Doubt , if not pessimism, is expressed by by David Shambaugh
on the ability of China’s new leadership to power China's Rise in an article of 21 November, 2012 here in
YaleGlobal Online, a platform of the Yale Centre for the Study of
Globalisation.

Shambaugh is professor
and director of the China Policy Program Elliott School of International
Affairs at George Washington University, and Senior Fellow in the Foreign
Policy Studies Program at the Brookings Institution. The article heralds
his forthcoming book “China Goes Global: The Partial Power (2013)” Click here

Shambaugh recognizes “a surprising strong
consensus” both inside and outside China on the following critical domestic reform
areas  –

“ – reorienting the economic
growth model away from investments into physical infrastructure and
subsidized exports to one driven by domestic consumption and innovation,
emphasizing the knowledge economy and service industries;

 – breaking the government’s monopoly over several
sectors, while empowering civil society and loosening controls
over the media, so as to facilitate the free flow of information needed in a
real market economy and innovation society;

– adequately resourcing “public goods” for the populace –
including healthcare, environmental protection, improved quality of education,
pensions, old age care – while seriously addressing social stratification and
inequity;

 – instituting the real rule of law – so as to counter
rampant corruption, rising crime, systemic abuse of privilege and power, and
facilitate the predictable functioning of a market economy;

 – addressing seething discontent among ethnic groups in
Tibet and Xinjiang in positive ways instead of relying on intimidation and
repression

 – permitting greater political pluralism, even within a one-party
system”.

“In the foreign-policy
arena”, Shambaugh thinks that “China’s neighbours hope it will adopt a
more accommodating
and less confrontational posture, particularly over maritime
territorial disputes. Beijing also needs to work with the United States to stem
the strategic competition and mistrust now pervasive in the relationship. Its
relations elsewhere in the world are increasingly afflicted by the growing
perception of China as a mercantilist state soaking up natural resources and
investing in strategic assets. China also needs to play a greater role in global governance
commensurate with its power and position in the international community”.    

However, the eminent professor thinks that China’s new generation of
leaders is hamstrung by four inherent constraints –

• A “path dependency”

“The growth model has not only produced
impressive national development – it has also employed a huge relatively
unskilled workforce. To transition away from this model risks widespread
unemployment and labour unrest, which would threaten social stability and party
rule”. 

Shambaugh explains that “The composition of (China’s ) exports needs to move up the value
chain – and this is linked to shifting investment from “hard” to “soft”
infrastructure: education, science, cutting-edge technologies, innovation and
cultural creativity. For China to make these transitions requires more than a
shift in financial allocations, though, as it requires loosening of the
political system, media censorship and civil society. A “knowledge economy”
cannot easily be built in an authoritarian system.”

• The
  “Soviet shadow” 

Shambaugh argues that with the
spectre of the collapse of the former USSR, together with the lingering threats
of the Eurasian “colour revolutions” and the “Arab spring”, there is a gripping
fear that “opening the political system to genuine pluralism, empowering civil
society, loosening media censorship, permitting free inquiry and critical
thinking in education and research, or making the legislative and judicial
systems autonomous of party control, would inevitable cascade out of control
and spell the demise of party rule”. 

• “Institutionalized”
  or vested interests

“The core problem is the state
sector of the economy, which still accounts for roughly 30 percent of GDP. This
includes state monopolies of the banking, energy, finance, defense, heavy
industrial, aerospace, telecommunications, and much of the transportation
sectors, as well as enormous swaths of land and property owned by the party,
state and military. Lenin warned of “state-monopoly capitalism” in 1917 – China
has it in spades today. These vested interests, particularly the 145,000 state
enterprises and 120 “national champion” corporations, are not about to divest
their interests voluntarily”. In addition, “three other entrenched
interest groups inhibit reforms: the military, the sprawling internal security
apparatus and the arch-conservative wing of the Communist Party”. 

•  “Aggrieved nationalism”

There is an “entrenched national narrative of victimization. This
narrative, assiduously developed over six decades through the propaganda and educational
systems, underpins the political raison d’etre of the Communist Party – but it
is a core source of the frictions with China’s neighbours and the West. China
needs to shed this psychological baggage to truly normalize relations with Asia
and the West – but to do so is to undercut the party’s legitimacy”.

To be fair, Professor Shambaugh is to be agreed as his prognosis is much
more balanced and analytical compared with most China studies characterized by
sectoral or pre-judgemental bias, hyping either the “China threat” or “China
collapse” at one end of the spectrum to “China rules the world” at the other. According
to his description of his forthcoming book, his conclusions are based on “six
distinct dimensions of China’s global emergence (perceptual, diplomatic, global
governance, economic, cultural, and security) and multiple manifestations of
each”.

While Shambaugh’s scepticism is
well-placed, it must nevertheless be seen in the following context –

On “path dependence”-

Ever since China started to reform and open up in 1978, the country’s
development has been a continuous work-in-progress, to stay above waters of a continually
changing tide. This perennial status of flux, of adaptation and change, has
been at the core of China’s economic miracle, compressing over a century’s
economic progress into a few decades. However, this has been breeding existential
threats in unbalanced growth, rampant corruption, social inequity and ecological
degradation and a hotbed of other social ills.

As early as the beginning of
China’s 11^th Five Year Plan (2006-2010), the leadership has been
highlighting the so-called five imbalances (between rural versus urban, human versus 
environmental, economic versus social, national versus local, and inward versus outward
investments). Ever since, the leadership has ushered in a swath of initiatives
to hone “ a nation of innovation”
including a battle for talent. Click here and the promotion of the kind of “soft”
infrastructure highlighted by Shambaugh: education, science, cutting-edge
technologies, innovation and cultural creativity, though the outcome is not yet inconclusive.

There has thus been a clear
sense of changed direction since 2006 – now reinforced by the 12^th
Five Year Plan (2011-15) – towards a dramatically different path based on slower
but more balanced, higher-quality, more equitable and more sustainable growth. There
is a broad-based awareness that the cheap labour pool is dwindling and China
must redouble efforts to respond to the so-called Lewis Curve Turning Point Click here and the challenges of the Middle Income
Trap. Click here

So the point here is that “path
dependence” is not immutable.

On the “Soviet
shadow” –

True, the Communist Party is caught in a quandary.  But what Daron Acemoglu and James Robinson
describe as “extractive institutions” (“Why
Nations Fail”, Profile Books, 2012) have generated growing social unrests
that threaten to undermine the stability of the whole regime. It is no coincidence
that from Wukan, Shifang to Ningbo, a recent series of uncharacteristic,
high-profile, government about-turns have begun to happen, overturning local projects
approved in Beijing in response to public protests against land grabs and
pollution. In particular, the so-called “Wukan model” of open and fair village
elections was daringly promoted by Wang Yang, one of China’s rising, if
recently checked but no means “disabled”, pro-reform “stars”.

It is also
instructive that a host of reform proposals in a new 468-page World Bank report
were given the rare  imprimatur of the
State Council (Development Research Centre). These include the promotion of
civil society, including the role of the media to monitor governance (if initially
only at the local level), and the strengthening of the rule of law, although, admittedly,
there is still a long and winding road towards greater legislative oversight
and judiciary independence.

But if the story is to be believed, Alexis de
Tocqueville’s “French Revolution” is
doing the rounds amongst China’s top leadership, including Li Keqiang, the
Premier-in-waiting and Wang Qishan, the new anti-graft czar. And fighting
corruption has been termed a matter of “”life or death” for the Party and the
nation, according to both out-going President Hu Jinatao and President-in-waiting
Xi Jinping at the 18^th Party Congress.

The point here is that the “”Soviet
shadow” also means that “not managing change” in tune with the times will only
threaten the whole regime’s survial.

On “vested
interests”

The reason why the 18^th Party Congress was
unexpectedly delayed was the shock of the Bo Xilai affair. Regardless of
factional vested interests, nothing concentrated the minds of the collective leadership
better than when the whole apple chart was about to be overturned by the overarching
ambition of a scheming, if charismatic, individual. This was also an epiphany
that vested interests must be curved, if not eradicated, particularly those represented
by the monopolistic state-owned enterprises which sapped the vitality of the
private sector. Indeed, this is one of the major reform areas highlighted in
the World Bank/Development Research Centre report.

As for the military, a
series of top military promotions and reshuffling took place during the mysterious
disappearance of then Vice President Xi Jinping. It is probable that he took French leave to boost the loyalty of the military
leadership in preparation for his taking over the Military Commision chairmanship in a first-of-its-kind complete power transfer at the Party Congress. As it is now confirmed, the Party’s top leadership has been reduced
from nine to seven members, downgrading the security and propaganda apparatus below
the level of the Politburo Standing Committee.

All these changes are of course
not enough to break the so-called “iron quadrangle” of the military, the security apparatus, state-owned
enterprises and arch-conservatives. This is not totally unlike the American example of
the military-industrial complex forewarned at the time of President Einsenhower
plus its modern adjuncts of big business and Wall Street.

The point here is that vested interests,
when push comes to shove, can also trigger reform in order to maintain overall regime
stability.

On Aggrieved
nationalism

The nation’s psychological baggage is a reality borne
of centuries of foreign oppression. Some of the remaining territorial disputes
are in fact their outcome. Such disputes are unlikely to be resolved anytime
soon. So territorial integrity is likely to remain a sore point in the national
psyche for a long time to come. 

Nevertheless,
China has now become more proactive in the global commons, for example in
international peace-keeping, as the largest contributor of peace-keeping forces amongst Permanent
Members of the Security Council. The country is also instrumental in brokering
the six-party talks on North Korea and is taking a keener interest in
addressing conflicts in the Middle East. But such a role cannot be equated to acquiescence
with one-sided demands or abrogation of China’s own national interests. Indeed,
no self-respecting nation would do this.

Meanwhile, China is now embarking on a
mission to promote the country’s soft-power, including Confucianism and other
aspects of China’s culture and heritage. But notwithstanding the gravitas of
China’s economy, debates about the merits of the so-called Beijing Consensus
and growing world-wide interests in the Chinese language, China is unlikely to
have many genuine followers until the country succeeds in showcasing a
new attractive civilization with a heart and soul that appeal to the spirit of
the times.("China's Economic Success and Its Implications for the World Order" Click here

In the final anaysis, despite many negative connotations, “in
the past ten years under the current leader, Hu Jintao, the economy has
quadrupled in size in dollar terms. A new (though rudimentary) social safety
net provides 95% of all Chinese with some kind of health coverage, up from just
15% in 2000. Across the world, China is seen as second in status and influence
only to America,” according to The Economist front cover article of 27 October
2012.

An article here  for the South China Morning Post dated 19 September 2012, China's Economy and Policy, the flagship publication of Gateway International, a global
China consultancy firm, postulates
that brighter
days are ahead for China’s economy.

The latest OECD report “Looking to 2060: Long-Term Global Growth Prospects” dated November
2012 here suggests that “China will overtake the eurozone in 2012 and the US within
the next four years to become the largest economy in the world.  By 2060
…… the combined GDP of China (27.8%) and India (18.2%) will be larger than that
of the OECD – and the total output of China, India and the rest of the
developing world (57.7%) will be greater than that of developed OECD and
non-OECD countries (42.3%)”.

Notwithstanding competition and rivalry, which are common to all political
systems, the different factions, power-centres, and vested interests of the
Party polity all embrace and continue to benefit from China’s continuing reform
and progress. The question is not whether to reform but where, how much, and
how fast, and of course, how to apportion their respective power and influence.

Depending on the time horizon and a host of imponderables, brighter
prospects may or may not materialize. Nevertheless, I am more inclined to the
view that the bottle is at worse half full. There is serious leakage that needs to be fixed but more water is coming in. At any rate, the jury is still out.

If one is to believe that in reply to Richard Nixon, Zhou Enlai said it’s
still too early to tell the impact of the French revolution, perhaps it is
still too early to be pessimistic about China, especially at such an epochal
watershed when no change is no option.

China will remain a work in progress for years to come. So, until China manages to address all of the above challenges, Professor Shambaugh is accurate – China remains a "Partial Power".