Xi Jinping's two-pronged strategy too ambitious?

Deng wisely counselled his successors to pursue a policy of patience, forbearance, and non-leadership in international affairs while concentrating on economic development. His advice was easy to follow in the 1980s and 1990s, when China was clearly in rebuilding mode.

Through the 2000s, however, tension steadily grew between advocates of the Deng approach and those who argued China had become strong and influential enough to demand that other governments accommodate its preferences in international affairs.

Standing up more forcefully on the world stage for China's interests is clearly one of the main pillars of Mr Xi's agenda, whether this is an end in itself for him or a means of facilitating one of his other major goals (such as economic restructuring or building a personal legacy). In making this shift now, however, Mr Xi takes a huge risk.

The first problem is timing. China's interests would be well served by another 10 to 15 years of lying low. China has been increasing its relative stature while participating in the global trading system and striving to appear as a responsible and constructive international citizen. Beijing was winning the game while playing by the rules. Despite Washington declaring a "rebalance" to Asia, important components of US military power were stagnating or shrinking. Most importantly, China subdued fears of a "China threat".

Precluding anti-China co-operation among fearful neighbours has been a major goal of the Chinese Communist Party (CCP). With another decade of patience, shelving of disputes, and smile diplomacy, foreign resistance would be minimal as China further extended its global economic penetration and expanded its clout in important international organisations. There was no compelling strategic reason for Mr Xi to implement a more assertive foreign policy. Whether this approach has, on balance, gained ground for China is questionable.

In the East China Sea, Beijing's military pressure failed to force Tokyo into a recognition of China's claim to ownership of the Senkaku/Diaoyu islands, but instead strengthened the US-Japan alliance.

For its tiny and indefensible artificial island military bases in the South China Sea, Beijing gets a new military flashpoint with the United States. Security co-operation among India, Australia, Japan and several South-east Asian countries is up, and American politicians are now talking about China as a reason why the US military needs upgrading.

The second problem is that China has not yet consolidated the economic development needed as a firm foundation for great power status. Mr Xi inherited an economy due for a huge and difficult transformation.

Former premier Wen Jiabao famously said China's growth is "unstable, unbalanced, uncoordinated and unsustainable". As the leaders in Beijing know, failure to maintain high annual growth rates could result in massive social discontent in a country where the legitimacy of the ruling party is based on its ability to meet the people's expectations of steadily rising prosperity.

Even the PRC's Finance Minister Lou Jiwei, however, has said China has a 50 per cent chance of falling into the "middle income trap", where once-poor countries that grew rapidly through cheap labour and capital are unable to maintain momentum because they lack high levels of productivity and innovation.

The ageing of Chinese society will heavily reduce the pool of workers over the next two decades, a deficit that will require a correspondingly large increase in productivity. Government policy privileges often-inefficient state owned enterprises. Yet income inequality is more severe in China than in India or the ultra-capitalist US. Mr Xi's well-publicised anti-corruption campaign is selective, failing to fundamentally root out a massive problem that damages China's economic health and the quality of life of its citizens.

The results of the failure to consistently enforce environmental protection regulations are increasingly obvious and will be immensely costly to rectify. The largest part of the economic transformation project will be moving from reliance on exports towards reliance on domestic consumption to maintain rapid growth.

That the Xi government has made little headway in this up to now is understandable considering the inevitable opposition from powerful groups that benefit from the status quo, many of them presided over by senior CCP officials. Along with tentative moves towards reform, the CCP under Mr Xi has taken a step towards the past Maoist practice of valuing "redness" over "expertness" (prioritising ideological correctness over pragmatic results).

The historically unprecedented success of China's rapid growth in wealth, technology and economic power over the last three decades stemmed largely from the leadership's willingness to absorb and adapt to international best practices.

Under Mr Xi, however, the regime has re-emphasised the need for vigilance against Western and liberal ideas, which risks demonising some of the adjustments, such as greater rule of law, that could energise the Chinese system and unleash greater productivity and innovation.

There may be political logic to combining an assertive foreign policy with near-revolutionary economic readjustment at home: the nationalistic approval stemming from the former provides the prestige needed to crush domestic opponents of the latter. But it is equally likely that Mr Xi's two-war strategy proves too ambitious, with the possibility that neither will succeed.

stopinion@sph.com.sg

This article was first published on June 22, 2015.
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