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Consultancy Report China’s 18th Party Congress: Domestic and External Policy Outcomes Carlyle A. Thayer January 5, 2013
China’s 18th Party Congress: Domestic and External Policy Outcomes
This report addresses four sets of issues arising from China’s recently concluded 18th party congress. The report first addresses likely domestic priorities for China under the leadership of Xi Jinping and the challenges Xi will face in addressing internal issues. Second, the report addresses China’s likely external policies under the new leadership team but notes that important changes in state leadership positions will not occur until the first session of the National People’s Congress in March. Third, the report tentatively sketches out the likely implications of China’s new domestic and external policies for Vietnam. Fourth, the report offers a brief assessment of the impact of President Barack Obama’s re-election for the Asia-Pacific. 1. The internal policy of China after the 18th Congress of the Chinese Communist Party. The 18th Congress of the Chinese Communist Party (CCP) marked a major turning point. China is poised to carry out major structural reforms under its next Five-Year Plan. China aims to double its Gross Domestic Product and per capita income, and increase domestic consumption while decreasing imports. Economic growth rates may slow but China will become the world’s largest economy by 2030 if not earlier. Anti-Corruption a Priority China’s new leadership is notable for the rise of so-called princelings to key positions. The princelings are nationalists with extensive interests in business and state-owned enterprises. The Bo Xilai affair touched a raw political nerve by exposing the financial affairs of high-level party leaders and their families. The 18th Congress signaled significant changes in the operations of the political system; in particular the administration of the State Council will be streamlined and the rule of law will be promoted. China will concentrate on the fight against corruption, especially high profile cases, in order to mollify public opinion. China’s anti-corruption efforts will have systemic implications due to the persistence and growing influence of special interest groups (including retired party cadres). Interest groups have, in effect, hijacked elements of public policy and their
2 persistence makes it more difficult to carry out political reforms. China’s system of “solicitation of advice” provides a back door for State Councilors to continue to influence the policy process as they are entitled to access to confidential documents after their retirement. The CCP Under Xi Jinping Xi Jinping’s selection as CCP General Secretary, member of the Politburo Standing Committee and appointment as chairman of the Central Military Committee (CMC) was decisive. He does not have to wait Members of the Political Bureau two years to assume full power as did Standing Committee Hu Jintao. Changes in China’s leadership will be Xi Jinping, Li Keqiang, Zhang Dejiang, Yu completed in March when the Zhengsheng, Liu Yunshan, Wang Qishan National People’s Congress and Zhang Gaoli. convenes and ratifies the new state leadership. Further changes in China’s leadership will take place over the next decade. The Politburo Standing Committee includes five persons who will retire in five years. The deputy of the Politburo Standing Committee is its second youngest member. Chinese political leaders have enormous authority. Nevertheless they sit at the top of a political system comprised of five levels in which policy momentum is diffused as it is implemented downward. Widespread corruption also makes it difficult for the CCP to impose discipline on its members. This exacerbates the problem of trying to curtail massive state intervention in business enterprises. Xi brings to office the legacy of his revolutionary family background and close association with the People’s Liberation Army (PLA). Consequently, Xi has greater authority than Hu Jintao; nonetheless Xi will operate in a system of collective leadership and will have to take the views of other top party leaders into account. Primacy of Domestic Issues The CCP under Xi Jinping will give top priority to a number of domestic issues including fast tracking economic growth (from 7% to 9% or higher), financial reform of small and medium enterprises, political reform, and dealing with the pluralization of society. Over half (51%) of China’s population now lives in urban areas, for example. China is also experiencing the rapid emergence of a large middle class with higher education and Internet savvy. There are more than thirty million tertiary students in China, more than double that of the United States. In addition, China faces severe problems relating to a large migrant population without residence permits, a marked rise in the frequency and scope of public protest, ethnic separatism and unrest in Xinjiang, religious dissent in Tibet, growing environmental degradation (e.g. the lack of potable water in northern China), unequal distribution of wealth in society, and an aging population and lack of an effective public welfare system.
3 The Chinese Communist Party These domestic issues will grow in intensity compared to the past five years. Pressures for change will be exerted by members of the general public, especially the growing middle class, and from within the party itself. Hu Jintao in his report to the 18th CCP Congress identified four threats, the most of important of which is the growing gap between the CCP and the people. Some analysts argue that economic and political reforms will be largely event driven as leaders respond to pressures from below. The CCP has more than 82 million members, of which 26 million were recruited in the last decade after the introduction of the ideology of “three represents.” Many of the new party members were educated abroad and returned to work in the private sector. There is internal debate within the CCP, especially its Marxist Studies Institute, about the efficacy of ideology. Class struggle and reliance on the workers and peasants has long been an essential ingredient of CCP ideology. The working class has grown to 350 million. The working class is undergoing transformation and reorganization: The workers should be the base of CCP power but now they are under capitalist bosses. The workers are not the real owners of the productive forces. The working class is impoverished under China’s economic system. The working class has lost influence in society and in the legal system. The working class has become weakened overall.
China has 700 million peasant farmers. Their situation may be characterized by “four no’s”: no land, no jobs, no capital and no social security. The CCP has attempted to expand its class base by admitting private entrepreneurs. Twenty-six million new party members come from this background. In sum, the two classes that have served as the base of CCP power now face major difficulties. Yet the 18th CCP Congress reconfirmed that Marxism-Leninism is the ideological basis of the party. Hu Jintao’s outgoing report stated that the monopoly of central state enterprises would continue to be the mainstay of the economy. The new National People’s Congress will have more peasant members than in the past. If the effort to enlist the support of workers and peasants is not successful, the CCP will turn to the People’s Liberation Army (PLA) for support to protect the party’s power base. If the CCP becomes more reliant on the PLA the party will have to concede to PLA demands. There are internal anxieties within the CCP that it will be approaching a landmark just after Xi’s second year term ends. According to this view, the Communist Party of the Soviet Union lasted in power for seventy-four years. The CCP has been in power for only sixty-three years. The question being asked within the CCP is whether Xi can consolidate the support base of the CCP and successfully extend CCP rule beyond seventy-four years. Xi is more likely that Hu Jintao to address popular grievances by opening dialogue with the people and crafting policies directed at stepping up rural development. Hardliners within the CCP, however, will press for a strong line against any
4 manifestations of anti-party and anti-state sentiments. Xi’s task will be to advance reform without destabilizing the political system. In order to advance reform Xi will need to shore up the legitimacy of China’s one-party regime by regaining popular trust through party-building efforts. China is not likely to witness major domestic political and economic reforms during Xi Jinping’s first five-year term of office. Xi will be better placed in his second fiveyear term to carry out progressive reforms. The coming decade will be China’s golden age when its GDP exceeds that of the United States. Central Military Commission In the past there was an overlap in generations on the CMC, with the older generation “taking care” of the newer generation. The 18th Congress ushered in a period of more stable and institutional leadership transition. Xi, as chairman of the CMC, has already begun to make personnel changes in department-level chiefs including the Chief of the General Staff. For the first time, one of the vice chairman of the CMC is a PLA Air Force general. During Xi’s first term in office he can be expected to draw up New Strategic Guidance for the PLA. Xi has tipped his hand slightly by stressing the importance of national revival and the rejuvenation of nationalism. The Work Report to the 18 th Congress Central Military Commission Membership
Chairman: Xi Jinping Vice Chairmen:
General Fan Changlong, former commander of the Jinan Military Region Air Force General Xu Qiliang, former commander of the PLA Air Force
General Chang Wanquan, former Director of the General Armament Department General Fang Fenghui, Director of the General Staff Department General Zhang Yang, Director of the General Political Department General Zhao Keshi, Director of the General Logistics Department General Zhang Youxia, Director of the General Armament Department Admiral Wu Shengli, Commander of the PLA Navy Air Force General Ma Xiaotian, Commander of the PLA Air Force, former Deputy Chief of the General Staff of the PLA General Wei Fenghe, Commander of the Second Artillery Corps
stressed the importance of building up maritime power and accelerating military modernization including space and cyber. In one of his first actions as CMC chair, Xi visited the 2 nd Artillery Corps. China’s first carrier landing was conducted under Xi’s watch, a clear signal that the PLA Navy will have top priority and that China will construct several aircraft carriers in the next
5 decade. Under Xi’s leadership of the CMC, China can be expected to pursue economic growth and military modernization in a more integrated fashion. Xi’s New Strategic Guidance will replace the New Historical Guidelines drawn up by Hu Jintao. The New Strategic Guidance will need to take into account a more complex security environment in which new elements – energy security, nontraditional security, non-combat emergency evacuation of civilians, peacekeeping, space and cyber – will coincide with traditional concerns over Taiwan and littoral and continental defense. China will face several constraints and challenges in meeting its defense objectives. First, as some analysts argue, the commissioning of China’s first aircraft carrier and the unveiling and test flight of the J-31 stealth fighter are signs of Chinese technological underdevelopment. Both the carrier and the fighter were derived, copied, and reverse engineered from dated Russian technology. Second, China’s national defense industry is well-known for its structural inefficiencies. Third, despite the double digit growth of China’s defense budget over the last two decades, defense spending has not exceeded the average increase in central government expenditures. 2. The external policy of China after the 18th Chinese Communist Party. Over the next ten years the distribution of international power will change rapidly in China’s favour. It is likely that the dynamics of China-United States relations will witness more contention than cooperation in Xi’s second five-year term. This will impact negatively on small regional powers. In sum, over the next five years China’s leaders will take on a greater international leadership role. Nonetheless, China will not seek to directly challenge U.S. interests. Relations with the United States In order to deal with the wide-ranging and serious domestic problems that China faces, it is in China’s interest to manage and if possible lower international tensions. However, strategic trust between China and the United States is at a very low level and is unlikely to be redressed in the short-term as the U.S pivots to and rebalances its military presence in the Asia-Pacific. In future, it will be up to President Xi and President Obama to define and given meaningful content to Xi’s expression of a “new pattern of great power relations.” China will seek to keep relations with the United States stable in the face of wide divergence in policies towards North Korea, Syria, and maritime territorial conflicts. In short, China will favour the status quo in relation to its core interests. China’s reaction to regional events is shaped not only by the dynamics of these events but U.S. reaction to these events. In China’s view the U.S. quest for absolute security contributes to proliferation rather than curtailing it. China will continue to face considerable external pressure in the next five years, including the global financial crisis, the sluggish U.S. economy and Europe’s poor performance. From the CCP’s point of view, the Chinese regime will face international pressure from those advocating “peaceful evolution.”
6 Change in Style There will be a change in style in Chinese foreign policy with the selection of Xi Jinping General Secretary of the CCP. Xi has more experience in dealing with foreign leaders and as a consequence is more comfortable in face to face meetings. Since Xi lived in the United States he knows Americans and American culture better than any of his predecessors. Xi will place priority on relations with the United States. He clearly understands that relations with the U.S. are China’s most important bilateral relationship. Xi and other Chinese leaders are well versed in President Obama’s policies. They are unlikely to pursue any major changes to present policy. Xi and his team are unlikely to provoke difficulties in relations with the U.S. Xi is more likely to make small adjustments. Relations with Japan Xi appreciates that to get relations with the U.S. on a firm basis he will also have to improve relations with Japan. This is no easy task as Chinese leaders fear Japan’s remilitarization. As a consequence, Sino-Japanese relations are locked into a pattern of action-reaction. China’s actions contribute to what they fear the most, Japanese remilitarization. Xi faces a major problem relating to its territorial disputes with Japan in the East China Sea. Obviously pursuing the twin goals of managing good relations with the U.S. and improving relations with Japan poses difficulties. Xi will have to pay close attention to rising domestic nationalism in dealing with the Diaoyutai/Senkaku island dispute. Relations with South East Asia Xi will search for a more constructive way of handling China’s relations with ASEAN. It has been reported by some analysts that Xi has raised improving China’s relations with ASEAN to a “core interest.” These analysts point to Xi’s inclusion of Hong Kong as part of the China-ASEAN Free Trade Area and the goals he set at the Nanning Expo in September last year. Xi listed the following priorities over the next decade: To increase bilateral trade from $362 billion in 2011 to $500 billion by 2015. To encourage investment by Chinese companies in ASEAN To develop transportation connectivity between China and Southeast Asia (roads and railways, air, and maritime). To promote people-to-people links with the goal of increasing two-way exchanges to 100,000 in a decade. During this period 10,000 Chinese youth and students would study in Southeast Asia each year; in return 1,000 students from each of ASEAN’s ten countries would study in China each year.
Xi has been closely associated with Chinese policy towards the South China Sea prior to becoming party leader. There will be no immediate change in the substance of Chinese policy towards the South China Sea under Xi. China will react strongly to action by other littoral states that directly challenges China’s claims to indisputable sovereignty.
7 Xi will also craft specific policies to deal with individual countries with which China has difficult relations, such as the Philippines. Xi will play on differences in ASEAN to suit China’s interests. China under Xi Jinping is unlikely to adopt overly heavy handed methods with respect to territorial disputes. But China will continue to act assertively when any country challenges the status quo in the South China Sea. 3. China’s 18th Party Congress and Vietnam. The outcome of China’s 18th Party Congress provides opportunities and challenges for Vietnam in its dealings with its northern neighbour. A new Chinese leader and a new leadership team may provide the opportunity to review current policies and address problem areas. China’s priority of maintaining a stable regional environment in order to address pressing domestic problems may provide a temporary respite from renewed Chinese assertiveness in the South China Sea. China’s stress on raising economic growth may bring benefits to the larger China-ASEAN Free Trade Area of which Vietnam is a part. But the persistence of Vietnam’s massive trade imbalance with Cihna is not likely to be redressed. Xi’s initiative in raising the prominence of ASEAN in China’s external relations holds the promise of increased Chinese investment in Vietnam. China’s promotion of intensive people-to-people interchange may also contribute to greater mutual understanding and reduce somewhat the vitriol expressed by private citizens on the Internet. But China’s increased focus on ASEAN may lead to Chinese wedge tactics (divide and rule) to single out recalcitrant ASEAN members to pressure them to bandwagon with China. China will most likely single out the Philippines. Vietnam will have to decide whether or not to show solidarity with a fellow member of ASEAN. China’s external policy of maintaining stable relations with the United States could result in a lowering of tensions over territorial disputes in the East China Sea with a spillover effect in the South China Sea. An improvement in Sino-American relations could result in the United States playing a less assertive diplomatic role over South China Sea issues. This could leave Vietnam in a more isolated political position, less able “to play the American card.” Heightened tensions and confrontation between China and the United States, especially during Xi’s second term, could undermine peace and stability in Southeast Asia and negatively impact on Vietnam’s national security. Vietnam may have to bear increased defense costs. If General Secretary Xi can exert greater central government control over the “eleven dragons” or competing bureaucratic interests that shape China’s maritime policy in the South China Sea, this could result in the reduction in the number of incidents between Chinese civilian agencies and Vietnam. This could lead to progress in delineating the waters off the mouth of the Gulf of Tonkin and open a new period of cooperation and ultimately joint development. However, Xi’s stress on the modernization of the PLA Navy and PLA Air Force, and increased priority in the maritime realm may signal renewed challenges to Vietnam’s
8 sovereignty claims in the South China Sea. Xi might have to concede ground to the PLA and domestic nationalism in order to pursue his domestic reform agenda. The PLA and domestic nationalist forces can be expected to take a hard line over survey activities in waters beyond mouth of Gulf of Tonkin or other actions that are perceived as altering the status quo. 4. President Obama’s re-election and implications for the region President Barack Obama’s re-election means that there will be greater continuity in U.S. policy towards the Asia-Pacific than change. The U.S. will continue to give priority to its Asia pivot and military rebalancing, especially in Northeast Asia. The United States will continue to give its support to ASEAN and its role in the region’s security architecture. The U.S. ability to give Asia-Pacific top priority is likely to be constrained by continued Congressional in-fighting over budget matters and demands on U.S. resources related to domestic upheaval in Syria and nuclear developments in Iran. A conflict in the Middle East would immediately constrain U.S. military balancing in the Asia-Pacific. At least three Cabinet members will resign: Secretary of State Hillary Clinton, Secretary of Defense Leon Panetta and Secretary of the Treasury Timothy Geithner. Senator John Kerry, a Vietnam War veteran, will replace Secretary Clinton. Kerry will bring considerable foreign affairs expertise to his new position. While Secretary Kerry has Vietnam experience, his appointment should be viewed with reserve in Hanoi. Vietnam-U.S. negotiations on a strategic partnership have stalled over a number of issues of which human rights is the most important. Despite a convergence of strategic interests between Hanoi and Washington over territorial disputes in the South China Sea, Vietnam cannot expect to leverage its relations with the United States in its dealings with China. Vietnam’s treatment of domestic dissidents – bloggers, journalists and pro-democracy activists – has gotten worse since 2011. This has soured the views of some senior State Department officials. A new attitude is taking shape that the U.S. owes no favours to Vietnam. In sum, the ball is in Vietnam’s court to take steps to redress this drift. Available at Scribd.com, see: Carlyle A. Thayer, “South China Sea: Implication of Obama’s Re-election,” Thayer Consultancy Background Brief, November 8, 2012. Carlyle A. Thayer, “United States: Implications of Obama’s Re-election for the AsiaPacific,” Thayer Consultancy Background Brief, November 8, 2012. Carlyle A. Thayer, “Cambodia: President Obama’s Visit,” Thayer Consultancy Background Brief, November 11, 2012. Carlyle A. Thayer, “Myanmar: President Obama’s Visit.” Thayer Consultancy Background Brief, November 16, 2012.
Suggested citation: Carlyle A. Thayer, “China’s 18th Party Congress: Domestic and External Policy Outcomes ,” Thayer Consultancy Report, January 5, 2013.
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