Retired US Navy Captain Michael Abrashoff, in his book It’s Your Ship: Management Techniques from the Best Damn Ship in the Navy, describes how he got command of a ship which was just about on the verge of mutiny because of its previous commander’s poor leadership. Abrashoff turned this around through a number of means, one of the most important being to reward the crew for good suggestions, a policy which ultimately made the ship the most efficient in the Navy. Beyond that, he gave them a sense of purpose, of importance and responsibility.
Every country with an advanced economy in East Asia- Japan, South Korea, Taiwan, Singapore- attributes its success to a state-led model of development. The remarkable thing about China was that it managed to shift from a Soviet-style command economy, wherein the government owns all major industry and directs all production, to a state planning model wherein the State shapes and facilitates the economy with a much lighter touch. To understand the implications of this legacy of state planning for the future of China, we have to understand not only the history of state-led development, but the ways in which it is used to support Party rule and the obstacles it faces today.
The history of the state’s role in China’s development is becoming fairly well-known. At the national level, the state has intervened systematically in order to grow key national “pillar” industries. It has used tariff barriers to encourage import-substitution. Along with other industrial, trade and investment policies, this has allowed a relatively rapid mobilisation of resources toward the “commanding heights” of the economy.
By commanding heights, China means the industries that it believes form the core of a nation’s industrial strength, both more traditional industries, such as steel and automobiles, and new entrants such as high-tech.
In the case of the automotive industry, the state was able to elicit key transfers of technology and expertise from multinational automakers to their Chinese partners, thus making sure that the lion’s share of development on future vehicles could be done in China. Development toward a market economy becomes a national project that focuses on developing certain key capabilities to ensure national economic strength and competitiveness.
The Chinese version of economic planning has also relied on the more decentralised entrepreneurship of local officials. The mechanisms of state planning and their effects in shaping and encouraging economic development are felt at a local level.
At the township and county levels, enterprises compete for a place on government enterprise lists, which in turn confers preferential assistance from the state in securing land, capital and other inputs needed for growth. Under the cadre responsibility system, township mayors sign contracts with the county which include economic productivity measures.
Some scholars have suggested that the measure of the strength (or relevance) of a developmental state should not be the ability of the state to engage in unilateral action, but rather its ability to coordinate among societal and economic actors to achieve the priorities it has selected through “strategic guidance.”
In the Chinese case, a decentralised state allows initiative, and competition, at the lower levels of government and in local industry, while providing structural incentives to rapidly advance the most successful enterprises that line up with the broad economic plans of the state.
This process was not without problems. Although highly successful at cultivating growth, the decentralised approach to state planning meant not only that lower government levels tended to coddle inefficient industries and become corrupt themselves, but that government itself grew in proportion to the economy.
Adaptation and Restructuring
Beginning in 1995, the state began to release all but the most profitable State-Owned Industries, and in 1998 began a series of programs designed to reduce government size and improve the efficiency of economic regulation. Although these reforms did liberalise large parts of the economy, they do not represent a transition from a planned economy to a market economy, but rather a new concentration of resources in strategic areas.
The idea has been not only to pick the winners in a Darwinian competition for state patronage, but to maintain state control of the “commanding heights” and to ensure that China had big, globally-competitive industries rather than smaller enterprises competing nationally.
If this seems strange, the mental leap we have to make is that the state itself is viewed almost as an enterprise, competing globally for the public good of its citizens. We can carp about unfair practices all we want, but the truth is that nations which adopt this principle will tend to gain the high ground (and every Western nation does engage in protectionism in one industry or another, as the Chinese are quick to point out), while others get left behind.
Chinese scholars persistently argue that the transition from command planning to reform economic planning was possible in China because of the continuing strength and coherence of the Party. In contrast to post-Soviet states, China was able to leverage the Party’s authority to systematically build an economy based on long-term national interest, rather than surrendering abruptly to market forces with disastrous consequences as Russia did.
Whether or not this is wholely supportable, it’s important to understand how the Party and many Chinese would like us to see the party-state.
Authoritarianism and the Developmental State
There is absolutely no question that the Chinese approach to development has worked incredibly well, or that the Party has gained enormous legitimacy with its people because of it. But when we ask about the future of the developmental state, we have to remember how the Party uses it, both ideologically and materially.
Consider this statement from Yip Kwok-wah, a former pro-Communist leader in Hong Kong and adviser to the Hong Kong Chief Executive, in his recent book The Uniqueness of China’s Developmental Model, on the difference between democracy and party rule:
“(Western) people may feel they are participating in the formation of the government but may find that, after venting their anger at the ballot box, there is no improvement in their welfare… The China Model, on the other hand, emphasises the effectiveness of government policies… the legitimacy of government policies through effective results is different from legitimacy achieved through election… Public opinion and sentiment have put great pressure on the (Chinese) government on many occassions, resulting in the government implementing measures to comply with the people’s wishes. Mao Zedong’s principle of “from the mass to the mass” has been largely adopted.”
He then proceeds to tie his argument directly into the developmental state by invoking Nobel laureate Amartya Sen’s assertion that people will only have genuine freedom of political choice when their basic needs are met. You’ve heard of “guns or butter”? This is democracy or butter.
First of all, let’s look at the uncomfortable truths in Yip’s assertions. For many of us, his comments about an uncaring political establishment incapable of consistent policy-making for the public good despite democratic process may strike very close to home. The Party has won a great deal of legitimacy by providing public goods, and it has certainly bowed to the wishes of the public in many instances.
As for the argument that people only have genuine political choice when they aren’t going hungry, well, consider Egypt. The former regime was overthrown by a minority of educated urban people. The new government has been put in place largely by the vote of the rural poor, whose basic needs have always been met more by the Muslim Brotherhood than by the state.
No More Incentive
But then we must consider another recent book, Unequal China edited by Sun Wanning and Guo Yingjie. Like many books about China, it is filled with tales of all the issues on which the Party is not listening to the people- unequal laws, gender discrimination, unequal development, unjust land laws, discrimination in social services and education.
And even many of these issues come second to the issues of labour abuses, environmental degradation, corruption, censorship and so many others that plague China. As premier, Wen Jiabao spent ten years telling the people that these problems must be dealt with. They never were, and the new administration is unlikely to change that.
The Chinese government reaches its highest adaptive potential when motivated by the need to maintain legitimacy though the provision of a public good, whether that be economic prosperity, economic sustainability or environmental health. But the catch is, they don’t think they need to adapt anymore. No crowds are assembling in China to campaign for democratic reform, no new student movement seeks to topple the government.
Those who campaign on issues like corruption or labour are effectively canalised within their own special interest. The government and the Party will make concessions in specific instances to keep a lid on popular protest- but it will not reform the system.
And why would it? The children of the Party, the “princelings” or taizidang, own vast amounts of the economy thanks to their covert pillaging of the old state industries and the power of their connections, control the commanding heights of the economy. They benefit from a loyal military, as well as the resurgent nationalism of a China that, thanks to the Party, is again truly the Middle Kingdom.
The Party experiences no immediate threat to its existence, as it did when reform and opening began. And without that, it has no reason at all to go the distance in satisfying the desires of the people to the detriment of the expensive lifestyles of its own higher cadres. Lacking that will, state-led development will hit a dead end. The Party might find itself trying to control a country on overload, and sooner than it thinks.
But even if the Party falls or is forced to radically reform, it is doubtful that state planning will ever entirely disappear. The people understand that a country the size of China must be managed, one way or another.
Joshua Kurlantzick’s 2007 book Charm Offensive: How China’s Soft Power is Transforming the World was nothing less than an attempt to transform the way that the West thinks about China’s rise in world influence. A longtime Asia correspondent and fellow at the Council on Foreign Relations, Kurlantzick lays out the breathtaking scope and multivalent complexity of China’s methods for developing soft power with a clarity born of personal experience. The message is clear: China is much smarter in its foreign policy than America had begun to concieve.
A Relevant Strategy
Today, China is still developing its international influence, but it is no longer whispering its way to success. Rather, it asserts its will with increasing stridency. And yet, behind the rhetoric, the mechanisms of soft power carry on, and the charm offensive strategy remains critically relevant if China is to avoid so alienating its neighbours that it becomes strategically isolated. At this juncture, a retrospective review of this remarkable book is useful in highlighting the goals and strategies of the charm offensive, which I would argue are still relevant, and may help us to understand the dangerous gamble the Party and the Chinese government would take by abandoning them. This is a history that anyone dealing with China internationally absolutely must be aware of.
Building A Narrative of Benevolence
Charm Offensive is above all a tale of China’s rapid implementation of a new way of relating to the world, within its own region and across the globe. This effort attempts to cast China as the benevolent leader among developing nations, generously doing its level best to bring to others the good fortune it now enjoys, the first Great Power to rise peacefully. Kurlantzick masterfully portrays the ways in which this foray into soft power- loosely defined- has found and created niches throughout the global economy, and with substantial effort has won over Southeast Asia and much of the developing world.
He portrays a China still unstable in its global identity, but able to learn and adapt quickly, and willing to put substantial effort into earning goodwill. This is not the China of the Western news media, which periodically hurls vituperative volleys in the direction of Japan and plays a bit part obstructing assorted international initiatives. If Charm Offensive falls into the familiar China-alarmist literature generated in the United States, this is only because it is couched as a wake-up call to the United States foreign policy establishment.
A Considered Strategy
Not so long ago, China was an isolated state, wary of multilateral institutions. Many credit ASEAN’s engagement with China with setting the stage for China’s foray into global institutions. The process of learning surrounding China’s ASEAN acclimatisation, and the watershed moment of choosing to help resolve the Asian Financial Crisis, went far deeper than mere multilateralism. A new generation of Chinese leadership and academics processed not only China’s experiences, but those of the United States, and arrived at a highly original approach to global soft power.
In order to create a perception of China’s “peaceful rise,” Beijing began to partner with, and advocate for, developing countries, sharing its own rising fortunes with the rest of the world. The China- ASEAN Free Trade Agreement, a first in Asia, was so successful as a policy that China began seeking out similar arrangements globally, behaving with economic generosity and attaching none of the conditions Western nations might. In countries of all sorts, China began to foster economic and cultural ties at an almost absurd rate.
The dividends in influence have been impressive. China’s outward development investment, Kurlantzick notes, does not yet approach the volume of major Western investors, but is better promoted and concentrated strategically on China’s own periphery, becoming the largest investor in many Asian countries. China has also largely won back the loyalty of its Asian diaspora, with their considerable financial resources, wresting them from the influence of Taiwan. China’s rising fortunes have shed prestige on the diaspora, so that even those who are culturally and linguistically assimilated make a point of emphasising their heritage.
China’s Import-Export Bank has surpassed the World Bank as a source for loans in Africa. China has attained pre-eminence as an economic partner in unlikely places, such as nascent East Timor, simply by positioning itself well, in this case as an alternative to dependence on neighbouring Australia or Indonesia. China has even managed to recoup its image in Cambodia, where it once supported the Khmer Rouge regime. Chinese books, music, film and other cultural items are gaining currency throughout Asia. China has not been lazy about capitalising on its new influence in areas of interest to it, achieving considerable success thereby in fighting drug trafficking and human trafficking.
Against the common assertion that China offers no compelling model for the world, Kurlantzick believes that China’s success in state-directed development provides an attractive model for Latin American and African, as well as Asian, states, including some democracies. The promotion of Chinese studies in nations throughout Asia is mirrored by a massive effort to attract foreign students to China, effort helped by a corresponding decline in Taiwanese foreign student subsidies and the rise of visa obstacles for students wishing to study in the United States. Just as the British educated generations of leaders at Oxford, the Chinese are now doing so, and at the same time creating programs to bring existing leaders to China, for training or just to be impressed.
As geopolitical strategy, there is no question that the “charm offensive” is a work of art to be admired, as Kurlantzick certainly does. That is not to say that he is blind to its dark side. Chinese officials repeatedly assert that China will be the first Great Power to rise without victimising other nations. This is the measure, then, by which China will ultimately answer the world’s ambivalence. Will it undertake policy adjustments in accord with this promise, recognising that contradictions in its foreign policy damage its image and legitimacy, or will it ignore them?
China has not been above using its pervasive influence for perfidious ends, notably in the case of the damming of the Mekong River, where Cambodia has been unable to muster the political will to force the Chinese to acknowledge the environmental and human cost of the project. This stands in contrast to the pattern of generosity accompanying China’s formal economic negotiations with weaker states, and such contrasts can only reduce China’s political capital. Some of the political ends served by the charm offensive are also not in line with the neutral and peaceable face of the new China. One such objective has been to isolate Taiwan from the few friends it had. More pernicious and excessive has been China’s courting of countries like Sudan and Zimbabwe, even while the former engaged in genocide. One can only hope China will outgrow the need for such demonstrations of support for states whose actions are certainly criminal by China’s own internal standards.
Then again, not all harmful effects of the charm offensive are deliberate. Kurlantzick points out that China risks exporting its own unresolved problems, including poor labour practices. While this is no doubt true, this is one challenge that China must meet internally in the coming years, which in turn will no doubt alter the practices it exports. China must face a succession of internal challenges in the near future, related to rule of law, environmental degradation, labour, income disparities, and perhaps, government structure. As it does so, one might expect to see the impact of these issues on trade and aid.
China Must Choose
Throughout his book, Kurlantzick makes much of Beijing’s advantage in being a new face. For instance, China’s relatively small assistance after the 2004 tsunami gained more public notice than the expected American and Japanese aid. Thus, American human rights abuses gain far more attention in the Southeast Asian media than Chinese abuses; one is the preeminent power, the other the fresh and dynamic alternative. China has also successfully generated a narrative in Asia regarding the North Korean situation, in which it is a rational actor mediating between North Korean and American extremists. America, Kurlantzick argues, is a known and somewhat tarnished quantity, while China is still in the process of an expansion analogous to 1950s America.
With greater experience, the “honeymoon period” will end. If familiarity does breed trouble for the charm offensive, one might expect to see a decision point, at which either China will redouble its efforts and address inconsistencies in its policy, or it will begin to rely on hard power, as the pessimists believe. That may be exactly what we are beginning to see now.
Kurlantzick emphasises that the charm offensive has filled the vacuum left by the decline of American soft power following the end of the Cold War, and he both presents options for America to convert its remaining advantages into renewed soft power and examines, almost hopefully, the ways in which Chinese soft power could yet decline.
But too many engrained American tendencies remain unaddressed, and the speed and aplomb with which China improves its policies remains a factor not to be underestimated. The danger of any concentrated American action is premature polarisation of the region, which, under any scenario, serves the interests of none of the parties. The best option, then, is to do as the Chinese did: observe, analyse, and develop new soft power capacity.
Now in 2013, the most serious problem with the charm offensive comes to light. China took the most intelligent path available to it, but it did not know where it was going. It did not ask itself whether China as a nation had the will to maintain the image it was trying to create. Now, the feeling is that China has exchanged Deng Xiaoping’s principle of hiding brightness and cherishing obscurity for a new confidence, uncertainty for certainty- the Middle Kingdom returning to its rightful place in the world.
But how secure is China in its newfound power, and how will the world’s perceptions change if the principles behind peaceful rise are abandoned? China has truly leapt into uncharted territory. The danger, for China and for the world, is that China will not slow down long enough to lay the foundations of long-term international influence and respect, without which its preeminence may be tragic and short.
A Strategic Classic
Charm Offensive is more than a geopolitical analysis; it is an exposition of one of the most insightful pieces of strategy that global politics has ever seen, and will live on for that reason. Of course, it’s also a quick and highly enjoyable read. Now more than ever, it should be required reading for every foreign service officer worldwide.