MIGHT THE KINKS BE SHOWING IN CHINA’S ARMOR?

Dr. David Shambaugh is a Professor of International Affairs at George Washington University, in Washington, D.C, and the Director of its China Policy Program.  After having been optimistic of China’s stability in recent years, he wrote an Op-Ed in The Wall Street Journal this past March 6th: “The Coming Chinese Crackup”.  Although Professor Shambaugh’s sudden about-face is not necessarily accepted by other Sinologists, his rationale will, no doubt, receive considerable discussion.  The Op-Ed is linked as follows: http://www.wsj.com/articles/the-coming-chinese-crack-up-1425659198.

Shambaugh’s conclusion regarding China is based on five important indications of what he feels are signs of the regime’s vulnerability and the party’s systemic weaknesses:

1.   China’s elites (political, military and business tycoons) have one foot out the door, and they are ready to leave at the first sign of weakness.  Considerable financial assets have been transferred overseas, homes purchased in upscale locations outside of China, and women travel to the U.S. to have babies, thus making them U.S. Citizens.  Also, remember that people with $500, 000 or more in financial assets have access to special Visa options in the U.S.

2.   President Xi Jinping has been intensifying repression since he took office in 2012.  Specific targets are:  the press; social media; film; arts; religious groups; the Internet; intellectuals; certain minorities; and even textbooks and university students.

3.   According to Professor Shambaugh, many of the party elites appear to be merely going through the motions.  The Chinese party system is one of compliance, rather than debate or offering alternative means, whether they be in economic, infrastructural or political matters.

4.   Corruption is widespread throughout Chinese Society, especially at the very highest levels.  President Xi’s anti-corruption campaign, which is more stringent than previous ones, has made numerous enemies among his colleagues within the Chinese Communist Party hierarchy.  Some feel that Xi’s approach might be more of a selective purge rather than anti-corruption.

5.   When newly-installed President Xi presided over the party’s Third Plenum, in November 2013, a huge package of economic reforms was unveiled.  Currently, after almost a year and a half, those proposals have not even gotten off the ground.

Shambaugh summarizes by suggesting that the Plenum’s goals of becoming an innovative society and a “knowledge economy” can only be achieved now through political reform.  He states that, if the party doesn’t work together to implement the reforms from the Plenum, it will be laying the groundwork for its own demise.

I would not pretend to know enough about China to weigh-in as to whether Shambaugh is right, wrong or perhaps premature in his conclusion.  In the past, however, I have pointed-out what I see as failures within the Chinese system, which appear to indicate that the CCP might be covering up its inadequacies.  Several points are as follows:

1.   China’s gross domestic product surpassed that of Germany and then Japan within the past decade. Currently, it lags only behind the U.S.  On a per capita GDP basis, however, China still trails many other countries.

2.   Chinese industrial production remains very much skewed toward the labor-intensive, lower technology end of the spectrum.  Also, some eighty percent of the population still lives in rural areas and works mostly in the agriculture sector.

3.   China-Shanghai has recently ranked first in the OECD (Organization for Economic-Cooperation Development) standardized tests for tenth graders (15 years old) on a global basis.  Is China covering-up a failure in its national educational system since it reports only its very best school district, rather than provide nation-wide statistics, as does every other country?

4.   The current One Child Policy, which was implemented “on a temporary basis” in 1979, keeps the country from replenishing its younger supply of workers.  More importantly, that policy has resulted in an aging workforce, which could potentially stifle its labor-intensive industrial base.

5.   Due to its repressive political system, foreign corporations have been reporting a difficulty in recruiting executives to re-locate to China and, accordingly, have been shifting some of their high-level managerial operations to Singapore.

No, I will not take a chance on the China Implosion Lottery; however, I do agree that there are some significant kinks which, if not corrected, will confine both the Chinese economy and its society to continued stagnation.  A lot has changed since Mao Zedong wrestled control of Mainland China from Chiang Kai-shek in 1949.  But, unless China continues to progress, there may very well be no other option than the seismic shift which Professor Shambaugh suggests.  The Chinese Communist Party must either accept this fact, and effect such a transaction–or suffer the consequences.

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  1. #1 by cheekos on April 10, 2015 - 12:36 PM

    This linked article from Bloomberg News notes somewhat more of China’s problems, perhaps with pursuing a Managed Economy: http://www.bloomberg.com/news/articles/2015-04-09/we-travelled-across-china-and-returned-terrified-for-the-economy

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