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Shambaugh's China disaster scenario examined

Shambaugh's China disaster scenario examined

'Always predict disaster', a shrewd academic economist told me some years ago. 'If it happens, you are proved right. And if it doesn't, then catastrophe was avoided by people heeding your wise and timely advice!' Dystopia is, as least for those foreseeing it, a win-win game.

18th National Congress of the Communist Party of China, November 2012

David Shambaugh is a seasoned China expert, and even he admits in his recent essay for the Wall Street Journal that predictions of demise in China have often been made. He refers to the 1989 Tiananmen Square massacre, which caused many to lose faith in the system, saying it would ignominiously collapse as other communist countries did that year and the next. The pessimists were proven wrong. From 1992, China entered a second phase of economic liberalisation, though only under firm unified political control.

Shambaugh knows that the Chinese Communist Party looked long and hard at the reasons behind the collapse of the USSR. He wrote a book about it in 2008. His view then was that the Party could adapt and transform. Evidently he has changed his mind. 

The five reasons he gives for China's imminent political revolution have been exhaustively discussed over the years. [fold]

His first refers to capital flight, with officials or members of the elite trying to set themselves up inside and outside China. But this started in the 1980s, almost from the moment some Chinese started to get wealthy. And the political elite were always up to it. Deng Xiaoping's son studied in the US. Hu Jintao's daughter lived there for a while. Non-convertibility of the Chinese currency means movement of their assets is more 'visible' as it goes out of China. Unlike the nomadic super elites elsewhere who can hide the shifts of their capital and assets around the globe easily, Chinese can't. But this doesn't portend impending Armageddon because of a collapse of confidence in the political system. It just means people in China are richer and more of them can do these things now. 

Shambaugh is probably right in saying that Xi Jinping and his hardline war on corruption has made some enemies. But in fact, Xi is using this campaign to edge China towards pragmatic structural changes along the same lines Shambaugh indicates would create better governance in China. He is making officials more accountable and, for all the fear it has created in the administration, the campaign has been popular on the street.

Among the property owning, investment seeking middle class of urban China who will be the warriors that create the country's service-orientated future, the anti-corruption campaign is welcome. For them, the language of stronger property rights and more financial stability in banks and investment vehicles, at least as it is laid out in the Fourth Plenum held last year, is appealing. These are the people Xi and his colleagues have to keep on side, not fat cats in the Party creaming off vast illicit profits for their networks in the state enterprise system. 

Shambaugh is probably right in saying that the game being played out in China now is one of high stakes. It could go horribly wrong. Christopher Coker from LSE delivered a similar warning against complacency in a book on scenarios for conflict between China and the US. 'The best way to avoid war,' he says, 'is to prepare for it.'

Similarly, the best way for China to avoid regime collapse is to prepare for it. The government seems to be permanently in crisis mode. The ugly crackdown on dissidents and activists (including five female ones earlier this month on International Women's Day), as Shambaughrightly says, shows a lack of political imagination. It is almost as if the government is picking on the same old list of easy victims and soft targets. Bashing up dissidents and activists should be stopped. They are the wrong targets.

But Xi, to his credit, has also struck against one of the most unpleasant members of the old elite generation, Zhou Yongkang. This was not an arbitrary strike. There was political logic to it. So far, for all its sprawling, messy character, the anti-corruption campaign does make sense.

Finally there is the biggest question, and one that hovers over much of Shambaugh's article. Beyond shrill nationalism, what precisely does the Chinese Communist Party offer as a belief system and national vision to its people and the world in the 21st century? We know what it doesn't want; some of these things are spelt out in documents like the No. 9 edict Shambaugh refers to from 2013. But beyond national rejuvenation and addressing historic resentments, what is the great China vision which the country and the world can buy into in the coming decades?

If the Party can capture the emotional life and convictions of the Chinese people, then anything is possible. But its message at the moment is one where idealism is mixed with fear and coercion. There needs to be an historic reset, something like a renegotiation of the social contract between the Chinese people and their government. I am not as pessimistic as Shambaugh about the outcomes of this, but I do agree something needs to be done.

The fundamental problem is that this intensely internal issue will have immense implications for the stability and prosperity of the world – and yet the best that foreigners are likely to manage is a bystander seat. 

Photo courtesy of Flickr user Remko Tanis.

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