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The China Challenge

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The China Challenge

Elizabeth Economy offers a penetrating look at Xi Jinping’s aggressively antidemocratic regime. June 7, 2019
Politics and law
Economy, finance, and budgets
The Social Order

The Third Revolution: Xi Jinping and the New Chinese State, by Elizabeth C. Economy (Oxford University Press, 360 pp., $27.95)

Russia’s leader Vladimir Putin was there. So was President Rodrigo Duterte of the Philippines, along with the heads of Italy, Portugal, Austria, Cyprus, and eight other smaller European states, all ostensible American allies. In late April, 150 nations sent some 5,000 delegates to the second summit in Beijing on Chinese president Xi Jinping’s signature economic project—the Belt and Road Initiative.

An invitation to discuss BRI—the sprawling network of roads, power plants, ports, pipelines, and more than 900 projects underway in 70 countries to create new land and sea corridors linking China with the rest of Asia and beyond—was a de facto summons. The leaders assembled in the giant convention center, all dutifully awaiting Xi’s remarks, testified to China’s new financial clout and political position in the world. China, not the United States, has become the largest trading partner of some 130 nations. For those trading with China, or seeking to do so, the BRI invitation could not be refused.

Notably absent, however, were leaders of the U.S. and its key European allies—Germany, France, and the United Kingdom. The abstentions reflected growing concern about not only the influence accompanying Beijing’s generous infrastructure loans and grants through BRI and China’s recently created Asian Infrastructure Investment Bank, but more broadly, Xi’s leadership—his ominous authoritarianism, unprecedented consolidation of power, his reversal of economic reform at home, and his increasing assertiveness in projecting China’s military and economic influence abroad.

In her compelling book, The Third Revolution: Xi Jinping and the New Chinese State, veteran China watcher Elizabeth C. Economy carefully chronicles the sweeping, dangerous changes implemented by Xi, asserting that they constitute a veritable “third revolution”—or, more accurately, a “counterrevolution,” as Orville Schell, a respected China scholar who praises her work, prefers to call it. Economy also analyzes why China’s challenge to the U.S.-led global order is so serious, as are the fundamental contradictions in China’s policies that threaten Xi’s ambitions. Finally, she dispassionately explores the paradox inherent in Xi’s strategy and the key question raised by the pursuit of his “Chinese Dream,” which represents the “rejuvenation of the great Chinese nation”: In an “illiberal state seeking leadership in a liberal world order,” can Xi’s quest for economic and political dominance succeed?

Economy’s book both exemplifies and reinforces a profound shift in American scholarly thinking about China over the past 50 years that has often mirrored the shifts in American diplomacy. It took some 30 years for the U.S. to recognize the country that emerged in 1949 from Mao Zedong’s Communist takeover, China’s first modern revolution. When Deng Xiaoping came to power and in the 1970s and 1980s and initiated what he called a second revolution—embracing radical market reforms that diminished the dominance of state-owned enterprises and relaxed political restrictions—an alternative, more hopeful school of scholarly thought (what some critics called naïve) emerged. The horrors of Mao’s rule—the mass famine induced by his “Great Leap Forward” (1959-1961) and the Cultural Revolution (1966-1976), in which literally millions of Chinese died—were supplanted by hope in the heady early days of Richard Nixon’s engagement with Beijing, reinforced by reassuring images of ping-pong diplomacy and China’s gift of two pandas to Washington’s National Zoo. Nixon’s and Henry Kissinger’s cautious diplomatic opening, pursued by virtually every president since, eventually blossomed into contacts, programs, and a relationship that has benefitted both countries, especially China. The view that a no-longer isolated China “would continue to undergo economic and political reform, gradually becoming more congruent with the existing international order and better integrated in it,” as Schell wrote last weekend in the Wall Street Journal, was embraced not only by the Left, often denigrated as “Panda Huggers,” but by practitioners of real politik, who saw triangular diplomacy as a counterweight to the Soviet Union.

American faith in the transformative nature of Deng’s reforms and the moral imperative of U.S.-Sino ties was so entrenched that not even the 1989 brutal massacre in Tiananmen Square—whose 30th anniversary the West, unlike China, commemorated this week—could shake it. The crackdown’s most enduring image remains that of the lone, still-anonymous “tankman” confronting a Chinese tank, but only three years after Tiananmen, President Clinton approved permanent most-favored nation trading status for China and, in 2001, membership in the World Trade Organization. China’s extraordinary takeoff in those years owes much to moral amnesia and American engagement.

China’s economic “miracle” has spawned truly miraculous results. With 20 percent of the world’s population, China is now the world’s “first or second-largest economy after the U.S.,” Rand analyst Ali Wyne writes. China’s gross national product grew roughly nine-fold between 2001 and 2016, from $1.34 trillion to $11.2 trillion; its share of the world economy nearly quadrupled, from 4 percent to16 percent. It outstripped Germany as the world’s largest exporter in 2009 and the U.S. in 2013 as the world’s largest goods trader. It rose from generating roughly a quarter of America’s manufacturing output to more than that of the U.S. and Japan combined. By 2016, China accounted for 34 percent of global economic growth.

Gratitude, however, was not China’s primary response. Many Communist Party leaders continued to see America as a hegemonic parvenu that had conspired to deprive Beijing of its rightful, dominant place on the global stage. As Economy asserts persuasively, expressions of China’s new assertiveness preceded Xi’s rise to power. As the 2008 global financial crisis unfolded and the U.S. fell into deep recession, Chinese hard-liners began pushing openly for a return to global preeminence and abandoning Deng’s shrewd policy of “hiding one’s capacities and biding one’s time.” China’s ruling elite, she writes, saw the 2008 financial crisis as a historic transition point: “the decline of the United States and the return of China.”

China’s assertiveness exploded with Xi’s rise to power in 2012. In 2014, Xi began calling for China to be “prepared not only to help write the rule of the game, but also to construct the playground on which the game is played.” While Economy and other analysts saw this as yet another “break from the Chinese tradition of assuming a low profile in international affairs,” other China analysts hailed Beijing’s pledge to work with President Obama to combat climate change and the Ebola epidemic and to cooperate on Internet governance and the management of the Arctic.

The Communist Party Congress (Photo by Kevin Frayer/Getty Images)

But Xi’s soothing pledges were soon undermined by his contradictory conduct, often “diametrically opposed” to the national interests of the U.S. and other liberal democracies. Contrary to Western expectations, China’s increasingly egregious behavior accelerated with engagement. Economy and other scholars point to China’s imprisonment of as many as 1 million non-Chinese Uighurs and members of other Muslim ethnic groups in reeducation camps in Xinjiang; the development of technology to provide the omnipresent, all-seeing, infallible surveillance required for an Orwellian police state; and Beijing’s systemic, state-supported cyber hacking and institutionalized grand theft of America’s scientific, technical, corporate and intellectual property. Republican and Democratic presidents alike quietly tried, but largely failed, to dissuade Xi from insisting on admission to national markets and international institutions while closing his own to foreign competitors. Under Xi, the suppression of domestic critics and barring of foreign students and nongovernmental activist groups has intensified. So has China’s military buildup in the South China Sea and far beyond. These trends, coupled with Xi’s elimination of presidential term limits and the revival of a cult of personality reminiscent of Mao around “Xi Dada”—or “Uncle Xi,” as he is known on social media—have sparked a backlash among scholars and policymakers.

Economy is not the first to warn of a toxic mix in China’s national political character: a sense of innate historical superiority and unfettered ambition combined with paranoia about foreign interference. Among the more interesting, if occasionally shrill and deliberately provocative, alternatives to Economy’s book is The Hundred Year Marathon (2015) by Michael Pillsbury, director of the Hudson Institute’s Center for Chinese Strategy and a former assistant undersecretary of defense for policy planning during the Reagan administration, who has interviewed Chinese military “hawks” for decades. Fluent in Mandarin and writing with a convert’s passion, the self-described former Panda Hugger argues that Xi’s growing assertiveness is neither new nor an anomaly but part of a methodical strategy to “displace the U.S. as the global hegemon.”

Pillsbury argues persuasively that America’s misunderstanding of China has caused no end of misery. In 1950, he writes, Washington misread China’s warning that American troops should not come too close to the Chinese border. After Chinese troops surged across the Yalu River into North Korea, more than 30,000 Americans would die in Korea before the war was halted by the 1952 armistice that remains in force to this day. American analysts also misjudged China’s relationship with the Soviet Union, as well as its intentions toward the student protesters in Tiananmen Square. While Chinese elites remain divided, Pillsbury accuses American analysts of consistently underestimating the clout of Chinese military hawks in Beijing. While reclaiming China’s “rightful place atop the global hierarchy” has been “a Communist Party ambition since Mao took power,” he asserts, many American analysts dismissed as empty rhetoric Xi’s embrace of the Chinese nationalist fringe slogan “fuxing zhi lu,” or “the road to renewal.” U.S. policymakers have failed to prepare for the severity of the challenge ahead, he concludes.

China’s ascendancy and President Xi’s sweeping changes have led many scholars to reject the view that as China develops, engagement with the West will result inevitably in improved human rights and enhanced political transparency, growing respect for the rule of law, and, ultimately, an embrace of democracy. Scholars now increasingly see Xi’s China as, at best, a fierce competitor, and at worst as the greatest long-term threat to U.S. hegemony and the liberal world order.

Economy’s book strikes a middle ground. While chronicling Xi’s often-alarming changes, she nonetheless highlights weaknesses and contradictions in Xi’s goals and strategy that may well stymie his ambitions. In chapters devoted to China’s struggle to innovate (rather than steal) ideas and create technology to reverse environmental degradation, Economy is skeptical of Beijing’s prowess. Though China is well-positioned to scale up and make other rapid changes in its production methods, given its “large and flexible manufacturing force of 150 million”—roughly ten times the size of America’s—Xi and the Chinese state are “deeply invested in the current model of innovation,” she writes. While China seeks Internet dominance, for instance, the Communist Party’s unwillingness to permit the free flow of information “hurts its credibility among Chinese citizens” and foreign buyers of its technology. And China seeks scientific innovation, but Xi’s growing restrictions on the participation of Chinese scientists in international scientific gatherings and the limited access granted foreign scientists to Chinese research institutes impedes discovery. “Constraints on education and the Internet, intellectual property theft, and a perverted system of rewards for research all hinder the development of an environment that fosters top-quality basic research,” she writes. So, too, does Xi’s return to favoring state-owned enterprises over individual-owned and smaller, more innovative businesses. China’s continuing brain drain also hurts. Thanks to China’s risk-averse bureaucrats and state-dominated R&D model, only 2.2 million of the 4 million Chinese students who studied abroad since 1987 have returned home.

On the other hand, size matters, Economy acknowledges. China’s money-to-burn on research and development, coupled with the growing size and sophistication of its own domestic market, make it likely that it will develop innovative technology companies to compete with the West. After visiting Haidian Park, with more than 5,000 “state-level” designated enterprises, 12,000 high-tech enterprises, and more than 330 publicly listed companies that in 2013 generated $273 billion in revenue, Economy called the scale of the effort “mind-boggling.” But if bureaucratic and political constraints ultimately prevent China from mastering the innovation challenge, writes David Shambaugh, an Asia expert at George Washington University and coauthor of a book documenting some of China’s weaknesses, “it simply will not move up the value-added product ladder and escape the middle-income trap.”

Similar problems plague China’s war on pollution. Despite a rhetorical commitment to cleaning up the country’s notoriously foul, dangerous air and water, the Lancet, the medical journal, reported in 2016 that China still “ranked second only to India in deaths related to air pollution.” Similarly, Beijing’s sharp constraints on activists who challenge official policy, its “national security overlay on environmental protection,” and the lack of incentives for businesses to adopt pollution-control technology, she writes, permit and even encourage local officials and business leaders to evade Beijing’s weak and poorly enforced environmental regulations. Questioning the sincerity of China’s commitment to limiting pollution and safeguarding the health and safety of its citizens, she notes that China’s plans to construct 22 additional coal-to-chemical plants alone will add 193 million tons of carbon emissions annually to the air—“more than the total carbon emissions of many countries.”

Much depends on how America responds to China’s challenge, and here, American engagers and hawks identify ample cause for concern. In a study by a task force convened by the Asia Society and the University of California, San Diego, and chaired by China-watchers Schell and Susan Shirk, 15 of the most prominent China experts, including Economy, former U.S. Ambassador to China Winston Lord, and China skeptic Shambaugh warn that the U.S. and China are on a “collision course” in their bilateral relationship unlike any they have witnessed in the past 40 years. Moreover, because American and Chinese economic and military capabilities have become “more evenly matched,” the “dangers of overt conflict” are also far greater than ever before. While they applaud President Trump for “pushing back harder” against China’s provocations and bad conduct, “pushback alone isn’t a strategy,” the report concludes.

The Trump administration, the task force complains, has exacerbated the dangers of miscalculation of and conflict with China “by undervaluing two of the United States’ greatest advantages: “our network of allies and partners and the global multilateral institutions on which we all depend.” By “questioning the benefits of or actively undermining these alliances, trade agreements, and multilateral institutions—and sometimes casually violating America’s international commitments,” they conclude, Washington has “heedlessly devalued the rule of law, alienated friends, and undercut America’s reputation at the very time when, given China’s actions, we need them more than ever.” The president’s lavish embrace of autocrats, Xi chief among them, has “emboldened” China’s Communist Party, “worried countries caught between the U.S. and China, unnerved our allies, and dispirited those Chinese people who desire political reform.” A particularly damaging error, Economy and the others argue, was the administration’s abandonment of the Trans-Pacific Partnership, the regional trade agreement “that would have joined together a dozen like-minded states and pushed China to conform to higher standards of fairness and reciprocity in trade relations.” And Trump’s “erratic” foreign policy—especially on Twitter, where he alternates between praising Xi and threatening a trade war—has created a vacuum that China and other challengers to American global leadership may be happy to fill.

Economy endorses a policy of “smart competition” with Beijing. This includes investing more in America’s great strength—its own science, research, technology, and social and physical infrastructure. Tensions could be reduced by emphasizing issues where the U.S. and China cooperate effectively—drug trafficking, counterterrorism, and clean energy—and by encouraging China as a regional and global power to do more. During the 2014 Ebola epidemic in West Africa, for instance, Beijing initially pledged just $161,000 per country to fight the virus; Washington pledged $313 million.

If efforts to address common challenges fail, as does embarrassing China into playing by Western established global rules, economic retaliation remains an important option, she argues. In technology, education, and media, Washington should not fear “targeted reciprocity” if diplomacy fails. Why should Washington not bar 400 more Confucius Institutes at American universities if China continues denying American scholars and journalists access? And while economists have long resisted sanctions and reciprocity as “a race to the bottom,” she asserts that Washington should not partner with Beijing unless it receives similar access in China.

For now, at least, Economy remains hopeful that America will do what must be done to protect its national interests, and that Xi’s efforts to project China’s soft power will remain unsuccessful. Xi’s quest for greatness for China “remains largely unrealized,” she concludes in a rare hopeful note. Yes, China has created institutions like the BRI to give the country a trade advantage and Beijing a leadership position, but Xi’s efforts to project an ideal, a model to be emulated, have largely “fallen flat,” she asserts. Despite China’s energy, wealth, vast population, and growing military strength, few nations are attracted to its “social norms, political values, and cultural dynamism.” “When U.S. greatness diminishes,” Economy writes, “China’s does not automatically increase.” Greatness is not a zero-sum game. It must be earned.

Top Photo: Chinese President Xi Jinping (Photo by Lintao Zhang/Getty Images)

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