2007 Demographic #02 China Forecast

PDF:  D02 China [with Graphics]

DEMOGRAPHIC: China

China was ruled by a Dragon-Emperor for over 2,000 years. The subsequent sixty years of rule by the Chinese Communist Party has used that as a model for its equally unquestioned centralized dictatorship.

Note: Where possible pinyin standard transliteration has been used. Pinyin was officially adopted in 1979 for spelling Chinese in Roman letters. Variants such as “Peking” and “Mao Tse Tung” will soon disappear entirely.

The Dragon Emperor (221 BC – 1967)

In 221 BC Yi Zheng (of terra cotta warriors fame) founded the Qin dynasty and united many warring fiefdoms into a single entity that continues through to today as the core of modern China. This was not an

Three hundred years before Yi Zheng, Confucius (K’ung-fu-tzu; 551-479 BC) had committed the principles of good governance to writing. Confucius – like his contemporary Lao Tzu – was an archivist, a courtier familiar with the written precedent and able to advise the ruler on traditional wisdom, “ lessons learned” in modern terms. These social systems proved resilient against all impacts – when the Mongols invaded China in the 13th century, they were subsumed into Chinese society, and ruled in the Chinese manner.

Although the Han are the dominant ethnic group, the Manchu were able to supplant the Ming dynasty in 1644, establishing the Qing dynasty centered on Beijing. This was to be last dynasty. Assailed throughout the 19th century by the British and others who forced China to trade at gun-point, by Russian intrigue and by Chinese republicanism, the last emperor P’u Yi (1906-1967) was deposed by the nationalists in 1912, and was “non-ruling emperor” until 1924. The Japanese later attempted to reinstate P’u Yi for their own imperialistic purposes but he was captured by the Russians, handed over to the incoming Chinese Communists and re-educated. The last Dragon Emperor – Lord of Ten Thousand Years – died as an ordinary Chinese citizen in 1967.

The Dictatorship of the Proletariat (1949– )

The emperor was the least of worries for the republican nationalists Sūn Yìxiān (“Sun Yat-sen”) and his protégé Jiǎng Jièshí (“Chiang Kai-shek”). From 1916 into the 1920s, China fragmented into warlordism, shifting alliances between warring regional leaders. The Russians fresh from their own people’s revolution were eager to advise the nationalists and helped establish the Guómíndǎng (“Kuomintang” – Nationalist People’s Party) with the germinal Chinese Communist Party as junior partners. With the death of Sūn Yìxiān in 1925, Jiǎng Jièshí saw it necessary to take full control of the Guómíndǎng and he started to kill his Communist allies. Twenty years of struggle followed, punctuated by a brutal invasion by Japan, ending in 1949 with the Communists under Mao Zedong winning control.  Jiǎng Jièshí fled to Taiwan and declared Taipei the capital of the Republic of China; Mao Zedong declared Beijing the capital of People’s Republic of China (PRC). Taiwan retained the “China” seat on the UN Security Council.

China was exhausted. Generations, perhaps centuries, of failing imperial rule, depredation by the West, genocide by Japan, and twenty years of civil war had done little to improve the lot of an agrarian, feudal population.

The Great Leap Backwards (1958-1966) 

The authority of the Communist Party quickly filled the vacuum of public order throughout the country, with order assured by the massive politically-correct People’s Liberation Army (PLA) still bloodied from years of battle. Within a decade Mao thought he knew better than his Russian advisers and instituted the Great Leap Forward, universal industrialization from the bottom up. Countless “backyard” iron and steel refineries and small factories sprang up throughout much of China. This revolutionary approach may in some form have worked over time – in some ways it did – but in the short-term it was disastrous and China experienced the worst famine in history 1960/1961. The diaster coincided with emerging ideological differences and Russia ceased all technology transfer, withdrawing all advisers by August 1960. Sino-Soviet relations froze.

Most, if not all, saw the need for a new strategy and Liu Shaoqi (State President) and his protégé Deng Xiaoping (Party General Secretary) promulgated practical middle-way policies. Mao (Party Chairman) refused to forsake his Way and in 1966 launched a vast proletarian “ Cultural Revolution” against the “revisionism” of Liu and Deng. The Red Guards – youth with Mao’s authority and a zeal verging on religious mania — attacked party and state official s and organizations at every level to purge China forever of reactionary thought and backwards-going. Few were killed but a generation of intellectuals and the capable were deposed, humiliated, and “re-educated” by ignorant 14-year olds. The widespread anarchy achieved nothing to advance the Chinese people.

By about 1973, the teenagers had exhausted themselves and Deng was appointed in 1975 to the Politburo Standing Committee, Chief of the PLA, and Deputy Premier, a potent triumvirate of posts. But the Mao camp was not beaten — Mao’s wife, Jiang Qing, and three others (later known as the Gang of Four) continued the Cultural Revolution and fought all that Deng stood for. On 05 April 1976, a spontaneous demonstration was staged a in Tiān’ānmén Square in memory of the popular Zhou Enlai (who had died in January) and in implicit support for Deng. They may also have sensed Mao was on his death-bed. The authorities panicked and forcefully dispersed the demonstration. Deng was blamed for the un-Chinese disorder and stripped of official posts.

With Mao’s death in September 1976, the Gang of Four were arrested and humiliated and then China went very quiet for almost a year while workable consensus was reached among the elite. In August 1977, Deng was rehabilitated to all of his previous posts and “pragmatic” – rather than “revolutionary” – policies were again on the table. The party also tried to rehabilitate elements of society who had been alienated by the Cultural Revolution; intellectuals and social critics were given license for critical analysis but it was clear to all that no license extended to critic ism of the Party’s singular authority. In 1980 the Cultural Revolution was officially described a catastrophe. Appointment of reformist Hú Yàobāto Party General Secretary in 1981 further signaled the future course had been set.

Reform policies, and particularly the suspension of central direction – a de facto “free market” — brought immediate improvement in the living standard, particularly among urban workers. But market forces also brought price rises, the re-emergence of crime, and seemed only to highlight how much greater reform was possible. In December 1986, there were demonstrations calling for faster reform. The Party failed to see this as healthy social criticism. Spontaneous assembly was seen as social instability and next month Deng was forced to blame his own protégé Hu Yaobang for the “unrest” and dismiss him as Party General Secretary, to be replaced by Premier Zhao Ziyang. Note how this reveals the relative importance of posts – Party General Secretary is a more powerful post than Premier (“Prime Minister”).

But Zhao was also a reformist and he came under attack from both camps – from some in the Party for courting social upheaval, and by some in the population for either slow reform or for consequences of reform such as price rises and inflation. A border away, in June 1987 Mikhail Gorbachev introduced the policy of Perestroika (“restructuring”), a watershed in Soviet history and winds of change that may have frightened some in China. A disaffected urban population was forming and the death of Hu Yaobang in April 1989 provided focus for demands for continued and faster reform, and for an end to official corruption. Protestors, mainly students, assembled in Shanghai, Chengdu, and Guangzhou and in Beijing at Tiān’ānmén Square. The crowd in Tiān’ānmén refused to heed government directions to disperse; martial law was declared on 20 May 1989 and several more days of standoff followed. On the night of 3/4 June army units from beyond Beijing cleared the Square with prejudicial force and a yet unknown number of demonstrators died.  Deng and the reformers were again blamed for causing social instability and “reform” became a politically-dangerous word.

Three years later, Deng made his third and final comeback. In early 1992 he traveled to the industrial heartland in southern China signaling market-based pragmatism was again to the fore. The living standard of the proletariat was to be China’s primary policy objective, even if this meant arrangements with “capitalist” principles were necessary. Crucially, the Party Politburo publicly issued an endorsement of Deng’s policies of economic openness. This has remained official policy since that day. China had finally resolved the dilemma between Communist rule and Free-market Capitalism with a unique solution – free-market capitalism under Communist dictatorship.

Transition

Deng Xiaoping died in 1997 (1904–1997). Unlike Mao, Deng was an urbane man educated in France (as were Ho Chi Minh, hero of Viet Nam and Zhou Enlai, China’s first Communist premier). He never held top State office of President or Premier but for 20 years was de facto leader of China, and for decades before that one its key helmsmen. He is the person most responsible for the form of modern China. His repeated survival and re-emergence attests to consummate skills of negotiation and persuasion.

Transition to a new generation was seamless; power devolved to President Jiāng Zémín (1926- ) and in March 1998 Zhu Rongji replaced Li Peng as Premier   In November 2002 Hú Jntāo (1942-), another Deng protégé, became General Secretary. By late 2004 he was also elected President and Chairman of the Central Military Commission, control of the PLA. China has not significantly resiled from its commitment in 1992 to economic reform and accession to the WTO in 2001 meant China had met “free market” standards that Russia is yet to meet. China sees its hosting of the 2008 XXIX Olympiad in Beijing as a final proof that the Long March has brought a modern China into a modern world.

People

The Han Chinese (92%) are the overwhelmingly dominant ethnic group but minorities such as the Manchu (10 million) have played a major part in centuries of Chinese history. Other minorities – the Turkic and Muslim Uygur (7 million), the Mongolians (5 million), and Tibetans (5 million) – are not fully willing citizens of the Chinese Republic. Other substantial minorities are Zhuang (16 million), Hui (9 million), Miao (8 million), Yi (7 million).

The Chinese population of 1,314 million is 20% of the human population. The government estimates the population will stabilize in around 2050 at around 1,600 million. Decades of zero-population-growth (ZPG) policy has produced an demography similar to Western nations – the median age of 33 years is closer to that of the USA (37 years) than to the median of Indonesia (27 years). Indicative comparisons are: Nigeria 19; India 25; Indonesia 27; China 33; USA 37; UK 39; Germany 43. There were reports offorced abortions in some regions to enforce ZPG but this may have been excesses of local party apparatchiks rather than the hand of Beijing. The one-child policy has been mainly pushed through propaganda and monetary sanctions. ZPG has largely worked and China has curtailed unsustainable population growth. As a capricious side-impact this has produced a nation of only children, often obese and self-centered only children, a vast number of “Me Generation” individuals which will have yet unknown social and political consequences.

Government

The Chinese constitution places the 2,985 seat National People’s Congress (NPC) as the legislative branch and supreme organ of government. This is a delegatory body, representing the Chinese population more than any other institution. It elects (or confirms Party recommendations for) the President, the Premier, and the State Council (Cabinet) and other functionaries of day-to-day government. The NPC has a permanent Standing Committee which exercises the authority of the NPC when it is not in session.

In reality the Party runs China and, in the most cynical view, the NPC simply rubber-stamps Party programs. Only 5% (66 million) of the population are members of the Chinese Communist Party. Constitutionally, the Party’s supreme body is the Party Congress, which generally meets every 5 years but the24 member Politburo (and its core 9 member Politburo Standing Committee), and the Secretariat headed by the General Secretary are the locus of real power. In a reductionist analysis, the Party General Secretary (or the Chairman in Mao’s day) is the center of power. But with Hú Jǐntāo’s rise to power all three key offices of President, General Secretary, and head of the PLA, reside in him. This may signal the first generation of a shift of gravity from Party to State-like apparatus.

China’s reality mitigates against a hopelessly cynical analysis. The complex story of China’s last 50 years is conspicuously lacking the purges and murders of Stalinist Russia. Deng Xiaoping would not have returned from political disgrace so many times – or lived to 93 — in many other societies. China does believe that only a ruthless autocrat – the Dragon Emperor – can rule China but the Chinese way is also one of personal relationships and consensus. The world press sees highly orchestrated NPC meetings but China watchers say there is active debate in closed sessions and a desire to rule by consensus.

Opposition

The China Democracy Party – with offices in Washington DC – is overtly opposed to the Chinese regime. Along with opposition elements based in Taiwan, it seeks the democratization of China in the Western manner. Although fundamental human rights shortcomings remain in China, the new policies of guided free market capitalism has considerably defused economic arguments for regime change.

The reasons China has banned Fǎlún Gōng as a subversive group are not clear. It is a quasi-religious spiritual movement with no overt antagonism to the regime; however it is fiercely proscribed in China and the government seeks to deny it comfort anywhere in the world. A likely explanation is Fǎlún Gōng’s success. It was formed in 1992 and by 1999 was said to have over 70 million followers, more than the Chinese Communist Party. The Party may find it perturbing to see a movement of any type grow so large so rapidly. It may be that Fǎlún Gōng offers a dangerous precedent for a broad-based democracy movement.


Separatism is a threat in waiting for China. The Turkic Muslim Uigars of Xingjiang-Uigar Autonomous Region have more in common ethnically, religiously, historically with Kazakhstan and Kyrgyzstan than with Beijing. The Uigars identify with other “oppressed” Muslim populations in Central Asia where Islamist activism is a challenge to some degree to each government in the region around the Fergana Valley. During the 19th century when central authority was already weakened by a number of challenges, Russia fomented separatism in Xinjiang that almost succeeded in breaking it from China. At least two other Autonomous Regions are similarly disenchanted with being part of China — Nei Mongol (“Inner Mongolia”) and Xizang (Tibet). People of Nei Mongol identify with adjoining independent Mongolia, and Tibet, the last repository of tantric Buddhism, is threatened by complete cultural obliteration by Chinese transmigration. Of these alienated provinces, only Xinjiang is capable of mounting serious armed (asymmetric) insurgency against Beijing. China is rightly fearful of any salutary examples of separatism. Were Xinjiang to revolt, it is most likely other provinces would follow the lead and pose a stinging embarrassment to China. As some say, “freedom” can be messy. Economic liberalization has brought a taste of affluence and personal choice and that curse of the West, individualism. It has also brought crime, traffic jams, electricity shortages, unemployment, and rising prices. There is no precedent for such a massive undertaking, for the transition from a feudal basket-case to the world’s largest economy within two or three generations. Perhaps China’s rulers are wise enough to know that great social upheaval is possible, which is why they respond with such disproportionate force to any show of massed public disaffection.

Proof of this nervousness amidst economic liberalization is China’s persistent censorship of the internet. Some degree of control is possible if Internet Service Providers (ISP) filter a growing list of proscribesites but the measures fall into the absurd when individual entries in encyclopaedia pages need to be modified for China conditions. It is unclear precisely what groups of users China is trying to protect from what content – to stop anyone knowing the Politburo puts on its trousers one leg at a time, to stop villaknowing how far they are falling behind the cities, or to stop urban elites knowing things they already know. One clue is the order in September 2006 that all foreign news bureaus must distribute their content through the state news agency Xinhua. The ability of large sections of the population to communicate to coordinate is probably the underlying reason for nervousness. This is consistent with the measuresagainst Fǎlún Gōng and the Tiān’ānmén protestors. The everyone else thinks it is – these measures are the clue. With increased officer exchange and growing professionalism in the military, the PLA may in futuan unexpected role in Chinese political affairs. Several possible scenarios may place the PLA in a dilemma between Party authority and the constitutional civil authority. Ideological correctness will incline them one way, modern military doctrine will incline them another.

Economy

China has had the fastest sustained economic growth in history. Its continuing growth of 8% to 10%boosted PPP GDP to almost $9 Trillion and PPP GDP per capita from subsistence levels to almost $7,000. Average unemployment is 9% but substantial unemployment (and underemployment) in rural areas is 20% or more. Since Deng launched the notion of a “socialist market economy” in 1992, China hmoved step-by-step towards privatization of state enterprises and relaxation of controls throughout the economy. This has brought immense social risks. Prices for basic foods freed from command econcontrols have risen and many millions of workers have been left jobless when unsustainable state enterprises closed. Today, China is the fourth largest economy in the world — in parity adjusted (PPPterms it is second to the US – but there is a need to sustain nothing less than world record growth to manage the economic transition without social disaster. The World Bank estimates 100 to 200 millionpeople in the inland provinces live in poverty on less than U.S. $1 a day. Incomes of the middle class urban elites has grown substantially in the last decade but the 50% of the population engaged in growing food have standards of living largely unchanged since 1950. This disparity is unlikely to trigger a Great Proletarian Revolution but it may trigger famine, epidemics, unrest, and embarrassment. The massive increase in throughputs of money which deregulation and growth have brought is fertile ground for corruption, tax avoidance, petty crime, and serious organized crime. These bring loss of government revenue and social discomfort. There are other discomforts as well. Much of China’s basic industrial growth has used 19th century processes and pollution is now apocalyptic in some areas. Apfrom white-goods, China’s economic miracle has also exported unemployment to the US and other countries. The euphemism off-shoring has meant factories throughout the industrialized world have closed and moved their capacity (sometimes lock, stock, and barrel with plant and equipment) to ChAt first, vast numbers of unskilled workers were left without jobs (but with the prospect of buying cheaper white-goods); now off-shoring means workers at any skill level may have their jobs exported.  Perhaps China’s 1950 goal of exporting proletarian revolution to the West will succeed afterall.

Energy

Energy policy is of supreme strategic importance for China. Any interruption to the relentless growth will throw millions into unemployment, whole regions into poverty, and a population into discontent with the regime. In 2003, China passed Japan’s energy consumption and became the second-largest world energy consumer after the US. China is energy rich – it is the third-largest energy producer in the world after thUS and Russia but supplies are inadequate to its current growth. Energy concerns are two-fold – China needs to import an increasing proportion of its energy, and the main of primary energy source is still coal,a dirty 19th century source that has caused massive pollution problems. China is the world’s largest producer and consumer of coal; it contributes over 60% to energy inputs. Although China has steadfast policies on reduction of the share of coal in energy inputs, consumption will continue to rise for many years in absolute terms due to the rate of growth. A slightly cleaner fuel is oil but China’s own productiocan not meet needs and it has been a net importer since 1993, largely from the Middle East. Imports are forecast to be around 3.5 million barrels per day by 2010. China is interested in diversifying the sources of its oil imports and has invested in oil operations around the world, from Sudan to the Gulf of Mexico.

China is driven by the two equally important imperatives: energy security and pollution reduction. It seeks energy security through greater efficiencies, diversification of sources, and security of delivery. Th11th Five-Year Plan (2006-2010) calls for a 20% improvement in energy efficiency per unit of GDP by2010, development of renewable energy sources and increased regard to environmental issues. With a forecast 45% increase in GDP during the plan period, efforts will need to be ceaseless to meet the goal. Among China’s “renewable” energy alternatives, is nuclear power and the country’s abundance of hydro-electricity potential but these projects – such as the Three Gorges Dam ($24B)– are capital intensive, longin completion, and invariably present new downsides. The Three Gorges Dam will have a total output 18 Gigawatt of “free” energy when fully complete in 2009, but China estimates it needs to add 15 Gigawof capacity each year to maintain present growth.  Clearly, imported primary energy sources will be crucial for some years to come.

Unlike Japan which imports most of its oil from the Middle East through the Malacca Strait, China hasdiversified its sources and means of delivery. Oil sources at present are Angola (18%), Saudi Arabia, Iran, Russia, Oman, Equatorial Guinea, Yemen, Congo, Libya, Venezuela, a diversity that provides some measure of intrinsic security. One additional layer in protection of energy sources is the StriPearls strategy, which calls for a string of tanker facilities on the Indian Ocean rim in Thailand, Myanmar, Bangladesh, Pakistan. Much of this infrastructure has already been built. In Pakistan, the first stage of the new port of Gwadar will be working during 2006. China can offload oil at Gwadar andpipe it through Pakistan to Western China. A project in waiting is a long-discussed plan to build a new canal across the Kra Isthmus in Thailand which would bypass the Malacca route entirely. Projectsas Gwadar indicate that China seems to have foreseen the current energy crunch years before some Western governments. Years of careful preparation have begun to deliver results apart from Gwadar. During 2006 the first batch of crude oil arrived through the China-Kazakhstan pipeline, a huge LNG terminal was opened, and natural gas reserves exceeding 100 billion cubic meters were proven in deep water in the Pearl River Basin. Also in 2006 China announced two coal-to-oil plants ($12B) in the North-west that will produce oil at around $27 per barrel, and announced a Sino-Thai hydro plant in Myanmaon Southeast Asia’s longest undammed waterway. Apart from maintaining good trading relations with Iran and Venezuela, China sees an oil future in Africa. It continues to cultivate relations with oil-rich Angola, and has a 40% stake in Sudan’s oil industry. Some think that Chad’s recent nationalization of ChevronTexaco and Petronas assets, ostensibly in a dispute over taxes, is a move in preparation for China to manage the reserves [Opinion]

During 2006 the State Council (Executive cabinet) produced a strategic energy policy, the first oin China. This and the goals of the present Five-Year Plan call for 10% of energy to come from renewable sources by 2020. At present nuclear power accounts for just over 1% in 2000 but this is forecast to grow to 5% by 2030. China’s high earthquake risk present difficulties for wide-spread use of nuclear power but energy imperatives may force an accelerated use of this problematic source.

Environmental Degradation

Diseases caused by air pollution are now a leading cause of death in China. Seven of the world’s ten most air-polluted cities are in China. On a bad day, Chinese air pollution reaches California. Acid rain now affects one third of the country and some regions are receiving nothing but acid rain. Around 20% of agricultural land has been lost or degraded since 1949, with serious desertification in some areas. Half of the population now lacks access to clean water; 90% of water bodies in urban areas are severely polluted; one third of cities have no centralized sewage treatment. Water scarcity, particularly in Northern China, is now a serious brake on sustained economic activity; over 300 cities are now water-stressed; aquifers, asin India and the US, are critically depleted.

All of this has resulted from China’s rapid industrial development. The leadership are giving increasingattention to these severe, sometimes irreversible, problems; not as idle tree-huggers, but from genuinconcern that decades of progress can grind to a halt in a toxic swamp. Various studies have estimated pollution costs the Chinese economy 7%-10% of GDP each year, more than $80 billion in 2004. Iresponse to the hazards looming ever larger, the State Environmental Protection Administration (SEPA)was upgraded to ministry level in 1998; but the levers on re-greening the environment are not as responsive as the levers of industry. China has recently admitted that the water pollution goals, and the goal of the Tenth Five-Year Plan (2001-2005) to reduce total toxic air emissions by 10% have not been achieved. China is caught in the dilemmas that all development brings. The massive Three Gorges Damproject will produce the hydro-electricity and flood mitigation China urgently needs but it will bring about displacement of large populations, silting of the Yangtze River, loss of endangered species, and – environmentalists warn – other long-term dire consequences.

China actively participates in global environmental forums. In 2005, it joined the Asia Pacific Partnership on Clean Development (with Australia, India, Japan, South Korea, US), a forum on strategies for pollution reduction and climate change mitigation and adaptation. It is a signatory to the Basel Convention governing the transport and disposal of hazardous waste and the Montreal Protocol fthe Protection of the Ozone Layer, as well as the Convention on International Trade in Endangered Species and other major environmental agreements. But China insists that this is a shared problem – in one way or another, the cost of any remedies will be shared with the industrialized world. This may mean a doubling (or tripling) in the price of many Chinese exports and/or assistance with remediation projects of a gigantic scale. Assistance may also take the form of cutting edge technology transfer — in September2006, China invited foreign investment in water conservation, sewage treatment, waste water treatment and recycling. Water shortages may halt growth and progress in some areas before energy shortfalls.  In some coastal cities it may be necessary to build water desalination facilities but these are energy-grand further complicate China’s water/energy equation.

China is taking every step to ensure a positive outcome from the Beijing Olympiad in 2008 and is investing heavily in pollution control measures directed at Beijing.  One measure is to close all industry in the Beijing region for the duration.  Only time will tell if the action taken is cynical window-dressing or a useful pilot project that can be applied in the rest of China.

Transnational Crime

Crime and organized crime is new to China.1 In 1992 China had 1.2 million police officers and, like the PLA of the Long March, no system of rank – the men know who to obey. In pre-1992 China, a society with limited personal property, cash, and freedom of movement, petty crime was difficult and unprofitable and the crime of old Shanghai and similar entrepot cities was extirpated by the incoming communists. With the liberalizations starting in 1992, there was new mobility, a gravitation to urban areas; money, jobs, unemployment, and, as night follows day, crime. Affluence and urban concentration salso brought recreational drugs and drugs of addiction which spawned crime sub-cultures of their own. Whereas China was once a transshipment point for opiates from the Golden Triangle, it is now also a significant market. It is now also a manufacturing source for newer drugs such as amphetamines now inwide use (as shabu) throughout south-east Asia. Personal crime such as highway robbery of bus passengers in rural areas is a priority for the government because it is seen as a direct challenge to its ability to keep law and order. Persons convicted of this and a vast range of “petty” crimes are executed.  The Chinese government has a very keen vision of what China should be like and it does not include new anti-social trends such as crime. Organized crime is doubly anathema because the leadership have a particular dislike for covert organized groups. In 2005 China reported success in over 50 money laundering cases involving around US$1.25 billion, but this is only a fraction of the estimated annual money laundering turnover of $37B to $50B. During the first half of 2006 China claimed a fall in (already llow) violent crimes and solving of 33,000 white-collar (“economic crimes”) involving about $7.27B. Organized crime and the associated money laundering need some degree of official corruption to survive. Corruption of public officials robs the Party of credibility at the level of the masses, and often deprives the government of revenue In 2002, the Party established the high- level Central Discipline Inspection Commission and charged it with extirpating corrupt party officials. China and organized crime brings triads to mind; wrongly say experts. The secret societies now known Triads date from 1674 when underground groups formed to resist the Manchurian interlopers.2 Starting something not unlike the Masons or Opus Dei, they are now a collection of loose-knit groups or gangs and not a monolythic criminal organization as such.  Some organized crime syndicates may include triad members but that is incidental.

Foreign Relations

In the early 15th century, China extensively explored the world by sea. Using the magnetic compass and other advanced navigation and mapping skills, Admiral Zheng He sailed to most corners of the world including the Americas in fleet of 300 ships.3 Zheng He’s report on return was detailed and extensive.  But the Chinese did not like what they heard. The world was different to China, hence inferior and dangerous. The fleet was burned and any further contact with the outside world was prohibited. The few years after the declaration of the PRC in 1949 had foreign policy implications that resounded for decades. China was quick to form fraternal relations with the Soviet Union, and the West suddenly sawthe specter of world-wide godless Communism beating at the gates. Proof came the next year when China sent troops to assist North Korea against UN forces. The Yellow Peril was on the move. With MaoGreat Leap into the Iron Age, the Soviets withdrew their advisors from by August 1960. Cooperation hadsuddenly transmuted into competition for ideological influence throughout the world. Bewildered Communists in the West had to choose between Moscow-line and Peking-line; Marxism or Maoism. The Soviet invasion of Czechoslovakia (1968) was condemned by China as vigorously as in the West but Radio Peking had a better vocabulary – Soviet hegemony was abroad in the world and was just as mucan enemy as US hegemony. China accused the Soviets of colonizing various parts of the world such as Cuba and Vietnam. Clashes on the Sino-Soviet border in 1969 proved the disagreement was not just ideological; the two great Communist powers thought the world wasn’t big enough for both of them, a dangerous sentiment for two nuclear powers. China embarked on its own foreign policy throughout thworld. It sought influence in third world nations and neighbors such as Pakistan and Indonesia, third-world nations which were resource-rich of of other strategic value and which the Soviets had not yet signed up for fraternal relations.

By the early 1970s, it became an increasing global absurdity that China – a quarter of the world’s population — was not a member of the United Nations and the China seat as a permanent membeSecurity Council was held by tiny Taiwan.  In 1971, Taiwan was unceremoniously displaced by PRC, the first major recognition that Communist China would not simply go away. Japan established diplomatic relations in 1972.. China continued to court far-flung members of the Nonaligned Movement (NAM), but now also began improving ties with the West, notably the US, the world’s anti-Communist flag-bearer. China offered anenticing deal – it could assist in countering Soviet hegemony if the West assisted China with modernization. Sino-US diplomatic relations were finally restored, after a 30 year interval, in 1979 and the two set about technology transfer and vigorous trade. As a condition of diplomatic relations China always insisted, then and now, on the one-China policy, recognition that Taiwan is an inseparable partChina. Any support for the principle of self-determination has proven weaker than the desire to trade with China. Now 159 states have diplomatic relations with Beijing; 25 have diplomatic relations wTaipei (the Holy See and some of the smallest nations in the world). In the 1970s China continued to see hegemony in its immediate region. It condemned Vietnam’s adventures in Laos and Cambodia in late 1978 and fought a token border war with Vietnam in early 1979. The Soviets were on the move too, invading Afghanistan in December 1979. Also, the Soviecontinued to maintain troops on the Sino-Soviet border and in Mongolia, provocations that China feared would foment separatism in Nei Mongol (“Inner Mongolia”) and excite the Muslim population in Xinjiang bordering Afghanistan.

June 1989 was a turning point for both China and the Soviet Union. Russia withdrew from Afghanistan with 14,000 dead; two years later the USSR had collapsed. China cleared Tiān’ānmén Square witunknown number of dead; the world realized that China meant what it said – any liberalization would bon the Party’s terms, not Western notions of free market anarchy. In the immediate aftermath of Tiān’ānmén, many countries suspended or reduced diplomatic and trading contacts with China. China worked vigorously to rebuild relations, but only on its own terms.  Cheap white-goods prevailed.  By late 1990, normal relations had been reestablished with almost all nations including the republics of the former Soviet Union.

The first two thousand years of self-imposed isolation created the highly homogenous self confident culture that lives on as modern China. But, for better or worse, isolation in the 24-hour connected globavillage is not possible. Foreign relations now take China’s leaders around the world in continual relation-building. China’s national interests are found both far and near. In its immediate neighborhood, China borders 14 countries — Afghanistan 76 km, Bhutan 470 km, Burma 2,185 km, India 3,380 km, Kazakhstan 1,533 km, North Korea 1,416 km, Kyrgyzstan 858 km, Laos 423 km, Mongolia 4,677 kmNepal 1,236 km, Pakistan 523 km, Russia (northeast 3,605 km, northwest 40 km), Tajikistan 414 km, Vietnam 1,281 km. Now China seems to have made peace with world at large, it has concentrated on affairs in its immediate sphere of influence. The Shanghai Cooperation Organization (SCO), established in 2001, comprises China, Russia, Kazakhstan, Kyrgystan, Tajikistan, Uzbekistan. It is primarily a security alliance with counter-terrorism as its main objective. China has also overcome much of the suspicion of Chinese hegemony in Southeast Asia and now has constructive relations with the Association of Southeast Asian Nations (ASEAN) Regional Forum, and the new (2005) East Asia Summit (EAS) which comprises ASEAN along with China, Japan, South Korea, India, Australia, New Zealand, with Russia as an observer. SCO and EAS – China is the only full member of both – places China at the heart of an oil rich high-growth consortium of nations which already rivals the economic might of the US. Forums such as this also serve to improve China’s relations with sometime enemies India and Russia. Premier Wen’s visit to India in 2005 and President Putin’s visit Beijing in April 2006 symbolize efforts on all sides to forge new relations.

China is the only nation to have a “special relationship” with North Korea and is relied on in the Six-Party Talks to prompt some reasonable position on North Korea’s nuclear weapons program. China is no longer a revolutionary regime. Although China once actively exported revolution to the Viet Cong, Pathet Lao, Khmer Rouge, in recent years it has carefully guarded the franchise on the term “Maoist”. It specifically says that Peru’s Shining Path rebels, Nepal’s self-described Maoists, and the Naxalite revolutionaries in several states on India are not Maoist revolutionaries and are unworthy of the word. Export of revolution is no longer a priority; it’s bad for business. This is not to say that China is not engaging in the more rewarding great game of cultural imperialism. Already, there is astounding growth in numbers learning Mandarin in Latin America and other parts of the world. Some forecasts see Mandarin passing English as a second language of choice throughout the world with a decade or two. In recent years, China has been increasingly active in the UN and other world forums and has contributedto UN peace-keeping missions. However, China has shown tardiness verging on contempt for multilateralism in its efforts to combat transborder disease threats such as H5N1 and HIV/AIDS, and in issuing alerts on the SARS crisis. This Chernobyl syndrome — unwillingness to admit problems — is  systematic in a Politburo-led system without a fourth or fifth estate.

International Disputes

Beijing has now resolved many long-standing border and maritime disputes, significantly with Russin1997 and in 2000 with Vietnam (with some islands in the oil-rich South China Sea still disputed).  Disputes with Japan over areas in East China Sea are largely perpetuated by heart-felt hatred over Japan’s genocide against China in the Second World War. In 2005, China and India began to resolve multiple border disputes, particularly in the Siachen Glacier and Karakoram Pass where the borders of China (Aksai Chin, North Ladakh) and India (Jammu and Kashmir) and Pakistan (Azad Kashmir and Northern Areas) meet. China’s occupation and cultural genocide in Tibet (Xīzàng Zìzhiqu) is regarded by the Tibetians as an outstanding dispute but no major nation has thought the self-determination of the unique Tibetan people sufficiently important to risk its trade relationship with China. China asserts sovereignty over the Spratly Islands together with Malaysia, Philippines, Taiwan, Vietnam. The parties in 2002 promulgated the Declaration on the Conduct of Parties in the South China Sea which has eased an unseemly scramble to erect tents and weather stations on various tiny islands. Vietnam has sometimes breached the code of conduct in establishing “site-seeing” tours to certainbut China has been instrumental in a pragmatic scheme to exploit the Spratlys oil/gas resources withouconflict – by initiating joint ventures with other claimants, and has commenced projects with the Philippines, and Vietnam. Whilst all claimants have been quick to condemn any one nation making territorial gestures, the group finds it more difficult to oppose joint activities. This may well be simple effective tactics born in Beijing’s politburo.

China occupies some islands in the Paracel Group that are claimed by Vietnam and Taiwan.

Projection Capability

Starting in 1978, the PLA demobilized millions of personnel and, consistent with Deng’s modernization policies, embarked on strategic redesign of the armed forces. Although Tiān’ānmén (1989) emphasized that the PLA (rather than the police) would remain the bulwark of ideological correctness, China remainsintent on transforming the PLA into a modern, high-tech, high-leverage, mobile force. In a model set fby the UK and then by the US, a state needs a blue-water navy to credibly protect its strategic sApart from strategic nuclear weapons, China has also developed a range of modern missile and other systems and acquired Sovremmeny-class destroyers, SU-27 and SU-30 aircraft, and Kilo-class submarines from Russia. Although this gives China the capability to wreak its will on a state such as Angola (and perhaps Taiwan), it is a limited projection capability for a nation that will soon be the world’s second economy. Although the US has expressed general nervousness about growing military power it is confident China will have no substantial force projection capability for several decades, but all observers agree that the question is not if but when China will acquire or build its first aircraft carrierstart to form credible carrier battle-groups. Russia started constructing the Kuznetsov-class carrier Varyag (67,500 tonne)in 1985 but work was discontinued in 1992 and she was partly stripped and sold for scrap in 1998. Despite rumors that she was to be a floating casino in Macau, the ship is now being repaired by PLA-Navy in drydock in Dalian (Liaoning Province bordering on North Korea).  China claims it will be a tourist attraction but it has now been painted service gray and most believe China intends to commission the carrier, either as a training ship or as its first operational carrier.

Although India-China relations have improved considerably, India is still a strategic rival, particularly as much of China’s oil imports still cross the Indian Ocean. India expects carrier INS Vikramaditya (formerly Admiral Gorshkov) to enter service in 2008 after refitting.  It also began construction of another carrier (37,500 tonne, 30 aircraft) in 2005, scheduled for completion in 2013 to replace the INS Vikrant (formerly HMS Hercules) decommissioned in 1997.

Proliferation

Although all Russian technical assistance was withdrawn from China in 1960, China was able to continueits nuclear weapons program and hold its first nuclear test in October 1964. China was the first nuclear power state to announce a no first use policy. It joined the IAEA in 1984, agreed to halt atmospheric testing in 1986, acceded to the NPT in 1992 and signed the Comprehensive Test Ban Treaty (CTBT) in 1996 (but has not yet ratified CTBT). Also in 1996, China agreed not to provide assistance to nuclear facilities without specified safeguards and began implementing regulations establishing controls over nuclear-related dual-use items in 1998. In May 2004 China joined the Nuclear Suppliers Group. China has committed not to engage in new nuclear cooperation with Iran (even under safeguards), but will complete existing cooperation as soon as possible.

China became a major international exporter of conventional arms during the 1980s and 1990s to many of the world’s conflicts. It joined the Middle East arms control talks in 1991 but walked out in September 1992 when the US agreed to sell F-16 aircraft to Taiwan. China is not a member of the Missile Technology Control Regime (MTCR) but since March 1992 has undertaken to abide by MTCR rules however in August 2003 a Chinese enterprise was found to have transferred scheduled equipment atechnologies to Iran, leading China to issue more comprehensive regulations on arms export.

In April 1997 China ratified the Chemical Weapons Convention (CWC) and by October 2002 had promulgated regulations on dual -use agents and precursors on the Australia Group control list.

US-China Relations

The journey from fighting a war in Korea in 1950 to President Nixon’s visit to Beijing in 1972 was eventful. The American Embassy had followed Jiǎng Jièshí to Taiwan in 1949 and China and the US exchanged artillery fire and vitriol since then. Starting with exchange of ping-pong teams, Sino-US relations were sufficiently positive for President Nixon to make a state visit in February 1972. This produced a joint statement, the “Shanghai Communiqué”, which has been a yardstick for Sino-US relations since. China insisted the communiqué embody the “one China policy” but acknowledged the US would maintain normal trade relations withTaiwan. As a transition, a Liaison Office operated in both countries 1973-1978, and diplomatic relations were formalized 01 January 1979, ending thirty years of antipathy. Several high-level visits were exchanged during the 1980s but with Tiān’ānmén in June 1989, the US and many other governments reduced or suspended bilateral arrangements and arms sales on human rights grounds. Although some othese suspensions remained for 10 years, trade and Chinese intransigence triumphed. But continuing improvement in relations could not prevail against one of China’s raw nerves. In 1996, following the “private” visit to the US of a Taiwanese former President to the US, China held military exercises near Taiwan. The US saw this as a provocation and sent two carrier battle groups to the vicinity. Both countries believed they had made their point. But US-China relations survived this and the (accidental) bombing of the Chinese Embassy in Belgrade in May 1999 and collision of a Chinese F-8 with a US Orion in international airspace near China in April 2001.

US investment in China is now over $50B. US-China trade has grown ten-fold in the last 10 years and is presently growing at 20% each year. The US trade deficit with China now exceeds $200B. Consistent Upolicy is to encourage China’s integration into a “global, rules-based economic and trading system”, but confusion about what those fine sentiments exactly mean is evidenced by the recent death of the Doha Round. China has grown very quickly from an isolated impoverished agrarian country to become an active participant in international institutions and a major trading nation. Both Marxism and Wall Street can claim a share in the credit.

One of the fruits of Sino-US relations is the role it is believed China can play in the Six-Party Talks with North Korea.  China has long had a special relationship with the failed Stalinist state but this has produced little practical progress yet.  Similarly it is hoped that China (along with Russia) can reinforce the US/EU views on Iran’s ambivalent nuclear program.  This is not a certainty, as Iran is an important (and close) oil supplier.

Near Term:

Chinese over-reaction to demonstrations and to ostensibly harmless groups such as Fǎlún Gōng betray insecurities felt by the leadership that are apparent in no other way. It is likely that the Politburo is correct – the population will not tolerate partial political freedom; it will be all or nothing. Like everyone else, the Politburo doesn’t know how the story ends yet but how it responds to challenges will be critical. China’s position as the “hub” member of both Shanghai Cooperation Organization and East Asia Summit, and its forward looking energy strategy, will gain it status on the world stage faster than econompredict. The only obvious weak point in its security is terrorism / separatism in Xinjiang province.

Mid-Term:

As China rapidly becomes a world power and its leadersis populated by the only child me-generation, there will be increasing pressure on the Politburo to make the sort ocompromise that Deng saw as China’s only course. Unless there is widespread unrest accompanied by separatism in border provinces, the Party will not be forced to cede power tomulti-party system. But some wise Party official may seethe only way to guarantee the1949 Revolution for another 5years is some astounding compromise – perhaps 50% multi-party seats in the PNC, 50% old system. Communist Capitalism was a compromise nobody foresaw.  China may have similar tricks to play.

Long-Term:

China does not have a history of imperialism far beyond it borders, but in one or two decades growing wealth, and the massive Chinese industrial capacity, may be able to produce a number of carrier battle groups. If there are then any awkward standoffs with the US these may be over the question of Taiwan but they are more likely to be disputes involving energy sources, and the likely to be in awkward places such as off Nigeria. Chinese cultural “imperialism” throughout the world will make the world significantly more Sinophone and Sinophile than now.  That world will be very different; it will fundamentally change the nature of “them” and “us.”

1 “Organized Crime In China”, Dr. Chu Yiu-Kong, Visiting Assistant Professor, Sociology Department, University of Hong Kong, http://www.crime.hku.hk/organizecrime.htm

2 “Triad” is derived from the triangular sign of the societies.
3 The “Bimini Road” in the Bahamas thought by some to be remnants of Atlantis is the slipway Zheng He built to repair his ships. The stones are “foreign” because they are ballast from China.

Reference: China — Administrative divisions:
23 provinces — Anhui, Fujian, Gansu, Guangdong, Guizhou, Hainan, Hebei, Heilongjiang, Henan, Hubei, Hunan, Jiangsu, Jiangxi, Jilin, Liaoning, Qinghai, Shaanxi, Shandong, Sichuan, Yunnan, Zhejiang plus Taiwan as 23rd province

5 autonomous regions: Guangxi, Nei Mongol (“Inner Mongolia”), Ningxia, Xinjiang, Xizang (Tibet)
4 munmicipalities —  Beijing, Chongqing, Shanghai, Tianjin

2 special administrative regions — Hong Kong, Macau