Xi Jinping and the “China Dream”

The new Chinese leader, Xi Jinping, is the strongest leader China has seen since Deng Xiaoping, and he has a more nationalistic and much more expansive view of how China can exercise its growing power around the world, Elizabeth Economy said at a roundtable lunch with LAWAC at the California Club on Monday. But that is causing some anxiety amongst China’s Asian neighbors, some suspicions amongst its trading partners further afield – and it is even making more affluent Chinese nationals nervous. A recent survey found a remarkable two thirds of wealthy Chinese have either emigrated or say they have plans to emigrate.

The stakes are very high, said Economy, who is Director of Asia Studies at the Council on Foreign Relations. After two decades of average annual growth rates around 10%, China has grown faster than any economy in history, but it has been a very uneven and untidy model. To realize his much-touted “China Dream” Xi has implemented an “extraordinary degree of centralization” by putting himself at the center of the party, the military and the economy. At the same time he has launched a strong anti-corruption campaign with the full knowledge that corruption “could be the death of the communist party, could be the death of the Chinese state.” But just one year into his job as President of China, it is still unclear whether the force of Xi’s personality and his grasp on power will be able to deal with all of China’s challenges.

Currently many people in China are afraid of the newly assertive government. Under the previous leader, Hu Jintao, the internet had been allowed to become a very lively space that provided a measure of accountability to the political system. Citizen journalists posted criticisms online of corruption and official abuses that frequently went viral around the country. “Xi has brought that to a close,” said Economy. The so-called “billionaire bloggers”, wealthy Chinese who used their blogs to criticize various social and political issues, attracting millions of followers, have been cowed into submission. And a new “anti-rumor” law has been passed that cracks down on anyone spreading “false rumors” online – if they get more than 5,000 followers they are liable to 3 years in jail.

Almost two-thirds of Chinese with more than 10 million yuan ($1.6 million) in the bank have emigrated, or are planning to emigrate, according to Hurun, a research firm that studies trends in China. (However the same survey found that most of these people wanted to keep their options open to return – only 15% planned to give up their Chinese citizenship entirely). The reasons that wealthy Chinese gave for wanting to live overseas – or at least to park their spouse and children overseas, often in the US or London – came down to four main categories: education, environment (the bad air in China’s cities is legendary, and especially bad for children), safety of assets and quality of health care. Concerned at the brain drain, the Chinese government is floating the idea of blocking promotions for any official whose spouse and children live outside China.

One consequence of China’s rapid industrial growth has been an enormous appetite for natural resources – which Economy logs in her new book, By All Means Necessary, How China’s Resource Quest is Changing the World, (co-written with Michael Levi). China is now the world’s largest energy consumer, burns more coal than the rest of the world put together, and imports vast amounts of oil, ore, timber and foodstuffs. This led to a rapid increase in commodity prices in the past decade, but also some anxiety about the lengths China appears to go to secure its commodity supplies. In Australia – whose largest trading partner is now China – more than 50% of people polled recently said they were opposed to Chinese investments. In Africa and elsewhere there is growing animosity to the influx of Chinese: “China is one of the only countries in the world which sends its own nationals to do infrastructure projects overseas – they do that because Chinese workers are much less expensive,” said Economy. Mongolia has passed a law under which any foreign mining company which wants to bring in its own nationals must hire 9 locals for each single foreign worker.

But it is China’s energy shortfall that causes the most concern. Last year China produced only 4.5 m barrels of oil per day, compared to a consumption rate of 11 m barrels per day. To make up the difference, China is now the world’s biggest oil importer. One of the reasons for China’s aggressive assertion of control over islands in the East China Sea and South China Sea is the huge reserves of oil that are thought to lie below the ocean bed there. At the same time Chinese companies have bought stakes in fracking companies in the US to learn how that method of oil and gas extraction works. However in northern China, where there are thought to be some hydro-carbon rich areas, there is also a chronic shortage of water which is required by the fracking technique. But overall, said Economy, China would very much like to achieve the level of energy self-sufficiency that the US is moving towards with the expansion of fracking.

Asked whether she saw potential conflict between China and Japan that would draw in the US – which has recently sent more naval ships to the area – Economy said “I don’t see a conflict emerging that would require extensive US intervention – us moving ships there is aimed at reducing that risk.” But she conceded there is still significant potential for a mishap. “The US Navy is concerned because they say a lot of the Chinese naval officers are very young and aggressive, and often ignore radio messages of warning from the US, even when relayed in the Chinese language.”

As China’s economy continues to grow, it is to be expected that it will be more assertive on the world stage. But it is important that this rise is accompanied by more transparency, so that the US and other countries don’t misinterpret what China is doing. “Often China flags its intentions way in advance, but you have to be looking very closely to see it,” said Economy. The Interpretation of the China Dream will be a key challenge for Xi Jinping as he goes forward.