Sublime and Beautiful

Chinese Communist Party: Change is for Democracies

Posted in Uncategorized by chaoren on September 17, 2009

These days, communist China is beginning to look a lot more like its imperial predecessor. The People’s Republic of China’s (PRC) awesome wealth and power have transformed its once formidable foes like Taiwan and Japan into cowed tributaries of yore. Now, it is no longer considered shrewd to speak of changing the Middle Kingdom. Scholars and politicians who used to pontificate about slowly molding China in the image of western liberal democracy have learned a harsh lesson: you don’t change China—China changes you.

Hall of the People

During the early years of China’s economic reforms, the country was seen as a humble backwater. Its plucky ambition attracted only benign curiosity from the West, akin to the curiosity adults bestow upon a child playing by himself. In time, this mild curiosity gave way to amusement and ultimately to intense interest and concern.

Today, Eastern and Western states alike shift their eyes from the United States to China, trying to decide with which power to cast their fate, asking: which is the true Rock of Gibraltar?

Judging from recent political developments in Taiwan and Japan, East Asia may well have already chosen its favorite: China. In March 2008, Taiwanese voters elected Kuomintang (KMT) candidate Ma Ying-jeou President of the Republic of China. Ma’s victory and his party’s overwhelming success in the 2008 legislative elections were pleasant news to the ears of Chinese Communist Party (CCP) officials. The KMT, once the archenemy of Communist China, had morphed over the years into a more tolerant, less Red Scare-crazed political organization. By 2008, it had become a veritable pussycat compared to Taiwan’s ruling Democratic Progressive Party (DPP). The KMT promoted engagement and eventual reunification with mainland China, while DPP firebrand and two-term President Chen Shui-bian spearheaded his party’s provocative pro-Taiwanese independence stance. Evident by the outcome of the 2008 elections, the people of Taiwan were prepared to bridge the Taiwan Strait and strengthen ties with a government they once sought to eradicate. It wasn’t Beijing’s charm that drove the Taiwanese towards its colossal neighbor. It was a mixture of economic opportunism and political fatalism.

When trying to instill a sense of responsibility in others people often recite the adage: no one can make you do anything. The saying is true enough and does a superb job of emphasizing freewill and self-control but it fails to address the fundamental problem of coercion. Granted, theoretically speaking, no one can force another to do something; however, one can do everything in one’s power to make a person’s life extremely difficult if they refuse one’s wishes. China has for years been squeezing Taiwan in such a way. It hasn’t forced Taiwan into its fold per se. However, communist China has worked tirelessly to preclude the Taiwanese people from choosing independence. At its crudest the PRC has resorted to harassing and intimidating Taiwan.

Beijing has been especially crafty in its political marginalization of Taiwan. Through a series of cunning Cold War political maneuvers, in 1971, Beijing succeeded in stripping Taiwan of its United Nations membership and replaced the island nation as a permanent member of the United Nations Security Council. How, you might ask, did the CCP execute such an astounding feat? The answer is quite simple: it waited patiently. No, the PRC didn’t undergo a rapid liberal-democratic makeover. The CCP didn’t moderate its politics or lessen its human rights abuses. Chairman Mao’s party only needed to bid its time until the world was willing to give it what it wanted.

By 1971, the political milieu in which the CCP operated had changed greatly. During the 1960s, numerous newly independent third world countries were admitted to the UN General Assembly. China courted these countries and cultivated them into a support base for its UN membership bid. Thus, the PRC gained the votes it needed to wage its coup. Plenty objected to allowing Chairman Mao’s mad experiment in communist statecraft into the ranks of the UN’s supreme governing body. But what could be done? The PRC had the numbers it needed to impose its will; so the opposition stood by impotently as they were defeated by their own beloved democratic process.
Ironically, the PRC’s UN victory took place in the midst of Mao’s infamous Cultural Revolution, one of the darkest periods in modern Chinese history. Unfortunately, irony is lost on those blinded by the fog of war. The Nixon administration, caught up in Cold War power politics and struggling to extricate its country from a sticky situation in Vietnam, looked to its new Security Council colleague and saw a potential partner—what it should have seen was a cold opportunist.

In the years after the Second World War, Sino-Soviet relations soured to such an extent that the two communist powers ended up in a series of brief but bloody border conflicts in 1969. Aware that its two great Cold War foes had turned on one-another, U.S. National Security Advisor Henry Kissinger and others in the Nixon administration, being the realists that they were, thought that they could win the allegiance of China and thereby shift the Cold War balance of power in the United States’ favor. Of course, as history has been written: the Nixon administration’s China diplomacy was an indubitable success—it helped to isolate the Soviet Union even further, and it delivered China from the dark recesses of the communist underworld to the light of liberal democracy. Even today, to say that 1970’s U.S.-China rapprochement was a resounding victory for U.S diplomacy is to speak the gospel truth. In actuality, the U.S. sold itself too cheaply and set U.S.-China relations on a dangerous course.

The Nixon administration’s dealings with China were the beginning of a deeply flawed negotiating pattern with the PRC that has seriously undermined the interests of democratic states the world over. The pattern has been one of give and take: the rest of the world gives and Beijing happily takes. U.S.-China trade, the foundation of U.S.-China relations, has been skewed horribly to benefit the PRC at the expense of average Americans. The U.S. trade deficit with China has ballooned over the past decade without U.S. officials taking any serious actions to rectify the matter. All the while, the PRC has utilized unfair trade practices including currency manipulation, investment restrictions, and appallingly lax labor and environmental regulations to suck money from foreign coffers. Of course, U.S. officials won’t admit that they have been steadily losing ground to a Mandarin-styled oligopoly; they won’t even acknowledge that China has made a mockery of its World Trade Organization membership—which China was able to gain with the support of the United States. Rather, U.S. officials have tended to argue that China is a backward country that can benefit enormously from Western tutelage. But China should not be mistaken for postwar Japan; South Korea; or Taiwan. The PRC is not eager to emulate foreign populist political systems nor is it in a position to have such systems imposed on it. On the contrary, the CCP has fashioned its own quasi-democratic one-party political system that cannot realistically support true democratic reform. Therefore, real catalysts for change will have to come from outside, not inside, China’s current political system. This means that efforts by the U.S. and other democratic countries to change China by working with the CCP are futile at best and extremely counterproductive at worst.

By no longer questioning the legitimacy of the CCP as a governing power, the world community obviates any leverage it might exert on the PRC. The Tiananmen Square Massacre of 1989 was a missed opportunity for democratic states to band together and demand democratic reforms in China. Likewise, the weak response of the world community to the 2008 Tibet unrest heartens the CCP in its claim that the strife of China’s minorities is an “internal issue” and only concerns the Chinese government. It is blatantly obvious by now that China’s economic strength is making it less and less susceptible to foreign influence and, conversely, more influential with other states. The supposed win-win trade relationships China has been developing with other countries may well be the CCP’s underhanded means of subjugating its adversaries. Currently, states are too preoccupied with economic issues to consider China as anything but a trade partner. But China is more than—a market—a lender—a supplier—it is an economic and a political actor. So, when China signs trade pacts with Taiwan and ASEAN there is more than money at stake.

Taro Aso and Yukio Hatoyama

The recent general election in Japan is a perfect example of how China has used trade to gain political power. For decades, Japan’s center right Liberal Democratic Party produced prime ministers that have for the most part either outraged or mildly offended Beijing. But, this summer’s elections brought a new party and a new kind of prime minister to power. The victorious Democratic Party of Japan and its president the new prime minister of Japan, Yukio Hatoyama, appear ready not only to support strengthening ties with China (as did previous Japan’s previous prime minister, Taro Aso) but to reduce Japan’s military cooperation with the United States. Prime Minister Hatoyama and his party are committed to reorienting Japan towards Asia which some have equated with turning Japan’s back on the United States, its greatest ally. This may seem an abrupt shift in policy but it has been a long time in the making. Japan’s trade relationship with China has been growing for years. China has supplanted the U.S. as Japan’s largest trade partner and the political consequences are now becoming manifest.

In essence, the United States’ flawed China strategy can be described as all carrots and no sticks. The danger for the U.S. and other countries is that the CCP has gained so much economic and political clout that it now holds most of the cards. Before when the U.S. had relatively more power than it does today, U.S. officials made too many concessions to China. They were content to believe that they could tolerate the PRC’s human rights violations, bad trade practices, unwarranted arms build-up, and general bad neighborliness in the international community because trade, they thought, was the panacea for all of China’s ills. First wealth then freedom became the mantra in Beijing and Washington. Unfortunately, wealth and freedom are not inextricably linked.

The China of today must be a rude surprise to the naïve scholars and government officials who once claimed that the CCP’s authoritarian rule would be demolished by China’s growing middle class. Karl Mark famously called religion the opiate of the masses; however, in China, money is the drug of choice. China’s middle class is more interested in accumulating wealth than accumulating civil liberties. Powerless peasants and remote ethnic minorities are the only people left that persistently challenge their illegitimate authoritarian government. Foreign powers like the United States now tread lightly when nearing the PRC’s turf. At present, the U.S. is carefully trying to decide whether honoring its commitment to protect Taiwan by selling it more than $6 billion worth of military hardware is worth incurring China’s wrath. The prospects of the dealing going through don’t look good especially considering that President Obama is scheduled to visit Beijing in November and a cooperative China seems to be vital to the United States’ economic recovery. So the CCP’s intransigence wins again. China’s influence in East Asia grows stronger, its economic ties tighten, and freedom—once a major issue, and then an afterthought—becomes an after-afterthought.

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East Asia’s Ties: Invested in China in a Time of Trouble

Posted in Uncategorized by chaoren on April 2, 2009

When the global financial crisis began to take shape in the United States all eyes immediately turned to China to see how it’s economy would respond to the rapid deterioration of its largest market. A lot of discussion since the onset of the crisis has surrounded the extent to which China has or has not decoupled from the U.S. economy. The implication being the weaker China’s ties to the U.S. economy prove to be the better its chances are of maintaining its own robust economic growth. But there is more to the modern global economy than U.S.-China trade. In fact, one of the most intriguing stories of the last couple decades has been China’s accelerated integration with the highly-developed economies of East Asia. Although Japan remains the largest economy in the region, China is the fastest growing. In 2007, China surpassed Germany to become the world’s third largest economy behind Japan and the United States; and, if current GDP trends hold, China should claim the number two spot within the next few years–a fact that is not lost on its neighbors.

Image Courtesy of oambassadors.org

As much as China has depended on the United States as a market for its products, the export driven economies of Japan, South Korea, and Taiwan have depended on China’s increasing consumption and cheap labor for much of their growth. This has meant a boon of foreign direct investment (FDI) for China. Japanese and South Korean companies have placed considerable bets on the continued strength and vitality of the Chinese market. Toyota Motor Corporation and Honda Motor Co., Ltd., Japan’s two largest automobile manufacturers, have each established joint ventures in China with extensive manufacturing and distribution operations throughout the country. But they are not the only Japanese enterprises putting down roots in the world’s most populous country. Companies as diverse as food & beverage colossus Suntory Ltd. and pharmaceuticals giant Takeda Pharmaceuticals Co., Ltd. have also set up shop along with thousands of other Japanese firms.

Japan’s FDI (balance of payment basis) in China during the mid- to late-90s was substantial and, after a precipitous drop off in 1999, it has increased every year since, save a small dip in 2006. According to preliminary figures prepared by the Japan External Trade Organization, Japan’s 2008 FDI in China totaled USD 6.497 bln more than 18 times greater than its total of USD 360 mln in 1999. However, in terms of percentage of total outward FDI, Japan’s FDI in China has been steadily declining since 2004.

More telling than Japan’s FDI numbers are its import/export figures and no such figures are more symbolic than those of 2007. That year was a watershed in the history of world trade. It was the first year in modern Japanese history that China was its largest trading partner. Prior to 2007, the United States held that claim. Thus, Japan’s economic ties with China have grown tighter. And, having racked up USD 109.1 bln from exports to China in 2007, Japan will be hard pressed if its greatest trading partner cannot weather the current economic storm as finding new markets may be well near impossible.

South Korea’s need for China to keep steaming along may be even greater than Japan’s. Since 1988, South Korean companies have established more than 19,000 ‘New Overseas Enterprises’ in China. Of these enterprises approximately three-fourths have been established in the last eight years. The degree to which South Korea has staked its own future on that of its neighbor is astonishing. Although Japan has invested many billions of dollars in China, its total FDI for 2008 only represents 5 percent of its total outward FDI of that year. In contrast, over the past two decades nearly one-fourth of South Korea’s total FDI has been in China. Similar to Japan, South Korea is heavily dependent on the Chinese market for its exports. According to the Korea International Trade Organization, the total value of South Korea’s exports to China in 2008 was approximately USD 91.38 bln, nearly twice the total value of its exports to its next largest market, the United States. South Korea has changed its orientation so fast, turning away from the U.S. towards China, that its current trade structure does not resemble its trade structure of 10 years ago in least. In 1999, the U.S. was by far the largest recipient of South Korean exports followed by Japan and China. However, by 2008 China had leapfrogged the U.S. and Japan to become the largest buyer of South Korean exports.

Finally, even the Republic of China (Taiwan) has decided to hitch its wagon to China’s star. Despite tight government restrictions on direct investments in the People’s Republic of China, Taiwanese companies have, by both official and surreptitious means, invested heavily in China. Shu-Ching Jean Chen of Forbes.com states that “Taiwanese companies have been for some time the top investors in China, having stealthily channeled more than $100 billion worth of investment to the mainland indirectly, through third-party intermediaries.” Hence, the presence of Taiwanese companies and capital in China, while relatively inconspicuous, is significant. Moreover, Taiwan shares with South Korea and Japan a newfound dependence on the 1.3 billion consumers in China. A decade ago, China was only Taiwan’s seventh-largest trading partner. But, by 2008, China had become Taiwan’s largest trading partner and market for exports, buying up almost twenty percent of its total exports.

Japan has not thrown its lot in with China in the dramatic fashion of South Korea and Taiwan. The U.S. may no longer be Japan’s number one market but it still runs a close second and it remains the top recipient of Japan’s FDI. Regardless, it is clear that the balance in East Asia has shifted towards China. For the time being at least, decisions China makes will be as important (if not more so) to the economic well-being of the East Asia region as decisions made by the United States. Some might feel unnerved to realize that tremendous powers now lie in the hands of an authoritarian government. A certain amount of disquietude is justifiable. If the Great Leap Forward and the opening up of China’s economy have taught us anything its that things change quickly in a country with a highly centralized authoritarian government running the show. There is always the chance that the Communist Party will react hastily or inappropriately to the future economic problems that are waiting to hit China. In an effort to raise employment the Party might take protectionist measures which would most certainly hurt all the countries of East Asia. Or, in order to deflect attention from its shortcomings, the government might encourage or turn a blind eye to violent expressions of nationalism. Laid off workers in China have already began to show their anger at executives, as witnessed after lay offs at Panasonic Electronic Devices (Beijing) in late-February of this year (See Article). Anger over layoffs at a foreign company could very easily go from a workers’ rights demonstration to an anti-foreigner riot if the Party decides ‘it’s either us or them.’ The possible scenarios whereby China could make Japan, South Korea, and Taiwan regret ever having cozied up to it are countless.

To date, the Party has responded well to the financial crisis. It has sought to combat the financial crisis in a calm but proactive manner. In November of last year, China announced its USD 586 billion stimulus package. Unlike the U.S., China has also seen foreign direct investment as key to its recovery. Just last month the government, seeking to facilitate foreign investment, relaxed FDI rules. These are positive signs for all the nations of the world. It is vital to the international community that both the U.S. and China make good decisions as they try to work their way out of the current economic troubles. But it is extremely important to the countries of East Asia that China feels the weight of its responsibility as the emerging leader of the region and acts accordingly.