fluctuations in the intervening period (Statistical Bulletin of China’s Outward Foreign Investment 2015). This statistic yet again serves as a reminder that while trade with China is largely free from political sensitivities in India, except for concerns relating to the trade deficit, Chinese investment raises a number of political and security concerns in India. India Loses China’s Contracted Projects to Pakistan Another sign that India’s pre-eminence in South Asia is getting diluted following China’s growing economic engagement with the region is in terms of the turnover value of China’s contracted projects, and the persons deployed for these contracts. In 2011, China completed US$7441.66 million worth of projects in India. The same year Pakistan saw the completion of Chinese projects valued at US$2372.77 million. From 2006 to 2011, the turnover value of Chinese contracted projects in India rose continuously, maintaining a lead over those in Pakistan. However, the numbers have been declining since 2012, with Pakistan taking the lead from 2014. In 2016, China completed projects worth US$7268.09 million in Pakistan, whereas completed projects in India the same year stood at US$1824.35 million in value. Thus, India and Pakistan changed places in

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the five years, between 2011 and 2016. This also prompts the thought, whether the comparative decline in the contracted projects of Chinese companies in India has anything to do with the deterioration in India-­ China relations in recent years, or whether it is because of the China-­ Pakistan Economic Corridor (CPEC), considered a flagship project of the BRI and announced in 2015 (China Statistical Yearbook various years). Incidentally, the other country, which is notable in this respect, albeit from a rather low base, is Maldives. The value of the turnover of Chinese companies in Maldives in 2011 was US$53.95 million, which progressively went up to US$247.05 million in 2016. But, in the case of Nepal, Bangladesh and Sri Lanka, the figures have been range bound, with the occasional spike or dip. In Nepal, the turnover value was US$191.43 million in 2011 and US$222.79 million in 2016. In Bangladesh, it was US$2073.04 million in 2011 and US$1916.23 million in 2016. In Sri Lanka, the same value was US$1257.15 in 2011 and US$1476.77 million in 2016. Finally, Afghanistan stands out, as the turnover value went down in 2016 to below the 2011 levels, after showing very impressive growth in 2012 and 2013. The turnover value was US$58.05 million in 2011, US$155.53 million in 2012 and US$432.42 million in 2013. The value declined to US$16.30 million in 2014 and US$11.33 million in 2015. In 2016, it recovered but remained at the level of US$40.58 million (China Statistical Yearbook various years). This is most likely because of the security situation in that country. The BRI and Changing Face of China-South Asia Economic Interaction The diversification of China’s economic partners in South Asia follows close on the heels of the BRI. While the spike in China’s trade with Pakistan and Bangladesh began a little before the announcement of the BRI, the surge in its OFDI in South Asia, particularly in Pakistan, Nepal, Sri Lanka and Maldives, took place closer to the BRI announcement. Interestingly, Maldives’ appearance on the OFDI map completely coincides with the BRI. India’s loss of contracted projects to Pakistan also has the same timeline. It seems that the trends in the Chinese economy that the BRI captured had already given a push to China’s economic engagement with these countries. The BRI has further intensified these trends. In the case of Pakistan, the CPEC under the BRI seems to be very clearly boosting China-Pakistan economic relations. It can be argued that India’s

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falling share in China’s trade with South Asia and in its OFDI and contracted projects in the region may be temporary, as India may have lost most of these to Pakistan, due to the CPEC. Therefore, once the CPEC projects are completed, India’s share is likely to rise again. Otherwise too, India’s share may again increase in the normal course of events. However, it would be wrong to assume that the CPEC and BRI are time-specific projects. This is not so much about the CPEC as a specific project, but about China harnessing Pakistan’s economic potential, which cannot have an expiry date. Such trading and investment interests are renewable and ongoing. It would be naïve to imagine that China-Pakistan economic ties will again become insignificant and go back to being defence-centric. The same holds true for other countries in the region, though much will also depend on how the economies of these countries perform domestically.

Strategic Aspects of the BRI Engagement with South Asia China’s long-standing strategic objectives in South Asia are several. These include a stable and friendly South Asia for promoting deeper economic ties and for enhancing its political influence in the Himalayas for ensuring Tibet’s security, the boundary dispute with India and the requirement of overland connectivity to West Asia via Pakistan. The statistics above show that China’s efforts to bring about the developmentoriented regionalisation of South Asia by means of the BRI have enabled it to achieve these objectives more effectively. At the same time, the BRI and the activities undertaken through it also seek to contribute to China’s new strategic objectives like ensuring political stability in Afghanistan, enhancing China’s influence in Sri Lanka and Maldives, as part of its overall maritime strategy to protect its overseas interests, and reducing great power influence in its South Asian vicinity. While bilateral relations are important, China’s endeavour to regionalise its engagement with South Asia under the BRI is moving beyond bilateral pairings. It should be clear that China’s regional approach did not begin with the BRI, but it does refine and give it a push, aided by its financial muscle. It takes the Chinese discourse on multipolarity and multilateralism forward in South Asia. China and South Asian countries interact in various multilateral organisations and processes such as the Conference on Interaction and

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Confidence-Building Measures in Asia (CICA), South Asian Association for Regional Cooperation (SAARC), Shanghai Cooperation Organisation (SCO), Indian Ocean Rim Association (IORA), New Development Bank (NDB) and Asian Infrastructure Investment Bank (AIIB). Of these the NDB, established in 2014, and the AIIB, founded in 2015, operate closely with the BRI (Freeman 2018). Besides, China has pushed South Asia-centric initiatives like CPEC and included the pre-existing Bangladesh-China-India-Myanmar (BCIM) Economic Corridor in the BRI. China appears to be supportive of ideas such as China-Nepal-India and China-India-Sri Lanka trilateral cooperation. Notably, China has recently proposed a 2+1 format: China-India plus any one relevant country in South Asia that may require support from the two big countries (Aneja 2018). It should be noted that except for India and Bhutan, every South Asian country endorses the BRI. BRI Ends China’s Formal Neutrality Between India and Pakistan The above statistics show that Pakistan has become the alternate and very substantial centre for Chinese economic activities in South Asia. This also indicates how the growth in Chinese trade, OFDI and the company projects in Pakistan are all closely linked with the BRI-CPEC. The CPEC, a US$62 billion flagship BRI project, runs around 70 projects of various types in the energy and infrastructure sectors, which are in their different stages (China Pakistan Economic Corridor 2018). It has upgraded China-­ Pakistan relations from the merely strategic to the larger geo-economic. Also, interestingly, the initial expectation that this upgradation may de-­ hyphenate India-Pakistan in the Chinese approach towards South Asia has been belied. In fact, it has further reinforced the core strategic substance of the relationship. China’s constant vetoing of India’s resolutions in the UNSC 1267 committee for sanctioning certain Pakistan-based terrorists (The Indian Express 2018) and the rejection of Indian objections regarding the CPEC passing through the Kashmir territory which is a matter of dispute between India and Pakistan (Ministry of External Affairs 2017; India Today 2017) indicates that the CPEC is making Pakistan indispensable for the success of the BRI. One may also argue that China is not shying away from a confrontation with India over Pakistan-based terrorists, which practically ends China’s neutrality in substantive terms with regard

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to India-Pakistan disputes, which it had adopted in the late 1970s and early 1980s onwards (Garver 2004). China Consolidates and Deepens Influence in Himalayas Deng Xiaoping’s reported advice to Nepal during his visit to the country in 1978 “to maintain good relations” with India (Tiwari 2013) and later China’s guarded response to the 1989 crisis in India-Nepal relations, which was perceived to have stemmed from India’s displeasure over Nepal’s purchase of Chinese arms (Garver 1991), contrast with China’s vocal support for Nepal, during the recent political crises in that country, particularly the latest Madhesi crisis in September 2015 over the promulgation of the new Constitution (Pant 2017). At times, this support has been at variance with India’s stance on the issues, as for example over the Madhesi opposition to this Constitution. China’s rising interest in Nepalese affairs is buttressed by its various infrastructure projects in Nepal. Notably, in the last decade or so, Maoist leftist forces in Nepal have looked towards China to offset India’s influence in the country (Pant 2017). Nepalese Prime Minister KP Oli’s decision to not participate in the BIMSTEC military exercise, proposed by India, but to send troops for a joint military exercise with China, which was well publicised, highlights the changing strategic landscape (The Economic Times 2018; Giri 2018). In recent times, China and Nepal have signed agreements on Transit Transport in 2018 (Mohan 2018a), a Memorandum of Understanding (MOU) for the Construction of Cross-Border Economic Cooperation Zones in 2017 (Ministry of Commerce of the PRC 2017) and an agreement on the Pokhara Regional International Airport Project in 2016 (Xinhua 2016). Prime Minister Oli signed 14 agreements worth more than US$2 billion during his visit to China in June 2018 (Rajya Sabha TV 2018). These agreements, signed in the wake of the Madhesi crisis, signal a focus on alternative connectivity for land-locked Nepal via China, thus reducing its reliance on India. As for Bhutan, the other Himalayan country, it has stayed away from the BRI and Chinese money. It does not also have diplomatic contacts with China but has a special relationship with India, one which is defined by various bilateral instruments. Bhutan too, like India, did not attend the first international BRI forum in May 2017 (Haidar 2017), and driving a wedge between the two countries was believed to be a Chinese motive, behind the Doklam stand-off, between India and China from June to

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August 2017 (Mitra 2017). A Bhutan, beyond China’s diplomatic reach, is of great symbolic value for India. However, as Bhutan too has a boundary dispute with China, there have been reports of Chinese pressure and inducements or incentives for dispute resolution on favourable terms for Bhutan, neglecting India’s security objections. There are media reports that China is also seeking to establish formal diplomatic relations with Bhutan; whether and how India can counter China’s pressure on Bhutan is the question (Patranobis 2018). Chinese Presence in Its “Maritime Backyard” a New Concern for India Sri Lanka had begun figuring in the strategic discourse regarding China’s deepening strategic influence, in the early 2000s in the context of the “String of Pearls theory” and China’s Malacca Dilemma. However, the Mahinda Rajapaksa presidency (2005–15) in Sri Lanka can be considered a turning point in its ties with China. As Rajapaksa led the war with the LTTE to its conclusion, in 2009, China emerged as a valid strategic option for Sri Lanka as it began receiving Chinese arms during this period because India—its supposedly natural source of help—held back due to its concerns about the war’s political implications for its own Tamil population. Western countries, too, opposed human rights violations during the war, which ended any possibility of Western help, too. The Rajapaksa government, in fact, signed several loan agreements with China, many of which predated the BRI—for instance, the agreement for Hambantota Port development and the financial agreements for port, electricity and industrial park projects. Rajapaksa’s welcoming of Chinese money was seen as a political choice to reduce Sri Lanka’s strategic reliance on India. Economic cooperation between the two countries is ongoing but these loans have now resulted in huge debt liabilities, which have become an issue in Sri Lankan politics. These liabilities are internationally cited to flag the “debt trap” model that the BRI entails. The leasing of the Hambantota port for 99 years to repay Chinese loans is a widely cited example (Limaye 2017; Fernholz 2018; Al Jazeera 2017; Abi-Habib 2018). In the other Indian Ocean island nation, Maldives, it was natural in 1988 for President Maumoon Abdul Gayoom to seek Indian help for putting down an attempted coup and cordiality existed in bilateral relations till 2008 when Gayoom retired (Kumar 2016). However, in the post-­ Gayoom era, India has become a point of contention in Maldivian politics.

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During the Yameen government, from 2013 to September 2018, especially, the government policy took a decisive turn against India as the latter appeared sympathetic to the embattled opposition. In 2018, when the Yameen government declared an emergency in Maldives, speculation was rife about a possible Indian intervention. During this time, there were signals that China may challenge India, if it intervened (Ai 2018). The alarmists began sensing a Doklam-type stand-off in the Indian Ocean (KC Singh 2018). The issue reportedly figured in the India-China dialogue (Malhotra 2018; Miglani and Aneez 2018). China seemed to be a source of confidence for the Yameen government. China had opened its embassy in Maldives in 2011 (Ministry of Foreign Affairs of the People’s Republic of China 2011) and in 2014, Xi Jinping became the first Chinese President to visit Maldives (Ministry of Foreign Affairs of the People’s Republic of China 2014). After Pakistan, Maldives is the only South Asian country to conclude an FTA with China in 2017 (The Wire 2017). Maldives also leased the Feydhoo Finolhu Island to China in 2016, a development that raised strategic concerns in India (Chaudhury 2016) with the latter (China) also developing important infrastructure projects like the Ibrahim Nasir International Airport (INIA) in Malé. China got this project in 2014 (Bosley 2014) after the contract with Indian firm GMR was terminated in 2012, reportedly unilaterally (Bosley 2014). Bangladesh and Afghanistan: Away from BRI Tensions The BRI does not appear to pose any palpable challenge to India-­Bangladesh relations, mainly because India has over the past decade managed its relations with the present Sheikh Hasina government well. The statistics given above reveal the considerable volume of bilateral trade between China and Bangladesh and Chinese investment in Bangladesh. The latter has signed various loan agreements for the infrastructure and manufacturing sector with the former in recent years. They signed 40 deals, reportedly, worth US$20 billion during Xi’s Bangladesh visit in 2016 (Paul 2016). China’s acceptability as a disinterested mediator between Bangladesh and Myanmar, over the Rohingya crisis, is also a notable development. Chinese Foreign Minister Wang Yi and Special Envoy Sun Guoxiang have facilitated meetings and exchanges between the two countries (Habib 2017; Ministry of Foreign Affairs of Bangladesh 2018). Wang Yi, in fact, proposed a three-phase solution: an on-site ceasefire and resumption of social stability, strengthening communication between Bangladesh and

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Myanmar and addressing the “root cause of turbulence and conflicts”. This, Wang appeared to indicate in case of the Rohingya crisis-hit Rakhine State in Myanmar, required “poverty alleviation” and “achiev[ing] stability through development” there. He committed that China would “make contributions to this end and play its due role” (Ministry of Foreign Affairs of the People’s Republic of China 2017). As for Afghanistan, China does not have any substantial economic relations with Afghanistan but a stable Af-Pak region is necessary for the success of the CPEC. In recent years, China has participated in trilateral and quadrilateral initiatives for the Afghan reconciliation process, which include Afghanistan-Pakistan-China and Afghanistan-Pakistan-USA-­ China dialogue forums (Ministry of Foreign Affairs of the People’s Republic of China 2018a; Chandra 2016; Dagia 2017). On the other hand, India’s involvement in the process is largely confined to development and reconstruction. As for the India-China dimension in the country, the two countries support an “Afghan-owned, Afghan-led” reconciliation (Ministry of Foreign Affairs of the People’s Republic of China 2018b; Ministry of External Affairs 2018). They do not cross each other’s paths in that country. In fact, it has been observed that following the Wuhan “informal” summit between Modi and Xi in April 2018, consultations between India and China on Afghanistan have increased. There have been proposals for joint projects in Afghanistan (Chaudhury 2018; Panda 2018; Mohan 2018b) and thus, Afghanistan provides a rare space for a trilateral cooperation for India and China.

India’s Concerns About the BRI As has been already stated, India is the only country in South Asia that does not endorse the BRI. Following India’s cues, Bhutan did not attend the BRI Forum in May 2017. However, it has not issued any public position on the BRI. In fact, India may be perhaps the only country in the world that has taken a public stand against the BRI (Ministry of External Affairs 2017). This it does because the BRI violates India’s sovereignty in CPEC as it passes through Pakistan-occupied Kashmir, which India considers its territory. Also, India has reservations about the revenue model of BRI and is concerned about the impact of BRI projects on the environment (Ministry of External Affairs 2017). Incidentally, it should be noted that India is a member of the AIIB and the pre-existing BCIM. While this situation may give an impression that India’s opposition is basically on grounds of sovereignty and the territorial aspects of the BRI in the context

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of the CPEC, it is difficult not to highlight India’s silent discomfort about that deepening political influence of China, which is basically an outcome of its deepening economic engagement. As the BRI framework has come to define the entire gamut of activities that China is undertaking in its international relations, India is also conveying its unhappiness over Chinese activities in the region, that are detrimental to its interests, by opposing this framework. It is difficult to ignore the issue as China’s economic engagement has increased in Nepal, Sri Lanka and Maldives where constituencies opposed to India have also got emboldened. The way China endorses trilateral cooperation initiatives in South Asia suggests China increasingly sees itself as not being external to the region (The Wire 2018). But the question is whether China’s BRI-­ oriented foreign policy will contribute towards resolving India’s strategic problems or whether it presents a much more sophisticated balance of power approach by China against Indian pre-eminence in the region.

Conclusion The BRI is China’s global geo-economic scheme. The challenges it poses to India in South Asia are largely part of the process. Although the CPEC does seem to be posing some very direct security challenges to India, on the whole, the challenges are political in nature. India runs the risk of facing aggravated political-strategic challenges, though marginalising it economically cannot be visualised. Chinese money may contribute to these political challenges, but they are pre-existent in India’s relations with its neighbours. The BRI is as much an intellectual, as it is a strategic challenge for India. India needs to draw realistic red lines vis-à-vis Chinese influence and develop its capacities to fulfil to its neighbours’ aspirations for development. It should re-envision its relations with its neighbours in keeping with the times and re-envisage its place in the global economic, security and political matrix vis-à-vis, and beyond, China. This is the message India should take home from the CPC’s 19th National Congress.

References Abi-Habib, Maria. 2018. “How China Got Sri Lanka to Cough Up a Port”. The New York Times, June 25. https://www.nytimes.com/2018/06/25/world/ asia/china-sri-lanka-port.html Ai Jun. 2018. “Unauthorized Military Intervention in Malé must be Stopped”. Global Times, February 12. http://www.globaltimes.cn/content/1089435.shtml

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Al Jazeera. 2017. “Sri Lanka Signs Hambantota Port Deal with China Maria”, July 29. https://www.aljazeera.com/news/2017/07/sri-lanka-signs-hambantota-port-deal-china-170729073859204.html Aneja, Atul. 2018. “China Proposed 2+1 Format for India Talks”. The Hindu, June 26. https://www.thehindu.com/news/international/china-proposed21-format-for-india-talks/article24264819.ece Bosley, Daniel. 2014. “Maldives Gives Airport Contract to Chinese Firm during Xi’s Visit”. Reuters, September 15. https://in.reuters.com/article/china-maldives/maldives-gives-airpor t-contract-to-chinese-fir m-during-xisvisit-idINKBN0HA1TS20140915 Chandra, Vishal. 2016. “Beijing: Kabul’s ‘Reliable’ Strategic Partner”. In China’s Transition Under Xi Jinping, edited by J.P Panda. New Delhi: Pentagon. 314–337. Chaudhury, Dipanjan Roy. 2016. “Chinese Company Bags Maldivian Island on 50-Year Lease”. The Economic Times, December 30. https://economictimes. indiatimes.com/news/politics-and-nation/chinese-companies-bags-maldivian-island-on-50-year-lease/articleshow/56245729.cms Chaudhury, Dipanjan Roy. 2018. “Wuhan Effect: India, China to Jointly Train Afghan Diplomats”. The Economic Times, July 16. https://economictimes. indiatimes.com/news/politics-and-nation/wuhan-effect-india-china-tojointly-train-afghan-diplomats/articleshow/65003167.cms China Pakistan Economic Corridor (CPEC). 2018. http://cpec.gov.pk/ China Statistical Yearbook. various years. Beijing: National Bureau of Statistics of China. Dagia, Niha. 2017. “Quadrilateral Meeting Begins in Oman with Hope for Peace in Afghanistan”. Tribune, October 16. https://tribune.com.pk/ story/1532600/quadrilateral-meeting-begins-oman-hope-peace-afghanistan/ Fernholz, Tim. 2018. “China’s ‘Debt Trap’ is Even Worse than We Thought”. Quartz, June 29. https://qz.com/1317234/chinas-debt-trap-in-sri-lanka-iseven-worse-than-we-thought/ Freeman, Carla P. 2018. “China’s ‘Regionalism Foreign Policy’ and China- India Relations in South Asia,” Contemporary Politics 24, no. 1 (2018): 81–97. Giri, Anil. 2018. “Nepal, China Begin Joint Military Exercises”. Hindustan Times, September 17. https://www.hindustantimes.com/world-news/nepal-chinabegin-joint-military-exercises/story-cqFFKTZQrSuuTp7SgwPCyN.html Garver, John W. 1991. “China-India Rivalry in Nepal: The Clash over Chinese Arms,” Asian Survey Vol. XXXi, No. 10, October. 960–75. Garver, John W. 2004. ‘China’s Kashmir Policies.’ India Review 3, no. 1 (2004): 4. Habib, Haroon. 2017. “China Offers to Mediate Dialogue between Bangladesh, Myanmar,” The Hindu, November 19. https://www.thehindu.com/news/ international/china-offers-to-mediate-dialogue-between-bangladesh-myanmar/article20556305.ece

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Haidar, Suhasini. 2017. “India to Skip China’s Belt and Road Forum”. The Hindu, May 13. https://www.thehindu.com/news/international/india-unlikely-toparticipate-in-chinas-belt-and-road-forum/article18445908.ece India Today. 2017. “India to China: Our Rise Not Harmful to Your Ascent, Sovereignty,” January 18. http://indiatoday.intoday.in/story/china-indiarise-foreignsecretary-s-jaishankar-raisina-dialogue-cpec-united-nations-pakistan/1/860220.html Kumar, Anand. 2016. Multi-party Democracy in the Maldives and the Emerging Security Environment in the Indian Ocean Region. New Delhi: Pentagon. Limaye, Yogita. 2017. “Sri Lanka: A Country Trapped in Debt”. BBC News, May 26. https://www.bbc.com/news/business-40044113 Luft, Gal. 2016. “It Takes a Road”. Institute for the Analysis of Global Security. November. http://www.iags.org/Luft_BRI.pdf Malhotra, Jyoti. 2018. “Stepping Back from Maldives, India Tells China,” The Indian Express, March 28. https://indianexpress.com/article/india/ stepping-back-from-maldives-india-to-china-doklam-5113855/ Miglani, Sanjeev and Shihar Aneez. 2018. “Asian Giants China and India Flex Muscles over Tiny Maldives”. Reuters, March 7. https://in.reuters.com/article/maldives-politics/asian-giants-china-and-india-flex-muscles-overtiny-maldives-idINKCN1GJ12N Ministry of Commerce of the People’s Republic of China. 2017. “Chinese Ministry of Commerce Signs the MOU on Constructing China-Nepal Cross-border Economic Cooperation Zone with the Ministry of Industry of Nepal”. May 17. http : //e ng lis h .m o f c o m .go v.c n / a r t i c l e / ne wsr e l e a se / si gni f i c a nt news/201705/20170502577336.shtml Ministry of External Affairs, Government of India. 2017. “Official Spokesperson’s Response to A Query on Participation of India in OBOR/BRI Forum”. May 13. http://www.mea.gov.in/mediabriefings.htm?dtl/28463/official+spokesp ersons+response+to+a+query+on+participation+of+india+in+oborbri+forum Ministry of External Affair, Government of India. 2018. “Visit of President of Islamic Republic of Afghanistan to India”. September 19. https://www.mea. gov.in/press-releases.htm?dtl/30410/Visit+of+President+of+Islamic+Republi c+of+Afghanistan+to+India+September+19+2018 Ministry of Foreign Affairs of Bangladesh. 2018. “China will Help to Facilitate the Return of the Displaced Myanmar Nationals from Bangladesh”. June 29. https://mofa.gov.bd/site/press_release/921c5b2d-9ab5-49a6-bb5004a4f9c06d7e Ministry of Foreign Affairs of the People’s Republic of China. 2011. “Chinese Embassy in Maldives Holds Opening Ceremony”. November 9. https://www. fmprc.gov.cn/mfa_eng/wjb_663304/zzjg_663340/yzs_663350/gjlb_6633 54/2737_663478/2739_663482/t875785.shtml

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Ministry of Foreign Affairs of the People’s Republic of China. 2014. “Xi Jinping Arrives in Male, Starting His State Visit to Maldives”. September 15. https:// www.fmprc.gov.cn/mfa_eng/topics_665678/zjpcxshzzcygyslshdsschybdtjkstmedfsllkydjxgsfw/t1191505.shtml Ministry of Foreign Affairs of the People’s Republic of China. 2017. “Wang Yi: China Proposes 3-Phase Solution to Address Issue of the Rakhine State of Myanmar”. November 20. https://www.fmprc.gov.cn/mfa_eng/ zxxx_662805/t1512592.shtml Ministry of Foreign Affairs of the People’s Republic of China. 2018a. “China-­ Afghanistan-­ Pakistan Trilateral Vice Foreign Ministers’ Strategic Dialogue Held in Beijing”. May 30. https://www.fmprc.gov.cn/mfa_eng/wjbxw/ t1565082.shtml Ministry of Foreign Affairs of the People’s Republic of China. 2018b. “China to Continue to Help Promote Afghan Reconciliation, Reconstruction: Premier”. October 13. https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/ t1604045.shtml Ministry of National Defence of the People’s Republic of China. 2015. “China’s Military Strategy”. May 26. http://eng.mod.gov.cn/Press/2015-05/26/ content_4586805.htm Mitra, Devirupa. 2017. “Six Expert Views on How India Should Look at the Latest Border Stand-Off With China”. The Wire, July 5. https://thewire.in/ diplomacy/expert-gyan-india-china-bhutan Mohan, Geeta. 2018a. “Nepal-China Transit Agreement Ends Sole Dependence on India”. India Today, September 9. https://www.indiatoday.in/ world/stor y/nepal-china-transit-agreement-ends-sole-dependence-onindia-1335863-2018-09-09 Mohan, Geeta. 2018b. “India, China Begin First Joint Afghan Project”. India Today, October 16. https://www.indiatoday.in/india/story/ india-china-begin-first-joint-afghan-project-1368738-2018-10-16 National Bureau of Statistics State Administration of Foreign Exchange of China, 2015. 2014 Statistical Bulletin of China’s Outward Foreign Investment. Beijing: Ministry of Commerce. Panda, Ankit. 2018. “How Far Can Sino-India Joint Economic Cooperation in Afghanistan Go?” The Diplomat, May 1. https://thediplomat.com/2018/05/ how-far-can-sino-india-joint-economic-cooperation-in-afghanistan-go/ Pant, Harsh V. 2017. “China’s Moment in Nepal: Implications for India”. The Diplomat, December 27. https://thediplomat.com/2017/12/ chinas-moment-in-nepal-implications-for-india/ Patranobis, Sutirtho. 2018. “Join BRI and Share Development Bonus’: China Reached Out to Bhutan”. Hindustan Times, July 24. https://www.hindustantimes.com/world-news/china-reaches-out-to-bhutan-sends-first-delegation-tothimphu-after-doklam-standoff/story-ZUzWkoV3Mofp76FXLVbyTO.html

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Paul, Ruma. 2016. “China Signs Deals Worth Billions with Bangladesh as Xi Visits”. Reuters, October 14. https://www.reuters.com/article/us-bangladesh-china/china-signs-deals-worth-billions-with-bangladesh-as-xi-visitsidUSKCN12D34M Rajya Sabha TV. 2018. “China, Nepal Sign 14 Agreements during Oli’s Visit”. June 22. https://rstv.nic.in/china-nepal-sign-14-agreements-olis-visit.html Singh, K. C. 2018. “Are China’s Games in Maldives Doklam II? The Door for Indian Action is Shutting Fast”. The Print, February 10. https://theprint. in/opinion/are-chinas-games-in-maldives-doklam-ii-door-indian-action-shutting-fast/34778/ Singh, Prashant Kumar. 2018. “Can India stomach an India–Nepal–China trilateral?” East Asia Forum, June 12. http://www.eastasiaforum.org/2018/06/ 12/can-india-stomach-an-india-nepal-china-trilateral/ The Economic Times. 2015. “Xi Jinping Proposes Trilateral Cooperation with India: Sri Lanka”. April 10. https://economictimes.indiatimes.com/news/ politics-and-nation/xi-jinping-proposes-trilateral-cooperation-with-india-srilanka/articleshow/46775305.cms The Economic Times. 2018. “Nepal Not to Join BIMSTEC Military Drill in India: Report”. September 8. https://economictimes.indiatimes.com/news/ defence/nepal-not-to-join-bimstec-militar y-drill-in-india/ar ticleshow/65733874.cms The Indian Express. 2018. “China Defends Move to Block India’s Bids at UN to List Azhar Masood as Global Terrorist”. September 29. https://indianexpress. com/ar ticle/world/india-china-jaish-e-mohammed-azharmasood-global-terrorist-un-5379125/ The State Council Information Office of the People’s Republic of China. 2017. “Full Text: Xi Jinping’s Keynote Speech at the World Economic Forum”. April 6. http://www.china.org.cn/node_7247529/content_40569136.htm The State Council of the People’s Republic of China. 2015. “Full text: Action plan on the Belt and Road Initiative,” March 30. http://english.gov.cn/ beltAndRoad/ The Wire. 2017. “Maldives Parliament Approves FTA With China – But With No Opposition Present”. November 30. https://thewire.in/external-affairs/ maldives-parliament-approves-fta-china-amidst-opposition-boycott The Wire. 2018. “National Security Conversations’ Episode 1: Wuhan IndiaChina Summit”. April 30. https://thewire.in/video/national-securityconversations-episode-1-wuhan-india-china-summit Tiwari, Chitra K. 2013. “China-Nepal Border: Potential Hot Spot?” In Beijing’s Power and China’s Borders: Twenty Neighbors in Asia, edited by Bruce Elleman, Stephen Kotkin, and Clive Schofield 212. New York and London: M.E. Sharpe. Xinhua. 2016. “Full Text: Joint Statement between the People’s Republic of China and Nepal”. March 23. http://www.xinhuanet.com/english/ china/2016-03/23/c_135216927.htm

CHAPTER 8

The BRI and the East Sea Disputes in China’s Ties with Southeast Asia Hoang The Anh

After becoming the General Secretary of the Communist Party of China (CPC), Xi Jinping launched the “Silk Road Economic Belt” (SREB) (September 2013) and the “21st Century Maritime Silk Road” (MSR) (October 2013) or  collectively, the “Belt and Road Initiative” (BRI). The BRI is also a way to consolidate and affirm China’s position and influence in the region and the world. Essentially, the BRI is a tool for China to implement its global strategy in the context of the changing regional and international order since China became the world’s second-largest economy. In order to implement the BRI, China’s goals are to promote linkages between China and other countries in five areas: policy coordination, physical  connectivity, unimpeded trade, financial integration and people-to-people exchanges (MFAPRC 2015). With the maritime countries of the Southeast Asia region, China wishes to realize these five goals through the MSR project and with continental countries  through the SREB.

Hoang The Anh (*) Institute of Chinese Studies, Vietnam Academy of Social Sciences, Hanoi, Vietnam © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_8

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However, depending on the relationship between China and each ASEAN country, the BRI is developing in different countries in different ways and each ASEAN country supports and cooperates in varying degrees and in different areas. Broadly, the BRI is bringing and will bring both opportunities and challenges in the security, economic, cultural spheres of ASEAN countries. The opportunities include the promotion of bilateral trade and investment between China and the ASEAN region, the increase of capital for infrastructure investment, the promotion of people-to-­people exchanges and so on. The challenges include security issues in the East Sea of Vietnam (South China Sea), ASEAN trade deficit with China, the capacity of China to implement projects in ASEAN countries, cultural collisions, and the trust deficit that many ASEAN countries have with China among other things. This chapter will look at each of these dimensions in turn.

China’s Implementation of the BRI in Southeast Asia Since China has set up the BRI, its actions with respect to ASEAN can be classified as follows: Cooperation with ASEAN After announcing the BRI at the end of 2013, China released two important documents expanding on what the Initiative stood for—the “2015 White Paper: Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road” (MFAPRC 2015)  and the “2017 White Paper: Vision for Maritime Cooperation under the Belt and Road Initiative” (China.org.cn 2017). According to these two documents, China’s policy towards ASEAN is mainly to promote a mutually cooperative relationship through the mechanism of ASEAN + 1. The locus of such cooperation includes the Zhu Jiang (Pearl) River Delta and the Guangxi and Yunnan provinces, encompassing cooperation over both land and sea. The Vision and Actions document specifically states, China should… create new strategic anchors for the opening-up and development of the southwest and mid-south regions of China, and form an important gateway connecting the SREB and MSR. China should… advance the construction of an international transport corridor connecting China with neighboring countries, develop a new highlight of economic ­cooperation in the Greater Mekong Sub-region, and make the region a pivot of China’s opening-up to South and Southeast Asia (MFAPRC 2015).

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China has called for a China-ASEAN cooperation mechanism for marine environmental protection to be established, and for this to be implemented under the framework of the China-ASEAN Environment Cooperation Strategy and Action Plan. It has also called for sharing of marine research infrastructure, data and technical resources, for the construction of marine technological cooperation parks, for establishing research centres and for cooperation through the APEC Marine Sustainable Development Center, the East Asia Marine Cooperation Platform, the China-ASEAN Marine Cooperation Center, the China-ASEAN College of Marine Sciences, the China-PEMSEA Sustainable Coastal Management Cooperation Center, the China-Malaysia Joint Marine Research Center, the China-Indonesia Center for Ocean and Climate and the China-­Thailand Joint Laboratory for Climate and Marine Ecosystem (China.org.cn 2017). Since 2013, China has signed intergovernmental agreements, MOUs and joint statements for ocean cooperation with countries such as Thailand, Malaysia and Cambodia, and under mechanisms such as APEC, the East Asian Leaders’ Meetings and the China-ASEAN Cooperation Framework. It has launched consultations on maritime affairs and established dialogue and cooperation platforms including the Blue Economy Forum, the Seminar on Marine Environmental Protection, the Ocean Cooperation Forum, the China-ASEAN Marine Cooperation Center and the East Asian Ocean Cooperation Platform. Beijing has also put resources into the China-ASEAN Maritime Cooperation Fund and the China-Indonesia Maritime Cooperation Fund with the Asian Infrastructure Investment Bank and the Silk Road Fund also providing capital for major cooperation programmes. Industrial parks in Cambodia, Malaysia and Myanmar have been set up alongside seawater desalination projects in Indonesia and the launch of the Asia-Pacific Gateway (APG) submarine optical fibre cable (China.org.cn 2017). In order to provide financial resources for the implementation of the BRI in the Southeast Asia region, in particular, and the globe in general, China has launched a number of organizations and mechanisms. For example, the Asian Infrastructure Investment Bank has an initial US$50 billion financial support for infrastructure construction in Asia (Xinhua Wang 2015); China has also  invested US$41 billion for the New Development Bank (Beijing Guoji Jingji Maoyi Ziliao Zhongxin 2016). In November 2014, the Chinese government announced that it would invest US$40 billion to establish the Silk Road Fund. In May 2017, the Chinese government announced that it would increase the capital of the Silk Road Fund by 100 billion RMB (Xinhua Wang 2019). This scale of

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investment is unprecedented: even during the Cold War, the United States (US) and the Soviet Union did not spend anywhere near as much as China is spending today. Together, the total  pledged investment by Beijing adds up to US$1.41 trillion. In contrast, the Marshall Plan cost an equivalent of US$103 billion in today’s dollars (Shambaugh 2015). A series of major projects have been started in recent years and investment in various fields is gradually increasing. The China-Myanmar oil and gas pipeline has been put into operation. The development infrastructure project in ASEAN countries under the MSRI is divided into two sectors— railway and port projects. China has estimated US$72.095 million for the railway construction in Vietnam, Cambodia, Laos, Thailand, Malaysia, Singapore and Indonesia and US$3800 million in realizing port infrastructure in Malaysia and Myanmar (Nurbach et al. 2018). The construction of the China-Laos Railway, which began in December 2016, is progressing on schedule and is expected to be in operation in early 2022. In July 2017, the Indonesian Yawan high-speed rail Valini tunnel was started. In the same year, the Thai cabinet approved the Bangkok-­ Nakhon Ratchasima section of the Sino-Thai Railway Cooperation Project, with an expected construction period of four years. At the beginning of August 2017, the East Coast Railway project in Malaysia, which was built by China Communications Construction Co. Ltd., was the largest overseas project by a Chinese company. In addition, major Chinese technology companies like Alibaba and Tencent are also increasing their investment in the Southeast Asian market and gradually expanding their growth industries such as transportation and e-commerce in the region (CIIS 2017). Meanwhile, China has also paid attention to laying the intellectual foundations and raising and sustaining such support for the BRI. A case in point is the first Belt and Road Multi-Cultural Studies Centre in Singapore launched by the London School of Business and Finance and the Overseas Education College of Xiamen University. It is funded by the China Cultural Heritage Foundation with programmes aimed at selling the BRI and Chinese cultural and business practices to business executives and students (Hardasmalani 2017).

Increasing Control in the East Sea of Vietnam In addition to pursuing the BRI, China has continued on with its illegal artificial island-building and reclamation project in the East Sea. Xi Jinping’s report at the 19th National Congress of the Communist Party of

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China on October 18, 2017 stated: “Construction on islands and reefs in the South China Sea has seen steady progress” as one of the achievements in his first term (Xi 2017). Indeed, from 2013 up to now, China has illegally created seven artificial islands in the East Sea (National Post 2015). This has led to a rise of tensions in the region. Also during this period in May 2014, China moved its giant oil rig, Haiyang Shiyou 981 (“HD 981”) to the waters near the Paracel Islands. This triggered serious tensions between Vietnam and China and has exacerbated their decades-old sovereignty dispute over features in these waters (Tran 2014). And according to Vietnamese Foreign Ministry’s spokesperson, from July 2019, Chinese geological survey vessel group Haiyang Dizhi 8 has repeatedly violated Vietnam’s exclusive economic zone and continental shelf in the south of the East Sea which fully belongs to Vietnam in line with the 1982 United Nations Convention on the Law of the Sea (UNCLOS), to which both Vietnam and China are signatories (Thớ i Đại 2019; Tuổi trẻ News 2019). This once again has made the relationship between the two countries tense and attracted the attention of many countries around the world. The US called on China to stop its “bullying behaviour” in the East Sea and the US State Department commented that such acts by China threatened regional peace and security. It said the acts were interfering with Vietnamese oil and gas exploration and production (South China Morning Post 2019). China has also increased militarization of the features it occupies by putting missiles on them (The Economist 2018). This Beijing has done despite a promise by Xi not to militarize the features during a meeting with then American President Barack Obama in September 2015. Chinese missile deployment has been reported on at least three Chinese-occupied features—Fiery Cross Reef, Mischief Reef and Subi Reef with targets within 160 nautical miles falling in range (The Economist 2018; Bateman 2018). Thus, it can be said that through the BRI, China has on the one hand strengthened its connectivity with ASEAN in terms of infrastructure, economic cooperation and cooperation on the sea while on the other hand, it has gradually realized its goal of encroaching on the East Sea. China’s strategy has combined geo-politics and geo-economics in the ASEAN region to benefit itself, rather than shifting from geo-politics to geo-­ economics (Nurbach et al. 2018).

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Opportunities Offered by BRI to ASEAN Countries It can be said that the BRI provides an opportunity to promote cooperation between China and ASEAN countries in the current period. The Master Plan on ASEAN Connectivity 2025 was adopted at the ASEAN Summit held in Vientiane, Laos, in September 2016, with an aim to enhance the competitiveness of ASEAN by increasing investment in sustainable infrastructure construction, digital innovation, logistics, import and export management and personnel mobility (Xinhua Wang 2017). The “Joint Statement between ASEAN and China on Further Deepening the Cooperation on Infrastructure Connectivity” (Asean.org 2017) stated that ASEAN is committed to further connecting with China through the docking of the ASEAN Interconnection Master Plan 2025 and the BRI. This is the first time ASEAN has issued official documents on the link  between  its overall development plan and the BRI.  It shows that ASEAN countries hope to use the BRI to accelerate infrastructure construction and connections in the region and stimulate national and global economies (Xinhua 2017). As stated in the “Joint Statement between ASEAN and China on Further Deepening the Cooperation on Infrastructure Connectivity”, ASEAN and China have complementary comparative advantages, and the two sides have great potential for further cooperation in the field of infrastructure interconnection (Xinhua Wang 2017). There is still tremendous need in areas like power, water, sanitation and roads throughout much of the ASEAN region. By one estimate, the need is more than US$22 trillion through 2030 (Curtis 2017). If Chinese investors can meet a part of this number, this will be an opportunity for ASEAN countries to meet their needs. If the BRI can reduce the infrastructure deficit and support industrial development, the ASEAN region will continue to develop economically with strengthened international and regional linkages (Papahi 2017). At the same time, cooperation between the two sides in this regard will greatly facilitate the economic development and trade relations in the region, provide key support for achieving the sustainable development goals and promote global and regional economic development (Xinhua Wang 2017). According to Xu Bu, the Chinese ambassador to ASEAN, these progresses and achievements are mainly reflected in the fact that the BRI and the ASEAN countries have basically achieved strategic integration and the formation of multi-level inter-governmental exchange mechanism; the construction of facilities connected by high-speed rail “going out” including a number of infrastructure flagship projects such as Yawan High-Speed

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Railway, China-Laos Railway, and China-Thailand Railway have landed; the upgraded version of the China-ASEAN Free Trade Area protocol came into effect, with an aim to increase international capacity cooperation with industrial parks as the starting point being closely promoted; the facility investment bank has been supported by ASEAN countries to provide financial security (Xinhua Wang 2017). Xu Bu also said that from the perspective of production, the ASEAN countries have a much younger populace compared with the aging trend of developed countries. Southeast Asian countries have rich land and mineral resources, but due to backward infrastructure, the huge economic potential has not been fully realized. It is precisely because of the dividends brought by the BRI project that the economic activities in the ASEAN region have increased (Xinhua Wang 2017). In recent years, economic relations between China and ASEAN have grown steadily. China has been ASEAN’s largest trading partner for eight consecutive years. ASEAN has been China’s third largest trading partner for six consecutive years. China and ASEAN set a goal of totalling bilateral trade of US$1 trillion by 2020 and bilateral investment totalling US$150 billion (CIIS 2017). In the current period, China has been transforming its economic development mode and implementing its “go out” strategy by encouraging enterprises to make global investments. This also provides opportunities for economic cooperation between China and ASEAN. According to Joey Concepción, Chairman of the ASEAN Business Advisory Committee, there are a large number of small and medium-sized enterprises that are eager to develop in ASEAN. The BRI construction will promote the interconnection of ASEAN with China and countries along the route and bring development opportunities for these enterprises. It will give them fair market opportunities and better market prospects (Xinhua Wang 2017). So if major Western economies are really going to roll back on their traditional global economic links, China’s BRI policy is set to fill some of the openings that will develop. BRI will be bringing together two of the world’s most dynamic economic regions by strengthening economic linkages not only among the ten members of ASEAN, but also between ASEAN member countries and China (Wong 2017). From the perspective of people-to-people and cultural exchanges, non-­ governmental exchanges through increased tourism have become increasingly active (Xinhua Wang 2017) with the numbers in 2016 exceeding 30 million, and there is potential for still greater growth. ASEAN students, in fact, receive the largest number of Chinese government scholarships (Xue

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and Li 2017). According to Premier Li Keqiang’s speech at the 20th China-ASEAN Summit, from 2018 to 2020, China will provide ASEAN countries with no less than 20,000 government scholarships (Li 2017). Chinese tourists coming to ASEAN countries also create employment opportunities and increase income for ASEAN countries’ people. For example, over 1.2 million Chinese tourists visited Cambodia in 2017, a 50 per cent increase year on year. Employment opportunities are much better for Mandarin speakers with Chinese interpreters making between US$700 to US$1200 a month working at hotels and casinos. This is significant given that the official minimum monthly wage for a garment factory worker in Cambodia is US$170 and a civil servant gets about US$250 (Faulder and Kenji 2018).

Challenges to ASEAN Countries Although undeniably the BRI has provided many opportunities for cooperation between ASEAN and China as mentioned above, but it has also brought about challenges for ASEAN countries. Security Challenge in the East Sea It can be said that with China’s rise and its proposal of the BRI, security’s challenges have also simultaneously arisen for ASEAN, especially the issue of sovereignty disputes in the East Sea. China has divided the ASEAN countries and thus prevented them from making collective decisions. For example, in the Meeting of the ASEAN Foreign Ministers in Kunming City (Yunnan Province) on June 14, 2016, ASEAN countries failed to reach a joint statement condemning China’s actions in the East Sea (Latiff 2016). After the Arbitral Tribunal Ruling on the South China Sea, on July 24, 2016, the 49th Meeting of Foreign Ministers of the Association of Southeast Asian Nations in Laos again failed to reach an ASEAN joint statement on the dispute over the South China Sea, because Cambodia vetoed all matters relating to the case. Cambodia’s position was influenced by China donating US$600 million to it after the PCA ruling (Tran Trang 2016). This further illustrates the combination of China’s economic and political measures in implementing the BRI in order to achieve its own interests in the South China Sea. One commentator observed, “I have not seen or heard one ASEAN member coming out publicly to support the MSR so far, because of what I see as a trust deficit in the relationship

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between China and some ASEAN members over the South China Sea dispute” (Yoon 2015). ASEAN countries also differ in their attitudes towards the BRI. While Thailand, Cambodia and Laos are fulsome in their support, others like Singapore, Malaysia, Indonesia and Brunei while acknowledging Chinese interests nevertheless have several concerns. The Philippines, Vietnam and Myanmar are among those considered to be the least supportive of China (Yoon 2015). China’s increasing presence and power projection in the East Sea worries naval powers who do not wish to see freedom of navigation and overflight in the area blocked in any manner. This threat has also led several weaker littoral stages to increase their security engagement with external powers (Pitlo III 2016). This has led to major countries competing strategically in Southeast Asia today, such as for example, the US’ rebalancing strategy in Asia, the India-Pacific strategy, India’s Act East Policy and so on. Economic Challenges Although trade relations between China and ASEAN have been steadily growing over the years, ASEAN has always had a trade deficit with China. Bilateral trade totalled US$514.8 billion in 2017, up 13.8 per cent year-­ on-­year, recording the fastest growth pace between China and any of its major trading partners. China’s exports to ASEAN countries reached US$279.1 billion in 2017, up 9 per cent year-on-year, while imports grew 20 per cent year-on-year to stand at US$235.7 billion. China registered a trade surplus of US$43.4 billion with ASEAN countries, narrowing by 27.4 per cent from 2016 (China Daily 2018). ASEAN still relies on Chinese manufacturing. Singapore was the only country to post a trade surplus with China in 2017 (Aecvcci 2018). Although China is a big market with a population of over 1.39 billion people and its rising household income, expanding middle-income group and increasingly diversified consumption has ensured China’s place as the most promising growth market in the world (Li 2017), but how ASEAN countries can export more to China and solve the asymmetric problems in their economic relations with China is still a question. In recent years, the rise of China and the inflow of large Chinese investments in ASEAN have led to conflict among domestic elites within some ASEAN countries. For example, in Malaysia, some Chinese investment projects have been cancelled or delayed, in Myanmar, the Myitsone Dam

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has been shelved and in Indonesia the Jakarta–Bandung High Speed Railway has run into several problems. The Philippines’ ZTE project was overpriced due to a host state politician’s demand (Camba and Yao 2018). That China’s investments lead to a lack of transparency and corruption in some recipient ASEAN countries  is also evident from  Malaysia.  Under Kuala Lumpur’s previous regime led by Najib Razak who had warm ties with China, a string of deals for Beijing-funded projects were signed, including a major rail link and a deep-sea port. Critics say many agreements lacked transparency, fuelling suspicions they were struck in exchange for help in paying off debts from a financial scandal, which ultimately brought down Najib’s regime. The new government, led by Mahathir Mohamad, called for a review of problematic Chinese deals, calling into question Malaysia’s status as one of Beijing’s most cooperative partners in its infrastructure push  (Star Online 2018). Mahathir also had concerns about relations with China with something of  a clear preference for Beijing’s rival Japan and even visited Tokyo for his first foreign trip after  taking office. During the visit, he appeared to hint that ties with Beijing would cool: “We will be friendly with China, but we do not want to be indebted to China” (cited in Lies 2018). In Cambodia, China has of late  invested quite  heavily, but ordinary  Cambodians, too, are wary as Chinese investments aiming to  transform their country (Faulder and Kenji 2018). In Myanmar, about 600 protesters demanded compensation from the Sino-Myanmar operators of dual pipelines in western Myanmar’s Rakhine state for land they confiscated for the massive and controversial project. The US$2.5 billion Shwe pipeline project has been dogged by complaints about little or no land compensation along with a loss of livelihoods for local fishermen. The protesters from Ann township in Kyaukpyu district demanded that Chinese state-owned oil company China National Petroleum Corporation (CNPC), or  its subsidiary,  PetroChina, and Myanmar’s state-owned Myanma Oil and Gas Enterprise (MOGE) pay them for land they had to give up for the pipeline project (Radio Free Asia 2018). It can be said that in their economic relations with China, ASEAN countries consider the benefits offered by the BRI, but they are also concerned and sceptical regarding China’s ultimate intentions and ability to deliver on its promises. As has been noted, “While infrastructure development is sorely needed in many areas of the region, the prospect of greater Chinese geopolitical and economic influence is sobering to many of the countries involved” (NBR 2017).

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Socio-Cultural Challenges In addition to the above challenges, there are also socio-cultural impacts on ASEAN countries with China’s BRI. The BRI needs to build a friendly image with the people of ASEAN. But Chinese companies and Chinese people, due to a lack of understanding of the culture and society of the ASEAN countries, have created unwarranted conflicts. It is also very likely that conflicts between Chinese enterprises and the people of host states will cause social insecurity. The most worrying problem is some Chinese investors seem to have difficulties understanding and adapting to local employees’ work ethics. Their Chinese managers value efficiency and thus can be quick in dismissing local workers as inefficient and are often frustrated when even monetary benefits do not serve as incentives to them. This then leads to a preference for workers from China, which in turn attracts criticism from host communities (Gong 2018). In addition, many Chinese tourists travel to ASEAN countries, sometimes causing aversion to China’s image in ASEAN countries. While ASEAN countries generally welcome more Chinese tourists, complaints have been made about their behaviour. Despite the Chinese State Tourism Administration’s efforts to ensure “civilised travelling” and moves to blacklist misbehaving tourists, there is still a long way to go in improving the situation (Gong 2018). Another case is related to a group of Chinese flying into Vietnam on the evening of May 13, 2018 on a charter flight from Tan An (China) to Cam Ranh airport. After completing the immigration procedure at Cam Ranh Airport, standing in the outer area, this group of people took off their coats, exposing their T-shirt printed with a map with a “cow tongue” (nine dashed line). There were about 14/40 people in the delegation wearing this T-shirt (Bao Giao Thong 2018). Regardless of whether this is a deliberate or spontaneous act of some Chinese people, this negatively affected China’s image among the Vietnamese people. At the same time, China’s request that UNESCO recognize the Silk Road as a global heritage site would be detrimental to some ASEAN countries, especially Vietnam. China could use the sea route as a way to reaffirm its historical presence in the region, allowing it  also to strengthen and deepen its claims in the East Sea (Phuong Vu 2017). This is a warning that China uses soft power to assert maritime sovereignty over the East Sea and will create further concerns for the ASEAN countries that also claim sovereignty in the region.

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Conclusion It can be said that the BRI is a global strategy for China with a special focus on the Southeast Asia region. These are China’s neighbouring countries and geopolitically very important to Beijing. China has combined economic measures with political measures to implement the BRI in the ASEAN countries. This, in turn, has provided opportunities for promoting economic ties between ASEAN and China. However, the BRI has also posed challenges to the maritime sovereignty of some ASEAN countries in East Sea, which in turn has divided ASEAN and created suspicion among these countries about China’s strategy as well as between themselves. ASEAN’s trade deficit with China and Chinese investment in the ASEAN region have led to further complications while extant cultural differences between the two sides also create difficulties in bilateral cooperation. Despite deep economic linkages, these factors contribute to reducing ASEAN’s trust in China and in turn, the prospects for sustained cooperation.

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Thoi Dai. 2019. “Haiyang Dizhi 8 violates Vietnam’s exclusive economic zone and continental shelf”. 20 July. http://vietnamfriendship.vn/HaiyangDizhi-8-violates-Vietnams-exclusive-economic-zone-and-continentalshelf-2404-26943.html Tuoi Tre News. 2019. “China’s survey ship Haiyang Dizhi 8 violates Vietnam’s EEZ, Continental Shelf, again: foreign ministry”. 16 August. https://tuoitrenews.vn/news/politics/20190816/chinas-survey-ship-haiyang-dizhi-8-violates-vietnams-eez-continental-shelf-again-foreign-ministry/51008.html Tran Si Vy. 2014. “Oil rig HD 981 incident: from the angle of the international law”. Vietnam Law Magazine. 22 August. http://vietnamlawmagazine.vn/ oil-rig-hd-981-incident-from-the-angle-of-the-international-law-3588.html Tran Trang. 2016. “Vuong Campuchia, ASEAN khong ra duoc tuyen bo chung ve Bien Dong” (Obstructing from Cambodia, ASEAN failed to produce a joint statement on the South China Sea), Bao Moi. 25 July. https://baomoi.com/ vuong-campuchia-asean-khong-ra-duoc-tuyen-bo-chung-ve-biendong/c/19929720.epi Wong, Peter. 2017. “How China’s belt and road is transforming Asean”. South China Morning Post. 8 January. https://www.scmp.com/comment/insightopinion/article/2059916/how-chinas-belt-and-road-transforming-asean Xi Jinping. 2017. “Secure a Decisive Victory in Building a Moderately Prosperous Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a New Era”. Report delivered at the 19th National Congress of the Communist Party of China, 18 October. http://www.xinhuanet.com/english/download/Xi_Jinping's_report_at_19th_CPC_National_ Congress.pdf Xue Li and Li Yongke. 2017. “The Belt and Road Initiative and China’s Southeast Asia Diplomacy”. The Diplomat. 28 November. https://thediplomat. com/2017/11/the-belt-and-road-initiative-and-chinassoutheast-asia-diplomacy/ Yoon, Suthichai. 2015. “Maritime Silk Road plan runs into South China Sea tension”. The Nation. 24 September. https://www.straitstimes.com/asia/se-asia/ maritime-silk-road-plan-runs-into-south-china-sea-tension-the-nation Xinhua Wang. 2015. “Silu Jijin qian via ‘shou dan’ xuangao shizhixing touzi ‘kaiju’” (丝路基金签下 ‘首单' 宣告实质性投资“开局) [Silk Road Fund signs ‘first order’, declaring a ‘start’ to substantial investments]. 21 April. http:// www.xinhuanet.com//world/2015-04/21/c_127716705_2.htm Xinhua Wang. 2017. “Zongshu: Jieli ‘yidai yılu’ Dongmeng jiakuai tuijin quyu yitihua jianshe” (综述: 借力“一带一路” 东盟加快推进区域一体化建设) [Summary: Leveraging the “Belt and Road” ASEAN accelerates Regional Integration].  15 November. http://www.xinhuanet.com/2017-11/15/ c_129741861.htm Xinhua Wang. 2019. “Gongjian ‘yidai, yilu’ changyi: Jinzhan, gongxian yu zhanwang” (共建’一带一路'倡议: 进展、贡献与展望) [Building the ‘Belt and Road Initiative’: Progress, Contribution and Outlook]. 22 April. http://www.xinhuanet.com/silkroad/2019-04/22/c_1124400071.htm

CHAPTER 9

Strategic Competition Between China and the United States in the Indo-Pacific Cu Chi Loi

With the rapid modernisation of its naval forces, the construction of the String of Pearls, the launch of the “one belt, one road” initiative (or Belt and Road Initiative, BRI), and accelerated disputes with countries in the South China Sea (East Sea of Vietnam), China has shown its ambition to control the Indo-Pacific region. The Donald Trump administration in the United States (US) has asserted that China is a strategic competitor challenging America’s power, and undermining American security and prosperity and seeking to replace the US in Asia. The American government has objected to China’s military strategy in the South China Sea by asserting its freedom of navigation in the region and launching an Indo-Pacific strategy to bring regional states together into a new secure network which includes the Quad (the US, Japan, India, and Australia) and other partners in the region. In addition to the security tensions, China and the US have now begun a trade war in which the two sides have retaliated with tit-fortat tariffs on each other’s goods. This chapter will analyse the recent rise in strategic competition between the US and China in the Indo-Pacific region, especially under President Cu Chi Loi (*) Institute of American Studies, Vietnam Academy of Social Sciences, Hanoi, Vietnam © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_9

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Donald Trump. It will also discuss the factors leading to the recent tensions in US-China relations and the impact of strategic competition between the US and China on cooperation and development in the IndiaPacific region. This chapter has three parts: (i) strategic interests of the US and China in the Indo-Pacific region, (ii) the rise of strategic competition between the US and China in recent years, and (iii) the impact of US-China relations on the security of the Indo-Pacific region.

China’s Strategic Interests in the Indo-Pacific Region With 14,500 km of coastline and many coastal islands, China is a costal state, and therefore, the sea plays a very important economic and security role for the country. First of all, the coastal area is home to China’s leading economic-administrative centres such as Shanghai, Guangzhou, Shenzhen, and several other cities. These economic centres have made a significant contribution to China’s economy, by being the major scientific and population centres and also the country’s port towns. The sea also plays an important role in China’s overall economy, including oil and gas exploitation, fishing, shipping, and logistics (To and Lee 2018). According to Liang Yu (2018), China’s maritime economy has accounted for about 10% of its GDP in recent years. With so much at stake, in recent years China has spent tremendous resources modernising its naval forces to ensure that these economic zones and big cities are protected from external challenges, especially American naval forces in the East China Sea. In terms of international trade, the Indo-Pacific plays a vital role for China’s economy because it is the main route through which China’s economy conducts  exchanges with other economies in the world. In 2017, China’s total export turnover was US$4.1 trillion, equivalent to about 34% of China’s GDP. Of this turnover, 60% was transported by sea (China Power Team 2017). Seaways also play a vital role for China’s economy in terms of imports, especially strategic commodities, such as crude oil. In 2018, China imported 440 million metric tons of crude oil, worth US$239 billion, accounting for about 20.2% of global crude oil imports (Workman 2019), with most of the imported crude oil was shipped through the Indo-Pacific maritime route. With the expansion of trade and investment relations, China’s economic and security interests are also

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expanding, and in particular, these benefits extend along the Indo-Pacific maritime route. Zhang (2006) states: The most crucial conduit connecting China with the region and with the rest of the world is the sea lanes, and therefore, China must have a powerful navy. The oil imports that China consumes from Africa, the Middle East, and Central Asia will mainly pass through these sea lanes. China’s trade is also 90% dependent on sea lane transport.

In addition to the economic benefits, China also has enormous security interests related to territory and territorial disputes in the Indo-Pacific region. Taiwan has always been viewed by China as a part of its territory, and uniting Taiwan with the Mainland has always been considered as a crucial objective of China’s foreign policy. In order to unify Taiwan, China has been improving the capacity of its naval forces and increasing measures to control the surrounding seas. In recent years, China’s sovereignty disputes with Japan in the Diaoyu/Senkaku archipelago in the East China Sea and with Korea over exclusive economic zones have escalated. Similarly, China also attaches great importance to the issue of sovereignty disputes in the South China Sea, where China has unjustly claimed territory with a ninedash line and constructed artificial islands and big scale infrastructure.

American Strategic Interests in the Indo-Pacific Region Although not located in the Indo-Pacific, the US has always considered itself an Asian country and so it has important interests in the region (Clinton 2011). Asia is a dynamic economic region with many large-scale economies such as China, Japan, and India, among others. The region is expected to become the economic centre of the world in the 21st century and for that reason the US maintains strong relations with the regional countries to promote economic relations and maintain its influence. Asia, however, is not a region to provide strategic imports like oil to the US, but a place to supply consumer goods to the American people and is also an important market for the US’ exports and investments. In 2017, 45% of total American imports were from Asia, and the continent was also a market for about 31% of American exports. The total value of American direct investment in the region in 2017 was US$941 billion dollars (Statista 2017). With such strong economic exchanges, it can be said that Asia’s

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stability and development will also mean stability and development for the US, and vice versa—Asian economic uncertainties can also be threats to growth, employment, and consumption in the US. The US has only a small part of its territory in the Indo-­Pacific region (Guam and Hawaii), but it has very important security interests in this area. Currently, the US is in alliance and partnership with many countries in the region including very key allies such as Japan, Korea, Australia, and has  strategic partnerships with ASEAN countries and India. With these allies and strategic partners, the US always places security as a core issue, in which it seeks to protect these countries from external challenges and to maintain peace and stability. Besides, because the Indo-Pacific region is home to an international arterial maritime route, the Americans have always considered freedom of navigation on this route a vital interest. Given these strategic interests, the US has always maintained strong naval forces in the Indo-Pacific waters to counteract challenges to regional security and freedom of navigation.

Rise of Strategic Competition between the United States and China As the Chinese economy has made significant advancement (surpassing Germany and Japan) in the twenty-first century, China’s geostrategic ambitions have also increased as it seeks to compete with the US in Asia and the world. When the 2007–08 financial crisis hit the US and a long and deep economic recession ensued, Chinese elites and leaders saw the US as declining and convinced themselves of it being a strategic opportunity to push for stronger global political ambitions and thus increased strategic competition with the US (Goldstein 2016). Speaking at the Assembly of Chinese Foreign Affairs in July 2009, the then Chinese President Hu Jintao said: The international financial crisis has caused the current world economic and financial system and the world economic governance structure to receive a major shock; the prospects for global multipolarity have grown clearer; the international situation has produced some new features and trends worthy of extremely close attention (cited in Kissinger 2012: 503).

The idea of America’s decline and China’s strategic opportunity still persists among Chinese elites, and with that calculation China has become

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even more aggressive in pursuing the idea of becoming a superpower on par with the US. The document of the 19th Chinese Communist Party Congress emphasised that the current period was “a key period for realising the great rejuvenation of the Chinese nation”. An article titled “China should grasp historic opportunity” in the People’s Daily, a Party mouthpiece, argued that “the drawbacks of capitalism-led political and economic systems are emerging; the global governance system is experiencing profound changes and a new international order is taking shape” (Xuan Yan cited in Zhou 2018: 1). Overall, although China still claims its rise to be peaceful, in actuality China’s foreign policy has changed dramatically since the early 2000s, China has abandoned the strategy of “keeping a low profile” and has adopted a new strategy of “actively achieving something” with the goal of regaining Asian control from the US. With these strategic calculations, China has since the 2000s rapidly increased its defence budget spending, with a focus on upgrading its naval forces for better serving its foreign policy objectives. During the period 2007–2016, China’s defence spending grew by 118%, making it the country with the largest increase in defence spending compared to all other countries in the world (Tian et al. 2017). In 2008, China had only one strategic missile submarine, while in 2016 the number grew to four. In 2012, China launched into service one aircraft carrier, with two more in the pipeline. In 2014, China did not have any corvettes, but by July 2018 it had 41 operational. In 2012, China had 26 destroyers, while in 2017, the number increased to 31; for this period, the number of frigates increased from 53 to 56; diesel submarines increased from 48 to 54, and China still maintained the number of atomic submarines at five (O’Rourke 2018). Along with improving the capacity of its military forces, especially the naval forces, to counter US naval threats in the past decade, China has also constructed the “string of pearls” military bases extending from southern China to the Persian Gulf area in order to gain control over the entire Indo-Pacific maritime route. Also, in order to increase its economic and political influence in the Indo-Pacific region, China has spent a huge amount of money to promote the “Maritime Silk Road Initiative” to pull countries around its circle of influence. At the same time, China has stepped up its territorial dispute with neighbouring countries in the East China Sea and South China Sea regions, declared an air defence zone in the East China Sea, claimed a vast area in the South China Sea, built large-­ scale artificial islands on the Spratly archipelago to become master of the

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maritime route and to exploit the resources in the area, and to create a strategic position to challenge the US Navy in the region. Responding to the escalation of China’s geostrategic ambition, the former US President Barack Obama introduced a “Rebalance to Asia” strategy, thus furthering cooperation with allies and partners in Asia. In June 2012, then US Defence Secretary Leon Panetta announced that by 2020 the US would deploy 60% its naval fleets to the Asia-Pacific region (Panetta 2012). The current administration of President Donald Trump has taken more aggressive measures to counter China’s strategic ambitions. The 2017 US National Security Strategy Report strongly criticised China’s current behaviour (White House 2017). According to the report, China is considered a “revisionist power” along with Russia, Iran, and North Korea, with ambitions to change the world order in its favour. Apart from accusing China of enforcing an unfair trade regime, stealing US technology, in terms of strategy the report says: “China seeks to displace the United States in the Indo-Pacific region, expand the reaches of its state-driven economic model, and reorder the region in its favor” (White House 2017). From this perspective, the 2017 US National Security Strategy Report reveals America’s Indo-Pacific strategic concept whereby the US will increase military presence in the Indo-Pacific region, accelerate engagement with allies and partners, and promote the resolution of territorial disputes in the region through peaceful means and in compliance with international laws. The US is also committed to maintaining freedom of navigation, supporting the construction of infrastructure in the region, encouraging countries to carry out unimpeded trade, and pursuing free trade agreements with regional countries. In order to gather forces to cope with challenges from China, the 2017 US National Security Strategy Report introduced a new security structure in the Indo-Pacific region called the Quad which includes the US, Japan, Australia, and India, who are expected to play a central role in coordinating with other allies and partners in the region (White House 2017). In his speech titled, “The Administration’s Policy toward China”, US Vice President Mike Pence once again highlighted a bitter conflict between the US and China in many areas including politics, economy, and security. He also affirmed, “President Trump made clear that the United States of America has adopted a new approach to China” (Hudson Institute 2018: 1). Along with boosting military activities to challenge China’s ambitions, the US has recently also launched a trade war with China, accusing China

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of not being an open market economy, violating intellectual property rights, stealing American technology, and enforcing unfair trade policy. With these allegations, the US has continuously increased the size of goods subject to high import duties from US$50 billion in June 2018 to US$200 billion in September 2018 and has threatened to impose high tax for all goods imported from China. The US’ goal in the trade war with China has been to defeat China’s “Made in China 2025” programme to promote high-tech industries, which on the one hand could directly compete with major American enterprises and industries, and on the other could support China’s defence industry (White House 2018: 2). In summary, in recent times China has made important adjustments in foreign policy and with that it has become a direct competitor to the US first in Asia, and then in the whole world. Facing these new challenges, the US has introduced important strategic adjustments: launching a trade war with China and reforming the Indo-Pacific strategy to consolidate its primacy and maintain Asian security. It seeks to do this by increasing its influence in the region to curb China’s geopolitical and geostrategic ambitions. US-China relations have become a strategic-­ competitive one and this trend is on the rise.

Impact of US-China Relations on Indo-Pacific Regional Security In response to China’s geopolitical and geostrategic ambitions in recent times, the US has expressed its determination through the implementation of new policies to challenge these ambitions of China. To achieve its IndoPacific strategy goals, the US maintains a close relationship with its allies and partners in the region. In the context of deteriorating relations between Japan and China stemming from territorial disputes in the East China Sea, the US continues to pursue the policies of previous governments of siding with Japan to protect its territory. President Donald Trump declared: “We are committed to the security of Japan and all areas under its administrative control and to further strengthening our very crucial alliance” (Holland and Takenaka 2017: 1). In recent times the government of Donald Trump has made important changes in its policy towards Taiwan. Although the US still claims to respect the “one China” policy, in reality the United States

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has increased security cooperation with Taiwan by selling weapons and military equipment to it, easing official policy to increase visits by government officials, and at the same time increased the number of visits by military vessels to the island. The US and ally military operations in the East China Sea have also increased substantively, for example, in November 2018 American, Japanese, and Canadian warships organised drills that were believed to be the largest ever in the area with the participation of 57,000 sailors (Kelly 2018). In the South China Sea, faced with aggressive Chinese territorial claims that threaten maritime security, the US has affirmed its will to maintain the freedom of navigation in the area. In 2010, the then US Secretary of State Hillary Clinton announced in Hanoi, Vietnam, that freedom of navigation in the South China Sea is a “US national interest” (Clinton 2010). The US has also repeatedly objected to China’s declaration of a nine-dashed line territory claim, opposed China’s construction of artificial islands in the Spartly archipelago, and in turn has demonstrated a tough attitude on this issue by sending American warships within the 12 nautical miles limits of t​ he artificial islands. Compared to the period under President Obama, the US under the Donald Trump administration has significantly increased military operations in the South China Sea. For example, it has increased the number of warship patrols in the South China Sea and held exercises in the South China Sea with the participation of the carrier Carl Vinson (along with the Japanese defence forces) in March 2018 (BBC 2018). In particular, the US continuously brought the B52 strategic bombers to conduct patrols in the South China Sea in the last months of 2018 (Browne 2018). In his speech at the Hudson Institute on 4 October 2018, the Vice President of America confirmed that, “the United States Navy will continue to fly, sail and operate wherever international law allows and our national interests demand. We will not be intimidated. We will not stand down” (Hudson Institute 2018). The rising tension in the Indo-Pacific region has led many American allies to either actively participate in military exercises alongside the US or conduct patrols under the banner of “freedom of navigation”. These countries also promote defence cooperation with countries like the United Kingdom, France, and Canada. India, a strategic partner of the US, is also actively implementing its “Act East” policy through which it supports maritime freedom in the Indo-Pacific region, and promotes economic cooperation, and engages  in defence cooperation with regional countries.

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In general, with the US  introducing the Indo-Pacific strategy and launching a trade war, US-China relations have become more intensely competitive and the relationship has now turned into a deadlock. The US, on the one hand, insists on maintaining its primacy to contain and defeat China’s rising state-led economic model, and on the other hand wants China to open its market for American commodities. For its part, China has refrained from escalating the trade war but pursued an assertive foreign policy, nevertheless, to increase its influence and expand its territory in the Indo-Pacific. The impasse in US-China relations makes matters of regional security worse and could create new dangers due to miscalculations from both sides. In the South China Sea, China is more aggressive in challenging American warships when they conduct patrols near China’s artificial islands—a high-ranking Chinese general warned that China was not reluctant to sink carriers in the South China Sea (cited in Seidel 2019). In addition, China has also showcased a resolute attitude on the Taiwan issue. In early 2019, Chinese President Xi Jinping reiterated the threat to use force in unifying Taiwan with the Mainland: “We make no promise to abandon the use of force, and retain the option of taking all necessary measures” (cited in Buckley and Horton 2019). Due to a territorial dispute with China, some countries in the region have supported the US’ Indo-Pacific strategy and welcomed an increase in American military presence. However, some other countries, due to their self-interest, want to maintain friendly relations with China. The competition between the US and China in general and security-related tensions, in particular, has made relations between countries in the region fraught. Of these countries, ASEAN is the most affected area. The unity and consolidation among ASEAN countries on matters of regional security have deteriorated. A number of ASEAN regional security summits have been unable to produce joint communiques due to pressure from China. Singapore’s Prime Minister Lee Hsien Loong speaking at the Annual Association of Southeast Asian Nations (ASEAN) Summit, held in Singapore in early November 2018, warned: “I think it’s very desirable for us not to have to take sides, but the circumstances may come when ASEAN may have to choose one or the other. I am hoping that it’s not coming soon” (cited in Wong 2018). If ASEAN countries have to choose to go with one side, then it is likely that ASEAN will become deeply divided and weakened and thus no longer able to play the central role in the region.

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Conclusion With its rapid development, China has made important adjustments in international relations. By increasing its military strength, adopting an assertive foreign policy, and promoting the “Maritime Silk Road” initiative, China has decisively given up its strategy of “keeping a low profile”. China’s new strategy seriously challenges America’s role in the Indo-­ Pacific region. In response to this challenge, the US administration under President Donald Trump has pushed the Indo-Pacific strategy to form a new security structure with the US, Japan, Australia, and India playing a central role, while promoting security relations with other countries and expanding regional military activities. The positive role of the US in the Indo-Pacific has brought stability to the region but it also faces major challenges from China. Regional countries, while welcoming Washington’s new role, have also faced difficulties in relations with China. The biggest challenge for many countries in the region has been to find a way to safeguard national security and maintain peace for development while at the same time avoiding taking sides in US-China strategic competition.

References BBC. 2018. “US aircraft carrier Carl Vinson in historic Vietnam visit, 5 March”, https://www.bbc.com/news/world-asia-43282558 Browne, Ryan. 2018. “US flies B-52 bombers near contested islands in the South China Sea.”  CNN News, 20 November, https://edition.cnn. com/2018/11/20/politics/us-b-52-bombers-south-china-sea/index.html Buckley, Chris and Chris Horton. 2019. “Xi Jinping Warns Taiwan That Unification Is the Goal and Force Is an Option”, 1 January, https://www. nytimes.com/2019/01/01/world/asia/xi-jinping-taiwan-china.html China Power Team. 2017. “How much trade transits the South China Sea?”, 2 August, https://chinapower.csis.org/much-trade-transits-south-china-sea/ Clinton, Hillary. 2010. “Remarks at National Convention Center, Hanoi, Vietnam”, 23 July, https://20092017.state.gov/secretary/20092013clinton/ rm/2010/07/145095.htm Clinton, Hillary. 2011. “America’s Pacific Century”. Foreign Policy, 11 October, https://foreignpolicy.com/2011/10/11/americas-pacific-century/ Goldstein, Lyle J. 2016. “Does China think America is in decline? How Beijing’s top “America hands” see their biggest rival”. The National Interest, 28 January, https://nationalinter est.org/featur e/does-china-think-americadecline-15042

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Holland, Steve and Kiyoshi Takenaka. 2017. “Trump says U.S. committed to Japan security, in change from campaign rhetoric”. Reuters, 10 February, https://www.reuters.com/article/us-usa-trump-japan-idUSKBN15P17E Hudson Institute. 2018. “Vice President Mike Pence’s Remarks on the Administration’s Policy Towards China”, 4 October 2018, https://www.hudson.org/ events/1610-vice-president-mike-pence-s-remarks-on-the-administration-s-policy-towards-china102018 Kelly, Tim. 2018. “US carrier leads warships in biggest ever Japan defense war game”, 3 November, https://www.straitstimes.com/asia/east-asia/us-carrierleads-warships-in-biggest-ever-japan-defence-war-game Kissinger, Henry. 2012. On China. Penguin Publishing Group. Kindle Edition. Liang Yu. 2018. “China’s maritime economy expands by 7.5 pct in recent five years”. Xinhua, 21 January, https://www.xinhuanet.com/english/201801/21/c_136913316.htm O’Rourke, Ronald. 2018. “China Naval Modernization: Implications for U.S.  Navy Capabilities” (CRS Report No. RL33153), https://fas.org/sgp/ crs/row/RL33153.pdf Panetta, Leon. 2012. “US to deploy 60% of navy fleet to Pacific”, https://www. bbc.com/news/world-us-canada-18305750 Seidel, Jamie. 2019. “‘Sink two aircraft carriers’: Chinese Admiral’s chilling recipe to dominate the South China Sea”, 2 January, https://www.news.com.au/ technology/innovation/military/sink-two-aircraft-carriers-chinese-admiralschilling-recipie-to-dominate-the-south-china-sea/news-stor y/ aaa8c33d57da62e7d5e28e791aa26e0f Statista. 2017. “Direct investment position of the United States in Asia Pacific from 2000 to 2017”, https://www.statista.com/statistics/188604/ united-states-direct-investments-in-the-asia-pacific-region-since-2000/ Tian, Nan, Aude Fleurant, Pieter D. Wezeman and Siemon T. Wezeman. 2017. “Trend in World Military Expenditure, 2016”, https://www.sipri.org/sites/ default/files/Trends-world-military-expenditure-2016.pdf To, Wai-Ming and Peter K.  C. Lee. 2018. “China’s Maritime Economic Development: A Review, the Future Trend, and Sustainability Implications”, Sustainability, Multidisciplinary Digital Publishing Institute, https://www. researchgate.net/publication/329795264 White House. 2017. “National Security Strategy of the United States of America”, December, https://www.whitehouse.gov/wp-content/uploads/2017/12/ NSS-Final-12-18-2017-0905.pdf White House Office of Trade and Manufacturing Policy. 2018. “How China’s Economic Aggression Threatens the Technologies and Intellectual Property of the United States and the World”, June, https://www.whitehouse.gov/wpc o n t e n t / u p l o a d s / 2 0 1 8 / 0 6 / F I N A L - C h i n a - Te c h n o l o g y Report-6.18.18-PDF.pdf

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Wong, Catherine. 2018. “Singapore leader Lee Hsien Loong warns region may have to choose between China and US”. South China Morning Post, 15 November, https://www.scmp.com/news/china/diplomacy/ar ticle/2173479/ singapore-leader-lee-hsien-loong-warns-region-may-have-choose Workman, Daniel. 2019. “Crude Oil Imports by Country”, 6 August, http:// www.worldstopexports.com/crude-oil-imports-by-country/ Zhou Xin. 2018. “CPC newspaper says China should “grasp historic opportunity””. Xinhua, 15 January, http://www.xinhuanet.com/english/201801/15/c_136897189.htm Zhang, Wenmu. 2006. “Sea Power and China’s Strategic Choices”, China Security, Summer 2006, 17–31.

CHAPTER 10

Competition and Caution in Chinese Foreign Policy Towards Northeast Asia Nguyen Quang Thuan and Hoang The Anh

Northeast Asia with its many hotspots has attracted competition and a scramble for influence among major countries in the world, particularly between China (a rising power) and the United States (US) (the world’s leading power). In recent years, in order to increase its influence and constrain China’s rising in this region, the US has adjusted its strategies in order to encourage greater Japanese participation in the region. Since Donald Trump became American  President, he has promoted a vision for “a free and open Indo-Pacific”, highlighting the theme in a speech at the APEC CEO Summit in Danang, Vietnam in November 2017 (Da Nang Today 2017). Breaking from his predecessors, President Trump and North Korean leader Kim Jong-un have met three times since 2018 to discuss ways to resolve a crisis over North Korea’s nuclear and

Nguyen Quang Thuan (*) Vietnam Academy of Social Sciences, Hanoi, Vietnam Hoang The Anh Institute of Chinese Studies, Vietnam Academy of Social Sciences, Hanoi, Vietnam © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_10

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missile programmes.1 The US had earlier also taken the provocative step of putting the Terminal High Altitude Area Defense (THAAD) system into operation in South Korea (Vovworld 2017). All of these steps have affected China’s foreign policies toward other Northeast Asian countries in recent years, and especially since the 19th Communist Party of China (CPC) Congress. In order to retain its influence and role in the region, China continues to both maintain steady ties with the countries in the region and implement some short-term immediate measures.

Cooperation and Competition with Japan Relations between China and Japan have involved both competition and cooperation in the political and economic realms but the former aspect has intensified in recent years and especially in the East China Sea. Beijing’s policy of switching between upping the ante on competition or seeking warmer relations has depended on the wider state of regional politics and the role of external players such as the US. Under Deng Xiaoping, in the 1980s and 1990s, China implemented reform and opening up and actively learned the experiences of Japan’s economic development after the war. Sino-Japanese relations made tremendous and pragmatic progress, with Japan becoming the largest official provider of aid and loans to China. Although there were still many disagreements in bilateral relations involving territorial disputes and historical issues, China’s diplomacy toward Japan adhered to the principle of keeping issues separate (qu fenkai lai 区分开来)2 and to support pacifist forces inside Japan. China’s expectations of Japan are also high, including that the latter adhere to the path of peaceful development especially given its record in World War II (Ping 2017). Cut to the present however, after 1  The first meeting was held in Singapore in June 2018, the second in Hanoi, Vietnam in February 2019 and the third time at the border of South Korea and North Korea in June 2019. 2  Under Mao Zedong, the CPC treated relations with Japan in two parts, that is, (i) separating the Japanese people from the minority militarists and the decision-makers of the Japanese government’s anti-China policy; (ii) separating policymakers of the Japanese government’s anti-China policy from political parties, politicians, and government officials, who may seek more positive ties with Japan; (iii) separating Japan from the US, which had established military bases in Japan. These three “separate” principles have become a sharp ideological weapon for China’s strategy toward Japan (Ping 2017).

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the September 2010 collision between a Chinese fishing vessel with a Japanese sea patrol vessel and the latter’s announcement of plans to nationalize the Senkaku Islands in September 2012, China reacted strongly by declaring an Air Defence Identification Zone over the East China Sea in November 2013. Abe in turn worsened matters by visiting the controversial Yasukuni Shrine in December 2013 (Wong 2018). Nevertheless, China has constantly tried to intensify multifaceted cooperation with Japan over the years in its own interests. In terms of political cooperation, according to the Ministry of Foreign Affairs of China’s statistics from November 2014 to April 2019, Chinese leaders Xi Jinping and Li Keqiang have met 15 times with the Japanese Prime Minister or his envoys at multilateral and bilateral forums. Important occasions include the May 2018 visit to Japan by Li and the October 2018 visit to China by his Japanese counterpart Abe (MOFA 2017). During the latter’s visit, Xi Jinping, at his meeting with the Japanese Prime Minister, noted that Our relationship has encountered a lot of obstacles. It was not a smooth ride. But with our joint effort, the relationship has become more normalised. A healthy relationship between China and Japan serves the basic interests of both countries. (Quoted in Wong 2018)

More recently, at the end of June 2019, Xi himself went to Osaka in Japan to attend the G20 Conference and held separate talks with the Japanese Prime Minister to promote bilateral relations in many fields. Significantly, he pressed Japan to participate more actively in the Belt and Road Initiative (BRI), emphasizing at the meeting that the joint construction of the ‘Belt and Road Initiative’ had opened up a vast world for mutually beneficial cooperation between China and Japan, and China welcomed the active participation of the Japanese side (Xinhua Wang 2019). In the economic field, China has always found cooperation with Japan in many industries advantageous to itself. Japan was for several years China’s largest trading partner and is currently China’s fourth largest trading partner (ranked after the US, EU, ASEAN). According to Japanese statistics, since 2007, China has been Japan’s largest trading partner. In 2018, Sino-Japanese trade totalled US$327.66 billion, an increase of 8.1% over the previous year. Of this, China’s exports amounted to US$147.08 billion, an increase of 7.2% over the previous year. The import value was

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US$180.58 billion, an increase of 8.9% over the previous year. Japan is China’s third-largest source of foreign direct investment, and China is Japan’s second-largest foreign investment destination. By the end of 2018, Japan’s accumulated investment in China was US$111.98 billion, ranking first in China. In 2018, China’s own direct investment in Japanese industry stood at US$251 million, which was basically the same as the previous year but, by the end of the year, China’s stock of direct investment in Japan was US$4.45 billion (MOFA 2019). In addition, according to China’s Ministry of Foreign Affairs documents, China has also signed with Japan scientific and technical cooperation agreements, with Japan involving various Chinese ministries and localities, while research institutes and universities of the two countries also conduct frequent exchanges and carry out a high level of cooperation in the sector. The two countries also have extensive cultural cooperation and also some military cooperation (MOFA 2019). However, none of this is to say that competition does not exist or that it is not significant in China-Japan relations. Clearly, China has always sought to maintain cooperation and contact with Japan, although the latter has been cautious and has doubts about China’s intentions. A case in point is the BRI, in which Japan has sought to participate, while also promoting its own alternative models like the Partnership for Quality Infrastructure. China and Japan are both ambitious powers in the Asia-Pacific region and, if anything, a rising China has only resulted in an intensification of their rivalry in recent years. Competition between the two countries is therefore, inevitable. Observing China’s competitive policies towards Japan, it is seen that in order to expand its influence, China has proposed cooperation models involving countries in the region, gradually replacing the existing models of Japan. For example, China has proposed a so-called community of human destiny as part of the BRI, but simultaneously accuses Japan of wearing nationalism-tinted glasses and of refusing to see or acknowledge its mistakes (Sina 2019). Notably, the BRI has created strategic competition between China and Japan. Launched by Xi Jinping in 2013, the BRI envisages China at the centre of a growing network of transportation and trade links that will ultimately stretch to encompass more than 60 nations. Naturally, this has generated concern in Japan about Beijing’s growing economic and political influence in the Asia-Pacific region and beyond. Tokyo has, as a result, forged new links with the US, Australia and India—an informal grouping

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referred to as the Quadrilateral Security Dialogue—in order to provide a counterweight to China (Ryall 2018). In Southeast Asia, meanwhile, China has, under the BRI, increased its investment in infrastructure in several countries, where Japan had previously invested and held an upper hand. China is catching up, therefore, with Japan—an impressive feat, considering its late entrance into the game in this region. An infrastructure analyst notes that “While Japanese companies and government agencies have had a long head start, Chinese companies have key advantages that could see them overtaking Japan in specific sectors” (The Japan Times 2018). With the Belt and Road Initiative underway, Chinese investments and trade in the region are set to grow. Malaysia is one of the countries reaping the benefits of Chinese investments in the region. The East Coast Rail Link from Kuala Lumpur to Tumpat is the biggest project China has in the country with the Exim Bank of China pledging US$14 billion (Ariffin 2018). In terms of security, Chinese analysts and government have also expressed concerns about Japan’s potential changes of its defence policies by, for instance, Prime Minister Shinzo Abe’s long-held goal of amending Japan’s constitution by 2020. One issue here is the question of the very name of an organization like the Japanese Self-Defence Forces (Johnston 2019). Although, within Japan, there are many different opinions about such a constitutional amendment, Beijing remains worried, as evident in its “White Paper on National Defense” (WND), released in July 2019, where it states: “Japan has adjusted its military and security policies and increased input accordingly, thus becoming more outward-looking in its military endeavors” (Xinhua 2019). This, in turn, has contributed to China increasing investment in its military modernization and capabilities in recent years.

Continue to Maintain Influence in the Korean Peninsula The relationship between China and the Korean Peninsula is a complicated one and, for the former, is one that is seen primarily in the context of its fierce competition for influence with the US. This perspective applies especially when it comes to the issue of North Korea’s nuclear weapons, the unification of the Korean Peninsula, and bilateral relations between China with North Korea and South Korea.

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From 2017 until now, China’s policy perspective towards the Korean Peninsula has been expressed in two public documents: “White paper on China’s policies on Asia-Pacific security cooperation” (WPAPSC) (released in January, 2017) and the WND. In the WPAPSC, China still claims to hold its previous position on nuclear weapons issues in the Korean peninsula: …China is committed to the denuclearization of the peninsula, its peace and stability, and settlement of the issue through dialogue and consultation. Over the years, China has made tremendous efforts to facilitate the process of denuclearization of the peninsula, safeguard the overall peace and stability there, and realize an early resumption of the Six-Party Talks. (MOFA 2017)

China continues to declare its opposition to North Korea’s nuclear weapons tests and missile launches: “… China has made clear its opposition to such actions and supported the relevant Security Council resolutions to prevent the DPRK’s further pursuit of nuclear weapons” (MOFA 2017). China’s approach of referring to the UN Security Council, where it too has a say in the form of its veto power, and the multilateral Six-Party Talks suggests also that it seeks to maintain its influence on the Korean peninsula’s nuclear weapons problem. However, US President Donald Trump’s willingness to engage with North Korea and his meetings with its leader, Kim Jong-un in Singapore, Vietnam and at the DMZ Korea, themselves challenge this approach, and Beijing has had to make policy adjustments accordingly on North Korea. In particular, China has boosted bilateral contacts and met with North Korean leaders and officials each time before Kim met with Trump. The question is, if there was no reaching out by Trump to the North Korean side, would the Chinese side have met with Kim? Evidence shows that in two years from 2018 to August 2019, Kim Jong-un has visited China four times with Chinese leader Xi Jinping also visiting Korea once. This is significantly different from the situation previously, when Xi had met his South Korean counterpart several times without ever meeting with the North Korean leader. It is worth noting that, in the new Chinese WND released in July 2019, China’s view has been adjusted not to criticize and oppose North Korea as it once did, but to refer to the American hegemony and involvement in hotspots in the region itself and the wider world. Thus, the WND notes that the situation on the Korean peninsula has eased even if there are still uncertainties, and that,

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China has played a constructive role in the political settlement of regional hotspots such as the Korean Peninsula issue… China opposes hegemony, unilateralism and double standards, promotes dialogues and consultations, and fully and earnestly implements UNSC resolutions. (Xinhua 2019)

In fact, Xi Jinping faces a dilemma in his policy towards North Korea. On the one hand, China wants North Korea to give up its nuclear weapons in the interest of regional stability. Pyongyang’s continuous nuclear and ballistic missile tests several years ago led to Beijing also voting in the UN Security Council to strengthen economic sanctions against North Korea. China has also encouraged North Korea to reform, open up and develop its economy as stated by Xi himself during his visit in June 2019 (Centurynews 2019), even if it has not been easy to convince North Korea to do as China wished it to. On the surface, the essence of China-North Korea relations, at least from Beijing’s perspective, is that its smaller neighbour should be dependent on it, but the situation seems to be the opposite in that it appears to be North Korea that always has the initiative, and keeps China unbalanced and in a somewhat disadvantageous position in the relationship (Centurynews 2019). On the other hand, since the 1990s, North Korea’s economic situation has remained sluggish, and international sanctions have both increased and hurt. In recent years, small-scale reforms have helped the North Korean economy improve, but Pyongyang has still relied on external aid, especially from China. However, at the same time, Beijing is also worried that too strong sanctions may completely collapse the North Korean economy, leading to political instability and a potential collapse of the Pyongyang regime and resultant chaos in the China-North Korea relationship (Centurynews 2019). With South Korea, meanwhile, ever since the two countries established diplomatic relations (in 1992) up to the setting up the Terminal High Altitude Area Defense (THAAD), American antiballistic missile defence system, on its soil, the bilateral relationship was generally good. When Seoul officially allowed the US to put the THAAD system in July 2016, however, China was furious, given that the system targeted also China. The Chinese Foreign Ministry said the THAAD system would destabilize the regional balance of security and without achieving anything to end North Korea’s nuclear programme, and China has since taken several measures to “punish” South Korea.

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It called on the US and South Korea to stop setting up the THAAD system and “to stop aggravating regional tensions and harming China’s strategic security interests”. It also declared that it would ­“resolutely take the necessary measures to defend its own interests” (MOFA 2017). Domestically, China has encouraged its state media and CPC organizations to promote calls for a boycott of South Korean products. The Chinese Communist Youth League, at local and central levels, has also been pushing for a boycott on the Internet, urging consumers not to buy South Korean goods including vehicles, cosmetics and electronics. Photos on social networks and news in websites show, for example, crowds smashing South Korean cars, while some Chinese travel companies have also cancelled tours to South Korea (Hong 2017). These Chinese retaliatory measures against South Korea have caused damage to both South Korea and China. For the former, China is a major market for its automobiles and other goods, while the large numbers of Chinese tourists are a significant contributor to that sector. China is South Korea’s leading trading partner, and bilateral trade between the two is greater than the combined trade of South Korea with the US and Japan. The Hyundai Research Institute found that the cost of the THAAD dispute to South Korea may have reached US$7.5 billion in 2017, affecting South Korea’s GDP by 0.5%. The loss in China, however, has been calculated at only US$880 million, accounting for only 0.01% of China’s GDP. The sales of South Korean cars in China have fallen sharply. South Korean retailer, Lotte, had to close up to 112 stores in China because consumers no longer patronized it and Korean movies and cosmetics too saw losses (Perlez et al. 2017). However, it was also the case that, after 18 months of hostility toward South Korea, at the end of 2017, Xi Jinping normalized relations with South Korea. This might suggest that entering the second term, Xi was more confident in foreign policy. But it would also appear that Xi was aware that if he continued to be hostile towards South Korea, on the one hand, he would not improve the situation but would push South Korea closer to the US, which in turn would affect China’s role in the region, including the long-term goal of replacing the US as the leading power in Asia (Perlez et al. 2017). In fact, in October 2017, South Korea also had to make commitments not to embarrass China with the “three no” policy: “No to add more THAAD systems, no to join the US anti-missile system, and no to developing the three-party military alliance of Korea, the US and Japan” (People.cn 2018).

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This shows that China has moved both forcefully and carefully to maintain its influence on regional countries, including South Korea and Japan. Thus, Chinese Premier Li Keqiang stated at the 7th China-Japan-ROK Leaders’ Meeting in Japan in May 2018, China, Japan and South Korea, as the world’s three major economies are important economic and trade partners for each other and have an important responsibility for promoting regional economic development, leading to regional integration, and maintaining regional peace and stability. Facing the current complicated and ever-changing international political and economic situation, strengthening cooperation between China, Japan and South Korea is not only the need of the three countries’ own development, but also the common expectation of regional countries and the international community. (People.cn 2018)

That China’s ultimate goal is to compete with the US in the South Korean context is shown specifically in the WND document, which points out, The US is strengthening its Asia-Pacific military alliances and reinforcing military deployment and intervention, adding complexity to regional security. The deployment of the Terminal High Altitude Area Defense (THAAD) system in the Republic of Korea (ROK) by the US has severely undermined the regional strategic balance and the strategic security interests of regional countries. (Xinhua 2019)

Relations between China and South Korea have since normalized and continue to develop. Politically, the frequent exchange of visits between leaders of the two countries or meetings in international multilateral activities has enhanced mutual understanding and trust and promoted the development of bilateral relations. Economically, the mutually beneficial cooperation between the two countries has only deepened. According to Chinese statistics, by the end of 2018, China was South Korea’s largest trading partner, largest export market and largest source of imports, and South Korea was China’s third largest trading partner. South Korea is also China’s second largest source of foreign direct investment. China is South Korea’s second-largest overseas investment destination (MOFA 2019). And more than 400,000 Chinese tourists went to Korea as of July 2018, up from 280,000 in the same period in 2017, and more and more South Korean retailers are joining forces with China’s

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mobile payment platform to attract more Chinese tourists. With the warming of relations between South Korea and China, South Korean companies have refocused their efforts on the Chinese market (People.cn 2018). Exchanges and cooperation between the two countries in the fields of culture, education, science and technology have become increasingly active and the two countries maintain close coordination and cooperation in regional and international affairs according to the Chinese foreign ministry (MOFA 2019).

Conclusion With the arrival of the Donald Trump administration, the Barack Obama administration’s policies of a “pivot” to Asia appear to have reached the next stage and profoundly affects both China’s equations with its three neighbours in the region, as well as those of these countries with each other and the US. The full extent of the US’ recalibration of its policies in Northeast Asia remains to be seen. Nevertheless, China’s relations with its neighbours Japan and South Korea have largely remained steady despite pressures created by American alliance relations. China’s position in the region remains far from comfortable but the current spell of worsening relations between Japan and South Korea works well for Chinese interest in complicating the trilateral alliance between the US and the two Northeast Asian countries (Ling 2019). Overall, Beijing remains cautious in its approach to its neighbours in the region despite greater uncertainty and flux generated by American policy actions, while continuously seeking opportunities to shore up its interests and undermine those of the US.

References Ariffin, Eijas. 2018. “Japan-China competition heating up”. The Asean Post, February 16. https://theaseanpost.com/article/japan-china-competition-heating Centurynews. 2019. “Xi Jin hui Zhongguo zancheng Chaoxian jingji gaige” (習 金會中國讚賞朝鮮經濟改革) [China Supports Korean Economic Reforms at Xi-Kim Meet]. June 21. http://www.centurynews.com.tw/news_content. php?id=11500

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Da Nang Today. 2017. “Full text of President Donald Trump’s speech at APEC CEO Summit”. November 10. https://www.baodanang.vn/english/politics/201711/ full-text-of-president-donald-trumps-speech-at-apec-ceo-summit-2577482/ Hong Van. 2017. “Tuc gian ve ten lua, Trung Quoc gay chien thuong mai voi Han Quoc” [Angered About Missiles, China Makes Trade War With South Korea]. March 3. https://vnexpress.net/the-gioi/tuc-gian-ve-ten-lua-trung-quoc-gaychien-thuong-mai-voi-han-quoc-3551076.html#ctr=related_news_click Johnston, Eric. 2019. “Abe’s Push to Amend Japan’s Constitution Faces Uncertain Future After Upper House Vote”. July 22. https://www.japantimes.co.jp/ news/2019/07/22/national/politics-diplomacy/abes-push-amend-japansconstitution-faces-uncertain-future-upper-house-vote/#.XUY81603t0w Ling Shengli. 2019. “Can the US Mediate Successfully in Japan-South Korea Trade Dispute?” Global Times. July 29. http://www.globaltimes.cn/content/1159628.shtml Ministry of Foreign Affairs of the People’s Republic of China (MOFA). 2017. “Waijiaobu fayanren Geng Shuang zhuchi lixing jizhehui”. (外交部发言人耿爽 主持例行记者会) [Foreign Ministry Spokesperson Geng Shuang Holds Regular Press Conference]. April 26. https://www.fmprc.gov.cn/web/ wjdt_674879/fyrbt_674889/t1457020.shtml Ministry of Foreign Affairs of the People’s Republic of China (MOFA). 2019. “Zhongguo tong Hanguo de guanxi” (中国同韩国的关系) [China’s Relationship with South Korea]. https://www.fmprc.gov.cn/web/ gjhdq_676201/gj_676203/yz_676205/1206_676524/sbgx_676528/ People.cn. 2018. “Zhong-Han guanxi jian huinuan (zhuanjia jieshi)” (中韩关系渐 回暖 (专家解读)) [China-Korea Relations Gradually Becoming Warmer, Expert Explains]. September 15. http://world.people.com.cn/n1/2018/0915/ c1002-30295170.html Perlez, Jane, Mark Landler and Choe Sang-Hun. 2017. “China Blinks on South Korea, Making Nice After a Year of Hostilities”. The New York Times, November 1. https://www.nytimes.com/2017/11/01/world/asia/china-south-koreathaad.html Ping Zhaokui. 2017. “Zhongguo dui Ri fangzhen yu Zhong-Ri guanxi yanbian” (中国对日方针与中日关系演变) [China’s Policy Towards Japan Develops with China-Japan Relationship]. People.cn. February 13. http://world.people.com. cn/n1/2017/0213/c1002-29077409.html Ryall, Julian. 2018. “Japan-China Aid Competition?” Khmer Times, February 26, 2018. https://www.khmertimeskh.com/110395/japan-china-aid-competition/ Sina. 2019. “Xuezhe: Zhong-Ri Jingzheng bei huishi qi yingxiangli buyayu Zhong-Mei duikang” (学者: 中日竞争被忽视 其影响力不亚于中美对抗) [Scholar: China-Japan competition ignored, but it’s influence is no less than that of China-America confrontation]. May 5. https://news.sina.com. cn/c/2019-05-05/doc-ihvhiewr9965328.shtml

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The Japan Times. 2018. “Japan Still Beating China in Southeast Asia Infrastructure Race”. February 9. https://www.japantimes.co.jp/news/2018/02/09/business/japan-still-beating-china-southeast-asia-infrastr ucture-race/#. XYOxevZuJyw Vovworld. 2017. “THAAD Put Into Operation in South Korea”. May 2. http:// vovworld.vn/en-US/news/thaad-put-into-operation-in-southkorea-538127.vov Wong, Catherine. 2018. “China, Japan Moving From Competition to Cooperation, Leaders Say”. South China Morning Post. October 26. https:// w w w. s c m p . c o m / n e w s / c h i n a / d i p l o m a c y / a r t i c l e / 2 1 7 0 4 3 6 / china-japan-moving-competition-cooperation-leaders-say Xinhua Wang. 2019. “Xi Jinping hui jianmian Riben Shouxiang An Bei Jinsan” (习近平会见日本首相安倍晋三) [Xi Jinping will meet Japanese Prime Minister Shinzo Abe]. June 27. http://www.xinhuanet.com/world/201906/27/c_1124681266.htm Xinhua. 2019. “Full Text: China’s National Defense in the New Era”. July 24. http://www.xinhuanet.com/english/2019-07/24/c_138253389.htm

PART IV

CPC Propaganda Abroad

CHAPTER 11

The CPC’s International Department and China’s Party-Based Diplomacy Ngeow Chow-Bing

China is a Leninist Party-State. A key feature of such a system is the parallel apparatus of the Party and the State, with the Communist Party of China (CPC) overshadowing the State, resulting in a complex structure of governance (Liu 1986; Zheng 1997; Wright 2015). Applied in the foreign policy process, three characteristics stand out. First, the Party Center is the highest foreign policymaking body, in the form of Politburo/Politburo Standing Committee, and its Secretariat (Barnett 1985; Lu 2000; Lampton 2001; Zhao 2012). Unlike in other countries, the Chinese Foreign Minister is far down in the pecking order, and unless a very top-level politician concurrently serves as a Foreign Minister (such as Premier Zhou Enlai and Marshall Chen Yi during the early years of the People’s Republic), the Foreign Minister is generally not a very powerful official within the top echelon of the communist leadership. But not all members of the Politburo/Politburo Standing Committee understand or are interested in foreign policy, and concurrently, not all important foreign policy officials serve in the Politburo/Politburo Standing Committee, so the coordinating mechanism for the Party Center, the Central Leadership Small Group on Foreign Affairs—upgraded to the level of Central Commission on Ngeow Chow-Bing (*) Institute of China Studies, University of Malaya, Kuala Lumpur, Malaysia © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_11

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Foreign Affairs in March 2018—plays a very important role in formulating the big policy directions for Chinese foreign policy. Underneath the Small Group/Commission is its Foreign Affairs Office (zhongyang waiban 中央外办), and the Director of Office is a Ministerial-Level position, usually assumed by a top foreign policy official, above the Foreign Minister. Second, the Party installs its cells in the Ministry of Foreign Affairs (MFA), in the form of dangwei 党委 (Party committee) within the MFA bureaucracy.1 Dangwei functions as a supervisory organ for the Party to ensure the compliance of MFA’s officials towards the correct political and ideological line in their discharge of diplomacy. While normally under the parallel Party-State structure the Party overshadows the State within the MFA; however, the Foreign Minister is the number one official (yibashou一把手),2 with one of his deputies serving as the Party Secretary of the MFA Party committee. Nevertheless, this does not change the fact that the Party wields immense influence and control through its organizational presence in the MFA. Its organizational apparatus within the MFA actually extends all the way to foreign embassies and consulates. Third, the party has its own unit in managing foreign affairs, and the unit in charge is the International Department3 (zhonglianbu 中联部). For foreign China watchers, the International Department has always been seen as a mysterious organization, with its importance and influence recognized but its actual role difficult to pin down. Other than knowing that it mainly conducts CPC’s relations with foreign parties, there was not much that could be analysed about the International Department and its role in the process of Chinese foreign policymaking. Lu Ning, a former MFA official, who later became a primary source for Western academia in analysing Chinese foreign policy process, suggested that, as China became more globally integrated, the International Department stood to lose its influence in China’s foreign policy, and likely to become the ‘biggest loser’ (Lu 2001: 60–61). 1  MFA is one of the few central government ministries that set up a dangwei. Most other Ministries have installed a dangzu 党组 (Party group) instead of dangwei. 2  The Foreign Minister himself is a member of the dangzu at the State Council level. Within the State Council, the Foreign Minister also usually answers to a higher official, a State Councillor or a Vice Premier in charge of foreign affairs, unless the Foreign Minister holds one of these positions concurrently. 3  In the past it has been translated as International Liaison Department or Central Liaison Department.

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However, recent studies emerged to suggest otherwise. Shambaugh (2007) documented extensively the origin, evolution, organizational structure, and functions of the International Department. In Shambaugh’s analysis, the International Department, rather than losing its status and influence, seemed to have regained its vigour and has been an active and important body. It has played an important role in: (1) dealing with relations with fellow communist party-states (such as North Korea and Vietnam); (2) researching on the causes of collapse of communism in the Soviet Union and Eastern Europe; (3) developing relations with other non-Communist parties, (4) fostering ties with parties in countries with which China did not have diplomatic relations; and (5) studying and learning foreign governance ideas. Ngeow (2017) analysed the party-to-­ party exchanges between Malaysia and China, detailing the various activities (mutual visits, cadre training, field research, etc.) that took place, through the International Department, between the CPC and two major component parties of the previous ruling coalition of Malaysia. The study ended with the conclusion that the CPC is now much more confident in offering its own governance experience and lessons to foreign (especially developing countries’) parties, in effect becoming a main conduit to promote Chinese model of development and China’s soft power. This chapter attempts to shed further light on the International Department and its signature party-based diplomacy,4 especially paying attention to developments occurring under the leadership of Xi Jinping, that is, between the 18th Party Congress and 19th Party Congress. It particularly takes note of the broadening conception of party-based diplomacy that expands CPC’s cultivation of friendship and networks to all kinds of foreign elite, a practice that started before Xi, but accelerated during his time of leadership. In addition, during and after the 19th Party Congress, Xi’s instructions for the International Department also seemed to have emphasized the role of party-based diplomacy to promote China’s image and soft power as well.

4  In Chinese parlance, several terms or phrases are used to refer to the work conducted by the International Department, including ‘party-based diplomacy’ (zhengdang waijiao 政党 外交), ‘party-to-party exchange’ (dangji jiaowang 党际交往), ‘party’s external exchange’ (dangde duiwai jiaowang 党的对外交往), and ‘party’s external work’ (dangde duiwai gongzuo 党的对外工作). While ‘party-to-party exchange’ refers to interactions between the CPC and foreign parties, other terms essentially refer to similar practices. This chapter will primarily use ‘party-based diplomacy.’

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What Is Party-Based Diplomacy? Views from Chinese Officials and Researchers The International Department today maintains relationships with more than 600 political parties from 160 countries. Each year the total number of delegations it receives from foreign parties and sends out to visit foreign parties is more than 300 (Academy of Marxism 2012). Obviously, the CPC devotes enormous resources to maintaining partybased diplomatic work and activities of the International Department. In the world, and certainly among the major powers, it seems that perhaps only China pays so much serious attention to the diplomatic work of its ruling party. In a book edited by a former Minister of International Department, Wang Jiarui, there is a passage that clearly elucidates how the CPC views party-based diplomacy, and is worth a long, direct quotation here (Wang 2013: 239): Party-based diplomacy is a component of the overall diplomacy of the country. Its main starting and focal points are to serve and obey the overall diplomatic big picture of the country, to help realize, protect, and develop the fundamental interests of the people and the country. As the diplomatic work of the Chinese Communist Party, it has the dual character of being governmental and non-governmental at the same time. In interacting with foreign ruling parties, it can do things that governmental diplomacy cannot or is not suitable to do. In interacting with foreign opposition parties, it can expand and network relationships, ensuring the continuity of bilateral relations. In interacting with parties in countries without diplomatic ties, it can help improve the work of establishing diplomatic ties. In interacting with foreign political leaders and young politicians, it can help raising pro-China or China-friendly forces. In interacting with foreign non-governmental organizations (NGOs) or social movements, it can help shape international public opinion, win over some support, and improve bilateral relations from outside (of the government).

In a conversation with an International Department official in late 2016, this author was given a simple description of the work of the International Department and its difference with the MFA. According to this official, ‘the work of the MFA mainly focuses on concrete things, whereas the work of the International Department is to focus on (building relationships with) the people’ (waijiaobu shizuo shi de gongzuo,

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z­ honglianbu shi zuo ren de gongzuo 外交部是做事的工作,中联部是做人的 工作). The long passage above is a richer illustration of this idea.5 Kong Genhong, an International Department official in charge of research, pointed out that party-based diplomacy is ‘omni-directional diplomacy,’ ‘foundational diplomacy,’ ‘preventive diplomacy,’ and ‘public diplomacy’ (Kong 2010: 204–210). By ‘omni-directional diplomacy,’ he meant that this is a diplomacy that engages with all kinds of countries (socialist, democratic, authoritarian, neighbouring, far away, developed, developing), all kinds of parties (ruling and opposition, and parties of various ideological leanings and natures), all kinds of subjects (political, economic, cultural), and all kinds of exchange mechanisms (mutual visits, dialogue forums, field trips). By ‘foundational diplomacy,’ Kong argued that party-based diplomacy aims to improve and consolidate bilateral relationships through basic, long-term, and foundational work in building up ties with foreign parties. Party-based diplomacy can also be a platform for ‘preventive diplomacy.’ On China’s ‘core’ national interests on issues such as Tibet, Taiwan, Xinjiang, and human rights, the International Department can use party-to-party channels to communicate with foreign party leaders and political elite, minimizing differences while searching for a more common and mutually acceptable position. Finally, Kong suggested that party-based diplomacy is also a form of ‘public diplomacy.’ However, the kind of ‘public diplomacy’ here is more elite-oriented, as Kong mostly wrote about the importance of building up ‘networking’ ties with foreign leaders: ‘making friends, exchanging thoughts, exchanging emotions, people-based, and work on the people’ (Kong 2010: 209).

Party-Based Diplomacy: Expanding Friendships and Elite Networks As the views of these above-mentioned Chinese researchers and officials illustrate, there is a growing mandate for the International Department to engage and establish relationships beyond foreign political elite and party leaders. Since Xi Jinping took over the leadership, party-based diplomacy has indeed become more active in expanding its range of engagement with different sectors of foreign elite.

5  It should not be seen as an absolute division of labour however. The MFN also builds China’s ties and friendships with foreign countries, institutions, and individuals.

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The International Department has noticed the importance of engaging with foreign NGOs and, in recent years, it has been actively participating in certain international NGO forums and activities, organizing some of these international NGO forums and activities in China, and inviting foreign NGO delegations to visit China. Hence, NGOs affiliated with the International Department, such as Chinese Association for International Understanding and Chinese People’s Association for Peace and Disarmament, have been actively conducting ‘NGO diplomacy,’ inviting foreign NGOs to tour China and discuss China-foreign NGO cooperation.6 In Africa, the International Department has been guiding and supporting the ‘going out’ of the more internationally active Chinese NGOs to represent the Chinese society (Yang 2017). It has also broadened its engagement networks to include the business and economic elite. The International Department now often promotes economic and trade cooperation by organizing various forms of trade forums such as business networking meetings for Small and Medium Enterprises (SMEs), inviting foreign entrepreneurs to visit China, and attaching an economic cooperation agenda to their own visits (Wang 2013: 242–249). It has maintained a Chinese Economic Liaison Center (Zhongguo jingji lianluo zhongxin 中国经济联络中心) to primarily engage with the foreign business elite. In the party-to-party exchanges between the CPC and Malaysian Chinese Association (MCA), a component party of the former ruling coalition in Malaysia, a key activity has been the cohosting of business matching conferences for the businessmen of both countries (Ngeow 2017: 74–75). Moreover, in line with the Belt and Road Initiative (BRI) actively promoted by CPC General Secretary Xi Jinping, the International Department has organized a BRI Think-Tank Consortium, comprising more than 130 think-tanks in China and more than 110 think-tanks along the BRI countries.7 In this sense, increasingly, the International Department is building a network of relationships with foreign think-tank analysts, university scholars or, in short, intellectual and culture elite. Party-based diplomacy has, indeed, expanded its networks of friendships beyond political elite in foreign countries.  Disclosure: this author participated in one of these tours in March 2017.  This figure was reported by GuoYezhou, the Vice Minister of International Department, during his speech in a forum in Fudan University on 14 October, 2018. This author was present in that forum. 6 7

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Engaging with key political elites, whether in the ruling party or in the opposition, of foreign countries, however, remains the key mandate of the International Department. For instance, it kept the channel of dialogue open between Japan and China through the China-Japan Ruling Party Exchange Mechanism (participated by the Minister and other leaders of the International Department, and key officials from the Liberal Democratic Party and Keimoto), when the bilateral relations were fraught with uncertainty. The Mechanism was started in 2006, went into a hiatus for almost 6 years from 2009 to 2015, when it was reactivated. It proved to be useful as the testing first step at improving official bilateral relations (BBC 2015). The Mechanism has continued with its eighth meeting, most recently held in October 2018 (Xinhua 2018). In some cases, the International Department played an important role in ensuring continuity of bilateral relations when there was a change of government in foreign countries. It engineered the visit by Myanmar’s leader Aung San Suu Kyi to China before her National League for Democracy came to power in 2015, thus ensuring a smooth relationship between Myanmar and China despite the change of government. In Malaysia, despite the very close relationship between the CPC and the former ruling coalition (see Ngeow 2017), after the change of government in May 2018, the International Department sent several delegations to Malaysia to immediately build ties with the parties of the  Pakatan Harapan, the new ruling coalition. Vice Minister GuoYezhou managed to meet with the newly-elected Prime Minister Mahathir Mohamad soon after the election (Kwong Wah Daily 2018). Key component parties of the Pakatan Harapan also organized delegations to visit China under the invitation of the International Department.8 In late October, Anwar Ibrahim, the likely successor to Mahathir, also visited China and met with both Foreign Minister Wang Yi and the Minister of International Department, Song Tao. Within a short period of time, the International Department has managed to build up solid relations with the key party leaders in Malaysia. The actual practices of party-based diplomacy in the past few years, especially under Xi Jinping, therefore, have indeed gone beyond just the ‘party.’ It has now engaged in multiple fronts, from the traditional focus of foreign party leaders (political elite), to entrepreneurs and business leaders (economic elite), NGOs (social elite), and think-tanks and ­academic (cultural and intellectual elite), securing more and different kinds of friendships and elite networks for China, and for the CPC. 8

 Based on the author’s interactions with some key members of these parties.

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The 19th Party Congress, Party-Based Diplomacy, and Promotion of China’s Image Beginning in the 19th Party Congress in November 2017, and through the 13th National People’s Congress in March 2018, Xi Jinping and the CPC undertook extensive reforms of leadership structure of the Chinese partystate. A key measure has been the empowerment of key foreign policy officials and institutions. As mentioned in the introduction, the MFA and its Foreign Minister have been relatively weak actors within Chinese politics. Xi Jinping elevated Yang Jiechi, the top foreign policy official (Director of the Office of the Central Leadership Small Group on Foreign Affairs/ Central Commission on Foreign Affairs) to be a member of the Politburo,9 and made Wang Yi, the Foreign Minister, as concurrently the State Councillor. In March 2018, the Central Leadership Small Group on Foreign Affairs was redesignated as the Central Commission on Foreign Affairs, making it a more established and concrete body. Li Keqiang, the Premier, who was not made a member of the Central Leadership Small Group on Foreign Affairs in the 18th Party Congress, was given the position of deputy leader of the Small Group in the 19th Party Congress. All these actions signified that Xi Jinping was empowering the institutions and actors involved in Chinese foreign policy, which is necessary, given the rapid expansion of the global influence and overseas interests of China. Within this context, the International Department continues to be a highly relevant actor in Chinese foreign policy. Xi Jinping has continued to emphasize the unique nature and advantage of the International Department and its party-based diplomacy to advance the interests of China by highlighting four major areas of focus: party, research, network, image (zhua zhengdang, zhua diaoyan, zhua renmai, zhua xingxiang 抓政 党, 抓调研, 抓人脉, 抓形象) (Song 2017). ‘Party’ and ‘network’ refer exactly to the mandate of ‘work on the people’—the expansion and securing of international friendships and elite networks through ties with foreign political, business, social, and intellectual elite. While ‘research’ has always been an important aspect of work of the International Department (see Shambaugh 2007, 2008), a novel aspect mentioned by Xi is to help promote China’s image and soft power, traditionally the work of the Central Propaganda Department. This can be observed particularly in the developments after the 19th Party Congress. 9  Qian Qichen 钱其琛, the foreign policy czar of the Jiang Zemin administration was the last foreign policy specialist who served in the Politburo (from 1992 to 2002).

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After the conclusion of the 19th Party Congress, the International Department was given an important task to communicate the achievements, significance, and future directions set forth in the Congress to foreign political elite. Song Tao, the Minister of the International Department, undertook a tour to fellow communist countries North Korea, Vietnam, Laos, and Cuba to brief the fellow ruling communist parties about the Party Congress. More extraordinarily, the International Department invited all foreign embassies and important foreign enterprises, chambers of commerce, and international organizations based in Beijing before and after the 19th Party Congress to its own briefing sessions. More than 260 Ambassadors, chargés d’affaires, and high-­level diplomatic officials from 150 embassies, and more than 140 delegates from foreign enterprises, chambers of commerce, and international organizations attended these sessions organized by the International Department (Xinhua 2017a). During the Fifth and Sixth Party Plenums of the 18th Party Congress, the International Department had already organized ‘publicity and introduction delegations’ (xuanjietuan 宣介团) to visit foreign countries and brief their foreign counterparts. After the conclusion of the 19th Party Congress, the International Department, together with other important bodies of the Party such as Central Propaganda Department and Central Policy Research Office, again organized these ‘publicity and introduction delegations’ to visit more than 30 countries to brief foreign political parties, media organizations, and think-tanks about the 19th Party Congress (Takungbao 2017). Following the 19th Party Congress, in December 2017, a special ‘HighLevel Dialogue between CPC and World’s Political Parties’ (Zhongguo gongchandang yu shijie zhengdang gaocheng duihuahui 中国共产党与世界 政党高层对话会) was organized by the International Department to highlight to the foreign political parties’ delegates the New Era under Xi Jinping since the 19th Party Congress. Xi Jinping also delivered his opening speech in the Dialogue. This Dialogue was attended by more than 600 delegates from 300 political parties in 120 countries. They issued a statement which endorsed the BRI, the signature initiative of Xi Jinping (Xinhua 2017b). Henceforth, it can be surmised here that these activities of the International Department before and after the 19th Party Congress reflected Xi’s emphasis on building up the ‘image’ of China and the CPC as part of the new mandate of the International Department and its party-

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based diplomacy, although it should be emphasized here that the target audience of these image-building activities remain essentially the political, economic, social, and intellectual elite of other countries. That reflects fundamentally a core aspect of the work of the International Department— the building up and securing of friendships and networks between the CPC and foreign elites.

Conclusion The International Department has so far delivered much of what is expected of it. Its brand of party-based diplomacy has assumed a prominence that is unseen in any other countries’ diplomatic practices. Although the growing mandate of the International Department to engage with not just political, but also social, economic and, more recently, the intellectual elite of foreign countries, started before the era of Xi Jinping, under his leadership party-based diplomacy has indeed grown to be an important tool of China’s diplomacy. Moreover, Xi is also emphasizing how party-­ based diplomacy can play a key role in explaining China’s policies and promoting China’s image and soft power to foreign elite. This unique practice of party-based diplomacy has perhaps given China the advantage to cultivate friendships and elite networks of all sorts. Looking forward, while much of what has been discussed in this chapter about party-based diplomacy will continue under the leadership of Xi Jinping, there could also be another growing role for the International Department in the future. This is the training of foreign party cadres, especially in developing countries. The author’s case study on party-to-­ party diplomacy between Malaysia and China (Ngeow 2017) has already unearthed this aspect of party-based diplomacy. Xi is increasingly becoming more confident in promoting the developmental experiences of China to the developing world and in offering the so-called ‘China solutions’ to complex problems in the world. Such developmental experiences and lessons are not confined to only economic development and, increasingly, they could refer to governance techniques as well. The growing and diversifying mandate of party-based diplomacy will ensure that the ­ International Department continues to be a critical actor in Chinese foreign policy.

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References Academy of Marxism. 2012. ‘Zhonglianbu fubuzhang Li Jinjun tan “dangde duiwai gongzuo 90nian”’ (中联部副部长李进军谈党的对外工作90年) [Vice Minister of International Department Li Jinjun on ‘90 Years of Party’s External Work’]. Makesi zhuyi yanjiuwang (马克思主义研究网) [Academy of Marxism Online]. 9 January. http://myy.cass.cn/c8a55a7e8a1e4593b75812fc1f9f1a22/201201/t20120109_1972385.shtml Barnett, A.  Doak. 1985. The Making of Foreign Policy in China: Structure and Process. Boulder, CO: Westview Press. BBC (British Broadcasting Corporation). 2015. ‘Zhongri huifu zhongduan liunian de zhizhengdang jiaoliu jizhi’ (中日恢复中断六年的执政党交流机 制) [China and Japan to Reactivate the Ruling Party Exchange Mechanism after Six Years]. 2 December. https://www.bbc.com/zhongwen/simp/ china/2015/12/151202_china_japan_party_exchanges Kong, Genhong (孔根红). 2010. ‘Yong xinzhi quanshi zhengdang waijiao de zhendi’ (用心智诠释政党外交的真谛) [Use Heart and Wisdom to Interpret the Nature of Party-based Diplomacy]. Postscript to Li Beihai (李北海), Wajiao xinyu (外交心语) [Heart-to-Heart Talks in Diplomacy], pp. 204–210. Beijing: Dangdai shijie chubanshe. KwongWah Daily. 2018. ‘Guo Yezhou huibai Dunma, taolun jiaqiang Mazhong guanxi’ (郭业洲拜会敦马, 讨论加强马中关系) [Guo Yezhou meeting Tun Mahathir, Discussed Improving Malaysia-China Relations]. 29 July. http:// www.kwongwah.com.my/?p=551900 Lampton, David. 2001. ‘China’s Foreign and National Security Policy-Making Process: Is It Changing and Does It Matter?’ In David Lampton (ed.) The Making of Chinese Foreign and Security Policy in the Era of Reform, pp. 1–36. Stanford, CA: Stanford University Press. Liu, Alan P. L. 1986. How China is Ruled. Englewood Cliffs, NJ: Prentice-Hall. Lu, Ning. 2000. The Dynamics of Foreign-Policy Decisionmaking in China, Second Edition. Boulder, CO: Westview Press. Lu, Ning. 2001. ‘The Central Leadership, Supraministry Coordinating Bodies, State Council Ministers, and Party Departments.’ In David Lampton (ed.) The Making of Chinese Foreign and Security Policy in the Era of Reform, pp. 39–60. Stanford, CA: Stanford University Press. Ngeow, Chow Bing. 2017. ‘Barisan Nasional and the Chinese Communist Party: A Case Study in China’s Party-based Diplomacy’, The China Review, 17, 1, 53–82. Shambaugh, David. 2007. ‘China’s “Quiet Diplomacy”: The International Department of the Chinese Communist Party’, China: An International Journal, Volume 5, Number 1, pp. 26–54.

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Shambaugh, David. 2008. China’s Communist Party: Atrophy and Adaptation. Berkeley and Los Angeles: University of California Press. Song Tao. 2017. ‘Shenru xuexi guanche Xi Jinping zongshuji dangde duiwai gongzuo zhongyao sixiang’ (深入学习贯彻习近平总书记党的对外工作重要思 想) [Deeply Learning and Implementing the Important Thought on Party’s External Work by General Secretary Xi Jinping] Qiushiwang (求是网) [Truth Seeking Online]. 31 March. http://www.qstheory.cn/dukan/qs/201703/31/c_1120707297.htm Takungpao. 2017. ‘30 xuanjietuan xiang shijie jiangshu shijiuda jingshen, quanqiu zhumu’ (30 宣介团向世界讲述十九大精神, 全球瞩目) [30 publicity and introduction delegations to narrate the spirit of the 19th Party Congress to the world, the world pays attention]. 3 November. http://news.takungpao.com/ mainland/focus/2017-11/3510260_print.html Wang Jiarui (ed.). 2013. Zhongguo Gongchandang duiwai jiaowang 90 nian (中国 共产党对外交往90年) [90 Years of External Exchanges of the Communist Party of China]. Beijing: Dangdai Shijie Chubanshe. Wright, Teresa. 2015. Party and State in Post-Mao China. Cambridge: Polity Press. Xinhua. 2017a. ‘Zhongguo gongchandang ruhe xiang shijie jiangshu shijiu da’ ( 中国共产党如何向世界讲述十九大) [How the Chinese Communist Party narrates the 19th Party Congress to the World]. 2 November. http://www.xinhuanet.com/politics/2017-11/02/c_1121894531.htm Xinhua. 2017b. ‘Zhongguo gongchandang yu shijie zhengdang gaocheng duihua Beijing changyi’ (中国共产党与世界政党高层对话北京倡议) [High-Level Dialogue between the Chinese Communist Party and World’s Political Parties, Beijing Initiative]. 3 December. http://www.xinhuanet.com/world/201712/03/c_1122050731.htm Xinhua. 2018. ‘Zhongri zhizhengdang jiaoliu jizhi dibaci huiyi zai Ri juxing’ (中 日执政党交流机制第八次会议在日举行) [China-Japan Ruling Party Exchange Mechanism Meets in Japan for the Eighth Meeting]. 12 October. http://www. xinhuanet.com/2018-10/12/c_129970298.htm Yang Chao. 2017. Zhongmei feizhengfu zizhi zai feizhou huodong bijiao yanjiu (中 美非政府组织在非洲活动比较研究) [A Comparative Study of American and Chinese NGOs in Africa]. Master’s Thesis. China Foreign Affairs University. Zhao Kejin. 2012. Dangdai Zhongguo waijiao zhidu de zhuanxing yu dingwei (当 代中国外交制度的转型与定位) [The Transformation and Position of China’s Diplomatic Institutions]. Beijing: Shishi Chubanshe. Zheng, Shiping. 1997. Party vs. State in Post-1949 China: The Institutional Dilemma. Cambridge: Cambridge University Press.

CHAPTER 12

China’s “Great Overseas Propaganda” Under the Belt and Road Initiative Roger C. Liu

China has a long history of overseas propaganda. Along with the “gun (qiangganzi 枪杆子; control over military force)” and the “knife (daobazi 刀把子; control over the police system)”, control over propaganda (“pen”, or biganzi 笔杆子) is viewed by the Communist Party of China (CPC) as one of three pillars of not only governing the state and society, but also managing foreign policy and international politics. This chapter begins with the definition and practice of propaganda in CPC, and then traces the origin of the “great/grand overseas propaganda” (GOP, or dawaixuan  大外宣) and its development after the Belt and Road Initiative (BRI, or yidaiyilu changyi 一带一路倡议) was announced and promulgated. The argument here is that, by connecting the “dots” of different departments in the party-state, as well as previously developed and practiced propaganda plans with the concentration of power in the CPC Party Central, the  BRI makes a comprehensive overseas propaganda system—which is laid out in the GOP—possible and expanding to a scale that had previously not been possible.

R. C. Liu (*) FLAME University, Pune, Maharashtra, India © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_12

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How Propaganda Is Defined and Practiced Under the Party Propaganda (xuanchuan  宣传) includes more than the news media (including some overseas news portals owned or supported by the government) in the party-state system of China. Institutions such as cinema, theaters, libraries, museums, exhibition and memorial halls are also part of the propaganda effort. Education systems of different levels—primary and middle schools, high schools and colleges/universities are incorporated into the propaganda and culture system (xuanchuan wenhua xitong 宣传 文化系统) dictated by the Party as well (Jing et al. 2016). At the top of the pyramid of the party-state propaganda machine sits the Central Leading Group of Propaganda and Ideological Work (CLGPIW; Zhongyang Xuanchuan Sixiang Gongzuo Lingdao Xiaozu 中央宣传思想工 作领导小组), currently led by Wang Huning (王沪宁), the 5th-ranked member of the Politburo Stand Committee (PBSC), who also administers the “party construction work (dangjian gongzuo 党建工作)” in Xi Jinping’s second term as General Secretary after the 19th CPC Congress. As the arm of CLGPIW, the Central Propaganda Department of the CPC (CPCPD; see Shambaugh 2007) incorporates organs in the central government including –– State Council Information Office (Guowuyuan Xinwen Bangongshi 国务院新闻办公室) –– General Administration of Press and Publication (Guojia Xinwen Chuban Zongshu 国家新闻出版总署 –– National Copyrights Administration (Guojia Banquanju 国家版权局) –– China Film Administration (Guojia Dianyingju 国家电影局) –– National Radio and Television Administration (Guojia Guangbo Dianshi Zongju 国家广播电视总局) to cover various types of media. According to a central directive issued in 1941, “the leadership of every aspect of outside propaganda should be unified under the CPCPD” (Zhang 2013). The “outside propaganda” can be referred as “outside of the Party”, but also as “outside of the country (i.e. overseas propaganda duiwai xuanchuan (对外宣传), or abbreviated as waixuan (外宣)”). After the Tiananmen Square Incident of 1989, and to counter the pressure from Western countries, the CPC revived the Central Overseas Propaganda Group (Zhongyang Duiwai Xuanchuan Xiaozu 中央对外宣传小组) originally established in the 1980s and put it in disguise under the leadership of CPCPD following the

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practice of “One Office, Two Plates” (yi ge jigou liang kuai paizi 一个机构 两块牌子) as the State Council Information Office (Zeng 1997(2006)). The CPCPD also dictates, leads, and guides other departments in the State Council regarding propaganda-related policies and plans. For example, with regard to a policy to perform traditional Chinese opera in schools and universities nationwide in 2017, CPCPD (of the Party) along with the Ministries of Education, Finance, and Culture (of the State) issued a guiding document in the format of “implementation opinion (shishi yijian 实施意见)”, which shows the leading role of CPCPD in the propaganda policy (The Central Propaganda Department 2017).

From Waixuan to Dawaixuan The earliest example of China’s overseas propaganda can be traced back to the 1950s when the Xinhua News Agency set up its first branch office in Africa. But it was not until the 1990s that the overseas propaganda or waixuan was launched officially in a larger scale and systemic manner. The enlargement of OP was meant to serve the Chinese strategy of “going out (zouchuqu 走出去)”, since the gaige kaifang (改革开放 reform and opening up) policy was launched in 1978. The Tiananmen Square Incident of 1989 and the consequent difficult international situation for China further added momentum to overseas propaganda. The term dawaixuan was coined and first appeared around the mid- and late-1990s. According to Wang (1999, 22), the difficulty that China has in international propaganda is that “the West is strong and we [China] are weak”. Backed by their home countries’ economic power, claims Wang, the Western news organizations occupied the world with modernized communication technology and global coverage, and this has created an unfavorable situation for China, which only has limited resources. To counter the Western influence, establishing a “grand overseas propaganda framework (dawaixuan geju 大外宣格局)” is necessary, as there were three problems in the overseas propaganda in the 1990s: (1) lack of integration between government branches; (2) no unified leadership, and (3) insufficient plans and directions. The word “大 da (grand)” refers to the broadness of this GOP campaign, as well as the integration and incorporation of different branches, organizations, and groups in the party-­ state and society (Wang 1999: 23).

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An ideal GOP plan thus should be played like a chess game and make use of all possible channels and forms of media, including newspapers, TV/ radio stations, publication organizations, the overseas media, the internet, as well as all sorts of cultural activities. Also, not only news media, different departments, agencies, sectors and functions—such as foreign affairs, trade, overseas Chinese affairs, Taiwanese affairs, education and culture, technology and even tourism—should also be part of the GOP project under the leadership of the party and government (Du 2000, 12–13). Under both Jiang Zemin and Hu Jintao, the efforts of GOP concentrated mainly on the media sector. The reinforcement and expansion began in the second term of the Hu Jintao administration. In 2009, China’s GOP was to create an “all-directional, broad-domain and multi-­layered” plan. At the core of this plan, according to Liu Yunshan (刘云山), then head of CPCPD, was the construction of “a modern communication system with wider coverage and advanced technology, so that [China can] create matching capability with our level of socio-economic development and international status”. To achieve this, China would step up its support and funding on specific central media portals for the development of multilingual channels for more international audiences. The Internet is also mentioned by Liu as “a vantage point for China to occupy” (cited in Jiang 2009). When Xi Jinping assumed power following the CPC’s 18th National Congress in 2012, he had a China materially more powerful than Jiang and Hu had. Xi, therefore, also appears to have plans with more ambitions for the country. The first one was the “Chinese Dream (Zhongguo meng 中 国梦)” in 2012 that incorporates goals of economic well-being and development for the Chinese public, with a set of “core values of socialism” that people should follow. Domestically, it is not surprising that the CPC wants to use the “China Dream” for the maintenance and reinforcement of its performance legitimacy by resorting to the economic welfare and the “great restoration” for the Chinese people. At the global level, by elaborating on China Dream, Xi and his party create a set of competing values challenging the monopoly of Western countries in the “discursive power” (huayuquan 话语权). To obtain more discursive power despite “Western dominance” has been at the center of the party-state’s GOP plan, but it had not been so assertive until Xi came to power. In August 2013 at the yearly “National Working Meeting on Propaganda and Ideology (Quanguo Xuanchuan Sixiang Gongzuo Huiyi  全国宣传思想工作会议)”, Xi mentioned that under the situation of a “strong West, weak China”, Beijing’s voice is

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hardly heard, and this is “a problem that should be tackled with great efforts”. CPC has to not only renovate its ways of overseas propaganda but also reinforce new discursive systems, as well as work on new concepts, aspects, and arguments that can be accepted by both Chinese and foreign audiences. By doing this, the party-state should “tell good stories about China, spread well China’s voices, and strengthen the discursive power on the international arena” (cited in Liu 2019). Compared with Hu, Xi’s GOP plan is much bigger in its scale. First, the Party seeks to play more a central role in propaganda and ideology, exerting more leadership and control. Second, more stakeholders in and out of the party-state are brought into this effort, “so that the propaganda and ideology work can be more closely associated with the management of administration, trade and society in every domain” (Xi 2013a). In the new GOP scheme in Xi’s China, though the CPC-controlled media still stay as an essential segment in propaganda, other players begin to bear more responsibility as well. To involve more sectors, branches, and departments in GOP is not a new idea, but it is only now under the Xi administration that this is being carried out and the key to the expansion of overseas propaganda is the BRI launched in 2013.

BRI and New Players in GOP The BRI greatly boosts China’s GOP plans. First, it broadens the geographical scope of GOP from some specific areas, regions, and countries. Before BRI, most cases of GOP were in Africa with a focus on local mainstream media organizations or in specific countries of Southeast Asia through the Chinese diasporas. But as the BRI has expanded, the “dots” are connected to a wider network, as new target countries are created in South Asia, Southeast Asia, and Central Asia as well. Second, stakeholders created by the BRI begin to function for GOP, as some of them supplement, reinforce, and share some of the responsibility that used to be borne by the party-controlled media. Other than the media, state-owned enterprises (SOEs) and universities are now among the two most important stakeholders. Media Since the 1950s the national media has been at the core of overseas propaganda. In 1956, the Xinhua News Agency established its first branch in Cairo and expanded to Sub-Saharan Africa three years later in Accra,

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Ghana, and had the Chief Branch set up in Nairobi, Kenya in 1986. Since 2011, the Xinhua TV News in English begins to cover the whole of Africa (Li and Li 2018, 131). China Radio International (CRI) began its Africa expansion in 1980 and now has several studios in countries like Kenya, Egypt, Senegal, and South Africa. CRI broadcasts in multiple African languages to 12 countries. CRI also helps the Confucius Classroom for its Chinese language programs. Compared with CRI and Xinhua, the China Central Television (CCTV) is a latecomer and did not enter Africa until 2010. In 2012, CCTV Africa was launched in Kenya as the first international TV channel in Africa. Other than the national media, the private cable TV company, Star Times, began its digital TV services in Africa in 2002 and has eight million subscribers (Li and Li 2018, 134). Although China has established a system of overseas broadcasting, compared to their Western counterparts, Chinese media portals still have relatively limited influence. According to a survey by Xinhua, international media organizations who use more than 10 stories from Xinhua monthly only account for 50%. Reasons for not using Xinhua stories include “too much propaganda”, “poor narrative skills”, “not too much information”, and “stories are not relevant” (Li 2017). China’s image in Africa is more about business and investment, rather than culture and language. According to a survey done by CNN cited in Cheng (2017), although 63% of African respondents see positive influence from China, “the language between China and Africa is just money”. To address these issues, Chinese state-owned media adopt different strategies, including further collaboration with foreign partners and use social media as alternative and supporting sources for the mainstream media campaign. Other strategies include the differentiation of audience, precise communication, and the conglomeration of big media portals and a flagship company. One example is the launch of China Global Television Network (CGTN) based upon the CCTV 9 International Channel in 2016 (Hu 2017a, 29–30). However, only after the announced launch of BRI in 2013 and the promulgation of its action plan in 2015 did media communication ­strategies get a major boost due to more interactions between China and BRI countries consequently. The BRI also created more nonmedia actors and players in the game of communications, such as companies (state- and private-owned), educational institutions, the diaspora groups, and Chinese nationals who travel overseas.

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State-Owned Enterprises (SOEs) in GOP Mainly comprising infrastructure projects, the BRI relies heavily on large state-owned construction companies like China Railway Group Limited and its branch companies; China Communication Construction Company (CCCC) and its subsidiaries China Harbor Engineering Company Ltd. (CHEC) and China Road and Bridge Corporation (CRBC), and so on. To many in BRI countries, these SOEs are the “face of China” they see on a daily basis, and their activities, projects, interactions with local people become a source of direct communication about China. On the other hand, the presence of SOEs and their projects in host countries also attract and create the need for Chinese media to report for both the domestic and international audiences. This then creates a mutually-reinforcing mechanism of communication that could not have existed without a huge connectivity project like BRI. SOEs in BRI countries are now increasing the proportion of local employees in the firm (“the localization strategy”). The employees of Chinese firms are also the audience, or “stakeholders” in the BRI and are more susceptible to GOP. On the other hand, SOEs have public relations activities geared toward the general public of host countries. For example, in Malaysia the CRRC group had an opening day event for the general public to show how the high-speed railway cars are manufactured (Kou 2019). In Ghana, CHEC established incubation sites for sea turtles as a gesture in promoting CSR since 2017; in Kenya, CCCC fixed the B3 Highway between Nairobi and Maasai Mara that was destroyed by floods in March 2018. CCCC also built the Pak-China Government Primary School Faqir Colony, Gwadar in 2016 and financially supported the renovation of the Basilica of Our Lady of Lanka in 2015 (Lü 2019, 47). By experimenting with corporate culture (including the corporate social responsibility/CSR), SOEs are also innovating in ways of communication for overseas propaganda efforts by changing the image of Chinese enterprises. The Chinese firms are aware of issues and problems generated due to cultural differences, and try to learn from their Western counterparts. This kind of learning process helps Chinese firms adapt to international standards and practices and, as a result, promotes overseas propaganda by improving the image of SOEs and China as well. Finally, SOEs are “sensors” for the Communist Party to collect local social and economic information as well as platforms for the party-state to

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execute its policies. At the 19th Party Congress of CPC in 2017, by reiterating the famous quote by Mao Zedong that “[t]he Party exercises overall leadership over all areas of endeavor in every part of the country1”, Xi (2017) announced the overall and broadened infiltration of the CPC into different sectors of the government and society, including SOEs overseas. The CPC has tried to involve itself more in the political, social, and even managerial aspects of different organizations, groups, and firms. This campaign to increase CPC’s infiltration is part of the so-called “Party Construction” (dangjian  党建). The purpose of Party Construction among SOEs is to increase the control of CPC so that it can reach every aspect of a project, even ones overseas. For each SOE there is a Party Committee (dangwei  党委) and for each project a Party Branch (dangzhibu 党支部). Occupying key positions in the firms or in the construction projects, CPC members of SOEs have routine meetings and “learning sessions”, which refer to the study of the latest documents, instructions, and directives issued from the Party Central in Beijing, just like their counterparts in China. Party Construction in SOEs also covers GOP, the creation of a national image of China, as well as PR activities and campaigns toward local employees and communities in the BRI-project host countries. Overseas propaganda is thus considered a responsibility of SOEs of China since they control some key “strategic projects” and thus are consequential to China’s national image (Liao and Li 2017). Furthermore, Party Construction in SOE aims to infiltrate more into areas such as corporate culture, corporate social responsibility, and public diplomacy so that it can better serve objectives in GOP campaigns. As a CPC cadre (Wei 2017, 26) said, “In many [BRI] countries it is not convenient for the CPC organizations and members to go public, so the SOEs become essential to do the work of party construction … In propaganda and publicity, we have to be precisely adaptive and tell good stories in foreign countries so that we can promote well our soft power. Stories are the best form [of propaganda] since they are most relevant, touching and ‘closest to the truth’… We have to heed how we do the propaganda campaigns. Instead of using jargons 1  The original language that Mao used is “In the Party, politics, military, the people and education; in the East, the West, the South, the North and the Middle, the Party rules and leads everything (Dang-zheng jun-min-xue, dong-xi-nan-bei-zhong, dang shi lingdao yiqie de 党政军民学, 东西南北中, 党是领导一切的)” (cited in Xi 2017).

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and exaggerated images, we should tell good stories of truth with warmth; in the globally-accepted ways and expressions that our objects are used to, so that we can build up our image more effectively and further demonstrate and spread well the national image of China”. Higher Educational Organizations and Their Increased Roles in the BRI Universities and colleges used to be marginal in overseas propaganda; in most cases, they only provided expertise, consultation, and training for overseas propaganda work. Even following the launch of the Confucius Institutes—the first was opened in June 2004 in Tashkent, Uzbekistan— higher educational institutions had not played an important role in the GOP campaigns until the BRI was launched. According to Li Changchun (李长春), the PBSC member responsible for propaganda under Hu Jintao, the Confucius Institutes were “an indispensable part of China’s grand overseas propaganda framework” (cited in Tao 2007). When a Confucius Institute is set up on a foreign university campus, it is done through a partner university in China. For example, when Jawaharlal Nehru University in New Delhi, India tried to establish a CI on the campus, the collaborative agreement was signed with Peking University’s Confucius Institute. However, in practice, it is Hanban (汉 办), or the Office of Chinese Language Council International, the Confucius Institute Headquarters) that dominates the missions and process, not the host Chinese university. Some language-focused universities may be more involved (such as the Beijing Foreign Studies University or the Beijing Language and Culture University), but generally universities and colleges are not the major components of GOP. The BRI has, however, altered the situation. In April 2016, according to the CPC policy deliberated in the central document “Some Opinions Regarding the Promotional Work of Opening Up the Educational Sector in the New Era” (关于做好新时期教育对外开放工作的若干意 见 Guanyu zuohao xinshiqi jiaoyu duiwai kaifang gongzuo de ruogan yijian), China would establish the Silk Road scholarship to support up to 10,000 students every year to study in China. The number of students from BRI countries has increased since 2015 and, according to one survey, among the top 15 countries sending students to China, the BRI countries account for 10 (Ha and Shang 2017).

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Various BRI projects also create the need for further exchange through the training programs designed and offered by China’s universities. In the China-funded Mombasa–Nairobi Standard Gauge Railway (SGR), with the financial support of CRBC (one SOE project contractor of SGR), teachers at the Railway Training Institute of Kenya traveled to China for training and cultural exchange programs at Southwest Jiaotong University (Shen and Lan 2017). CRBC also provides scholarship for 100 high school graduates to study in Beijing Jiaotong University (Xinhua 2018). With collaborations like these, the BRI reinforces Chinese overseas propaganda by creating an alliance among the Chinese firms (whether SOE or private), universities and governments of the host countries. By 2016, China had established 56 Overseas Economic and Trade Cooperation Zones (OETCZ) in BRI countries. In some OETCZ such collaborative relationships have been forged. One example is the cooperation between the Hongdou Group and the Wuxi Commercial, Vocational, and Technical College to set up a training center at Sihanoukville OETCZ for the training in Chinese language and technical skills of Cambodian labors (Zhu 2017). Universities are becoming more involved as the BRI expands. First, with national funds to support more BRI-related research, universities are encouraged to more actively provide policy suggestions for the regions that they neighbor with the results produced used by the GOP to adjust their propaganda strategies. Second, by hosting exchange events with the BRI countries, universities are generating new audiences among the younger and educated populations of neighboring countries. In the new GOP scheme, universities and colleges are bearing greater responsibilities. What the United States (US) did during the Cold War in the realm of higher education through institutions like United States Information Agency and projects like the Fulbright Scholar Program, including the provision of exchange opportunities, scholarships, and scholarly collaborative projects and viewed by the Chinese as part of the “cultural warfare” to counter Soviet influence is now emulated by China as the template of GOP (Wang 2017, 273–275).

Xi Turns to “Covert Propaganda” If GOP earlier relied more on mainstream media, Xi and his central party cadres are trying more subtle and stealthier ways today. In 2013, Xi said:

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“The Western countries know very well how to do propaganda. Ostensibly they oppose it, but in fact they do it more and better than others, by hook or by crook. They just cover it with all efforts, and what they do is actually ‘the invisible propaganda.’ The best propaganda should be seemingly no propaganda at all. You make the influenced to go anywhere you want them to, and they thought it was them who chose the way. This is their [Western countries’] strategy” (Xi 2013b). Xi’s invisible propaganda is similar to the “covert propaganda” that is defined as “materials prepared by a government agency and then disseminated by a non-government outlet with the source undisclosed” (GAO 1988). To “tell a good story about China”, it is important that it should not be told by CPC or the Government of China. Only when the story is told by foreigners who have benefitted from China’s policies, such as the BRI, can it be persuasive. BRI thus provides good examples and opportunities for GOP to use. On the other hand, some of the BRI’s core functions require GOP. At the core of the BRI are “five connections/communications (wutong 五通)”: communication in policies (zhengce goutong 政策沟通); with roads (daolu liantong  道路联通); in trade (maoyi changtong  贸易畅通); in currencies (huobi liutong 货币流通), and among hearts of the people (minxin xiangtong  民心相通). Among them, the communication of policies and that between “hearts” are directly related to overseas propaganda. The former aims at the governments of BRI-related countries, while the latter at the nationals in those countries. To tell this kind of a story about China, it is also necessary to keep the Party and the Chinese Government behind the scenes. The propaganda machine has modified their narrative strategies for this purpose. According to Wang Yu, vice director of the economic desk of the China Daily (2019), the BRI stories of success should be told with gradual influence without a trace “just like the spring rain nourishing everything soundlessly at night”. When telling BRI stories, some principles are highlighted. First, that the positive results and fulfillment of CSR in the BRI projects had to be stressed and highlighted so that the accusations of Western countries against the BRI can be refuted. Second, stories of success were best told through “foreigner’s mouths”, especially the CEOs, union leaders, and leaders of societies and groups, so as to “intentionally refute and defend against the smearing by certain countries on BRI”. Third, the stories should also focus on younger foreign entrepreneurs and generations since it is they who are more likely to accept the opportunities generated by the BRI (Wang 2019, 22–24).

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Conclusion While GOP began in the late 1990s, it is the BRI that is now fulfilling the goals originally set out for GOP of establishing a system, on the top of which sits the Party, and which includes the media and other organs of the government. In China’s political system, where the Party-State dominates, not only media but also other departments and sectors can be used to propagate the interests of the Party. The BRI has made the overseas propaganda system more effective, since it creates stakeholders in relevant foreign countries with interest in China’s infrastructure projects. These stakeholders are both the audience and communicators at the same time. With the creation of agents such as firms and universities, the CPC can now establish a “stratified overseas communication system” (Bu and Dong 2018) to launch communication via both media and non-media channels. On the other hand, the data collected by or from stakeholders for the BRI projects can also be used to adjust, modify, or (re)design overseas propaganda plans. This is especially true when the GOP now turns to the use of social media, big data, artificial intelligence, and country-specific communication strategies (Hu 2017b). For the purpose of propaganda, the BRI and GOP are essentially two sides of the same coin, complementing and reinforcing each other.

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PART V

Economic Development and Foreign Policy

CHAPTER 13

China’s Quest for Global Leadership Through Scientific and Technological Innovation Nguyen Binh Giang

The Communist Party of China (CPC) has long recognized science and technology (S&T) as an important component of revolutionary productive forces. Over the last 40  years since the birth of the “Four Modernizations”, the status of S&T has been further enhanced.1 Scientific and technological development serves not only the people, but also the ambition of many generations of the CPC leaders to develop China into “a superpower”. During the period of “keeping a low profile” (韬光养晦 taoguang yanghui) and focusing on economic development rather than gaining power, China regarded a superpower as a country that was not poor. However, as China implemented its global strategy (Hoang 2017), Chinese leaders expanded the definition of a superpower to mean a major power with international responsibilities such as facilitating global governance reform, securing a representation and voice in world affairs as well as creating preferential global conditions for national reform and development (Hu 2012). Since China  Modernizations in the fields of agriculture, industry, science and technology, and national defense. 1

Nguyen Binh Giang (*) Vietnam Academy of Social Sciences, Hanoi, Vietnam © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_13

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entered the “New Era” and strives to r­ ealize the “Chinese Dream of the great rejuvenation of the Chinese nation”, a superpower has been understood as “a global leader in terms of composite national strength and international influence” and “moving closer to central stage” (Xi 2017). In accordance with changes in the conception of a superpower from “standing up” to “growing rich” and to “becoming powerful” (Xi 2017), China has respectively shifted its purpose/goal of scientific and technical development from reducing poverty to building a major power to emerging as a global leading power. This chapter examines the CPC’s policies of promoting S&T innovation at the 19th National Congress (in October 2017) and explores the link between these policies and China’s ambition of gaining global leadership and advantages.

China’s Scientific and Technological Achievements Before the 19th CPC National Congress The CPC and the Chinese Government put strong emphasis on S&T, initially for military purposes and later for dual military-civil purposes. Also initially, the focus was political (before 1985), while later the focus shifted to application and economic efficiency (from 1985 to present). After entering the twenty-first century, thanks to the introduction of the tenth five-year plan (2001–2005), China promptly mobilized sufficient funds and human resources to launch a series of major programs on scientific research institutions and S&T projects. In 2006, under the Hu Jintao Administration, China implemented a medium and longterm plan for S&T development by 2020 (State Council 2006). A year later, the 17th CPC Congress declared China’s national innovationdriven development strategy (China Daily 2007). In the Fifth Plenum of the 18th CPC Central Committee, innovation was regarded as one of the five development principles and the primary driver of development (State Council 2015b). In 2016, China announced the implementation of the 13th five-year national plan for science, technology, and innovation development (National Development and Reform Commission 2016).

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According to an assessment by the U.S.-China Economic and Security Review Commission (2017), China has capabilities of scientific and technological commercialization in a spectrum of fields. The commercialization of China’s scientific and technological advancements in specific fields in comparison to the United States (US) stands as follows: (a) In the field of artificial intelligence, China and the US stand at a similar place. Several Chinese enterprises have participated in this field, especially Baidu. With government support, Chinese enterprises have opened research facilities in the US, recruited American talent, invested in start-ups, and established businesses and science facilities in that country. (b) In the field of quantum information science, China is likely to catch up with the US soon. While the latter still holds a dominant position in this area, once American investments in this area become unstable or even decline, China’s investments may increase and receive more support from all ministries. (c) In the field of supercomputing, China owns the world’s two fastest supercomputers and may soon surpass the US in manufacturing the next generation supercomputer—the  exascale computer— which is planned to be put into operation by 2020 in China, and only by 2021 in the US. As of 2017, among the 500 most powerful supercomputers in the world, 207 are Chinese and 143 American (Vincent 2016; BBC News 2017). (d) In the field of biotechnology, the US remains the leading global player but is followed by China. The Chinese government has provided financial support to set up the world’s largest genetic restructure technology companies and to promote scientific publication in the fields of gene technology and biotechnology. (e) The field of robotics technology has rapidly developed in China in terms of both quality and competitiveness and for both civilian and military purposes. This can be attributed to the state-funded robotics companies with foreign technology and knowledge as well as foreign talent. (f) In the field of nanotechnology, the US remains world leader, but China is the world’s fastest growing country in terms of scientific publications and applications. As in the case of the robotics indus-

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try, the nanotechnology sector has received a large amount of Chinese government funds, foreign talent, and also benefited from the development of nanoscience parks. (g) In the field of cloud computing, the US is the leading market for products and China follows for now but what is worth noting is that most of China’s major cloud computing businesses have close ties with their government. In addition, China’s space industry has also advanced. China successfully launched the Wugong explorer (in 2015), the space laboratory Tiangong-2 and the Quantum Experiments at Space Scale satellite, Mozi (both in 2016). China also commissioned the five-hundred-meter aperture spherical telescope Tianyan (in 2016). In the aircraft manufacturing industry, China manufactured its first commercial aircraft. In May 2017, the narrow-body passenger aircraft, which was completely built by China Comac C919, made its maiden flight (Bradsher 2017). China plans to produce more C919s to compete with Boeing 737 and Airbus 320. In marine technology,  the Jiaolong manned deep sea submersible that can dive to a depth of over 7000 metres is an example of China’s advanced technology (Chinese Academy of Sciences 2018). China is also leading the world in the production of drones. Shenzhen-­ based DJI occupies 70% of the global market share (Quanlin 2015). China is advancing rapidly in the field of electric cars and electric buses and currently accounts for about a third of the global market for electric vehicles. BYD, also based in Shenzhen, is the world’s second-largest electric car manufacturer after Tesla. Contemporary Amperex Technology, based in Ningde, Fujian, is the world’s largest supplier of lithium-ion batteries. In the field of smart phones, Huawei, BKK Electronics, Xiaomi are among the top five largest manufacturers in the world together with Samsung and Apple. In traditional PCs, during 2013–2016 Lenovo was the  world’s number one producer. ZTE is the world’s leading company in designing and manufacturing network operator’s equipments, nodes, and elements. In the field of Internet of Things, ZTE ranks first in the world and Huawei tenth in terms of number of patents. In 2016, China was the only middle-income country to enter the ranking of world’s top 25 economies in technological innovation and has improved its position every year since then (Cornell University, INSEAD, and WIPO 2016).

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China’s Desire to Gain Global Leadership and Advantages At the opening of the 19th CPC Congress, General Secretary Xi Jinping delivered a political report confirming the CPC’s mission to “secure the success of socialism with Chinese characteristics for a new era” (Xi 2017: 2).In the words of Xi, China “has stood up, grown rich, and is becoming strong” and “has come to embrace the brilliant prospects of rejuvenation” (Xi 2017: 8). In 2018, at the conference celebrating the 40th anniversary of national reform and opening up at the Great Hall of the People in Beijing, Xi proudly stressed on China’s considerable achievements. Indeed, China has contributed more than 30% to the world economic growth and has become the world’s second largest economy and the largest manufacturing country. Plus, Beijing is also the top global trading nation in goods and the second largest country in commodity consumption and in foreign capital (Xi 2018b). In Xi’s speech at the 19th CPC Congress, the term “rejuvenation” is repeated 29 times. The great rejuvenation of the Chinese nation can be traced back to its global leadership and advantages that China achieved in the Shang, Zhou, Qin, Han, Tang, Song, Ming dynasties (Jihang 2018). Xi also reminded his deputies of China’s 5000-year history with splendid civilization, remarkable contributions to mankind, and its evolution as a great nation (Xi 2017). Xi expected China to take up the leading role in diffusing its development model of socialism with Chinese characteristics to other developing countries and help them toward modernization (Xi 2017). In addition, China would play a pioneering role in encouraging the evolution of the global governance system and promoting international cooperation to respond to climate change. In his report to the 19th CPC Congress, Xi set a goal that China would become a global leader in innovation by 2035 and a global leader in terms of composite national strength and international influence by 2049. In order to achieve these targets, he urged the CPC to upgrade national industries to be able to participate in the medium-high end of the global value chain, increase the number of world-class advanced manufacturing clusters as well as transform state-(fully or partly) owned enterprises into world-class and globally competitive firms. Furthermore, Xi also committed China to bear responsibilities for international affairs, especially reforming and developing the global governance system (Xi 2017).

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Regarding military power, China’s paramount leader affirmed that a superpower must possess strong armed forces and the dream of becoming a superpower must include the dream of building a strong military (强国 必先强军, 强国梦也是强军梦 qiangguo bi xian qiangjun, qiangguo meng ye shi qiangjun meng). Therefore, in China’s new era, the CPC and the Chinese military need to develop the people’s forces into a world-class force. Xi also laid out the vision that the modernization of national defense was to be completed by 2035, with the people’s armed forces being fully transformed into a world-class force by the middle of the 21st  century (Xi 2017).

Xi Jinping’s Views on S&T Innovation Before and Since the 19th CPC Congress In China, innovation has been integrated into the Chinese dream and renaissance since 1995 under Jiang Zemin Administration (Xinhua 2016). Notably, Jiang Zemin was the one who selected Xi Jinping as the successor to Hu Jintao for the post of CPC General Secretary. At the 18th CPC Congress, innovation-driven development was proposed as one of the five tasks/requirements to accelerate the improvement of the “socialist market economy” and change China’s growth model. At the 19th CPC Congress, together with coordinated development, green development, opening up, and inclusive development, innovation became one of the five main development ideas. On a visit to the Chinese Academy of Science on 17 July 2013, as the new CPC General Secretary, Xi urged Chinese scientists to focus further on scientific innovation and take it as a driving force for national development. In a speech delivered on 3 November 2015, Xi called for the launch of various projects including aviation engines, quantum teleportation, intelligent manufacturing and robots, deep space and deep sea probes, new materials, brain science, and health-related science. This may have been a proposal for the country’s 13th five-year plan (2016–2020). Attending the national conference on science and technology on 30 May 2016, Xi expressed his concern on China’s weak S&T foundation and warned that national core technologies in key fields were still under other’s control (Xinhua 2016). Amid such circumstances, China should make efforts to become one of the most innovative countries by 2020, a leading

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innovator by 2030, and a world-leading science and technology power by 2049 (Chinese Academy of Sciences 2017). Through this speech, Xi implicitly supported the manufacturing strategy of “Made in China 2025” and the National Innovation-Driven Development Strategy, in particular. The “Made in China 2025” Strategy issued by the State Council requires China to build domestic manufacturing brands and indigenous innovation with clear goals. As such, China would lead global innovation in the most competitive industries by 2035; which in turn would help China to improve its capabilities to lead innovation and possess competitive advantages in major manufacturing areas, and develop advanced technology and industrial systems by 2049. This strategy set out a number of strategic tasks in terms of science, technology, and innovation, including the creation of a network of manufacturing innovation centers (15 by 2020 and 40 by 2025) (State Council 2015a). The National Innovation-Driven Development Strategy jointly designed by the CPC Central Committee and the State Council, mapped out three-step goals for China, namely, becoming an innovative nation by 2020, an international leader in innovation by 2030, and a world powerhouse of scientific and technological innovation by 2050 (State Council 2016). According to Xi, in order to speed up the development of socialism with Chinese characteristics, China should “undertake theoretical analysis and produce policy guidance on … science and technology” (Xi 2017: 14). At the 19th CPC Congress, Xi reaffirmed that innovation was the primary driving force behind development and the strategic underpinning for building a modernized economy (Xi 2017). A half year after the 19th CPC Congress, at the 19th Meeting of Academicians from the Chinese Academy of Sciences and the 14th Meeting of Academicians from the Chinese Academy of Engineering held in Beijing on 28 May 2018, Xi remarked that in pursuit of national rejuvenation, China must foster S&T development and become the world’s major scientific center and innovative high ground (Xi 2018a). Aiming at national rejuvenation and development of socialism with Chinese characteristics for a new era, Xi proposed a two-stage goal. Firstly, the CPC is expected to implement an innovation-driven development strategy, and a military-civilian integration strategy by 2020, and develop China into a moderately prosperous society with more advanced science by 2021. Secondly, CPC must increase national economic and technological strengths significantly, become a global leader in innovation by 2035, and

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a global leader in terms of composite national strength by the middle of the twenty-first century (Xi 2017). To deliver the above goals, Xi asked Chinese communist party members and the people of China in general to integrate technological innovation into the economic development by improving total factor productivity and accelerating the building of an industrial system. This would lay a solid foundation for the facilitation of China’s innovation capacity and its economic competitiveness (Xi 2017). He pointed out six tasks that were to be accomplished in order to achieve the goals. First, China aims to develop a quality and advanced manufacturing sector, where the integration of the internet, big data, and artificial intelligence into the real economy was to be further promoted. The primary task lies in pushing Chinese industries to step into medium-high end of the global value chain, and also increasing the number of world-class advanced manufacturing clusters. To do so, China would exploit “new growth areas and drivers of growth in medium-high end consumption, focusing on innovation-driven development, the green and low-carbon economy, the sharing economy, modern supply chains, and human capital services”. In addition, the government will adopt measures to protect entrepreneurship and encourage the spirits of innovation and startup (Xi 2017). Second, China also aims to focus on the frontiers of S&T such as basic research and groundbreaking and original innovations. Especially, basic research in applied sciences and innovations in key generic technologies, cutting-edge frontier technologies, modern engineering technologies, and disruptive technologies would be given high priority. By doing so, China would gain S&T strengths in terms of product quality, aerospace, cyberspace, and transportation, thus paving a way toward a digital China and a smart society. Third, China aims to leverage its national innovation system by fostering the S&T management system reform and developing a market-­ oriented system for technological innovation. In this system, enterprises play the main role while collaboration among enterprises, universities, and research institutes will be promoted. The government also committed to support small and medium-sized enterprises’ innovation and the application of advanced S&T. Fourth, China aims to enrich the innovation culture and encourage the creation, protection, and application of intellectual property. This will be

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done by nurturing a large number of world-class scientists and technologists in strategically important fields, and increase the number of scientific and technological leaders, young scientists and engineers, and high-­ performing innovation teams (Xi 2017). At the 19th Meeting of Academicians from the Chinese Academy of Sciences and the 14th Meeting of Academicians from the Chinese Academy of Engineering on 25 May 2018, Xi encouraged Chinese scientific and technological workers to seize the first-mover advantage not only in the national sphere but also master the global cutting-edge S&T and take a global lead in technological development. To make it clear, Xi added that China should control innovation and development by owning and controlling the critical core technologies, thus China must innovate key common technology, leading-edge technology, modern engineering technology, and disruptive technological innovation (Xi 2018a). Regarding the reform of armed forces, in his report to the 19th CPC Congress, Xi stressed on technological adaptation by the arm forces. Realizing the importance of technology as the core combat capability, China aims to stimulate innovations in major military technologies independently. In fact, the development of intelligent military and joint operations for enhanced combat capabilities based on the network information system and the ability to fight under multidimensional conditions would be fostered. Furthermore, Xi reaffirmed that national prosperity must go hand in hand with military strength and China would “speed up implementation of major projects, deepen reform of defense-related science, technology, and industry, achieve greater military-civilian integration, and build integrated national strategies and strategic capabilities” (Xi 2017: 48). With respect to coordinating science and technology innovation in key areas between the military and civilian sectors, at a session on 12 March 2018 of the 13th National People’s Congress in Beijing, Xi asked related parties to promote integrated reasoning and implementation on key S&T projects and race to occupy the strategic high ground in terms of S&T innovation (Zhou 2018). According to him, the implementation of military-­civilian integration strategy presents a prerequisite for building integrated national strategies and strategic capabilities for realizing the Party’s goal of building a strong military in the new era. During his remarks at the second session of the Central Commission for Integrated Military and Civilian Development, Xi asked for a stronger hold on the implementation of the integration and further coordinated innovation in S&T (Mu 2018).

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Conclusion The ambition for global leadership may give light for China to shine as it did in its historical past. This can be achieved due to its manufacturing, financial, and military strengths. Nevertheless, China has been fully and clearly aware of the fact that global leadership and advantages are unsustainable unless the country can create core technologies indigenously, rather than import foreign technologies. Under the Hu Jintao administration, China made both financial and regulatory changes to promote scientific and technological innovation, and this effort has been even further enhanced under the Xi Jinping administration. As the “core” leader in China and the most powerful leader since Mao Zedong and Deng Xiaoping, Xi’s views on S&T innovation have attracted much attention. Despite their unfavorable responses, advanced nations must accept that S&T power will turn China into a global leader on the international stage and will attract more and more followers.

References BBC News. 2017. “China Dominates Top Supercomputers List”. November 13. http://www.bbc.com/news/technology-41971380. Bradsher, Keith. 2017. “China’s New Jetliner, the Comac C919, Takes Flight for First Time”. New York Times, May 5. https://www.nytimes.com/2017/ 05/05/business/china-airplane-boeing-airbus.html. China Daily. 2007. “Innovation Top’s Hu Jintao’s Economic Agenda”. October 15. http://www.chinadaily.com.cn/china/2007-10/15/content_6174836.htm. Chinese Academy of Sciences. 2017. “Xi Jinping’s Remarks on Scientific Innovation”. June 2. http://english.cas.cn/newsroom/china_ research/201706/t20170602_177673.shtml. Chinese Academy of Sciences. 2018. “Submersible Jiaolong’s New Mother Vessel to Be Named Deep Sea No. 1”. May 14. http://english.cas.cn/newsroom/ china_research/201805/t20180514_192443.shtml. Cornell University, INSEAD, and WIPO. 2016. “The Global Innovation Index 2016: Winning with Global Innovation”. https://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2016.pdf. Hoang The Anh. 2017. “Nhan dien chien luoc toan cau cua Trung Quoc qua cac bao cao chinh tri Dai hoi 18 va 19 Dang Cong san Trung Quoc (Identify China’s Global Strategy by Examining the Reports at the 18th and 19th National Congresses of the Communist Party of China)”, in Vietnamese. Paper presented at the workshop Chien luoc cua Trung Quoc va tuong quan suc manh

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toan cau (China’s Strategy and the Global Comparison of Strengths) held by the Vietnam Institute for Chinese Studies in Hanoi on 7 December. Hu Jintao. 2012. “Firmly March on the Path of Socialism with Chinese Characteristics and Strive to Complete the Building of a Moderately Prosperous Society in All Respects”. China.org, November 8. http://www.china.org.cn/ china/18th_cpc_congress/2012-11/16/content_27137540.htm. Xinhua. 2016. “President Xi Says China Faces Major Science, Technology ‘Bottleneck’”. June 1. http://www.xinhuanet.com/english/2016-06/01/c_ 135402671.htm. Jiang Jihong. 2018. “Philosophy and History: Interpreting the ‘Xi Jinping Era’ Through Xi’s Report to the Nineteenth Congress of the Chinese Communist Party”. The China Story, May 11. https://www.thechinastory.org/cot/ jiang-shigong-on-philosophy-and-history-interpreting-the-xi-jinping-erathrough-xis-report-to-the-nineteenth-national-congress-of-the-ccp/. Mu Xuequan. 2018. “Xi Urges Deeper Military-Civilian Integration”. Xinhua, October 16. http://www.xinhuanet.com/english/2018-10/16/ c_137534739.htm. National Development and Reform Commission. 2016. “The 13th Five Year Plan For Economic and Social Development of The People’s Republic of China (2016-2020)”. http://english.www.gov.cn/state_council/vice_premiers/2015/11/09/content_281475231452196.htm. Qiu Quanlin. 2015. “Drone Maker Soars to New Heights”. China Daily. May 5. http://www.chinadaily.com.cn/bizchina/tech/2015-05/05/content_20620998.htm. The State Council of the People’s Republic of China. 2006. “National Mediumand Long-Term Science and Technology Development Plan 2006-2020”. February 9. http://www.gov.cn/jrzg/2006-02/09/content_183787.htm. The State Council of the People’s Republic of China. 2015a. “Made in China 2025”. http://www.miit.gov.cn/n973401/n1234620/n1234622/c4409653/ content.html. The State Council of the People’s Republic of China. 2015b. “Vice-premier Outlines Development in 13th Five Year Plan”. November 9. http://english. w w w. g o v. c n / s t a t e _ c o u n c i l / v i c e _ p r e m i e r s / 2 0 1 5 / 1 1 / 0 9 / c o n tent_281475231452196.htm. The State Council of the People’s Republic of China. 2016. “Outline for National Innovation-Driven Development Strategy”. Xinhua, May 19. http://www. xinhuanet.com/politics/2016-05/19/c_1118898033.htm. U.S.-China Economic and Security Review Commission.2017. “2017 Report to Congress of the U.S.-China Economic and Security Review Commission”. November.https://www.uscc.gov/sites/default/files/annual_reports/2017_ Annual_Report_to_Congress.pdf.

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Vincent, James. 2016. “Chinese Supercomputer is The World’s Fastest  — And Without Using US Chips”. The Verge, June 6. https://www.theverge. com/2016/6/20/11975356/chinese-supercomputer-worlds-fastestaihulight. Xi Jinping. 2017. “Secure a Decisive Victory in Building a Moderately Prosperous Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a New Era”. China Daily, November 4. http:// www.chinadaily.com.cn/china/19thcpcnationalcongress/2017-11/04/content_34115212.htm. Xi Jinping. 2018a. “Speech at the 19th Academician Conference of the Chinese Academy of Sciences and the 14th Academician Conference of the Chinese Academy of Engineering”. Xinhua, May 28. http://www.xinhuanet.com/ politics/2018-05/28/c_1122901308.htm. Xi Jinping. 2018b. “Speech at the Celebration of the 40th Anniversary of Reform and Opening Up”. Xinhua, December 18. http://www.xinhuanet.com/ politics/2018-12/18/c_1123872025.htm. Zhou Xin. 2018. “Xi Calls For Deepened Military-Civilian Integration”. Xinhua, March 12. http://www.xinhuanet.com/english/2018-03/12/ c_137034168.htm.

CHAPTER 14

Rural Vitalisation and Foreign Policy Prachi Aggarwal

Rural vitalisation (xiangcun zhenxing 乡村振兴) was one of the major themes of the 19th National Congress of the Communist Party of China (CPC). Historically, Document No. 1 has always been devoted to agriculture and rarely addressed policies beyond the routine. However, as China seeks to establish its ‘new normal’, it has established the revival of agriculture as one of its top eight priorities. Food has been an important aspect of the Chinese psyche and this is now being reflected by its political leadership as well. President Xi Jinping has been vociferous about his position of linking Chinese food with Chinese prestige. As China rises and inches towards achieving its Chinese miracle, it has begun to emerge as a major investor in agriculture in other countries. With the Belt and Road Initiative as one of China’s major projects, it seems to be utilising it to achieve all levels of security especially food and energy. Can China’s foreign policy ambitions help meet its basic domestic needs? Can China maintain its goal of self-sufficiency? This chapter examines if the 19th Party Congress declarations can give a new lease of life to China’s moribund agriculture.

P. Aggarwal (*) Sanchi University of Buddhist Indic Studies, Sanchi, Madhya Pradesh, India © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_14

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What does Rural Vitalisation Mean? China has moved forward from the era of ‘taoguang yanghui 韬光养晦’ (hide one’s capabilities and bide one’s time) to ‘fenfa youwei 奋发有为’ (forge ahead). Beijing has become extremely proactive in making efforts to realise the ‘Chinese dream’.1 China has emerged as an economic hegemon with a dominant military and a polity involving bold attempts at internal reforms. In the process, China has also expanded its outward bound investments to secure food and land for its supplies. CPC General Secretary Xi Jinping in his very first term had strongly laid down the position of ‘Chinese food being firmly clasped in Chinese hands’ and since then has vociferously argued in favour of innovation in agricultural technology (German Sino Agricultural Centre 2017). Chinese agricultural policies have a two-pronged strategy: one in favour of strong domestic reforms and the other in favour of a cooperative and investment-oriented foreign policy to seek both product and process in enhancing agricultural produce. This means that while China is encouraging international cooperation with developed nations in agricultural innovation, it is at the same time also trying to buy agricultural land in various developing nations that it is engaging with. China has food as one of its core national interests which is why Document No. 1 (Zhongyang yi hao wenjian 中央一号文件) has always been devoted to agriculture. The revitalisation of rural areas should not be interpreted as being limited to the development of the agriculture sector only. In actuality, China has seen a windfall growth in its economy but this has largely been limited to the coastal areas, with the rural hinterland remaining largely underdeveloped. Yet, the large number of labour for the manufacturing sector of coastal China comes from rural areas. These rural areas are now akin to ‘exporters of labour’ within the domestic territory of China (Feng 2018). Hence, Xi is now seeking to establish a version 2.0 of ‘back to the countryside’ programme where it is not urban intellectuals being sent away to learn about rural life as happened during the Cultural Revolution, but factories seeking newer bases in the rural areas. Among the biggest challenges faced by the rural areas are untended crops and children left behind due to the migration of adults to coastal areas as factory labour. Xi wants to rectify this by giving them factory employment in their native regions. These ‘satellite factories’ (weixing gongchang 卫星工厂) seem to be a big indication of the future of China’s  This term was first used by an officer in the People’s Liberation Army, Col. Liu Mingfu.

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development (Feng 2018). Chinese analysts call it the farmers’ way of ‘going out’ (Bai 2018). This programme of ‘satellite factories’ is providing steady employment and income. These ‘satellite factories’ are giving them the required money at the required place. An analyst at China Policy points out that ‘the real aim of the rural revitalisation strategy is that China’s continuous economic development shall depend upon its fourth tier cities which will join as the new consumer class’ (Feng 2018). Most of these factories come under China’s poverty alleviation programmes where the government is building infrastructure to help company owners to save around an average of 1.5 million yuan per factory (Feng 2018). Hence, these satellite factories seem to adopt a ‘win-win’ situation for all where the farmer is happy, because he not only gets time to sow his crops but also a steady income during his off days. The entrepreneur is happy because he not only is getting government assistance for infrastructure and recruitment but also has to pay lower salaries (18,406.8 yuan) compared to the coastal areas (30,654.7 yuan) (National Bureau of Statistics 2017). And finally the government is happy because it has not only dissipated the effects of an overheated economy but also managed to win points in its rural vitalisation strategy. However on the flip side, questions of food security continue to persist. The importance of the subject can be understood from the fact that Xi had stressed the importance of ‘food security’ as soon as he assumed office (People’s Daily 2014). Many Chinese analysts have attempted to find reasons behind the lack of food security. While Wang Liting (2013) points to the declining availability of arable land, others like Zhao (2012) blame it on urbanisation and the pressures of the ‘well-off society’, where quality of food has taken precedence over quantity. Hou, however, refers to it as being a by-product of land grabs (Hou 2014). China is still under the spell of small landholdings farming system which is why farmers are often left without work during the off seasons and migrate to the coastal areas to work as migrant labour (Feng 2018). Also, China is dangerously dipping below its ‘red line’ as arable land is increasingly being used for commercial purposes with the establishment of ‘satellite factories’ (Feng 2018).

Rural Vitalisation since the 19th Party Congress China has been advocating a focus on innovation (chuangxin 创新) for quite some time now and the latest Party congress seeks to bridge the digital divide between the rural and the urban. Many legislators are advocating the use of IT in the agricultural sector. Yao Jinbo, a deputy of the NPC,

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was quoted as saying, ‘Internet companies should focus more on agriculture (nongye 农业), rural areas (nongcun 农村) and on farmers (nongmin 农民) to advance technological upgrading’ (Bai 2018)—or the ‘Three rurals (san nong 三农)’. Yao is himself a business tycoon owning 58.com, a Chinese online shopping store, and has declared intentions of submitting proposals for internet infrastructure in rural areas (Bai 2018). Liu Qiangdong, another legislator and member of the Chinese People’s Political Consultative Conference (CPPCC) and an owner of online retailer JD.com, has also advocated for e-commerce as a tool of rural vitalisation that connects the rural producer and the urban consumer. He has suggested building up of rural brand chains and has been attracting consumers by marking it as a social initiative of poverty alleviation (Bai 2018). Zhang Jindong, another NPC deputy and owner of Sunning.com, is an advocate of cold chain logistics. All of this has been supported by Premier Li Keqiang in his 2015 government work report where he advocates for Internet Plus (Xinhua 2018b) agriculture model and the integration of primary, secondary and tertiary sectors (Bai 2018). The priority to ‘rural vitalisation’ can be judged from the fact that the 2018 China Development Forum (Shang 2018)2 devoted a full session to ‘Rural vitalisation and modernisation’ in March 2018 (Shang 2018). The goals of rural vitalisation were highlighted as the following: • Removing the urban and rural divide—this involves not only the improvement of physical connectivity but also virtual and market connectivity. • Improvement of infrastructure—this means that basic issues related to quality education and infrastructure are improved in poor rural areas and environmental issues are addressed in wealthy rural areas. • Support to rural innovation—development of R&D in the rural technology sector. • Advancement of supply-side structural reforms especially in agriculture—motivating villages to convert local products into healthy nutritious products. • Reforms in the subsidy system—converting subsidies for production to supporting income. 2  This is a forum for dialogue between China’s leaders, businessmen, scholars and international organisation. It is organised by China Development Research Centre of the State Council. The theme for 2018 was ‘China in the New Era’.

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In fact, the basic idea behind this whole concept of rural vitalisation is to integrate agricultural and rural development, which is why the Ministry of Agriculture was renamed Ministry of Agriculture and Rural Affairs. The importance of China’s Document No. 1 can be realised from the fact that it sets the ‘theme’ for China’s investments of that year (Mao 2018). In 2018, the priority of Chinese investments lay in agriculture. China has been experimenting with the idea of a ‘China in the new era’, and the rural vitalisation strategy seems to be the new harbinger of Socialism with Chinese characteristics (Zhongguo tese de shehui zhuyi 中国特色的社会主义). The 2017 Document No.1 had argued in favour of supply sector reforms in agriculture and the 2018 Document No. 1 argues in favour of intensification of those supply sector reforms (nongye gongji ce jiegouxing gaige 农业供给侧结构性改革) (Mao 2018). However, the question is what China means by supply sector reforms in agriculture. Director Han Jun points out that this implies that China’s focus should not only be on production but also lie in grasping the market (Mao 2018). This means that China will bring reforms in grain storage system, focus more on quality-­oriented production and encourage environment-friendly agricultural products. In fact, at the centre of the supply sector reforms in agriculture is the belief that the farmer should be in control of the quality and quantity of his produce. Hence, since December 2015 when this concept started gaining ground, macro-level regulations have sought to improve economic and environmental efficiency rather than merely a targeted production approach. The ‘Internet Plus’ model is advocated by Premier Li and is meant to encourage cooperation between the agricultural market and the agricultural producer. Hence, farmers are now encouraged to develop agribusiness entities and policies are being made to support them. The conversion of farmers into agribusiness entities in order to better financial and investment channels as well as services for the rural sector is also being encouraged (Mao 2018). While rural vitalisation strategy was not elaborated much during Xi’s speech at the 19th Party Congress (Dim Sums 2017), the Ministry of Agriculture has laid great stress on it for a ‘transformational upgrade’ (Dim Sums 2017). Discussions among Chinese experts for developing the rural vitalisation strategy have pointed out that the country’s goal of a moderately ‘well-off society’ (xiaokang shehui 小康社会) required integrated development of four aspects: land policy (tudi zhengce 土地政策), property rights

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system (chanquan zhidu 产权制度), management system (jingying tixi 经营 体系) and policy system (zhengce tixi 政策体系). Further, the rural vitalisation strategy would work only if economic construction, political construction, cultural construction, social construction and ecological construction went together—‘five is one’ (wu wei yiti 五位一体) (Xinhua 2017). The concept of wu wei yiti has a certain connotation in the realm of rural vitalisation and has been elaborated by the National Development and Reform Commission as follows (National Development and Reform Commission 2015): • Economic construction (jingji jianshe 经济建设)—in rural areas it would mean combining farmers’ cooperatives and rural industries to upgrade the rural economy, building rural infrastructure, developing aquaculture economy, fruit and vegetable economy and the handicraft industry. The agricultural industry in its initial phase will be built under the concept of ‘one village, one product (yi cun yi pin 一村一品)’ and ‘one township, one industry (yi xiang yi ye 一乡一业)’. • Political construction (zhengzhi jianshe 政治建设)—this primarily implies developing the grassroots party organisations at the village level that play a role in mediating disputes, maintaining social stability and imparting legal education. • Cultural construction (wenhua jianshe 文化建设)—or retaining ‘rural characteristics’ while building rural architecture, preserving ancient buildings scattered in rural areas and developing both tangible and intangible rural cultural heritage. • Social construction (shehui jianshe 社会建设)—involving educating peasants about new changes in society and to transform their traditional or backward thinking. • Ecological civilisation construction (shengtai wenming jianshe 生态文 明建设)—addressing problems like garbage collection, sewage treatment, village greening and sanitation improvement among others. Another important aspect of rural vitalisation strategy is the clarification of rural land rights (Dim Sums 2017). Up until now collective land was leased to farmers but ownership on books is often found to be different from ownership on land and officials under this strategy are given the task of issuing certificates of contracting land. Another dimension of the reforms is establishment of ‘land banks’ where management rights are transferred to ‘fit’ farmers who can sow the land. The farmer who owns the contracting

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rights in turn gets a specified fee which is generally fixed around 12,000 yuan per annum (Xinhua 2018a). Rural vitalisation strategy seems to be a blend of both socialistic and capitalistic characteristics. While it uses capitalist techniques of market and ‘farmer’ rights, it also retains socialistic aspects of collective farming, small plots and so on (Dim Sums 2017). Document No. 1 starts with the observation that ‘China cannot become modernised without modernising its agriculture and rural areas’ and has set a timeline of objectives for 2020, 2035 and 2050 with the culmination, achieving the target of a ‘well-off society’ for farmers with a ‘beautiful countryside’ (Xiang 2018). All of these goals will be achieved by the CPC achieving greater control in rural areas and the elimination of grassroots-­level corruption. A globalised China however, is also thinking of ‘self-­sufficiency’ especially in the dimension of food in terms of investments not just in domestic agricultural sector but also in foreign agriculture. China is thus, keen to integrate its foreign policy initiatives with its domestic policies especially in nationally sensitive but strategically important issues like agriculture.

China’s Outbound Direct Investment in Agriculture China established a global agricultural policy in 2007 which encouraged overseas investments in agriculture and has now linked its domestic food security with one of its major foreign policy initiative, that is, the Belt and Road Initiative (BRI) (Cornish 2018). China’s National Bureau of Statistics data shows that foreign investment in agriculture between the periods 2010 and 2016 has amounted to US$3.3 billion that is five times higher than the same period before that. Another major objective of outward direct investment (ODI) of China in agriculture is acquiring foreign technologies relevant to agricultural production; thus, China’s foreign agricultural investments are not just limited to land buying but have also involved acquisitions of foreign companies. For instance, both the state-­ owned China National Cereals, Oils and Foodstuffs Corporation, Bright Foods and the privately owned New Hope Company which have formed joint ventures with foreign companies (Cornish 2018). Apart from seeking food security, China is also keen on becoming a global player in the international agriculture market, a goal which many attribute to have emerged ever since China gained membership to the World Trade Organisation. It is to be noted that while ODI in agriculture by China has grown at an annual rate of 36 per cent, it constitutes only 1.3 per cent of the total ODI by China. An article in The Economist published in July

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2017 called this the ‘third wave’ of investment; the ‘first wave’ of Chinese outbound investments between the 1950s and 1980s invested in agriculture of other developing nations under the agenda of ‘south-south’ cooperation (The Economist). Chinese researchers at the Research Centre for Rural Economy opine that agricultural investments in the Mao era (1949–1978) was meant to serve diplomacy (yi fuwu guojia waijiao wei zhu 以服务国家外交为主), where China not only participated in international organisations like the Food and Agricultural Organization (FAO), but also had agricultural exchanges with more than 50 countries (primarily with the Soviet Union), which led to collaborations in technology and a variety of foreign crops (Wu 2013). The ‘second wave’ began from the 1990s and lasted till the early 2000s when China’s state-owned enterprises began scaling up and investing outwards as part of this process (The Economist 2017). This period has been referred to as the phase of (yin jin lai 引进来) or ‘attracting in’, a period when China was seeking cooperation in agriculture with both multilateral institutions and developed countries especially on the technology front. The expansion of agricultural trade also set the stage for China’s ‘going out’ (zou chuqu 走出去) policy. In fact, Chinese researchers point out that the ‘yin jin lai’ and ‘zou chuqu’ became synchronous with each other to an extent that 156 agricultural cooperation committees were established with 50 countries (Wu 2013). The Economist is cynical about the intentions of SOEs and obliquely refers to them engaging in land grabs. However, since 2005 the strategy seems to have shifted slightly in favour of private enterprises, especially small and medium enterprises. This strategy is on similar lines of the domestic sphere where the government has restricted itself to ‘basic modernisation’ until 2035 while encouraging private investors to develop the countryside (The Economist 2017). There is some discrepancy in data pertaining to China’s agricultural ODI. While the figures from Western sources seem to be inflated (because Chinese statistics do not count acquisitions in processing and distribution industry of agriculture), the figures from China’s Ministry of Commerce are much more modest (Cornish 2018). Hence, The Economist (2017) points out that while China’s Ministry of Commerce records China’s accumulated ODI in agriculture to be US$14.4 billion by 2016, a Western source—China Global Investment Tracker (2018), jointly published by The Heritage Foundation and the American Enterprise Institute—pegs it at US$49.34 billion.

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Also, in analysing China’s top destinations for agricultural investment, The Economist (2017) notes that at least two of the top four destinations— the USA and Australia—are countries with which China currently has severe political and economic problems with. A case in point is also the acquisition by ChemChina of the Switzerland-based Syngenta in 2016. Yet the ease of business has superseded all doubts and fears. This deal has been a clincher for China in three dimensions, argues Alagu Perumal Ramasamy. China not only gets access to US technologies but also gives a foothold to China in the US agrochemical market and strengthens its global position amongst agricultural firms (Ramasamy 2017). Zhang Zhen (2017) states that China’s agricultural investments outside its territories could still be considered to be in its early years. Being one of the many 503 projects under the ‘go out’ policy, China’s agricultural investments had to do some major preparations for doing business abroad. As an investor abroad, China is indifferent to matters of human rights issues, sanitary standards, quality control and so on (The Economist 2017) but it is also tough for exporting countries to question the product when it is grown in their own homeland. For example, after their order of 2220 tonnes of garlic got rejected by South Korea, Shandong Qihe Biotech started investing in that country to avoid future  hassles (The Economist 2017). Gooch and Gale argue that Chinese agricultural investments are prompted more in underdeveloped regions than developed regions. They postulate that this preference for underdeveloped regions is not only because the Chinese have few local competitors but also because the prowess of Chinese technology can be fully utilised in these regions to raise productivity (Gooch and Gale 2018). Another reason for ODI by China is the demand for food security. With an emerging educated middle class there is growing demand for nutritious and better quality food. China has had its fair share of food scandals in the recent past, and with the search for quality as well as opposition to GMO food crops, the Chinese middle class is asking for foreign and preferably organic products even if it is grown by overseas Chinese, especially those that are subject to European and American regulations. However, it has also been argued that China’s ODI in agriculture is a loss-making exercise. For example, China’s investment in agriculture in Latin American countries is deeply affected by poor infrastructure, due to which Chinese investors have to bear a larger cost. Similarly, investments by China especially in Asia are limited to traditional farming, which is the dominant mode in underdeveloped countries. Overall, this has been called

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a ‘risky’ proposition as China is not only subjected to market price volatility but in some cases also scrutiny and security by the host country especially in the cases of mergers and acquisitions (Zhang 2017). In 1996, a White Paper titled, ‘The Grain Issue in China’ targeted 95 per cent of self-sufficiency in food grains (State Council of People’s Republic of China 1996) but impacted by the forces of globalisation, China in 2014 gave a new definition to self-sufficiency where absolute security in rice and wheat and basic self-sufficiency in cereals were advocated. Hence now the central government refers to self-sufficiency as ‘domestic supply with moderate imports’ (Zhang 2016). In fact, this is why China’s two domestic banks Export Import Bank of China and China Development Bank are ready to give concessional loans to those companies, including SOEs that are engaged in ODI in agriculture (The Economist 2017). Also, small-sized companies can also get subsidies for this purpose. Thus, despite concerns about food security, it is now being argued that China should ‘adopt a global agricultural policy to mitigate risk’ (Zhang 2016). It is interesting to note that the 13th Five Year Plan (2016–2020) has pointed out that China would ‘appropriately increase imports of agricultural products that are in short supply at home’ and is thus encouraging ODI in this sector in areas of producing, processing, storage, agrochemicals and so on. The 13th Five Year Plan also advocates in favour of ‘establishing bilateral and multilateral cooperation’ in agricultural technology (National Development and Reform Commission 2015). It should be noted that since agriculture involves perishable commodities, China apart from involvement in improving infrastructure is also keen on maintaining geographical proximity while investing, as is shown in the figure below (Table 14.1). In the period from 2005 to 2018, China’s ODI in agriculture stood at US$97.77 billion with the 2017 year alone witnessing an investment of US$47.42 billion (China Global Investment Tracker 2018). The figure given below gives a split of China’s outward agricultural investments area wise (Fig. 14.1). Table 14.1  Chinese provinces making foreign agriculture investments Province of China making agricultural investment

Region in which it is investing

Guangxi, Guangdong, Chongqing and Yunnan Heilongjiang and Jilin Xinjiang Shanghai, Zhejiang, Shandong and Liaoning

Southeast Asia Russia Central Asia Japan and South Korea

Source: The Economist (2017)

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Percentage of total ODI in agriculture 60 50 40 30 20 10 0

Asia

Europe

Africa

Oceania

Latin America

North America

Fig. 14.1  China’s outward agricultural investments area-wise. (Source: Gooch and Gale (2018:22))

The above figure reveals that China’s major investments are happening in Asia despite the problems of undeveloped infrastructure and the developed regions of Europe and North America are not seen as major areas of interest. A study done by the United States Department of Agriculture (USDA) points out that China under its BRI is interested in making agricultural investments its major characteristic (Gooch and Gale 2018). The strategy involves smaller companies targeting regions like Africa, Southeast Asia, Russia and other lesser developed regions that are open to Chinese investments, while Western Europe, Australia and New Zealand fall within the ambit of larger companies. It has often been argued that agricultural ODI by China has been less than its ODI in other sectors (i.e. only 1.7 per cent of the total amount of ODI in 2016) (Gooch and Gale 2018). However, these deals are numerous in number even if they are individually of small sums (ProAg 2018). The table below gives details of Chinese ODI in agriculture, forestry and fishing during 2003–2016 (Table 14.2). It should be noted that since the launch of the BRI, agricultural ODI has risen sharply. China’s agricultural food imports had also begun, ­however, to grow at a rapid rate in the preceding years. As of 2016, China’s agricultural exports were worth US$2 trillion while imports were worth US$3.5 trillion. This gap was slightly less than the previous year of 2014 when the exports were US$1.9 trillion and imports stood at US$3.9 trillion dollars (Gooch and Gale 2018).

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Table 14.2  Amount of outward direct investment by China, 2003–2016

Year

Amount (US$ billions)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

0.1 0.3 0.1 0.2 0.3 0.2 0.3 0.5 0.8 1.5 1.8 2.0 2.6 3.3

Source: Gooch and Gale 2018:6

Conclusion Xi Jinping in his speech at the 19th Party Congress specified that China would ‘work tirelessly to realise the Chinese dream of national rejuvenation’ (Xi 2017). The speech also highlighted agricultural modernisation and agricultural production, both of which have been similarly talked about by several other Party members. Rural vitalisation incorporates the message of turning the farmer into an entrepreneur who does not battle with the vagaries of weather, trade and production targets but on the contrary has the power to turn his business into a profitable venture for himself and his country. Agriculture has carved a niche of utility for itself in the BRI and it is interesting to note that this China of the ‘new era’ has shed its fascination with self-sufficiency and is now thinking more like an investor than a producer. China has matured into adopting the method of mergers and acquisitions than mere land buys and is now focussing more on cooperation in agricultural technology. For this purpose, it is not only utilising its diplomatic influence but is also encouraging its private sector to go all out in agriculture. China has had its fair share of advantages and disadvantages in ODI in agriculture. While infrastructure and market volatilities stunt its growth, China enjoys an open field of being the dominant player with very few competitors. Also, the government is more relaxed now towards import-

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ing of food and hence, despite not having an investment of huge proportions as compared to other sectors, the agriculture sector also sees a large number of small-scale deals. What is food for thought now is whether China’s rural vitalisation will assist its ‘new normal’ goals and blend technology for agricultural prosperity or whether under international trade pressures it will fall short and content itself with enhancing production targets only.

References Bai Jiahao. 2018. “Rural Revitalisation highlighted at two sessions”. China.org.cn. March 5. https://baijiahao.baidu.com/s?id=1594083511372667411&wfr= spider&for=pc China Global Investment Tracker. 2018. “Worldwide Chinese Investments and Construction”. http://www.aei.org/china-global-investment-tracker/ Cornish, Lisa. 2018. “Understanding China’s foreign agricultural investments in the developing world”. Devex. April 30. https://www.devex.com/news/ understanding-china-s-foreign-agriculture-investments-in-the-developingworld-92639 Dim Sums. 2017. “China’s ‘Rural Revitalisation’ set for 2018”. December 27. http://dimsums.blogspot.com/2017/12/chinas-rural-revitalization-setfor-2018.html Feng, Emily. 2018. “China Moves its Factories Back to the Countryside”.  Financial Times. April 3. https://www.ft.com/content/ fe86f76c-1215-11e8-8cb6-b9ccc4c4dbbb German Sino Agricultural Centre. 2017. “China is pursuing a new rural revitalization strategy”. https://dcz-china.org/news/china-is-pursuing-a-new-ruralvitalization-strategy Gooch, Elizabeth and Fred Gale. 2018. “China’s Foreign Agricultural Investments”. United States Department of Agriculture Economic Research Service, April. https://www.ers.usda.gov/webdocs/publications/88572/eib192.pdf?v=43213 Hou Liqiang. 2014. “Report Identifies Sources of Mass Protests”. China Daily. April 9. http://www.chinadaily.com.cn/china/2014-04/09/content_17415767.htm Mao Meijing. 2018. “Jinnian Zhongyang yi hao wenjian jiang yi ‘xiangcun zhenxing’ zhanlüe wei zhuti” (今年中央一号文件将以“乡村振兴”战略为主题) [This year’s Central Document No. 1 will be based on the theme of ‘Rural Revitalization’ strategy]. China Securities Journal (中国证券报), January 23. https://www.thepaper.cn/newsDetail_forward_1963045

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National Bureau of Statistics. 2017. “Per capita Disposable Income of Nation-­ Wide Households in 2016”. http://www.stats.gov.cn/tjsj/ndsj/2017/html/ EN0603.jpg National Development and Reform Commission. 2015. “Meili xiangcun jianshe yao zuo dao ‘wu wei yiti’” (美丽乡村建设要做到“五位一体”) [Beautiful Rural Construction Needs to be ‘Five In One’]. November 28. http://www.ndrc. gov.cn/yjzx/yjzx_detail.jsp?SiteId=101&comId=80048 National Development and Reform Commission. 2016. “The 13th Five Year Plan For Economic and Social Development of the People’s Republic of China (2016–2020)”. http://en.ndrc.gov.cn/newsrelease/201612/ P020161207645765233498.pdf People’s Daily. 2014. “Zhongguoren de fanwan yao duan zai ziji shoushang” (中 国人的饭碗要端在自己手上) [The ricebowl of the Chinese people should be in their own hands]. January 7. http://news.sina.com.cn/pl/2014-0107/050029174175.shtml ProAg. 2018. “China’s Foreign Agriculture Investments”. April 26. https:// www.proag.com/news/chinas-foreign-agriculture-investments/ Ramasamy, Alagu Perumal. 2017. “Acquisition of Syngenta by ChemChina: Implications and Lessons for India”. Institute of Chinese Studies,  ICS Occasional Paper, No: 15. August. https://www.icsin.org/uploads/2017/08 /18/300e257abda07b643f909a4427d29b80.pdf Shang Xinyuan. 2018. “Rural Vitalisation: What Lessons can China learn from International experiences?” International Food Policy Research Institute. April 5. http://www.ifpri.org/blog/rural-vitalization-what-lessons-can-china-learn international-experiences State Council of People’s Republic of China. 1996. “White Paper- The Grain Issue in China”. https://www.iatp.org/sites/default/files/Grain_Issue_in_China_ White_Paper_The.htm The Economist. 2017. “China’s ODI in Agriculture: The Third Wave”. London: Economist Intelligence Unit. July 18. https://country.eiu.com/article.aspx?ar ticleid=335678817&Country=China&topic=Economy&subtopic=Reg_4 Wang Liting. 2013. “Zhongguo de liangshi anquan wenti”. (中国的粮食安全问 题) [China’s Food Security Issue]”. 北京农业 (Beijing Nongye). 325. Wu Youjun. 2013. “Zhongguo nongye guoji hezuo (中国农业国际合作) [International Cooperation in China’s Agriculture]”. Research Centre for Rural Economy, May 8. https://max.book118.com/html/2017/0518/ 107525719.shtm Xi Jinping. 2017. “Juesheng quanmian jiancheng xiaokang shehui duoqu xin shidai Zhongguo tese shehui zhuyi weida shengli – zai Zhongguo Gongchan Dang di shijiu jue quanguo daibiao dahui shang de baogao” (决胜全面建成小康社会 夺取新时代中国特色社会主义伟大胜利——在中国共产党第十九次全国代表 大会上的报告) [Secure a Decisive Victory in Building a Moderately Prosperous Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a New Era: Delivered at the 19th National Congress of the

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Communist Party of China October 18, 2017]. Xinhua. October 27. http:// www.xinhuanet.com/politics/19cpcnc/2017-10/27/c_1121867529.htm Xiang Bo. 2018. “Economic Watch: Policies Released on China’s Rural Vitalisation”. Xinhua. February 4. http://www.xinhuanet.com/english/201802/04/c_136948801.htm Xinhua. 2017. “Xiangcun zhenxing zheng dangshi −2018 nian ‘san tian’ fazhan qian zhang” (乡村振兴正当时——2018年 ‘三农’发展前瞻) [At the Time of The Rural Revitalization ——A Prospect of the Development of the ‘Three Rural Issues’ in 2018]”. December 27. http://www.xinhuanet.com/201712/27/c_1122173577.htm Xinhua. 2018a. “China Focus: Rural Land Ownership Reform Unleashes Greater Growth Potential”. March 8. http://www.xinhuanet.com/english/201803/08/c_137025249.htm Xinhua. 2018b. “Internet Plus Agriculture Model to Promote Integrated Rural Development”. June 27. http://www.xinhuanet.com/english/201806/27/c_137285120.htm Zhang Hongzhou. 2016. “Food Security in China: Whither the Self Sufficiency Policy”. RSIS Commentary. No. 126, May 26. https://www.rsis.edu.sg/rsispublication/rsis/co16126-food-security-in-china-whither-the-self-sufficiency-policy/#.XYj8OZMzbBI Zhang Zhen. 2017. “Zhongguo nongye duiwai touzi mianling na xie tiaozhan” ( 中国农业对外投资面临哪些挑战) [The Challenges of China’s Outward Investment in Agriculture]. March 1. https://m.sohu.com/n/482093361/ Zhao Yin (赵银). 2012. “Zhongguo de liangshi anquan de xianzhuang ji duice sikao” (中国的粮食安全的现状及对策思考) [Analysis of China’s Food Security Situation and Countermeasures]. Xiang Chao (湘潮) 12, (395):89–90.

CHAPTER 15

China’s State-Owned Enterprises as Agents of Party and State Power Aravind Yelery

State-owned enterprises (SOEs) have remained a central pillar of the Communist Party of China (CPC) ever since the founding of the People’s Republic and provided an effective medium for political socialization and mobilization. However, the role of SOEs had waned as the influence of private enterprises grew in the post-reforms era; the private sector’s ability to introduce breakthrough technologies left China’s SOEs looking obsolete on the domestic front. Nevertheless, over the period of the last decade or so, the influence and role of SOEs have been on the rise again with the CPC working at overcoming the shortcomings of SOEs and investing energy in optimizing the use of state-owned capital around transformation and upgrading of state-owned assets and improving their efficiency. The Party is making sure that SOEs deploy real-time innovation-driven strategies to sustain and perform a much bigger role of political communication and consolidation of Party control. If one takes into account market cycles, the rapid development of industrial production technology and the continuous innovation of product research globally have created a new set of challenges for Chinese SOEs engaged abroad even as they dominate globally in finance, logistics A. Yelery (*) Peking University HSBC Business School, Shenzhen, Guangdong, China © The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8_15

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and energy. As a result, on the external front, although the world economic situation has undergone major changes since 2000 including a global growth slowdown, the role of Chinese SOEs is still influential and of critical importance to the Chinese state. The large scale of acquisitions and mergers, investment deals and overseas corporate restructuring were some of the measures adopted by the Chinese state companies to circumvent these challenges. With the launch of the Belt and Road Initiative (BRI), there was an increased tendency for overseas investments among Chinese SOEs, which complicated their role further and also brought them under the scanner of the State Council. In the initial years, the acquisitions were seen as strategic and aimed at influencing the global market but as the global slowdown persisted, such moves did not help the Chinese SOEs with substantial returns. Going forward therefore, Chinese SOEs have a mammoth task to reinvent their role in global geo-economics especially in the current situation of the BRI and the US-China trade war running simultaneously.

SOE Reforms In September 2015, the CPC Central Committee and the State Council issued a guideline to deepen reforms of Chinese SOEs. SOE reforms are seen as crucial to stimulating state-controlled industries and their struggling management to maintain the balance sheet in order. The guidelines are not harsh and do have a ceremonial tone in placing the suggestions in front of politically-backed and cadre-occupied sectors/industries. In other words, the reform guidelines are seen as essential but also assumed as being difficult to pursue (Zhang 2015). In terms of state profits, assets and revenue, the position of SOEs remains invincible domestically, which in the past gave the cadre a reason to crave for SOE positions as well as allowed the central leadership to use such posts for political rewards and incentivization. This, however, should not be taken to underestimate the scale of reforms the leadership has initiated in SOEs. The reforms are progressive as they indicate the leadership’s intentions to keep SOEs both afloat and at the center. This has been so, in fact, since the 1990s when the central leadership determined SOE reforms let the Party control a critical lever of the economy, institutionally and politically. In China, public enterprises are owned either by the central authority, under State-owned Assets Supervision and Administration Commission of the State Council (SASAC) or by provincial equivalents, covering the provincial entities. The provincial state-owned enterprises were controlled by the provincial party

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secretary and administration. Combined, there are about 150,000 SOEs in China which hold over 100 trillion yuan (US$14 trillion) in assets and employ more than 30 million people (Wang and Xie 2015) among which 80 percent comprise urban labourers. Taking stock of SOE performance, a September 2018 study carried out by the China Enterprise Confederation noted that private enterprises were quickly overtaking public enterprises in market share and size of their fortune. In simple terms, this indicates that the rise of private enterprises is correlated with the growth of national GDP. The report established that in addition to traditional SOEs, 237 private companies were listed in the 500 Chinese Fortune club (China Daily 2018a). Every year the threshold to qualify for this list keeps on rising. The 2018 report listed only those companies eligible whose annual revenue exceeded 30.69 billion yuan (approx. US$4.44 billion). This report was in contrast to one published in August 2015, which highlighted that Chinese companies were slowing down the pace of expansion and that the number of loss-making enterprises had increased to the maximum over the previous ten years (2005–2015).1 In this earlier list of top 500 enterprises, 293 were SOEs and 207 were private ones (Gov.cn 2015a). However, the number of SOEs had been steadily decreasing since 2005—357 SOEs had appeared in the list of top 500 in that year (People.com 2005); in 2010, the total number went down to 325 (Fortune 2010) and in 2014 to 293 (BJnews 2015). Private enterprises are thus displacing state enterprises. About 17 of the top 500 Chinese private enterprises are also among the top 500 global enterprises (China Daily 2018b). As per the 2018 report, the number of private enterprises in the tertiary industry increased for five consecutive years, from 117 in 2012 to 162 in 2017, an increase of 38.46 percent, while the number of enterprises in the secondary industry had declined for five consecutive years, from 380  in 2012 to 333  in 2017 (China Daily 2018c). This indicates that the private enterprises are leaving space for the public enterprises to play more role in the secondary industry, which was hit hard following the 2008 global financial crisis and continues to remain a non-performing sector compared to the primary and tertiary sectors (China Daily 2018c).2 There are global implications to this as well for 1  This report was published by the China Enterprise Confederation and China Enterprise Association. 2  The private sector still has its highest number of firms, that is, 288, among the top 500 enterprises, in the manufacturing sector (China Daily 2018c).

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both SOEs and private enterprises, as the latter intensified their global mergers and acquisitions to expand their footprint while the former simply tried to hold their competitiveness globally in non-commodity sectors. Since 2015, as the State Council began strict scrutiny of overseas investments of all Chinese enterprises, the rate of such investments has been brought under control with 2017 seeing a significant drop by 9.4 percent of overseas investment by the Chinese private enterprises. Despite their depleting profits, some SOEs remain central to provincial economic growth but provinces that relied heavily on SOEs have suffered greatly. The data also shows that out of 500 top Chinese companies (based on the 2015 report), SOEs accounted for 78.3 percent of revenue targets, 90.2 percent of state assets, 81.1 percent of state profit targets and 88.7 percent of taxes (People.cn 2015). Without proper reforms, these indicators indicate the jeopardy an already slowing economy faces. Hence, SOE reforms aim at improving economic performance as well as enterprise efficiency and are important not just for China’s overseas ambitions but also for domestic stability. Difficulties and Challenges The reforms and measures announced at the 18th National Congress of the CPC in 2012 were implemented broadly based upon past experience and also experiments to be carried out by the SASAC. The prime motive behind the reforms is to make SOEs more competent to take the pressure off China’s domestic economy as well as to internationalize the industry. In order to start with some of these primary concerns, SASAC has set up four special teams to look in to the problems state enterprises faced. This is also known as the ‘four reform’ pilot program—si xiang gaige (四项改革) (SASAC 2014). The first focus is to restructure SOEs itself and capital assets; second, to introduce mixed ownership in SOEs on a pilot basis; third, to do a microanalysis of managerial boards, monitoring of senior management personnel, performance appraisal and compensation model; and last, to install discipline inspection groups in the pilot state enterprises (Fenghuang Wang Caijing 2014). To carry out these reforms, SASAC listed six enterprises: the State Development Investment Corporation (SDIC); China National Cereals, Oils and Foodstuffs Corporation (COFCO); China Pharmaceutical Group Corporation (CPGC); China National Building Material Group Co., Ltd. (CNBM); China Energy Conservation and Environmental Protection

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Group companies (CECEP); and the Jihua Group Co. (China Daily 2014). These six companies were further categorized as per the reforms intended. COFCO and SDIC were listed as the State Capital Investment Corporation pilot units; CNBM and CPGC were nominated to undergo the mixed ownership reform models; CECEP, CPGC, CNBM and Jihua Group together were identified as pilot units to undertake experiments with the managerial and board level configuration. In addition, a few more enterprises are being considered from the centrally owned enterprises under SASAC for the pilot discipline inspection group (SASAC 2014). SASAC has also laid down a few guidelines regarding mixed ownership, which includes six key aspects: one, while exploring the establishment of mixed ownership to also maintain effective checks and balances and equal protection of the governance structure; two, to explore the professional manager system and market-oriented labour reforms; three, to explore the market incentive and restraint mechanisms; four, explore the mixed ownership with employee stock ownership plan, which is an employee-owner program that provides a company’s workforce with an ownership interest in the company; five, to improvise and effectively use the supervision mechanism; and six, to build and preserve the interests of the Party using mixed ownership (Wang and Xie 2015). Interestingly, the pilot program does not have any time limit to assess the success rate and is believed to spread over for next couple of years. Since Xi has also called on the markets to play an active role in elevating economic performance, promoting cross-shareholding pattern and blending between state-owned capital and private investments is seen as essential. The six major enterprises chosen for the pilot program come from varied sectors. Additionally, with each one of them having a number of subsidiaries, they are expected to create a wide impact area. For instance, COFCO has COFCO Biochemical, COFCO Property and COFCO Tunhe as its mainland subsidiaries apart from other subsidiaries in Hong Kong. In addition to its core expertise in industrial investment, SDIC also has presence in power, coal, transportation, fertilizer and infrastructure with interests also in strategic and defense industries as well as financial investments. The reforms underway are certainly aimed at creating a momentum along the whole industry chain in China. The reforms in Chinese oil company Sinopec—also a major global player—illustrate what can go wrong. Sinopec has 25 private enterprises that own 29.9 percent stake in the company, but this is still a minority share. While the stake gives the private enterprise the right to vote, it does

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not translate into giving them a key role in strategic decision-making because the state still holds the upper hand with a 70.1 percent stake (South China Morning Post 2014). This impacts the corporate governance structure, which obviously does not favour smaller stakeholders. In basic financial terms, Sinopec still holds complete control over the management and this means the market structure may not undergo any significant changes. One welcome change might, however, come with respect to capital accumulation or concentrations of profits. With a claim over profits and funds, private enterprise will also get access to public capital and may influence the use of public funding. This is evident in the case of Chinese telecom major and global player, Huawei. Although Huawei is a private enterprise, the state has allowed Huawei’s use of fixed assets extended by the Shenzhen municipality. Private enterprises are turning to be the blue-eyed boys for the state to exhibit the overall impact of China’s economic and technological might and superiority over its global counterparts. Party Control vis-à-vis Corporate Governance of SOEs As SOEs are seen as the new leaders of China’s economic development and geo-economics, they are expected to play a more responsible role. In recent times, China has been giving special attention to the global governance be it in the field of political institutions or financial institutions. SOEs being critical players in building China’s image of economic power globally, corporate governance has emerged as a critical component in rectifying structural institutional problems of management and control of enterprises. In recent years, the Party has increasingly paid attention to the goal that SOEs avoid any damage to national image over issues of compliances and standards. Corporate governance also has its internal implications. Since enterprises followed different criteria to operate capital, production, quotas for subsidiaries, sub-contracting, there existed numerous irregularities. However, the CPC has tried to use SOEs not just to streamline internal control but also to manage mutual checks and balances between ownership and management based on institutional relationships in order to effectively resolve internal conflicts of interest and reduce transaction costs (SASAC 2018a). Thus, management control in the hand of the Party as part of ‘reform of state-owned enterprises’ operating mechanism’ is a euphemism referring to the need to fix these problems.

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Li Jin, chief researcher of China Enterprise Research Institute, in an interview, underlined that improving the corporate governance structure of SOEs is an inherent requirement for advancing the modernization of the national governance system and governance capacity and is also an important task for the new round of SOE reforms (Zhu 2015). This will also help in resolving a range of issues including indistinct powers and responsibilities, insufficient restraints or controls, the relationship between Party leadership and corporate governance, the role of Party management cadres, selection process to elect managers by the board of directors and review lack of checks and balances and so on. In addition, this would help SOE activity in support of implementing the ‘going out’ strategy and BRI projects. As a result, it has increasingly become necessary to strengthen and improve Party leadership over SOEs (through supervision) and to streamline the process by getting involved in SOEs from within. Capital Management and Control over SOEs The management of state-owned assets has remained a neglected area and has raised many questions within Party circles. While SOEs remained unable to generate profits in many areas, the focus shifted to their asset management and the losses incurred. The state could no longer neglect the fact of non-profitable businesses related to SOE assets by believing that assets were by themselves sufficient. Questions regarding the management of state-owned capital also came under serious scrutiny against the backdrop of the quest of Chinese enterprises to go global and compete with international enterprises. As a result, the CPC has begun seriously implementing a new pilot program of State-Owned Capital Investment and Operating Companies (国有资本投资运营公司试点—guoyou ziben touzi yunying gongsi shidian) (SCIOCs). Capital and investment companies are the best examples of how the duties and tasks of SOEs are being categorized further with regard to wealth, assets and capital management. At present, SOEs account for only 0.74 percent of all registered enterprises in China, and while its layout and structure are rather dispersed, state-owned capital still penetrates almost all sectors, including those that face severe overcapacity (Gov.cn 2016). In order to increase returns on state-owned capital, it is, therefore, necessary to optimize the economic planning around the use of this capital.

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The broad design seems to include the three kinds of central SOEs: industrial corporations, investment companies and operating companies. The new entities in the making and being put into pilot category aim to develop mechanisms where it could demarcate the government from enterprise, government from capital and ownership and management rights. Deloitte (2016) in one of its White Paper series on SOE reforms studied the reception of these pilot initiatives and views of Chinese respondents. The report claims that respondents (the state-owned capital investment companies and state-owned capital operating companies) lack sufficient understanding of the policies and highlights the fact that the development of core capabilities—including capabilities of financing, risk management and control, fund management and post-investment evaluation—are going to be the toughest challenges of reform for most respondents. While commenting on the classification of the capital investment and operating companies, the report further indicated that the state-­ owned capital investment companies take strategic management and control as the priority model of management and control over funding companies while state-owned capital operating companies take financial management and control as the priority model of management and control over funding companies (Deloitte n.d.). Since the results are expected to be replicated by SOEs across the board, the process will put pressure on them to fall in line with recommendations or models developed by the SCIOCs. This will have direct impact on international operations of SOEs and their profitability and competitiveness and direct implications for their role in China’s foreign economic policymaking. To return to the SDIC, it is China’s largest state-owned investment company and carries greater responsibility to undergo internal reforms and translate these into its overseas performance. The SDIC is engaged in innovative and emerging industries. Besides recent projects in Indonesia, India, Russia and the Czech Republic, the SDIC is expected to follow BRI-focused investment plans. SDIC’s overseas assets stood at 31.8 billion yuan (US$4.60 billion) by the end of 2017, accounting for 7 percent of its total assets, this indicates how SDIC, one of the SCIOCs, is geared to play significant role globally (Li and Zhuang 2017). As SOEs undertake more infrastructure projects in countries involved in the BRI, crucial transformations like SCIOC reforms ensure survival in an innovation-driven market environment.

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SOEs and Chinese Foreign Policy SOEs play a critical role in China’s economic statecraft and have always remained central in China’s domestic economy. After the launch of the reforms and opening up process, this role has been further amplified internationally. In the past four decades, China has carefully nurtured its economic rise globally and various agencies have helped it to achieve its goal. Among these, SOEs have remained the central focus of the leadership. Although the China Investment Corporation (CIC) leads the strategy, it is not as old as the central enterprises in terms of expanse and operations. CIC works as a sovereign fund of China and has limited ability to influence the actual operations of Chinese enterprises abroad. As CIC looks at investments, SOEs carry the burden of internationalizing the Chinese brand more aggressively. SOEs have a clear mandate to perform key responsibilities in China’s foreign economy policymaking. They are expected to continue ensuring secure access to international supplies of energy and natural resources on the one hand and on the other, to help insulate the economy and national wealth from potentially destabilizing external shocks. Going forward, Chinese  SOEs aim to both promote the global expansion of national industries through investment abroad as well as acquire new technologies and become top performers in terms of economic returns as well. With the ongoing reforms to correct the way SOEs have been functioning, the Chinese state is making sure SOEs play a role in bolstering the country’s international standing. Enough literature is now available which talks about state capitalism and Chinese statecraft—under Xi’s leadership of the CPC, SOEs have been included in the larger plan of promoting the Chinese dream (Gov.cn 2015b). Reforms are seen as essential to turn SOEs into a ‘modern enterprise system’ (xiandai qiye zhidu 现 代企业制度) and help carry out international operations. SOEs are encouraged to use capital to link  up, forge alliances and accelerate the cultivation of a number of multinational companies with world standards (Gov.cn 2015b). As a result of intensive interventions by the state regulators, over the period of last two decades, SOEs have emerged as the representatives of China’s advanced productive forces and with growing comprehensive strength and international competitiveness, SOEs have also now crossed national boundaries to play a major role in international talent management and influence international resources allocation.

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Since the BRI was proposed by Xi Jinping in 2013, China’s local governments, central ministries and commissions, large state-owned enterprises have used the pretext to expand their strategic role in resources management internationally. SOEs being a prime carrier of state propaganda and legacy were the first to praise and respond to the BRI.  This signifies an unchanged rule among SOEs to back the policies of the state leadership. In order to express political loyalty to Xi and expect political benefits, SOE management have pursued more aggressive approaches to global mergers and acquisitions. They have been undeterred by the financial risks and seek central government funds and projects as well as greater resource management authority. By 2017, after completing four years of BRI-driven globalization strategies, the central enterprises’ overseas investment had spread over 185 countries and regions in which 42 central SOEs participated in over 1600 BRI projects via business models such as establishing joint ventures, making direct investments or becoming shareholders (Zhong 2017). In the past five years, in fact, SOEs have undertaken a large number of landmark projects abroad in the fields of infrastructure construction, energy resource development and international capacity cooperation bypassing considerations over non-performance (Suokas 2018). Indeed, the efficiency of Chinese SOEs remains a matter of concern hampering their ability to compete with other global players. Big in size, state enterprises deploy a lengthy and rule-based approach to penetrate and increase their market share. Initially these rules and policies brought about a sense of order, transparency and consistency—with Party guidelines in place, Chinese enterprises could hardly bypass them. But as SOE number were reduced and they were incentivized to compete with global firms internationally and with private firms at home, business grew in size and scope, which in turn drove the formulation of internal rules, policies, processes and procedures. As a result, in the past 40 years or so, in the larger SOEs, the internal regulation or bureaucracy has also grown making them cumbersome and threatening the loss of agility, and of capability to innovate and respond to the market fast enough; SOEs thus faced challenges such as insufficient R&D investment and inadequate management (People.cn 2016). In recent years, Chinese SOEs have rapidly advanced in fields such as manned space flight, high-speed rail, communication technology, computer and nuclear power among others and have demonstrated ability to innovate. Innovation, however, needs not just talent and intellectual ­support but sustainable financial support as well. The State Council is

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concentrating on how to improve the return on investment of R&D funds and thinking about increasing the risk compensation rate of innovation funds. The Party, including Xi himself, is convinced about the importance of innovation in SOEs and by extension for China’s foreign policy. In August 2016, for example, a state-owned venture capital fund was established by the State Council with a total of 200 billion yuan (US$30.19 billion) to invest in innovative technology and industrial upgrading projects. It was financed by China Reform Holdings Corp Ltd., China Postal Savings Bank, China Construction Bank Corp and Shenzhen Investment Holdings as per the disclosure by SASAC (Reuters 2016). The company is registered as China State-owned Capital Venture Investment Fund Co. Ltd., in Qianhai, a pilot zone for financial reform in the southeastern coastal city of Shenzhen (Caixin 2016) and was expected to combine capital and innovation in technology to increase the coordinated development among enterprises and to encourage central enterprises to invest and acquire innovative enterprises with prospects. As per the 2018 China State-owned Enterprises Reform Report (Xinhua 2018), SOE reforms have shown significant progress in technological innovation—the central enterprises’ R&D expenditure accounts for about one-fourth of the total national R&D expenditure. Between 2013 and 2016, the central enterprises won 335 National Science and Technology Awards, accounting for one-third of the total number of award-winning projects (CRHC 2017). In the National Science and Technology Awards declared in 2018, central enterprises bagged more than 10 technical invention awards and more than 40 scientific and technological progress awards, including one first prize of the National Technology Invention Award and one special prize of the National Science and Technology Progress Award (SASAC 2018b). According to Li Jin, the establishment of China’s state-owned venture capital fund will provide new energy for central enterprises in the future (cited in Wang 2017).

Conclusion The CPC has displayed caution in implementing the several rounds of reforms, which are aimed at not only enhancing its control over the SOEs but also making them increasingly professional in carrying forward the Party’s political message globally of a ‘China model’ or ‘Chinese wisdom’ as Xi (2017) puts it. Apart from synchronized efforts to meet the domestic as well as global challenges, the reforms seek to ensure that SOEs transi-

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tion into global leaders. If earlier efforts by the Party were to rectify the problems, the latest reforms are aimed at making them invincible brands in character and performance. The reforms are intended to ensure that SOEs take care of finance, equity and market together and no longer get sick and act as zombies. SOEs are supposed to play a leadership role in reforms going forward and can no longer expect the government to infuse unlimited capital. On the contrary, they are expected to lead economic growth as evident from Xi’s call for them to become leaders (lingdao zuoyong 领导作用) of the Chinese economy. With the focus on competitiveness and innovation, SOEs remain the last instrument of control in case upheavals in the domestic markets worsen. Globally, meanwhile, Chinese SOEs are flexing their muscles around production, supplies and services, as the BRI becomes an important tool in China’s push for globalization and expansion.

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Index1

NUMBERS AND SYMBOLS 13th Five-Year Plan, 64–66, 188, 193, 208 13th National People’s Congress, 12, 14, 29, 53, 65, 164 17th CPC (Communist Party of China) National Congress, 188 18th CPC Central Committee, 6, 24, 71 18th CPC National Congress, 33, 38, 78, 79 21st Century Maritime Silk Road, see Maritime Silk Road (MSR) 2021 centennial, 6, 8, 46, 50, 52, 72, 189, 193 2049 centennial, 8, 9, 52, 53, 55, 72, 191, 193 500 Chinese Fortune Club, 217

A Abe, Shinzo, 147 Afghanistan, 79, 100, 102, 103, 107–108 Africa, 11, 133, 162, 171, 173–174, 209 Agriculture foreign investment in, 205–206 investment in, 206–207 revival of, 17, 199 supply sector reforms in, 203 use of IT (information technology) in, 201–202 Aircraft manufacturing industry of China, 190 Air Defence Identification Zone (ADIZ), 145 Alibaba, 42, 118 Anticorruption campaign, 26, 50, 53, 58, 70 Artificial intelligence, 7, 180, 189, 194

 Note: Page numbers followed by ‘n’ refer to notes.

1

© The Author(s) 2020 J. T. Jacob, Hoang The Anh (eds.), China’s Search for ‘National Rejuvenation’, https://doi.org/10.1007/978-981-15-2796-8

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INDEX

Artificial islands, 87, 119, 133, 135, 138, 139 ASEAN, see Association of Southeast Asian Nations Asian Infrastructure Investment Bank (AIIB), 104, 108 Association of Southeast Asian Nations (ASEAN) 49th Meeting of Foreign Ministers, 122 challenges of BRI to, 122–125 conflicts within, 123–124 economic ties with China, 116–118, 120–123 lack of unity amongst members, 122–123, 139 Master Plan on Connectivity, 120 opportunities offered by BRI, 120–122 Aung San Suu Kyi, 163 Australia, 15, 131, 134, 136, 140, 146, 207, 209 B Baidu, 42, 189 Bangladesh, 100–102, 104, 107–108 Bangladesh-China-India-Myanmar (BCIM), 104, 108 Belt and Road Initiative (BRI), 26, 60, 97, 98, 102–103, 118, 175, 179, 216 and ASEAN countries, 120, 122, 125 boosting China’s GOP (Great Overseas Propaganda) plans, 169, 173 and China’s international relations, 98, 109, 115, 126 in CPC Constitution, 44 foreign political parties’ endorsement of, 165

as foundation for China’s new foreign economic relations, 44 implementation of, 117–118 role of higher educational organizations in, 177 Bhutan, 104–106, 108 Big data, 7, 42, 180, 194 Biotechnology, 189 BRI, see Belt and Road Initiative Brunei, 123 C Cambodia, 117–118, 122–124, 178 CCDI, see Central Commission for Discipline Inspection Central Asia, 133, 173, 208 Central Commission for Discipline Inspection (CCDI), 31, 71–72 Central Commission on Foreign Affairs, 157–158, 164 Central Economic Work Conference (CEWC), 67 speech of Xi Jinping at, 67 Central Leading Group for Deepening Overall Reform, 25, 27 Central Leading Group of Propaganda and Ideological Work (CLGPIW), 170 Central Overseas Propaganda Group, revival of, 170 Central Propaganda Department of CPC (CPCPD), 170–172 ‘Century of humiliation,’ 10, 18, 52 CEWC, see Central Economic Work Conference CGTN, see China Global Television Network ChemChina, 207 China Global Television Network (CGTN), 174

 INDEX 

China–Pakistan Economic Corridor (CPEC), 102–104, 108, 109 China Radio International (CRI), 174 Chinese Academy of Science, 192 ‘Chinese Dream,’ 5, 24, 47, 51, 53, 57, 59, 73, 88, 172, 188, 192, 200, 210, 223 Chinese People’s Political Consultative Conference (CPPCC), 202 CLGPIW, see Central Leading Group of Propaganda and Ideological Work Cloud computing, 42, 190 Confucius Institutes, 174, 177 CPCPD, see Central Propaganda Department of CPC CRI, see China Radio International D Demilitarized Zone (DMZ), 148 Deng Xiaoping, 28, 32, 45, 52–56, 70, 79, 105, 144, 196 Diaoyu/Senkaku Islands, 79 ‘Digital China,’ 60, 194 Disruptive technologies, 194 Djibouti, 11 Doklam, 105, 107 Drones, 87, 190 E East Sea, see South China Sea (East Sea) ‘Eight affirmations,’ 55–56 ‘Eight regulations,’ 25 Electric vehicles, 190 Elite networks, 163, 164, 166 Europe, 5, 159, 207, 209

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F ‘Four comprehensives,’ 24–25, 54–55 ‘Four reform’ pilot program, 218 ‘Four undesirable work styles,’ 25 Freedom of navigation operations (FONOPS), 9, 10, 15, 78, 79, 87, 123, 131, 134, 136, 138 Fujian, 50, 83, 190 G G20, 145 “Going out” strategy, 120, 162, 171, 201, 206, 221 Government Work Report, 39, 45, 46 Gulf of Aden, 9 H Haiyang Dizhi 8, 10, 119 Haiyang Shiyou 981, 10, 119 Hong Kong, 219 Huawei, 11, 69, 190, 220 Hu Jintao, 49, 52, 85, 134, 172, 177, 188, 192, 196 I India, 5, 9, 10, 12, 14, 15, 97, 101–109, 123, 131–134, 136, 138, 140, 146, 177, 222 Chinese OFDI in, 101 concerns about BRI, 108 Look East policy, 79 pre-eminence in South Asia, 101 trade with China, 99, 100 Indian Ocean, 9–10, 88, 104, 106–107 Indonesia, 79, 117–118, 123–124, 222 Indo–Pacific region, 14, 131–140, 143

234 

INDEX

importance in China’s economy, 132 security interests related to, 133, 134 Innovation, 11, 16, 32, 33, 41, 53, 60, 65, 72, 120, 188, 190–196, 200–202, 215, 222, 225, 226 Intellectual property, 194 International Department of the CPC engagement with foreign NGOs, 162 organization of BRI Think-Tank Consortium, 162 party-based diplomacy of, 166 promotion of economic and trade cooperation, 162 relationships with foreign political parties, 160, 165 role in Chinese foreign policy, 163–164 ‘Internet Plus’ model, 203 J Japan, 10, 47, 79, 83, 124, 134, 138, 143, 152, 208 and Quadrilateral Security Dialogue, 15, 131, 136, 140 relations with China, 133, 137, 144–147, 151 ruling party exchanges, 163 Japanese Self-Defence Forces, 147 Jiang Zemin, 52, 72, 79, 85, 164n9, 172, 192 K Kim Jong-un, 143, 148 Korean Peninsula, 34, 147–149

L Land banks, 204 Laos, 118, 120, 122, 123, 165 Latin America, 207, 209 Li Changchun, 177 Li Keqiang, 29, 39, 50, 65, 122, 145, 151, 164, 202 Liu Yunshan, 172 Local governments, 39, 65–67, 69, 224 Low-carbon economy, 194 M Made in China 2025 strategy, 42, 137, 193 Malacca Dilemma, 106 Malaysia, 79, 117–118, 123–124, 147, 175 and China, party-to-party exchanges between, 159, 162–163, 166 Chinese investments in, 124, 147 Maldives, 100–103, 106–107, 109 Mao Zedong, 4, 28, 32, 45, 53, 70, 79, 176, 196 Mao Zedong Thought, 55–56 Maritime Silk Road (MSR), 115–116, 118, 122, 135, 140 Middle East, 133 Military bases, 81 Military–civilian integration strategy, 195 Military reforms, 51, 78–83, 86–88, 202, 216–223 Mombasa–Nairobi Standard Gauge Railway (SGR), 178 Monetary and financial policy reform measures, 43 MSR, see Maritime Silk Road Myanmar, 104, 107–108, 117–118, 123–124, 163

 INDEX 

N Nanotechnology, 189 National Development and Reform Commission (NDRC), Report of, 51 National innovation-driven development strategy, 193 National innovation system, 194 National media, and overseas propaganda, 173 National Supervisory Commission, 23, 31, 59 definition of, 30 formation of, 29, 71 NDRC, see National Development and Reform Commission (NDRC), Report of Nepal, 100–102, 104–105, 109 New materials, 192 ‘New type’ of international relations, 54, 60 Non-combatant systems, 86 North Korea, 15, 83, 136, 143, 144, 159, 165 relations with China, 147–149 O Obama, Barack, 78, 119, 136, 152 Overseas Economic and Trade Cooperation Zones (OETCZ), 78 Overseas Foreign Direct Investment (OFDI), 99–102, 104, 205–210 P Pakistan, 60, 70, 99–105, 107, 108 and BRI, 104 trade with China, 100 Paracel Islands, 81, 87n2, 119

235

People’s Liberation Army (PLA), 13, 50 growth and expansion of, 11 reforms of, 78, 86, 88 Philippines, 78, 123–124 PLA, see People’s Liberation Army Politburo Standing Committee, and foreign policy, 157 Political consensus, threats to, 5 Political goals in terms of economic achievements, 72 Preventive diplomacy, 160 Public diplomacy, 161, 176 Q Qing dynasty, 4 Quadrilateral Security Dialogue, 15, 131, 136, 147 R Real estate market, 69 Robotics, 42, 189 Rohingya crisis, 107 Rural land rights, 204 Rural revitalization, 200 concept of, 203 goals of, 202 meaning of, 200 strategy of, 201–205 Russia, 47, 83, 136, 208, 209, 222 S SASAC, see State-owned Assets Supervision and Administration Commission of the State Council ‘Satellite factories,’ 200–201 Science and technology (S&T), 187, 188, 192–196 US–China comparison, 189–190

236 

INDEX

SCIOCs, see State-Owned Capital Investment and Operating Companies ‘Self-strengthening movement,’ 4 SGR, see Mombasa–Nairobi Standard Gauge Railway Shenzhen, 132, 190, 220, 225 Singapore, 79, 118, 123, 139, 144n1, 148 Sinopec, 219–220 Six-Party Talks, 148 Small and medium-sized enterprises (SMEs), 121, 162, 194 Social security, 38, 46, 51, 78 SOEs, see State-Owned Enterprises Soft power, 14, 125, 159, 164, 166, 176 South China Sea (East Sea), 9–10, 14–15, 78–79, 81, 83, 85–88, 116, 118–119, 122–123, 125, 126, 131, 133, 135, 138–139 South Korea, 15, 144, 144n1, 147, 207, 208 relations with China, 149–152 Space industry, 190 Spratly Islands, 81, 135 Sri Lanka, 100–104, 106, 109 State Council, 30, 70, 158n2, 170–171, 193, 202n2, 216, 218, 224–225 State Development Investment Corporation (SDIC), 218, 219, 222 State-owned Assets Supervision and Administration Commission of the State Council (SASAC), 216, 218–220, 225

State-Owned Capital Investment and Operating Companies (SCIOCs), 218, 219, 222 State-Owned Enterprises (SOEs), 6, 17, 41–44, 68, 71, 173, 175–177, 206, 208, 215, 222 in BRI countries, 175 and Chinese foreign policy, 223 in GOP, 175 mergers, 71 party control of, 220 reforms, 216, 218, 223, 225 ‘String of pearls,’ 106, 131 Supercomputing, 189 Syngenta, 207 T Taiwan, 34, 64, 78, 83, 85n1, 133, 137–139, 161, 172 Tencent, 42, 118 Terminal High Altitude Area Defense (THAAD), 144, 149–151 Thailand, 117–118, 121, 123 Theater commands, 82–85 Three Represents, 28, 72 Tiananmen Square Incident, 171 Tiangong-2, 190 Tibet, 78, 83, 103, 161 Tourism, 121, 125, 172 Trump, Donald, 5, 14, 15, 131, 132, 136–138, 140, 143, 148, 152 U UN Convention on the Law of the Sea (UNCLOS), 87, 119 United Nations Peacekeeping Operations, 9

 INDEX 

United Nations Security Council (UNSC), 104, 149 United States of America (USA), 5, 7, 47, 69, 70, 79, 118, 143, 144, 146, 178, 207 “Asia rebalance” strategy, 78, 123, 136 Department of Agriculture (USDA), 209 Department of Defense, 81 National Security Strategy Report (2017), 136 relations with India, 78, 138 relations with North Korea, 148 relations with South Korea, 149–151 relations with Taiwan, 137–138 scientific and technological advancements, 189–190 State Department, 119 strategic competition with China, 14–15, 87, 131–140 trade war with China (see US-China trade war) USA, see United States of America US-China trade war, 7, 15, 34, 46, 66–69, 131, 136–137, 139, 216

237

V Vietnam, 9n1, 116, 123, 138, 143, 144n1, 148, 159, 165 relations with China, 10, 15, 81, 85, 87–88, 118–119, 125 W Wang Huning, 170 Wang Qishan, 59 Wang Yi, 107, 163, 164 Wugong explorer, 190 X Xiaomi, 190 Xi Jinping Thought, 3, 12, 27, 32, 50, 55–58 Xinhua News Agency, 173 Xinjiang, 61, 78, 83, 161, 208 Xu Caihou, 85, 86 Y Yang Jiechi, 164 Yasukuni Shrine, 145 Z Zheng He, 10 Zhou Enlai, 157 ZTE, 124, 190