China: Strategic Culture & Political Economy
The final part of the chapter on China, USA is next.
The two main fundamental aspects of a capitalist society are the existence of socially unencumbered private property rights (especially land and the means of production) and the existence of an independent capitalist class that owns the majority of that property (especially the means of production) and can utilize the state apparatus to protect that property. In China since the mid-1950s, all land has been owned by the state or held in some form of collective ownership (e.g. rural collectives). The state is not controlled by an independent capitalist class but rather by the CCP, creating a Party-state (PS). The CCP has a membership of 90 million and is the dominant social, political and economic institution. State appointments are controlled by the CCP, including for state-owned enterprises (SOEs), removing the possibility of an independent state civil service. An independent civil society, independent media (including the Internet) and independent property-owning bourgeoisie are to all intents and purposes non-existent within China. PS control is maintained over the commanding heights of the economy, including the financial system. This control is extended through investment and lending relationships, informal networks, and the CCP committees that exist in all corporations. At the same time private property does not have the same level of protection as in the West; the owner can have his property removed and face criminal charges if deemed necessary. The Party-state-society complex (PSSC) is integrated to a much higher degree than in liberal democratic societies. It is the Party class that dominates society, not the capitalist class.
The market is a disciplining factor for corporations, including the SOEs, but it is an embedded market designed to serve the aims of the PS. When the vicissitudes of the market threaten a strategic industry, such as the solar photovoltaic (PV) industry in the early 2010s, the PS will be at hand to support the industry during rough times. Individual corporate winners may not be chosen, rather the industry as a whole is protected. Aside from the market, the dangers of over centralization are mitigated by the sheer size of and competition between Chinese provinces, many equal to sizeable nation states; aided by the state decentralization initiated by Deng in the 1980s until its partial reversal in the mid-1990s. This allows for a diversity of practices and localized flexibility, with the best practices becoming good examples for other provinces while the failures are only locally impactful.
The PS is seen as the center that must hold. It would be expected that any direct threat to it would be dealt with swiftly and effectively. Actions taken against Falun Gong, the Uyghur community, specific dissidents, and the Hong Kong protests fall within this expectation. Soon after Xi Jinping gained the leadership of the CCP he started an anti-corruption drive to improve a Party reputation that had been tarnished by significant levels of corruption. The drive also facilitated a removal of many of Xi’s opponents within the Party, consolidating his power. He has been very successful in having his own acolytes promoted to the Politburo of the CCP (Thomas 2020). A number of commentators now see Xi as the most powerful CCP leader since Mao, exceeding the power position that Deng enjoyed.
The alignment with the Mandate of Heaven and Confucian benevolent good governance is apparent not just in the anti-corruption campaign but also in the response to the increasing politicization of local environmental issues – especially air pollution within the larger cities. The CCP leadership has also taken multiple actions, such as heavy investment in rural and economically lagging areas, together with increased social services in such areas and increases in the minimum wage, to mitigate increases in income inequality. Together with rural areas possibly reaching the Lewis Turning Point at which rural migration to cities tightens up rural labor markets, Chinese income inequality has fallen significantly after peaking around 2010 (Li 2016; Kanbur, Wang & Zhang 2017; World Bank 2020). The focus on the equitable sharing of the benefits of growth was one of the key elements of Hu Jintao’s harmonious society strategy; PS benevolence experienced by all citizens. The BRI also serves to help develop many underdeveloped inland regions, as they become hubs for international transport networks. After a stumbling start, the effective and efficient response to the COVID-19 pandemic can also be seen in the same Confucian light. The center must not only be strong but also seen as legitimate through its actions and its ethics. It must be remembered though that the ideology of the Party is not Confucianism but Marxism. The position of Marxist ideology had been somewhat sidelined during the decades of focus on economic growth and efficiency, as the Marxist economist Liu Guoguang stated (Martinez 2022):
For some time, in the field of economic science research and teaching, the influence of western economics has increased and the guiding position of economic science of Marxism has been weakened and marginalized. In the field of economic theory research and teaching, it seems that nowadays Western economics has become the dominant trend; many students consciously or unconsciously take Western economics as the dominant economic trend in our country. Some people consider Western political economy to be the guiding thought for development and reform in China, some economists openly advocate that Western political economy should be seen as the dominant trend, replacing the guiding position of Marxist economics. Western bourgeois ideology permeates both economic research work and the work of formulating economic decisions. I am very concerned about this phenomenon.
Xi Jinping not only implemented a drive to reduce corruption, but also a drive to re-center the Party around Marxist philosophy, opining that (Martinez 2022):
Some people consider Marxism outdated, that China currently does not follow Marxism; some people consider Marxism to be just ideological “preaching” without rationality and scientific systematization. In practical work, in some fields Marxism has been marginalized, turned into something empty, symbolic.
A major focus of the Party under the leadership of Xi Jinping has been the need not just to achieve economic growth and efficiency, but to do those things within a socialist society. The “disciplining” of the private business sector of the past few years, and the reining in of its social power (e.g. with respect to the gathering and retention of customer data), is part of this process. Xi has put the challenge quite bluntly (Martinez 2022):
We must adhere to the political position of Marxism. The political position of Marxism is primarily a class position, which implements class analysis. Some people say that this idea no longer corresponds to the present era, which is a mistaken point of view. When we say that the class struggle in our country is not the main contradiction, we are not saying that in our country the class struggle within certain limits no longer exists, or that in the international sphere it doesn’t exist either. After the Reform and Opening, our Party’s ideas on this problem have always been quite clear.
The hegemonic culture does not treat Marxism and Confucianism as equal philosophies, and the Party ideology is certainly not a hybrid of Confucianism and Marxism as Jacque (2012) proposes. Marxism is the dominant philosophy and the neo-Confucianist movement has become much less evident under the leadership of Xi.
A significant surprise among many Western scholars and policy makers has been the lack of movement toward a society with liberal institutions, such as political democracy, a free press, and independent non-governmental organizations; why is this and will it continue? To answer such a question a historical materialist approach provides many insights. The Chinese state/society complex has swung between that of an effective central state that dominates society, and disintegration, for nearly four millennia – a continuous process of dialectical change rather than any smooth route to societal perfection. Even within dynasties there were dialectical processes present, as shown with the Discourses of Salt & Iron during the Han period, in which competing groups debated how much the state should intervene in the market for basic necessities that affect the cost of living of the general population. This historical discussion was an important part of the debates about the pace of liberalization of the Chinese economy in the 1980s, a period when a “big bang” economic and social liberalization was a significant option (Weber 2021). An example where ideas can be extremely long-lived, even when the material and institutional conditions that helped create them are well in the past; especially within a society with a multi-millennia continuous written history. Over the nearly four millennia, there were also popular uprisings and other challenges that had to be dealt with and new ideas integrated into an updated societal common sense as a result of these dialectical processes. The Century of Humiliation can be seen as the period during which this common sense was reconceptualized, after remaining relatively stable for over a millennium, to align with the modern world and the challenge of the West.
This resulting common sense includes the societal acceptance of a scale and scope of state activities that differs greatly from Western liberal conceptualizations. This stems from the association of social stability and the growth of material capabilities with a strong competent state, and social chaos and collapse in its absence. The interaction over time of the philosophy of Legalism that was the ideational base for the first imperial dynasties (the short-lived Qin and then the four century Han) with the repeated successes of states that utilized it drove a positive feedback between material capabilities, institutions and ideas. Confucianism added the need for the state to rule benevolently, for the benefit of the nation as a whole, benefitting from the same positive feedback between the forces. As noted above this process was not smooth, as shown by the repeated collapses and reconstructions of the Chinese state/society complex – each of which brought new derivations of the same basic formula; for example, competitive exams for state bureaucratic positions. These Legalist and Confucian concepts align well with a Marxist-Leninist tradition that envisages a strong state working through a central planning process to foster the good of the working people and the limiting of their exploitation. The lack of a bourgeois revolution, either organically or from above, also meant that markets were not seen as a separate realm better left independent of the state. The ease of the combination of aspects of different philosophical schools, points to a level of ideational pragmatism in state building, far predating Deng’s famous statement that “It doesn't matter whether a cat is black or white, as long as it catches mice”. Although it must be remembered that Marxism is the dominant philosophy of the Party, a position that Xi Jinping is reasserting and reinforcing.
The victory of the communists in 1949 put paid to the development of a capitalist economy and the dominance of the state by capital. Instead, the communist Party-state very much followed the historical practice of a strong, and socially dominant, central state. Even after the extensive reforms started by Deng, there is still not a truly independent bourgeoisie, instead the Party-state remains as the dominant elite grouping, “In the Chinese state–society complex, primacy rests not with an autonomous capitalist class but ultimately with the state and a state class organized around the Communist Party, which is still the dominant source of power in society” (de Graaff & van Apeldoorn 2018, p. 116). A Party-state dependent upon a performance legitimacy that very much aligns with the historical concept of the Mandate of Heaven and has been burnished by the incredible growth in material capabilities that it has overseen in the past decades.
In this context, Xi’s focus on routing out corruption, asserting the power of the Party-state with respect to the wealthy and their corporate vehicles, and the need to reduce income inequality, can be seen as a logical rebalancing after the excesses created by the breakneck and less controlled growth of the first decade of this century. All things that previous emperors and their administrations would have been at home with as they worked to maintain the strong central state’s efficiency, effectiveness and legitimacy. In at least the medium term, the strong Party-state will remain as the dominant social, economic and political institution and the creation of an independent bourgeois class will continue to be stymied.
The work of the Amsterdam School adds to these insights through its focus on the background and relationship networks of the societal elite. The PS elite is seen as independent of other national and cross-national elite groupings, an independence supported by the Party control of the “commanding heights” of the economy (e.g. finance, energy and media) as well as the bureaucratic recruitment and advancement processes. China’s independence is not just supported by its material capabilities, institutions and ideas, but also through the career paths leading to membership of the policy-making elite. Xi’s extensive focus against corruption within the PS, as well as the recent reassertion of PS dominance over economic elites, will serve to bolster that independence.
It is this PS elite that provides the Chinese strategic culture, imbued with the historical beliefs and learnings of China aligned with Marxist philosophy; the fundamental belief in the efficacy of a strong central state (and Party) populated with highly educated and experienced bureaucrats, dependent upon the people for its legitimacy and with a strategic vision of a reinvigorated Middle Kingdom. The multi-decade process through which a leader rises through the Party hierarchy, during which they experience increasingly senior and diverse assignments, will tend to reinforce group cohesion and identification with the Party. This long process of advancement within the Party, together with the long tenure of paramount leaders (14 years for Deng, 10 years for Jiang, 10 years for Hu,11 years so for far for Xi) and other senior officials, supports a long-term orientation to strategic planning and decision-making; in contrast to the US political cycles that regularly place individuals with no previous state executive experience in senior positions, including that of the President. Such a strategic culture can support the multi-decadal commitments required for such things as the Belt & Road Initiative and a move beyond the middle-income trap; it also mirrors the leadership stability during the rapid economic growth of Japan (the LDP), Korea (Park Chung-hee), Singapore (Lee Kuan Yew), and Taiwan (the Kuomintang).
The personal experiences of Xi and many of his colleagues during the Cultural Revolution also serve to reinforce the perceived efficacy of a strong central state, as well as the need to limit the impact of a somewhat rogue individual leader (such as Mao). Xi may now have gained as much power as Deng, but the strategic culture will provide much resistance to him ever becoming a Mao; somewhat mirroring the focus on collective leadership within the Soviet Union after the time of Stalin. The strategic culture is also affected by the material capabilities of China versus the Western powers, hence Deng’s foreign policy orientation of keeping a low profile to allow for the unimpeded focus on economic growth. China’s multi-decade exponential growth has now placed it into a position to start to challenge the West’s dominance of the world order, and these new circumstances have been reflected in a more assertive foreign policy. The strategic culture is also informed by the historical way in which China has dealt with foreign powers, which differs greatly from that of the US. The Tribute system did not require the invasion nor cultural dominance and homogenization of other nations, instead it focused on the benefits of trade while accepting heterogeneity and independence as long as the leading position of China was acknowledged and not challenged. These ideas can be seen in the material capabilities and institutions of the Belt & Road Initiative, and provide a fundamental ideational, as well as material and institutional, challenge to the way in which the West has operated. China’s foreign policy, including recent policy statements, tends to align with the Five Principles of Peaceful Coexistence first formulated by Zhou Enlai in the 1950s. Principles that support the Westphalian concept of state sovereignty and stand in contrast to Western interventions in other state’s affairs and conceptualizations of humanitarian intervention:
· Mutual respect for each other’s territorial integrity and sovereignty
· Mutual non-aggression
· Mutual non-interference in each other’s internal affairs
· Equality and co-operation for mutual benefit
· Peaceful co-existence
In recent years, the CCP has also started to increasingly use nationalism as a tool of legitimation, utilizing the need to overcome the Century of Humiliation and re-establish the Middle Kingdom in Asia for purposes of both legitimation and social unification. This nationalist orientation, combined with performance legitimacy, orients the CCP (and hence the state) toward a focus on traditional concepts of the national interest. The lack of a truly independent bourgeois sector (Starrs 2017), together with the lack of integration and subjugation of Chinese elites into transnational networks (de Graaff & van Apeldoorn 2018), also supports the view of the Chinese elite as focused predominantly on the Chinese national interest; the raison d’etat. This argues for a realist (within the Chinese Legalist philosophy) strategic culture perspective, imbued with Confucianist and tributary elements that do not call for the geographical, military or philosophical dominance of other nations as long as those nations do not threaten China; a strategic orientation that also combines a strong defense to deter aggression with a preference for victory without the need for battle. This shares much with defensive realism.
Strategy is less about winning battles than it is about winning without a battle. Good strategists seek positions that are so powerful that no one challenges them. Fighting opponents openly is usually the failure of strategy … The goal is to create positions that others cannot attack and that ideally they want to join. Sun Tzu teaches that a general who fights a hundred battles and wins a hundred battles is not a good general. A good general is one who finds a way to win without fighting a single battle. Strategy teaches that you win by building the right positions and advancing those positions while avoiding conflict. (Gagliardi 2014)
The nationalist orientation, together with China’s continued strong economic growth, places China in the position of the rising power attempting to establish its own sphere of influence; very much as the US did with respect to the Western Hemisphere. Unlike the British though, the US is highly unlikely to acquiesce to the establishment of a Chinese sphere of influence. This is underlined by a US (and Western) position that seems to be, “[the] United States and other Western powers … [are] eager to bring China … on board to share responsibilities … but … not willing to give up their much larger share of the decision making power” (Li 2011, p. 347). China is also surrounded by strong powers (Russia, India and Japan) that restrict its room for geopolitical maneuver. The Chinese elite nationalist orientation also places it at odds with the US TNC elite, as it represents a barrier to the latter’s ability to fully control and profit from the Chinese state/society complex. In addition, the CCP’s fostering of globally competitive Chinese firms creates strong competitors to US (and other Western) TNCs.
With the Chinese economy continuing to grow significantly faster that the US and Europe, time is on the Chinese side. From a defensive realist stance, and one of power transition theory, it would be best for China to not trigger a military conflict and deter one through a strong defensive position. China has increased the size of its military in line with economic growth to deter aggression from other powers, an objective enhanced by the increasingly close relationship with Russia. Its military has also been reoriented toward deterring an aggressive US move through the denial of a safe operating space to the US navy in the Western Pacific and South China Sea through such things as long range anti-ship missiles and submarines. Expansion has been carried out through financial, economic and diplomatic means, the BRI being the prime example, which should not trigger open conflict. With forecasts that show the Chinese economy on a PPP basis more than twice as large as the US and bigger than the US and Europe combined by 2030, it may be only a decade before China once again becomes the Middle Kingdom. This places a strong imperative on continued economic growth and development within the Chinese strategic culture.
As I will argue in the chapter on the US, China faces a main opponent that is not fully aligned around an agreed raison d’etat, with significant contention within the elite. US corporations have reaped extremely large profits from both the location of production within China, and their ability to sell into the large and expanding Chinese market. An excellent example is that of the Apple global value chain (GVC) that allows for that corporation to capture over 50% of the value of iPhone sales (Phillips 2017). This creates a tension within the US elite with respect to steps that may benefit the relative US strategic position but directly, or indirectly through Chinese counteractions, damage TNC profitability and market positions. Another possibility is that actions to limit the use of US corporate intellectual property (IP) by Chinese firms may accelerate a drive to replace that IP. Given that the control of GVCs is heavily dependent on IP (Phillips 2017), such moves are a direct threat to the US and Western TNCs that currently dominate most global GVCs. Such considerations may significantly delay substantive US action and facilitate a “playing for time” Chinese strategy. The opening of a Tesla factory in China, aided by funding from the Chinese state, could be seen as the creation of a useful hostage in such an environment.
The concepts of competing state/society complexes and the co-creational combination of material capabilities, institutions and ideas allows for a full appreciation of the scale and scope of the challenge of China to the US, and the West in general. The fundamentally differing backgrounds of the competing societal elites, with very different worldviews and relatively few connections between them, also underline this challenge and the great difficulties that the US elites will have in attempting to co-opt Chinese elites. In addition, the historical legitimacy of the state, together with that developed by the Party-state in recent decades, does not augur well for any attempt to separate the latter from “the Chinese people” as imagined by the then US Secretary of State Mike Pompeo (2020). The still relatively low level of GDP per capita underlines the opportunity for the Chinese state/society complex to outgrow the scope and scale of its US counterpart; empowering an elite centered on the Party and state rather the capitalist class as in Western nations. The differing material and institutional capabilities with respect to domestic fossil fuel production and the technologies required for a low-carbon energy transition only deepen the challenge, as China seems positioned to gain significant advantage with respect to the US during any such a transition. The continued success and growth of China becomes a direct challenge to the interests of the Western capitalist classes and their ability to dominate both the international system and their own domestic citizenry.
The Chinese state/society system does not have an internal fossil fuel capitalist group that may resist an energy transition, as the energy sector is owned by the Party-state – i.e. the nature of the elite and political economy removes significant barriers to such a transition. An industrial policy that has favoured green technologies as part of a policy of continuous economic upgrading and growth (central to the continuing legitimacy of the Party-state), together with the position of China as a major oil importer, will result in significant benefits from the move to low carbon technologies. In addition, a focus on the electrification of transport will benefit domestic energy production and reduce the dependence upon foreign oil. A limitation upon the speed of such a transition will be a strategic culture that values social stability, and a need to support Russia and Central Asia that are important allies that secure its borders, support its energy security in the short and medium term, and provide military and geopolitical support in the case of Russia. The result may be a transition that is faster than that in the US, but not too fast to threaten internal and external stability.
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Bravo! An ambitious agenda and a fine tour d'horizon.
My day job is editing a newsletter about China for central bankers and government officials on their China desks.
For the past three years I have learned of every Chinese accomplishment as it happens, in real time, and that time is 3-5 years ahead of where our media tell us China is. As the bearers of evil tidings, they know that evil tidings are an evil thing to bear.
We'll find out soon enough things lie
– China's productive (wartime) economy is 300% bigger than ours
– It will add $1.2 trillion this year – more than the entire GDP of 70% of the world's countries
– One Type-55 can sink three carrier battle groups without coming in range of the group's assets – and still have enough missiles to sink another battle group.
– China is ahead of us in every science and technology, not just 37 out of 44, as the State Department claimed.
It's over. It's too late.
Thank you, so insightful!