CoverStory

Modern makeover

China is rapidly becoming the dominant superpower, but first a little housekeeping is in order.

By Shen Dingli

China is a rapidly rising power. Its confidence is up after a continuous decade of spectacular economic growth. During the eight years of the Bush administration, its economic output quadrupled. Today it is the world’s No. 2 trading country and the world’s No. 1 exporter. It possesses the largest foreign currency reserves in the world. In the aftermath of the global financial crisis, which saw the United States’s economy fall back, China sees a ‘strategic opportunity’ to extend its lead.

After three decades of economic development at home, China is shifting its hitherto low-key strategy of expanding its interests and asserting its diplomatic influence abroad. All of this will have profound implications for the region.

As China’s interests expand overseas, it will continue to strengthen its military to protect these interests. There is a debate going on now as to whether China should develop supply lines for its navy or establish naval bases overseas. Although the government is approaching this issue cautiously, there is no question that it’s an issue China will have to address at some stage. Such a development, if it ever came to pass, would be based on three criteria: to protect China’s legitimate interests; to further the interests of the host country; and to enhance regional and international stability.

The idea of an overseas Chinese naval base and the growth of its military strength shouldn’t alarm the world. Instead, it should be viewed as a source of regional stability.

China’s defence spending has been growing over the past decades. The latest defence budget of the People’s Liberation Army (PLA) has reached $US78bn, only 11 per cent of that of the US. But the PLA budget has maintained a double-digit percentage increase for nearly two decades, rising at 13–18 per cent for the last 10 years, excluding 2010. If it can sustain this trend for several more years, it could rise up to $US300bn, on par with that of the US in 2000. By the late 2010s, with purchasing power parity (PPP) taken into consideration, China’s defence spending could even match what the US spent in 2008.

As a result of this spending hike, the PLA is becoming more modern and professional. China’s second artillery force, for instance, can now execute an inter-continental nuclear strike. In addition, China is modernising the sea-launched leg of its nuclear triad. While conventional missiles constitute China’s backbone force (with both anti-ship and anti-ballistic missile interception capability), it is also developing a space program. Currently, it is deploying a Compass (beidou) navigation and guidance system, and has already demonstrated an anti-satellite (ASAT) warfare capacity. Meanwhile, the world is watching as China develops its blue-water navy and information warfare capabilities.

China’s economic and defence spending is complemented by its investment in education, science and technology. Over the last three decades, China has doubled its number of universities and colleges, from 1000 to over 2000. At any given time, China has more than 30 million students attending institutions of higher learning. The government has plans to increase higher-education participation to 40 per cent of its young people in 2020 and 80 per cent by 2050. This would make it an education powerhouse.

As China has been rising, so has its international standing and influence. China has played a vital role in stabilising the world economy in the aftermath of the global financial crisis of 2008–09. It has hosted all Six-Party Talks on North Korea's nuclear weapons program. Among the permanent five countries (P5) of the United Nations Security Council, China has contributed the most peacekeepers to UN missions. Within three hours of the recent earthquake in Haiti—a country with which Beijing has no official diplomatic relationship—a Chinese rescue team was airborne on its way to Port-au-Prince.

For better or for worse, China is becoming a crucial actor in world affairs. For example, it was Chinese pressure that succeeded in persuading the Sudanese leadership to allow African Union troops into Darfur to act as a peacekeeping force. In Myanmar, China has continued to advise the military government to keep its doors open to the outside world. At the UN Climate Change Summit in Copenhagen last year, China and the United States' failure to find a mutually acceptable agreement on CO2 emission led to the disappointing outcome, illustrating how crucial China's role in international affairs has become.

Even as China is playing a greater role in world affairs, the international community is expecting China to shoulder a greater share of responsibility, one that is commensurate with its growing power and clout. China is expected to do more to maintain security and trade in the region and beyond. In the area of nuclear proliferation, China is expected to use its traditional links with Pyongyang and Tehran to help moderate their nuclear ambitions. Even in the pirate-infested Gulf of Aden, Chinese naval fleets are keeping the sea lane free from piracy.

What the world expects of China is also what China expects of itself. China wants to be seen as a responsible actor on the international stage and has initiated and implemented policies to help stabilise regional crises in Northeast Asia, South Asia, Central Asia and the Middle East. At the same time, China is conscious that it is still a poor country that requires resources to maintain economic development at home. As a result, it has to strike a balance of responsibilities: responsibility for internal development as well as the international order.

Despite these expectations, China's ability to live up to its role as a responsible 'global citizen' is limited by certain realities.

First, there's the ideology. China maintains that it doesn't interfere in the affairs of other nations. By that yardstick, other countries shouldn't interfere in its affairs. It has shown an unwillingness to attach strings to external economic ties, whether in its relations with its traditional trading partners or the resource-rich ones. This ideological baggage is one the West has trouble coming to terms with. When China goes to the Middle East, Africa and Latin America in search of energy and minerals, its so-called 'non-intervention' policy is met with resistance by local politicians and criticised by the West as a form of neo-colonialism.

At home, Beijing faces daunting challenges on the economic front. The recent financial crisis has exposed China's vulnerable spots—its over-reliance on exports and its weak domestic economy. China's development model—based on high exports—is dependent on cheap labour and exploitation of the natural environment. Changing this won't be easy. China still has some 150 million people (mainly from rural areas) who live on $1 per day (the UN definition of the poverty line). This represents an untapped labour force which companies are keen to exploit. But China needs to move away from this development model, to increase its levels of domestic consumption and develop homegrown technology and innovation.

China needs to restructure its economy from a labour-intensive one to a technology-driven one. Already it is making moves in this direction. It has launched its own version of jumbo civilian aircraft, which is expected to enter into service in the next decade. China is also leading the way in environmentally friendly goods and services. It is also fast improving its energy efficiency and moving toward clean coal and hydrogen, solar, nuclear and other sustainable sources of energy. Presently China houses the leading research centres in inertial confinement fusion (ICF) technology. If it succeeds in making this fusion energy commercially viable, it has the potential to meet the world's energy demands.

Although China's development model has contributed to its prosperity, it has also brought catastrophic environmental damage. Due to an inefficient use of energy, China has been burning far more energy to fuel its economy than most industrialised societies. As China's primary source of energy is the burning of low-quality coal, its rapid industrialisation has come at a dreadful cost to the environment, resulting in environmental and ecological degradation, and concomitant problems in public health and social stability.

China is also facing an ever-severe shortage of clean water in its coastal areas and most of its population centres. The severe drought in China's south-west—described as the worst drought for a century, affecting more than 60 million people and destroying billions of dollars worth of crops—is evidence of the crisis. Securing access to resources such as water will remain a challenge for China, especially since it shares borders with neighbouring countries all competing for the same scarce resource.

China's transformation from communist autarkic state to major global power has been the result of its economic performance. But as economics and politics are intrinsically intertwined, keeping them in separate compartments could lead to a major mismatch between China's economic infrastructure and political superstructure. For instance, rampant corruption, social injustices, disparity between the city and the country, and unequal distribution of wealth, could lead to internal instability and division.

Although other nations face secessionist problems, China's case is both unique and acute. China faces the persistent threat of independence from Taiwan, Tibet and Xinjiang. For decades now the US has meddled in these issues. On Taiwan it continues to arm the country (the recent announcement of a weapons sale to Taiwan is a case in point), to pursue what it calls a balance of power across the Taiwan Straits. On Tibet, US presidents, including the present one, continue to meet with the Dalai Lama at the White House.

China's road to global power status starts from its periphery. Building trustful and peaceful relationships with its neighbours gives China the security to focus on its domestic policies. While China is adapting to the changing international order, it is also reshaping that order. Countries in the Asia-Pacific region need to adapt to this fact. This is a process that will take time and may prove difficult.

As China shares international borders with 20 countries, nine of which it is embroiled in territorial disputes with, it has launched various confidence-building measures to smooth out relations with its neighbours. It has worked out an agreement with the Association of Southeast Asian Nations to peacefully handle maritime disputes without resorting to the use of force. With India, it has agreed to maintain peace and tranquility in the disputed territories. Despite political differences with Taiwan, Beijing has initiated the Economic Cooperation Framework Agreement to facilitate freer trade across the Straits. Beijing believes that economic integration will enhance mutual trust and responsibility.

As mentioned previously, China has played a pivotal role in devising a Six-Party Talks framework so as to offer North Korea with a viable security alternative in return for abandoning its nuclear program. China has worked with its neighbours in South and Central Asia to tackle trans-border terrorism, separatism and extremism in the region. Along with Russia, Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan, China has strengthened the Shanghai Cooperation Organisation as a forum for regional dialogue and cooperation. In recent times, Beijing has been concerned by instability in the region caused by the war in Afghanistan. China's approach is to work with the Afghan government, to train its security forces and develop its economy.

China's peaceful rise and the dividends this is yielding are having an effect in the region. The US and Asia-Pacific nations are now inclined to see China's rise an opportunity for their countries. As a result, US allies such as Japan are readjusting their political relationships with Beijing and Washington. This is not say that the US–Japan alliance is waning, but China's peaceful development is rendering one of the most important security alliances in the region less necessary. Other US allies in the region, South Korea, Australia and Singapore, are also building trusting partnerships with China.

Last year, the Australian Defence White Paper expressed concerns about China's military build-up. It called on China to increase transparency over its defence capacity and intentions. Such advice is welcomed, as it will facilitate a more trustworthy relationship between Beijing and the rest of the world. It is expected that as China grows more confident it will become more transparent with its defence programs.

The rise of China presents particular challenges to the US, which fears that the age of its dominance might come to an end. This scenario is unlikely in the short term. Although China's economic output might pass Japan's some time this year, its per capita output is still 8 per cent of the US's and 10 per cent of Japan's. Barring a major catastrophe in the years ahead, it is likely China's economy would overtake the US in one or two decades' time. But for this to happen, China has to fix many of its problems.

Although some commentators have dubbed the growing partnership between Beijing and Washington 'G2', China rejects the term. On the one hand, Beijing and Washington are expanding their cooperation and collaborating on issues such as the global economy, nuclear non-proliferation, anti-terrorism, education exchange, clean energy development and regional security circumstances. But on the other hand, they are still suspicious of each other's strategic intentions, and this situation won't change for some time yet.

Witness recent events, for example: a month after President Obama visited China last November, the two countries have been at loggerheads over climate change, exchange rates, the Dalai Lama and arms sales to Taiwan. At the climate change summit in Copenhagen, China dispatched a vice-minister level official to a leaders' meeting, and according to media reports, that official berated President Obama. In recent months the two countries have also quarrelled over information censorship and internet hacking. All these issues and incidents indicate that the bridging of values and interests between the two countries remains a long way off.

For quite some time into the future, China and the US will continue to maintain vastly different political institutions. Both countries need to accept this fact and not to aspire to change the other's political systems. While China is pragmatic about this, the US remains idealistic, and is prone to measure others against its own values. But China is a lot more confident than it used to be, and is better able to deal with this problem.

To try to influence China's peaceful rise is no longer the right option for the US. Arming Taiwan to achieve a balance of power in the Straits doesn't enhance security; it only encourages an arms race which Taiwan cannot win. By showing hostility towards Beijing, the US not only shows disrespect to the Chinese people, it also retards the move towards good governance and institutional reforms. Although the US says it welcomes "a strong, prosperous, and successful China that plays a greater global role," it needs to move beyond the rhetoric.

Both the US and China are playing to best protect their respective national interests, and if they interact well, the world will prosper as a result. So it is in everyone's interest that both sides establish ways and mechanisms to manage their economic and diplomatic tensions. While Beijing needs more US respect for its core interests (Taiwan, Tibet and currency exchange rates), it should also take care of more legitimate US interests (anti-terrorism in Afghanistan, nuclear issues of North Korea and Iran and the financial crisis). President Hu's participation in the Nuclear Security Summit sent a message that China sees multilateral cooperation as a means to enhance bilateral trust between the two countries.

Since the late 1970s, China has made spectacular progress. Apart from the economic and political achievements, there have been other notable milestones, like the building of the world's highest railway link to Tibet, the first Chinese spacewalk by the taikonauts, the Beijing Olympics and the recent opening of the World Expo in Shanghai.

Continuing along this trajectory is not beyond China. By the middle of the 21st century, China expects to become a respected superpower. But before then, China needs to continue its political reforms, particularly in the areas of governmental accountability and social justice. Modernising China's political institutions doesn't have to mean overturning the political order; it is a matter of building good governance and strengthening the constitution into the present order. So as to achieve these objectives, it is imperative that there is greater public participation and representation in the affairs of the state. There should be a move towards a more professional law-making apparatus, a more independent judicial system, more checks and balances in the democratic structure and a freer press.

China's rise will inevitably alter the global balance of power. With greater power comes greater influence. Not only will China have a bigger say in the UN or the G20, its share of influence on the World Bank and International Monetary Fund will also increase. Having successfully launched the Shanghai Cooperation Organisation, China could also conceive and launch more regional or global initiatives.

China's rise can only be peaceful, as its rise is dependent on the multilateral order of international cooperation, on the global market with free and easy access to foreign capital, technology and export markets. Such interdependence with the rest of the world requires both a peaceful environment at home and making concessions on absolute sovereignty abroad.