19 October 1995 - 21 October 1995

China after Deng: Policy Implications

Chair: Lord Wilson of Tillyorn, GCMG

Our conference, distinguished by the presence of Her Majesty The Queen during its opening session, was mounted in collaboration with the National Committee on United States-China Relations, the Japanese Institute of International Affairs and the London-based China Quarterly. We addressed our huge and hugely-important subject at what we all agreed to be a particularly timely point.

Deng Xiaoping was still alive, and the shadow of his historic influence had not passed; but it was clear that from most practical standpoints (to the relief, so far, of those who recalled China’s history of difficult leadership change) the succession had already taken place. China had customarily had at its head a single powerful, even autocratic, figure, and President Jiang Zemin did not seem in that mould; but he was a skilled coalition-builder, and had his allies widely placed in positions of influence. Some participants nevertheless doubted whether the current team, mostly of long-standing bureaucratic provenance, would remain at the helm for more than a few years; by the time of the Fifteenth Party Congress the key figures would have had an extended run, and a new generation - of different experience and perhaps more outward-looking approach - might progressively thereafter be moving in.

Would the extraordinary economic advance last? - annual GDP growth at 10%, with inflation nevertheless brought down to relatively tolerable levels? There was no likelihood that the underlying reforms - which had massive popular support - would be reversed, or that the growth would be halted; so vast and diverse an economic machine had its own momentum. But 10% scarcely seemed sustainable; cyclical variation - comparative recession - was inescapable in some degree, especially given the mounting significance of the export component, which would pose increasingly awkward questions for Chinese structures and attitudes. Moreover, though the state-sector share in industrial production was declining, it still posed a difficult dilemma between the political need to avoid too sharp a fall in the employment it sustained and the economic need to cut the subsidy it absorbed.

The likelihood of at least slower growth, and consequently disappointed popular hopes, might well throw into sharper relief the paradox of a socialist market economy. For all that there were arguably partial analogues elsewhere in East Asia, there was no full precedent for the long-term maintenance of a free- market economy, with its rising middle-class aspirations, partnering an unelected authoritarian political system. The fact that the philosophical underpinning of that political system had largely collapsed with the discrediting of Marxist-Leninism emphasised the paradox. China, as always, was special, but tensions and therefore a less-than-smooth development seemed inevitable. The fact of order sustained, with the warning example at hand of the ex-Soviet Union, in itself, however conferred legitimacy on the regime; there was no inheritance of democratic expectation - nor, some speculated, much real likelihood that so vast a country could be run by the norms of democracy elsewhere; and the philosophical vacuum might be further filled by emphasis on national dignity and pride as the unifying force (an emphasis not without risks of a backward-looking xenophobia that might damage both China and those who dealt with China). It would moreover be mistaken to suppose that there had been no responsive political change accompanying the economic transformation; a good deal had happened progressively in ways not officially proclaimed, for example in devolution to the provinces, in sensitivity to local opinion and in the openness of the media, though questions remained about whether pace or scale could match the pressures. Prediction was historically hard in respect of China, but we mostly thought implosion or fragmentation improbable.

We recognised that China faced an array of problems which in their scope and intensity could well presage disaster for any country of smaller size or less deep-rooted coherence. Demographic growth was due to stabilise in about 2010 - but at one and a third billion, with current growth continuing at about the magnitude of Australia’s population per year, and with threatening imbalances flowing from family-limitation policies. Even with a stabilised population economic growth would increase per-capita consumption and so intensify already-severe resource scarcities, notably in water and energy supplies (and though there might be huge gas reserves in the South China Sea, oil dependence on the Middle East seemed inescapable). Road and rail communications were improving, but the general infrastructure remained inadequate for a modem economy. The macro-economic levers available to government were at best precarious, and the tax system (particularly for province-to-centre transfers) ramshackle. Inequalities of wealth were very marked, both between individuals and between provinces; while poverty did not approach the proportionate scale of India, many had enjoyed no share in the economic advance. Corruption - acknowledged by President Jiang himself as a grave impediment - was rife, with organised crime (including drug trafficking reaching beyond China) widespread. The rule of law and governmental subjection to it was undependable, at least to outside eyes. There were multifarious and massive environmental problems.

We dwelt on agriculture as an area of especial difficulty, for several reasons. Structural changes had generated a vast migration, mostly in conditions of deprivation, to the towns - figures around a hundred million were canvassed - and the scope for consequent social unrest was evident. China, with 22% of the world’s population and 7% of its arable land, was not feeding itself. Partly because of poor land-use control and distorting price mechanisms, agriculture remained inefficient by standards achieved elsewhere; investment was inadequate and improvement slow.

The key institutions within China remained the Communist Party and the People’s Liberation Army. Whatever outsiders might like, the Party provided the only general structure of government available; it was becoming in practice more flexible and more representative; and the alternative to using it and working with it would be chaos. Western policy had to recognise that reality. The PLA for its part was still a key political force and a vital ally for the government; and it remained an important participant in the economy. Internally, it showed a double or parallel division ; first between a relatively advanced and well- equipped component, and a much larger body of more limited competence and old-fashioned structure; second, between traditionalist “people’s army” concepts and a reforming strand concerned, especially after vivid observation of Desert Storm, to learn modem lessons and if necessary to build professional links for that purpose with the United States and other advanced countries - a desire which offered opportunities to the West for improved two-way understanding through dialogue. Though China’s military development understandably attracted vigilance among its neighbours, its prospects were often exaggerated; fears of an effective ability to project large-scale force outside China’s borders, for example across the Taiwan Strait, would remain unfounded for at least many years to come.

China’s own inbuilt attitudes were nevertheless likely to continue to make for uneasy relationships with many who dealt with her. Quite aside from specific concerns - historical hang-ups, some participants thought, but perceptions were a significant kind of reality - like a militarised Japan, a resurgent Russia, an encircling United States or an extremist Islam, Chinese external behaviour more generally still sometimes tended to reflect a suspicious or touchy insecurity inherited from many decades seen as marked by experience of disadvantage, disrespect and inequity. It was no doubt at times convenient domestically to portray the outside world as hostile or unsympathetic, and externally to exploit both that world’s fear of chaos in China and its expectations of China’s future greatness. Chinese negotiating styles appeared to regard deals, once struck, as still open-ended, but in one direction only; more generally, China often seemed reluctant to accept the existing international order and its customary norms, viewing them as the product of bargains to which China had not been party. There had been significant shifts in recent years, partly as China’s own situation altered - for example, China no longer felt so natural a political affinity as in the past with the non-aligned group; Chinese behaviour had been cooperative or acquiescent in respect of Cambodia, of most Security Council business and of sanctions against Saddam Hussein; and there seemed a pragmatic if tacit convergence of policy towards North Korea. But there remained differences, for example on certain aspects of arms proliferation (where it remained unclear whether Chinese motives for exports unwelcome to the West were primarily political or related to a need for hard currency). The Comprehensive Test Ban Treaty would be a hard issue for China, on grounds likely to include its own direct technical concerns.

Chinese candidature for membership of the World Trade Organisation (WTO) - which we were minded strongly to favour - was likely to pose still harder and wider issues for China. We discussed trade and investment from several standpoints. For the outside businessman China presented huge opportunity alongside a good deal of complication - corruption cast its shadow; the rule of law (or its observance), the sanctity of contract and customary business ethics were all, to Western thinking, unreliable; and the paucity of responsibility-shouldering management skills could offset the attractions of low labour costs. From the Chinese standpoint the outside investment itself was often less important than the accompanying know-how - three-quarters of investment in China was internally generated, and much of the rest came from overseas Chinese. The prime importance for China of commercial relationships with other countries lay however in the mounting volume of its exports - growing by 20-25% per year, with around one-third of the total going to the United States. China’s trade partners pointed increasingly to the need for this flow to be matched by fair access to Chinese markets for their own imports: but such access posed painful issues for Chinese structures, practices and attitudes.

We debated how China saw herself as a foreign-policy actor within the East Asian region; would China be primarily a problem for neighbours, or a force for stability? China had not shown herself eager to build regional structures, or to use them; she seemed uneasy about the Asia-Pacific Economic Cooperation Forum, and Chinese participation in regional fora was mostly passive or reactive, reflecting primarily a concern not to be excluded. Such fora nevertheless offered neighbours an opportunity for dialogue, understanding and two-way reassurance, even if not for joint action.

Among particular issues Taiwan remained the most salient - and the most awkward, especially as it bore upon relations with the United States. Democratisation, including its more uncomfortable reflections, was irreversible; and while few Taiwanese favoured the extremes of either early independence or early re-integration, preferring to shelve the tougher issues and get on with prospering economically, occasional popular pressures meant that in the delicate interface provocations had in recent times come more from the Taiwanese than the Chinese side.

Hong Kong was a special British concern, but we mostly agreed that its future should for several reasons be also of wider Western concern. It mattered both for direct substantive reasons - its seven million people generated a GDP nearly a quarter the size of China’s, and any collapse in its massive trade flows would reverberate through the whole Chinese economy - but also as a signal (not least to Taiwan) about the future character of Chinese government itself. The West would have to recognise the realities of transition - for example, Chinese commitment to abolish the present Legislative Council seemed beyond doubt - but should do all it could to underline to China both the sensitivity of the Hong Kong polity and the interdependence of its various facets, like the reliability of the commercial-law system, the integrity of the civil service and academic freedom in its universities.

As we sharpened the conference’s practical focus - on messages for policy-shaping by those who dealt with China - we asked ourselves to what basic goals those policies should relate. We found little doubt of the answer: for almost every sort of reason, neighbours and other interlocutors must want a stable and successful China, comfortable in the long term as a partner in the international system; and actions in the near and medium term should not lose sight of that central desire.

A good deal could cumulatively be done in ways not necessarily or primarily involving governments. Educational and cultural exchange and research, with wider linguistic competence on both sides, could build understanding of China as a civilisation, not just a state, and by China of the outside world; in the commercial field and among professions, too, other countries could help to deepen skills for the global market-place and to construct institutions underpinning both sound business dealings and an emerging civil society.

At the inter-governmental level it was not to be expected that China, amid its enormous problems and with its distinctive historical perceptions, would quickly become easy to deal with. Western actors must be ready to partner sensitive understanding (and a careful vocabulary, avoiding “Cold War” notions like containment) with a clear and robust view of their own practical interests. That view should be distorted as little as possible by media and pressure groups, though it would remain necessary to convey candidly to China - and in a timely manner, as need arose - that her actions (as, most markedly, at Tiananmen) had public effects which democratic interlocutors could not brush aside.

There were within our group differences of emphasis about the involvement of China in international structures; the general case for this was evident enough, but it was suggested that the involvement of China might sometimes delay or obstruct important agreement and collective action. We were inclined to conclude that case-by-case judgement was needed; but weight should always be given to the cumulative merits of bringing China progressively - and patiently - into the structures, dialogues and habits of the global community, strengthening its sense of being an accountable stakeholder, not a free-riding outsider. In these processes the interlocutors need not deal over-softly, and should be on the alert to identify and use legitimate levers, both positive and negative, for influencing Chinese behaviour in preferred directions.

Western countries also needed to consider their priorities realistically, not asking too much of China all at once; and to walk the sometimes-narrow path between on the one hand an uncoordinated diversity of action generating either confusion or divide-and-rule temptations for China, and on the other the appearance of ganging up. Multilateral structures of dialogue would generally be preferable to bilateral ones, not least as the context for United States dealings with China. The United States was still often suspected in China of having a hidden agenda of undermining the entire system; and though the United States inevitably had more leverage than any other country, it would be damaging and often counter-productive if others regularly stood back and let it appear that only the United States cared about wider China-related issues.

Our overview throughout remained conscious of the difficulty of forecasting, and of the wide range of possible outcomes. Whether or not, as a majority guessed, some special Chinese form of muddling-through was the likeliest scenario, the policies of those who dealt with China could not prudently be built on any other premise but that China’s rise would continue, and that it should be received as not only a necessary but a welcome development. Outcomes were overwhelmingly for Chinese governments and peoples themselves to shape: but for others to base policy on pessimistic assumptions about Chinese success, or hostile ones about Chinese orientation, would have the ultimate effect of throwing external influence, whatever its weight, into precisely the wrong side of the scales.

This Note reflects the Director's personal impressions of the conference. No participant is in any way committed to its content or expression.

Chairman: Lord Wilson of Tillyorn, GCMG
Governor and Commander in Chief, Hong Kong 1987-92


Mr Murray McLean, OAM
Head of East Asia Branch, Department of Foreign Affairs and Trade

Sir Leonard Appleyard, KCMG
Ambassador to the People’s Republic of China
Mr Anthony Galsworthy, CMG
Deputy Under Secretary of State, Foreign and Commonwealth Office (FCO)
The Lord Glenarthur, DL
Deputy Chairman, Hanson Pacific Ltd; formerly Minister of State, FCO
Professor Christopher Howe
Professor of Economics with reference to Asia, London University
Mr Christopher Hum
Lately Assistant Under Secretary of State for Northern Asia, FCO
Mr Henry Keswick
Chairman, Matheson & Co Ltd and Jardine Matheson Holdings Ltd, Hong Kong
Sir Robin McLaren, KCMG
Lately Ambassador to the People’s Republic of China
Dr Edwina Moreton
Diplomatic Editor and Deputy Foreign Editor, The Economist
Dr Jessica Rawson, CBE, FBA
Warden, Merton College, Oxford
Dr Gerald Segal
Senior Fellow, Asian Security Studies, International Institute for Strategic Studies
Dr David Shambaugh
Editor, The China Quarterly. Conference rapporteur
Dr Michael Yahuda
Reader, Department of International Relations, London School of Economics

Professor Fred Bild
Lately Ambassador to the People’s Republic of China
Professor Paul Evans
Director, Joint Centre for Asia Pacific Studies, University of Toronto and York University

The Hon Endymion Wilkinson
Head of Delegation of the European Commission, Beijing

Monsieur Gilles Chouraqui
Deputy Director for Asia and Oceania, Ministry of Foreign Affairs
Monsieur François Godement
Senior Research Associate, Institut Français des Relations Internationales

Dr P Christian Hauswedell
In charge of bilateral relations with Asian countries, Federal Chancellor’s Office
Herr Cornelius Sommer
Director, East Asia Division, Ministry for Foreign Affairs

Signor Mario Pini
Chief Representative, Italian Economic and Cultural Promotion Office, Taipei

Ambassador Nobuo Matsunaga
Envoy of the Government of Japan; President and Director, Japan Institute of International Affairs
Mr Shuji Shimokoji
Deputy Director-General Intelligence and Analysis Bureau, Ministry of Foreign Affairs
Professor Seiichiro Takagi
Member, Japanese Committee, Council for Security Cooperation in Asia-Pacific Region

Mr Bryce Harland
Formerly New Zealand Ambassador to the People’s Republic of China

Ambassador Igor Rogachev
Ambassador to the People’s Republic of China

The Hon Barber B Conable, Jr
Chairman, National Committee on US-China Relations
Mr Peter Geithner
Director, Asia Programs and lately Representative in China, The Ford Foundation
Dr Robert Kapp
President, US-China Business Council
Dr David M Lampton
President, National Committee on US-China Relations
Dr Michel Oksenberg
Director, Asia/Pacific Research Center, Stanford University
Mr Stanley O Roth
Special Assistant to the President for Asian Affairs, National Security Council
The Hon J Stapleton Roy
Lately Ambassador to the People’s Republic of China; Ambassador - designate to Indonesia