A recent, excellent episode of the Sinica podcast featured
the economist Yukon Huang, and his words shone a ray of light into the cloud of
geopolitical pessimism which generally hovers about me, such that as I write
this, I feel somewhat more optimistic not only about China’s feature, but also
about the future of US-China relations.
Like many foreign observers, I have been rather downcast
about the general air of autocracy and xenophobia which has intensified during Xi
Jinping’s tenure as paramount leader. I have, of course, been equally if not
more pessimistic about the Trump presidency. And with the recent news of the
Trump administration imposing unilateral sanctions, a trade war looms.
But I have lately wondered whether my thinking about the
intentions of Party Central is rather mistaken. I generally begin with the premise
that the primary goal of the Communist Party is self-preservation. I still
think this is true, but the result is that one tends to assume bad faith in
everything they do, when in fact, they may very well have a strong desire to
benefit the Chinese people, because that’s how they’ll retain power.
As much as I deplore the Chinese state’s human rights
abuses, I have to admit: I think they’re pretty good at running the economy. Many
international economists and most of the international media are eternally
bearish on the Chinese economy. Just google “China bubble.” Back in 2012, when
I first moved to China, everyone talked about the housing bubble’s impending
explosion. We’re still waiting. In the last few years, I’ve heard much more about
China’s ostensible debt bubble. We’re still waiting. This isn’t to say that
these are not bubbles and they’re not going to burst. Perhaps they will.
Or perhaps the market fundamentalists want China to fail.
Huang’s analysis of the housing market is sunny: yes,
housing prices have risen 500-and-some-odd percent in about a decade, but that’s
fine. Why? Until recently, Chinese housing was entirely state-provided. The
private housing market was only instituted in 2004 (per Huang), and prices are rising
to meet the real market value of housing, which had not previously been
determined—as they should. Regarding debt, Huang points out that China’s total debt-to-GDP
ratio (257%) is higher than the average developing country, but lower than the
average developed country. That’s exactly what we should expect, because China
is, indeed, somewhere between developing and developed.
In short, Huang argues that the fundamentals of the Chinese economy
are strong at present, and he seems to think they will remain so for the medium
term. The most urgent question, to my mind, is how China’s economy can remain
healthy in the long-term given its aging population. The Chinese government has,
however, settled on a solution to that problem, namely, massive investment in
AI and automation. Having followed arguments about AI for while now, here my learned
opinion on it: no one knows what it is let alone what it will lead to.
In arguing about politics and policy and where they lead us,
we try to make arguments by analogy with history. People tried this there and
it didn’t work; people tried that then and it did work. Marxists insist on laws
of history which allow us ironclad predictive power. Economists, likewise, tend
to insist on the empirical rigor and validity of their models. People lose sight of the role of possibility; we think of low probabilities
as not really being possible. As for me, my tendency to gloom impairs my
ability to admit happy possibilities.
I often worry that China is moving toward totalitarianism,
by which I mean a system in which the state attempts to insert itself into
every aspect of life, which was already China’s situation in the fifties and sixties.
It would be bad for Chinese people, bad for me personally, and bad for the
world. Why do I worry about this? Because of Xi’s growing cult of personality,
because of the breakdown of norms of leadership transition in the Communist
Party, because of increasing state-sponsored xenophobia, because of the experiments in surveillance being conducted in Xinjiang, and because of the nascent social
credit system. Yet as much as these are the things that preoccupy me, they are
just elements which point toward possibilities.
There are other trends, other indicators, and other
possibilities. In comparative political economy, the historical evidence
indicates that in order for a country to transition from middle-income to
high-income, it must liberalize its political system. The only exceptions have
been petrol-states such as those of the Persian Gulf, which have managed to
attain high-income status while remaining authoritarian monarchies. For China-watchers,
this means that the Communist Party must relinquish some power in order for China’s
per capita income to continue rising; otherwise, the country will remain mired
in middle-income authoritarian mediocrity.
To me, this simply means that China faces a rocky road
either way. But Yukon Huang makes a startlingly optimistic statement in this
regard. Comparing China with South Korea and Taiwan, historically similar East
Asian developmental states, he points out that both countries made their transitions
from authoritarianism to democracy at almost exactly the same time, exactly the same level of per capita income, and exactly the same level of urbanization; he
then goes on to say that China will reach these same levels in 2025, the
implication being that China will democratize or at least liberalize in that
year.
Again, Huang’s optimism about the possibility of democratic transition
in China is frankly shocking. Why? Because among China watchers—whether
academics, journalists, or Western government officials—views of China have
become increasingly dour since the years of the George W. Bush administration. Toward
the end of the Obama administration, the US government found it increasingly
difficult to accomplish anything in partnership with China. Xi Jinping and
Obama did not get along. Military tensions have risen with China’s claims in
the South China Sea and America’s belligerence toward North Korea. In 2016, the
Trump campaign pushed conspiratorial views of the Chinese-American trade
relationship, and now the Trump administration seems to be getting around to
acting on them.
The US diplomatic community has even begun to question the
fundamental nature of the US-China relationship. Ever since Nixon went to
China, the guiding principle of American China policy has been engagement: the
idea that being open to China is in America’s interest, because a China which
trades with “the free world” will be less aggressive, because trade will make
both sides prosper, and because American liberal democratic values will flow in the wake of
trade, ultimately transforming China into a free society. As Nixon put it: “We
simply cannot afford to leave China forever outside the family of nations, there
to nurture its fantasies, cherish its hates, and threaten its neighbors.”
A significant part of the US diplomatic community has given
up on the idea of engagement, because they feel that our efforts to strengthen
China have proven harmful rather than beneficial to us: Relations with China
may have helped us to balance against the USSR, but now China presents a military
threat to the democracies and US allies in Asia. Having pushed very hard for
China’s entry into the WTO, we now have a massive trade deficit with China. The
American corporations which have ventured into the Chinese market have faced
huge impediments put up by the Chinese government and have been bullied into tech
transfers while the Chinese government runs a state-sponsored program of intellectual
property theft via hacking. The list goes on, and even in the realm of values, perhaps
it is we who begin to resemble the Chinese more than they have come to resemble
us. In the last year, we have seen all manner of authoritarian, illiberal,
mercantilist attitudes take over the US government. Trump’s behavior feels all-too-familiar to me. The CCP has been
calling the American media fake news for decades.
Yet values are hard to define and perhaps difficult to see. For
one thing, it is undeniable that engagement has helped to change the economic
attitudes of the Chinese people. At this point, the youth of America are in
love with Bernie, an avowed socialist, whereas the youth of China are acolytes
of Dale Carnegie. The culture of Silicon Valley has now corrupted the minds of
many more Chinese youths than American, and they undoubtedly quote Steve Jobs more
frequently than Mao.
Liberal social attitudes, it seems, have yet to follow suit,
in part due to the Chinese government’s vociferous resistance to civil society—particularly
civil society with foreign ties. Yet what progress there may be is difficult to
track. A #metoo-inspired movement, for example, has caught on to some extent in
China, yet it is impossible to say how widespread support for such movements
is, because anytime they flare up on Chinese social media, the censors quickly
stamp them out.
At least we can say that rap music has received the
Communist Party’s seal of approval, since Xi himself has featured in
state-sponsored propaganda raps.
We are all caught up in dystopian thinking. If AI isn’t
going to go all Skynet on us, the use of CRISPR on human DNA is going to result
in a caste system or vampires. And it is in China that some of us expect these things to go
wrong first. Yet society improves sometimes! How do we know this? Because the world has
gotten much, much better since 1918. And this very much applies to China, where
hundreds of millions of people have seen real improvements in their lives with
the economic reforms since the 1970s.
What Huang has reminded me today is that the improbable
is still, after all, possible. Try to imagine the world in 2100. The more
reasonable you are, i.e., the more possibilities you consider and the more you
try to assign them probabilities based on the evidence of the past, the more
you must admit the utter impossibility of prediction. So why not take a moment
to consider some things that could go right in China in the near-to-medium term?
One Belt, One Road could lead to faster economic growth
throughout the developing world. China’s new anticorruption institution, the national supervisory commission,
may finally systematize anticorruption efforts. The Party might finally get
around to deeper State-Owned Enterprise reform. Urbanization is probably going
to continue apace, which will mean more productivity growth. The welfare system
is going to continue getting tweaked, and it might work out pretty well. The
state’s massive investments in research will probably pay dividends of some
sort eventually. Heck, rule of law might even become an actual thing!
But political liberalization in 2025? That would be a
gargantuan, earth-shattering change. When one considers the amount of resources
the Chinese state throws at social control—whether it be in policing,
propaganda, censorship, surveillance, united front work, or the social credit system—it is just plain
inconceivable to me.
Maybe I’m short-sighted. There have always been multiple voices in the Party, and who
they are and what they are advocating has seldom been apparent to outsiders
until years later, when the documents are released. Xi Jinping does not appear to care about democracy, but then
again, who predicted his intense anticorruption campaign? Democracy is one of
the Socialist Core Values. Scoff at those if you want, but the Party has always professed an intention to implement some kind of democracy. Perhaps it begins
with intra-Party democracy. Perhaps elections for cadres at the lower levels
become both universal and genuinely competitive. Perhaps the success of the new
anticorruption body convinces the central leadership of the usefulness of genuine
rule of law. Perhaps an economic downturn sparks protests severe enough to
convince the Party of the necessity of a more reliable form of public
consultation. Perhaps Xi’s successor is a Hu Yaobang or a Zhao Ziyang. It seems
unlikely now, but no one actually has any real idea who will succeed him anyway,
so who knows?
We don’t see the big changes coming. That is reason for optimism as much as for pessimism.
