Joe Borich: The Rise and Fall and Rise of China

Joe Borich, Washington State China Relations Council
Joe Borich, Washington State China Relations Council

Joseph J. Borich is President of the Washington State China Relations Council.  Prior to his current position, Mr. Borich was a Foreign Service Officer  beginning his career in 1972.   He has been closely associated with China throughout most of his career, serving under every president from Nixon to Clinton in a China-related capacity. His last assignment was as Consul General in Shanghai from 1994 through 1997; he previously helped open this Consulate General in 1980.  He also served as Director of the Taiwan Coordination staff in the Bureau of East Asian and Pacific Affairs in the Department of State, and prior to that as the last Deputy Chief of Mission in the former U.S. Embassy in Mogadishu.

[These comments are based on an impromptu lecture given during a trip with a group to southwest China in 2011.]

I was quite content to let our national and local tour guides handle the descriptions of the places we visited and their significance. Indeed, they know far more about what we were experiencing on the ground than I did.

At about the mid-way point of our trip and on one of our several bus rides, I gave an hour lecture to try to provide some contemporary and historical context to the tour. I titled the lecture the rise and fall and rise of China, the principal themes of which follow:

By the mid-15th Century China was the most powerful and advanced nation on earth. The fleet assembled by Admiral Zheng He comprised ships that held up to 10,000 soldiers and sailors along with cavalry horses, livestock for food and all the supplies necessary to sustain the fleet on long voyages. They plied oceans far and wide and might even have beaten Christopher Columbus and other European explorers to the New World. There is no question that Zheng He sailed up and down the east coast of Africa as well as most of the Indian Ocean and the western reaches of the Pacific.

However, the Ming Emperor ordered Zheng to destroy his fleet and basically cut off China’s contact with the outside world. Thus did China “coast” for more than 200 years. However, China by then had built up so much economic and intellectual capital that as recently as 1820, the Middle Kingdom could still account for about one-third of the world’s entire gross domestic product.

By then, though, the West was developing rapidly spurred on by the industrial revolution. From that point on, the West rose with spectacular speed while China’s rate of decline in comparative and absolute terms accelerated. From the early 1800s until about 1980, China was an unrelenting theme park for the Four Horsemen of the apocalypse, with but a few brief exceptions. Following the Opium Wars of the 1840s and the loss of sovereignty over its economically most important regions, China was next struck in quick succession by the Taiping Rebellion, the Boxer Rebellion, the fall of the Qing Dynasty and the Republican Revolution, the warlord period, WWII and the War of Anti-Japanese Aggression, and the post-WWII strife between the KMT and the communists. After 1949 and under Mao, there followed the Korean War, the Anti-Rightist Campaign, the 100 Flowers Campaign, the Great Leap Forward and the collectivization of agriculture, the famine of the early 1960s (a direct result of the collectivization of agriculture) that killed tens of millions and, finally, the Cultural Revolution.

By 1978 with Mao dead, the Gang of Four in jail and Deng Xiaoping back in power, China was a dispirited, bankrupt country. If its people were not so exhausted from unrelieved strife there probably would have been another revolution in the late 70s.

Deng understood this and also understood that nothing less than sweeping reform and not incremental change could get China back on its feet and restore legitimacy to the Communist Party. Thus was the policy of reform and opening launched in late 1978.

Since then China has enjoyed one of the longest stretches of peace and prosperity in modern Chinese history. In fact, the generation that was born in China since 1979 is the first to have never experienced the ravages of war, rebellion, famine or grinding poverty since the early 1800s.

Although reform and opening is a complex policy focusing on privatizing much of China’s economy and opening it up to foreign direct investment, the underlying principle, made clear if implicitly by China’s leaders several decades ago, was that it was once again okay to get rich. This underlying principle, perhaps more than anything else, has tapped latent Chinese entrepreneurship and propelled the country forward.

Outside observers generally credit cheap labor and other input costs along with acceptance of foreign direct investment for China’s ascension to become the “workshop for the globe.” While this has no doubt contributed significantly to China’s growth and development over the past 30 years, the same factors are in plan in other developing countries to one extent or another. What sets China apart from the rest of the pack is the enormous investment China has made – and continues to make – in infrastructure.

Expressways and bullet trains, airports and ports, telecommunications and the use of the Internet – China is building a world class infrastructure that is having the cumulative effect of diminishing time and space in China and between China and the rest of the world. It is China’s new found, world class ability to connect people and businesses across time and space as much as anything that buttresses its competitive advantage today – and will continue to do so tomorrow.

Along with infrastructure China is also investing massively in education. China now has as many college graduates per year as the U.S. among which are 700,000 with engineering degrees or certificates.

But, China’s path toward becoming a “middle level developed country by the end of this century” (its stated goal) is not without significant obstacles. Here are some of the major ones:

Financial insecurity
In today’s capitalist China, wealth is increasingly accumulating in the hands of a few. At the same time, the social safety net that used to be in place – guaranteed affordable housing, free medical services and education and state sponsored retirement – have vanished. China’s remarkable growth is not broad enough to give the average consumer a sense of long term financial security.

This, in turn, means that in order to continue to grow its economy at a high rate, China must rely heavily on exports as the principal growth driver, rather than domestic consumption. This strategy, however, skews global trade and investment flows and creates significant political problems with its leading export markets like the U.S. and EU. Even China’s top leaders now admit that export driven growth is no longer sustainable. In order to put China’s growth on a more sustainable footing, Beijing must strengthen China’s social safety net, including pension and healthcare system reform, to boost domestic consumer demand.

The cost of corruption can be calculated not only in terms of lost economic opportunities, but also in social and political discord. The central government conceded that in 2010 there were 180,000 incidents of unrest. Most of these were precipitated by local corruption, malfeasance and extra-legal expropriation of property. The absence of competing political parties, an independent judiciary and unrestricted media means that the ruling party must effectively police itself to root out corruption and official criminal behavior, something it has thus far generally failed to do with any consistency.

(Clean) Energy
China is already the world leader in energy consumption and greenhouse gas generation, and is adding power generation capacity at the rate of about one gigawatt per week (roughly the amount of energy consumed by the city of Seattle), mostly by constructing old technology coal-fired plants. Looked at from another perspective, there are now about 100 million privately owned fossil fuel-powered vehicles in China today. This represents a quantum increase from the number of such vehicles on China’s roads only a decade ago. China now has become the world’s leading market for automobile sales, and its market share of global sales will continue to grow quickly. Project ahead a decade or two when private car ownership rises from the current rate of under 10 percent to somewhere between 30-40 percent of the population, a virtual certainty. What will be the impact of another 400-500 million cars on China’s roads on its own environment, as well as the biosphere generally?

Economic development has been more rapid in coastal provinces than in the interior, and approximately 300 million rural laborers and their dependents have relocated to coastal urban areas to find work over the past 25 years. As many as 300 million more will likely migrate to the cities over the next two decades, meaning that China will have to expand its urban environment by the equivalent of the entire U.S. population in that time.

Not only is China’s population moving, it is getting older. One demographic consequence of the “one child” policy is that China is now one of the most rapidly ageing countries in the world. Currently there are about 167 million people in China over 60; that number will grow to 248 million by 2020, and to 437 million by mid-century. If birth rates do not change substantially by then about one-third of China’s population will be over 60 and China’s population pyramid will resemble a top-heavy hour glass.

Looking ahead: U.S.-China cooperation, competition, or conflict?
China is a rising power that is not going away and we will need to adapt to China and its changing circumstances. How best to do this?

Although our ability to press China for systemic change is long gone (if it ever existed), we still have a limited capacity to influence to some extent the direction that China will take. Our best cards here are the indisputable success that a market economy, an open political system and the free exchange of ideas in our academic institutions have created here. To the extent that China may be willing to borrow more from our example, it may help overcome some of its systemic weaknesses on one hand, while enabling a wider range of convergent interests with the U.S. on the other. For this approach to work, though, we must continue to maintain our “edge,” or there will be no reason for China to follow our example.

Much of what China is doing today is flawed and the flaws will constrain to some extent its prospects for further growth and development. But there is also much China is doing that is right. Beijing’s policies promote infrastructure development and the expansion of educational and research institutions while our infrastructure crumbles and our education and research institutions show signs of languishing through lack of investment and policy priorities. If someday China overcomes its systemic weaknesses, it will have in place all the material building blocks needed to reach its goals.

Thus, the fundamental issue becomes not whether we can somehow stop or slow China’s advance; rather, it is whether the U.S. will simply cede its advantaged position through lack of political will and effective policies here at home. The outcome of this issue is completely – and only – ours to control.

The question we really need to ponder is when/if China reaches its goals, will we still be in the game? How well we manage this challenge and our relations with China today may well be the deciding factor on whether historians describe the 21st Century as one of peace and prosperity, or one of conflict and suffering.