Commentary No. 79: Potential For Domestic Instability in the People's Republic of China in the Medium-Term (2001-2006)

Michael Szonyi

November, 2000
Unclassified

Editors Note: The author of this issue, Professor Michael Szonyi, is a member of the Department of History, University of Toronto, and a recognized international authority on Asia.

Disclaimer: Publication of an article in the Commentary series does not imply CSIS authentication of the information nor CSIS endorsement of the author's views.

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Introduction

While the official Chinese media continue to trumpet the triumphal successes of Chinese reform, some Chinese analysts are drawing attention to reform's dramatic negative consequences. Outside observers should take notice. Ma Licheng and Ling Zhijun's 1998 exposé Jiaofeng (Crossed Swords) describes the attacks on reform by the so-called 'Old Leftists,' the last surviving proponents of the planned economy. Though the Old Leftists themselves have little credibility in China today, their criticism of rising inequality, corruption, foreign influence and moral decay has struck a chord with many Chinese readers. He Qinglian's The Pitfalls of Modernization, published the previous year, goes an important step beyond reactionary rant. While supporters of reform both inside and outside China had always said there would be difficulties during the course of reform, He argues that the roots of corruption and inequality lie in the reform process itself, that the problems are far more serious than anyone is willing to admit, and that they may ultimately undermine economic, political and social order. These two works by authors inside the People's Republic of China provide a useful point of entry into discussion of the country's medium-term security issues.⁽¹⁾ Much Western analysis ignores the potentially destabilizing consequences of the reform process. This article will discuss some of the major challenges to Chinese stability for the period 2001-2006, paying particular attention to analysis emerging from within China. Many factors could lead to varying degrees of domestic instability in the PRC in this period, including dissatisfaction with economic change, ethnic separatism, and religious ideology. While leadership and succession issues, tensions between the civilian leadership and the army, and the commitment to recover Taiwan may contribute to the overall uncertainty, challenges to stability are less likely to come from the political domain.

The Negative Consequences of Reform

While economic reform was and will continue to be both necessary and beneficial to many segments of society, the last decade of reform has created a host of new problems. These present new challenges to the legitimacy of the ruling Chinese Communist Party (CCP), to its leaders, and to social order.

In the 1980s, decollectivization and decentralization in agriculture and industry led to increases in household incomes across China. Most everyone benefited from reform. By the early 1990s, though, the productivity gains made possible when individual households were allowed to make their own decisions and reap the benefits of their own hard work had mostly been exhausted. The agricultural boom slowed. On the industrial side, the collectively owned Township-Village Enterprises (TVEs), which drove much of the growth of the earlier period by expanding low-end manufacturing, also began to reach the limits of what can be accomplished without larger scale and more advanced technology. Excessive and arbitrary taxation and embezzlement deepened the rural slowdown. Since the early 1990s, rural incomes have stagnated and even declined.

According to He, the economic boom of the 1990s has been mostly urban driven, and results mainly from the plundering of state assets by millions of state officials, managers of state-owned enterprises (SOEs) and their immediate families. The extension of reform from agriculture to the SOEs led to a process that has been labeled 'the privatization of profits and socialization of losses,' whereby managers and local officials bought the more efficient parts of an enterprise themselves, or sold them to their friends. The collective enterprises had traditionally been responsible for providing employees and their families with a wide range of social benefits, including housing, welfare, pension and other benefits. The residual enterprise that remained after its most productive parts had been privatized is much less well equipped to provide these benefits, all of which have been eroded.⁽²⁾

Thus reform has led not to solid institution-building or the equitable redistribution of collective property, but rather to the personal enrichment of power-holders of the old system. In the last decade, moreover, political considerations rather than the marketplace have driven much of China's investment in infrastructure and productive capacity, further skewing economic development. According to Nicholas Lardy of the Brookings Institution, China's banks continue to channel vast sums into SOEs, not because these businesses can make efficient use of the money but because the banks' political masters tell them to do so.⁽³⁾  The bureaucrats don't really expect that bank loans will turn China's rusting factories around. Rather, they fear that, if they are allowed to go bankrupt, laid-off workers will take to the streets.

The result has been rising inequality, rising unemployment, and rising dissatisfaction. The World Bank reports that urban households earn on average 2.5 times what rural households earn. When benefits such as housing, pensions, and insurance are included, the ratio rises to 4 times. There are serious and growing regional disparities. Per capita gross domestic product in Shanghai and other coastal regions is ten times that of the poorest provinces in the interior.⁽⁴⁾  At about three per cent, official unemployment in China is remarkably low. But this figure is misleading because rural unemployment or underemployment is notoriously difficult to measure, and large numbers of urban workers have been laid-off (xiagang) but remain on the administrative rolls of their employer. Some analysts estimate that the number of real urban unemployed is as high as twenty million. To this estimate must be added the tens of millions of rural migrants-China's so-called floating population-who have come to the cities looking for work, but are captured by statisticians only if they find work.⁽⁵⁾  Real unemployment is also unevenly distributed across regions, with the highest levels in the northern provinces, where the economy continues to be dominated by loss-making state-owned enterprises.

All of these problems can be expected to worsen in the period 2001-2006. As the Chinese economy becomes more capital intensive, unemployment pressures will increase, and further reform will make it harder, not easier, for the economy to absorb the growing surplus workforce. Accession to WTO, likely by the end of 2000 or early 2001, will further intensify these problems. China's leaders have long known that short-term pain, in the form of unemployment and displacement, is necessary in the interest of long-term growth. WTO is seen as the catalyst for that short-term pain. But by lowering import barriers against agricultural and industrial goods, membership will increase the pressure on China's farmers and industrial workers, millions more of whom will be thrown out of work or driven off farms that cannot compete in the global market. State-owned enterprises currently employ some 70 million people, who support over 200 million dependents. Roughly half of these enterprises operate in the red now, and that proportion is sure to rise after WTO accession. Unable to support SOEs with soft credit indefinitely, the state will be forced to choose to back the most competitive, and let the others cease operations. Even official Chinese sources are beginning to acknowledge that unemployment will rise dramatically in the years ahead. One Ministry of Agriculture official openly mentioned the figure of 200 million surplus labourers in a publication for Chinese overseas.⁽⁶⁾  In a recent survey of urban residents in China, 21.6% identified unemployment and layoffs as the most significant social problem they faced, the most of any single issue.⁽⁷⁾  The research of Wang Shaoguang, of the Chinese University of Hong Kong, suggests that the displacement and restructuring of further economic reform will only intensify existing urban/rural and regional disparities.⁽⁸⁾ Rising economic inequalities and hardship are certain to drive rising emigration, a matter of great concern to Canadians. It is generally not the poorest of China's poor who emigrate illegally. Rather, it is members of families whose expectations were raised in the early stages of reform, but who have been disappointed by subsequent developments. These people, many of whom live in coastal regions, have felt further pressure as large numbers of internal migrants from poorer parts of China come to the coast looking for work, thereby depressing local wage levels. Thus the uneven course of Chinese development is leading to both internal and international migration, as people try to take advantage of economic differentials within China and between China and other countries.⁽⁹⁾

New (and old) Challenges to the Regime

The political implications of the problems anticipated for the next stage of reform are significant. The most important political support of the CCP has always been farmers and industrial workers, precisely the two groups which stand to lose the most. Under Deng Xiaoping's leadership, the CCP abandoned collectivism and egalitarianism as the basis of regime legitimacy, substituting rapid economic development and rising income for all. But the former is proving difficult to sustain, and in any case it is no longer obvious that it leads to the latter.

The regime's greatest fear must be the bottom-up challenge of endemic and accelerating pattern of urban and rural mass protest. Over 100 000 mass demonstrations were reported to the government in 1999; the real number is surely many times higher. Various types of grievances send people to the streets in China today. In the cities, the most important include the closure of bankrupt state-owned enterprises and resulting layoffs; unpaid wages, privatization of housing which involves eviction from public housing and levels of compensation inadequate for purchase of a private home, and other erosions of social welfare. In May, students at Beijing University, long a touchstone for the national sentiments, demonstrated against the unsafe campus environment after the rape and murder of a fellow student. In rural areas, people demonstrate and riot against excessive taxation, government failures to pay for procured products, land disputes, corruption and embezzlement by local officials, and manipulation of village elections. Rural and urban residents protesting against government closures of investment funds for illegal activity have been particularly outspoken because they believed that the state actively promoted and guaranteed the investment funds. Over one hundred mass demonstrations related to investment funds are said to have occurred in the upper Yangtze city of Chongqing alone.

Three aspects of the demonstrations are noteworthy. First, they are occurring throughout China, in both rich and poor areas, because there are dissatisfied people everywhere. In a single week of January 2000, there were reports of anti-government protests in Guangdong's Zhongshan county, close to Hong Kong and one of China's richest counties, and in impoverished Shanxi in the north.⁽¹⁰⁾  Second, the scale of the protests is large and growing. In the northern province of Liaoning, over twenty thousand miners demonstrated in February 2000 against inadequate payoffs when their bankrupt mine shut down. In May, five thousand steelworkers demonstrated, also in Liaoning. Media reports suggest the People's Liberation Army is increasingly being called upon to restore order. Rural protests are also growing in scale. In January 1999, over five thousand villagers near the Hunan capital of Changsha were dispersed by police after gathering to demonstrate against taxes and corruption.⁽¹¹⁾

Third, despite their size and intensity, the demonstrations are narrowly focused on specific economic grievances, and there is no coordination or organization linking separate protests. Thus, popular expressions of dissatisfaction will probably not become regime-threatening in the period 2001-2006. They would become much more worrying if their demands broadened to include political change, if a coordinating organization emerged, or if they become serious enough that the leadership feels compelled to distract popular feeling by manipulating nationalism, perhaps through aggressive action against Taiwan, discussed below.

The many people who have suffered the negative consequences of recent reform are also highly receptive to the appeal of religious and spiritual movements. The supporters of falun gong (Wheel of the Law) are predominantly urban poor and middle-class, many of them elderly. They have seen one of the most remarkable systems of free public medicine and pensions in the developing world wiped away just as they begin to need it most. One of falun gong's great attractions is that followers believe it offers a cheap alternative route to healing. falun gong is the most prominent of the new religious groups because it appears to be national in scope, and well organized, and because of the state's campaign against it. Reports estimate that tens of thousands of falun gong followers have been detained nation-wide. But several other new religious movements across the country have also been suppressed by the state in the last year.⁽¹²⁾  Underground Christian churches have also grown in adherents in recent years; some reports put their membership at over ten million Catholic and thirty million Protestant, and members of these churches face frequent if sporadic persecution.⁽¹³⁾

The government of the PRC's recent harder line against unauthorized religious movements is due not only to the fact that apocalyptic cults have threatened political rule repeatedly in the past, nor because, drawing adherents from those who have lost out from recent reforms, these groups threaten the legitimacy of a regime which is dedicated to economic development; it is also because these groups enjoy what the economic demonstrators do not: popular support, and tightly-knit organization. The current generation of Chinese leaders are too young to have fought in the struggles against the Japanese and Chiang Kai-shek's Nationalists (KMT), but they are well aware that the CCP came to power on the basis of organized popular mobilization to unacceptable conditions. The real and perceived overseas connections of falun gong and the underground Christian churches only intensify the political leadership's fear of them.

Lastly, the negative consequences of economic reform also shape the ongoing issue of ethnic separatism. Here too, internationalization of the issues complicates matters. Though there has been some unrest in Inner Mongolia, the main foci of ethnic separatism in China continue to be Xinjiang and Tibet. In both regions, economic reform and modernization has led to development, but not necessarily to the benefit of the indigenous ethnic groups. A recent report by the independent PRC scholar Wang Lixiong identifies a large number of programs as 'showcases of modernization' (xiandaihua biaoyan), which serve the interests of political and military control, Han immigrants, and a small number of Tibetan cadres, while not improving the lives of ordinary Tibetans.

Unrest continues to simmer among ethnic Tibetans; there were several bombings by Tibetan separatists in 1996; a riot among political prisoners in 1998 in which some reports say as many as ten Tibetans were killed, and in late 1999 a massive demonstration by supporters of a detained religious leader which also ended in bloodshed. Wang believes that there is little possibility of a resolution of the tension. In the early 1980s, the CCP tried to adopt a more liberal approach to Tibet, but found that the result was stronger support for the Dalai Lama and greater nationalist sentiment. By the late 1990s, the CCP had returned to a hard-line approach, blaming external forces including the Dalai Lama for all social unrest in Tibet.⁽¹⁴⁾

In Xinjiang too, ethnic separatist unrest continues. Since large riots in Yining in 1997, which left ten dead by Chinese accounts and over one hundred dead according to overseas Uygur organizations, there have been recurring reports of separatist demonstrations and bombings. Most recently, Uygur separatists have been blamed for a May 2000 attack on Chinese diplomats in the Kyrgyz capital of Bishkek in which one Chinese died.⁽¹⁵⁾  Many Uygurs have been sentenced to execution or long prison terms for separatism and criminal activities such as robbery and murder, but the links between organized crime and ethnic separatism, if any, are unclear.⁽¹⁶⁾  As in Tibet, there is an international dimension to the problem of Uygur separatism. The Chinese government publicly blames 'foreign forces hostile to China' for fomenting unrest, a formulation which usually refers to the United States, but in this case also probably refers to sympathetic groups in Central Asian states, Turkey, and elsewhere. Some Russian reports link Uygur extremists to militant Chechens and to the Taleban. Building on ongoing collaboration, in August 1999, the Shanghai Five, China and its neighbours to the northwest, Kazakhstan, Kyrgzstan, Tajikstan and Russia, signed the Bishkek Declaration on cooperation against cross-border crime, terrorism and separatism. This commitment was then reinforced at the 2000 meeting of the Shanghai Five in Dushanbe, but precisely what the parties have agreed to do remains unclear.

Unrest due to ethnic separatism is likely to continue or grow in the next five years, especially if reform is seen as improving the lives of Han immigrants at the expense of indigenous groups. But the fundamental basis of the separatist movement is not economic, it is rooted in the desire by Tibetans and Uygurs to enjoy greater political and cultural autonomy and even independence. Thus the PRC's new Western development initiative will do little to dampen separatism. The CCP has for some years been promoting strong nationalist sentiment as a possible alternative basis for regime legitimacy should the current basis for legitimacy, the commitment to rapid economic development and rising incomes for all, prove unsustainable. This, and China's determination to recover Taiwan, make it virtually impossible to yield to separatist movements on the question of autonomy. Since Beijing seems willing to use whatever force is deemed necessary to suppress dissent, in which decision it probably enjoys the general support of most Han Chinese, there is little chance that separatist movements will succeed. Interestingly, as with the economic unrest discussed above, unrest in Tibet and Xinjiang remains highly focussed on three issues: demands for greater religious freedom, protests against discrimination, and ethnic separatism. There is little evidence to date of organization linking activists. Indeed, overseas Uygur organizations insisted that even the massive riots of 1997 were 'spontaneous,' 'unexpected,' and were not organized by political groups.⁽¹⁷⁾

State Responses Constrained

Responses to all of these problems are constrained by the structural weaknesses of the Chinese state. In the 1950s and 1960s, the Chinese state was a relatively powerful state, largely in control of the economy and able to mobilize the populace through a complex system of social control. Badly shaken by the Great Leap Forward and the Cultural Revolution, by the mid 1970s, while the Chinese state was still nominally very powerful, it controlled an economy that was badly deficient and enjoyed little popular legitimacy.⁽¹⁸⁾  Since 1978, the lifting of restrictions on employment and residence and the collapse of a social welfare system that effectively tied citizens to the work units and communes to which they had been assigned have seriously eroded its system of control. More importantly, the rapid economic growth of the last two decades, growth which occurred primarily outside of the state sector, the rudimentary nature of the nascent taxation system, and the increasing power of local and regional governments to retain the taxes they collect have drastically reduced the fiscal abilities of the central government. In 1980, Chinese government expenditures amounted to about 14% of GDP. By 1997, government expenditures as a percentage of GDP had fallen to 8%. This compares to a figure of 18% in the developing world aside from China and India, 19% in low and middle income countries, and 31% in the high income countries.⁽¹⁹⁾  In other words, the Chinese state is impoverished, ill-equipped to extract revenues from the economy, and thus unable to take strong action to alleviate the concerns of the populace, through redistribution, guided development, or other measures.

The state's power to contain instability is also severely limited by the endemic corruption of its officials. This corruption ranges from the pilfering of state assets (discussed above) and misuse of state funds to graft, smuggling and other illegal activities.⁽²⁰⁾  A number of high-profile cases in 2000 indicate that the government is taking the problem seriously. But corruption is so pervasive that dealing with it will be extremely challenging, if only because those involved will interfere with investigation and prosecution, and because too much attention to the pervasiveness of the problem further undermines the legitimacy of the regime. He Qinglian argues that anti-corruption efforts have become nothing more than tools to increase personal power at the expense of or to launch political struggles against those accused of corruption.⁽²¹⁾ Corruption has also severely limited the state's ability to enforce compliance even from its own constituent parts, especially the military and local officials. While corruption itself may pose a threat to stability in that it fuels popular discontent, this more general erosion of legitimacy and authority is ultimately more worrying. The declining legitimacy of the CCP also limits the possible options for dealing with discontent. Unable to make claims on people's loyalty for the sake of the common good, the state is forced increasingly to rely either on violent suppression, or, in the case of economic protest, on its limited capacities to buy off protesters, for example by paying back-wages to SOE employees and increasing subsidies to laid off workers. There are obvious limitations to both of these approaches, and neither addresses the root causes of the problems. Thus corruption and the erosion of government legitimacy are themselves important potential sources of instability, which the state seems powerless to quell.

All of the concerns discussed above can be expected to worsen in the years ahead, as the transition to full involvement in the world economy plays out. Moreover, they are interconnected in complex ways. For example, deepening economic reform may strengthen the popular legitimacy of the regime, but at the same time it offers new opportunities for corruption, and new potential for economic dislocation. Thus the challenges facing the Chinese state defy simple solution. It will be unable to resolve the underlying factors causing domestic stability during 2001-2006. It follows therefore that the Chinese state can be expected to continue to act firmly against any manifestations of those underlying factors, be they demonstrations rooted in economic or political dissatisfaction, or persuasive religious ideology, in order to ensure that these expressions of popular discontent do not snowball, develop inter-connections, and thus become threatening to the regime.

The Possibilities for Political Reform

A group of Chinese intellectuals who might be called 'neo-statist', among whom Hu Angang of the Chinese Academy of Sciences is the most prominent, have emerged in the last few years, and seem to have the ear of some top government leaders.⁽²²⁾  They argue that the Chinese state's problems require a twofold solution. First, the state must strengthen its ability to redistribute the gains of economic reform. Second, it is necessary to institutionalize government.⁽²³⁾  This means stabilizing the leadership, making government more efficient, more accountable, and less arbitrary. The implication would seem to be that political reform is necessary. Indeed, in a recent survey of academic and government researchers, 32% identified lagging political reform as the chief constraint on China's economic and social development in the first decade of the twenty-first century.⁽²⁴⁾ But this group has been understandably vague about the specifics of how this reform should be accomplished. This comes as no surprise, since the central government has recently launched a crackdown against liberalism, known as the 'Three Stresses campaign'. The campaign has already cost two prominent members of the Chinese Academy of Social Sciences and an influential newspaper editor their jobs. Introducing the campaign to local cadres, Jiang Zemin said, "We absolutely cannot implement the West's model of bourgeois democracy. If we do, chaos in China is inevitable."⁽²⁵⁾  The existing level of unrest only reinforces the convictions of senior leaders that it is absolutely essential to maintain tight control in order to push through tough policies, the ultimate benefits of which will only become clear to the general populace in the long term. As will be discussed below, the apparent successors to the current senior leadership show no indication of diverging from the commitment to strict one-party control.

Given that the senior leadership has ruled out the possibility of serious political reform, there remain three possible paths to democratic reform. The first is the gradual extension of village level democratization upwards through the political hierarchy. After early experiments, the principle of democratic election of village leadership was written into the political report of the Fifteenth Central Committee of the CCP in 1997, and enshrined in law by the National People's Congress the following year. With the first village elections in Guangdong in 1999, village elections were in place in every province, and some villages had held as many as three rounds of elections. Foreign observers have been increasingly impressed with the fairness of election procedures, though some sources such as the Hong Kong Centre for Human Rights and Development continue to report problems such as restrictions on the voters' list and ballot-stuffing. While direct elections are making a real difference in the lives of rural Chinese, their significance should not be overestimated. Candidates must still be approved by local party and government officials, and direct elections are held only at the level of village leader and the lowest level of People's Congresses, the township. At every level at and above the township, elections are a mere formality, as even senior Chinese political observers admit.⁽²⁶⁾  There is little prospect of the upward extension of direct elections, and no indication in the senior leadership of a willingness to discuss reforms that would undermine the overall leadership of the CCP. Even liberal intellectuals like the former Vice President of the Chinese Academy of Social Sciences Liu Ji concur that universal suffrage and multi-party politics will not be appropriate for China until the level of education and economic development has been raised considerably, a process that could take more than two generations.

The second possibility is the emergence of organized political opposition to the CCP. This is unlikely. The dissident movement is weak and isolated. The Chinese Democracy Party appears to have been effectively crushed by the sentencing of its three co-founders and some twenty other members to long jail terms since 1998.⁽²⁷⁾ No other organization within China has appeared to take its place. The most prominent political dissidents are all in exile abroad, and deep divisions between them prevent the emergence of a united challenge to the regime.

Many of those, both inside and outside China, who favour granting China membership in WTO argue that continued economic development will lead inevitably to political reform, along the lines of the Little Tigers such as South Korea and Taiwan. In their view, rising income and greater interaction with the Western world will create and mobilize a new middle class in China. The power of this class will eventually weaken the CCP's monopoly on political power, and lead to democratic political reform. Recently, some influential Chinese analysts have argued that developments in China are following a rather different course, one that will leave China resembling certain Latin American countries, with wealth highly polarized and little prospect of meaningful democracy. They argue that a nascent middle class was indeed forming in China in the 1980s. But in the 1990s, this group was squeezed out and forced lower down the social and economic hierarchy by a nouveau riche class of government officials, state-owned enterprise managers, and their relatives and friends. They are a classic rent-seeking group, in the sense that they pursue benefits arising from the difference between free-market prices and the higher prices that result from continued state regulation and interference in the economy. This new intermediary stratum between the state and the populace arose out of an exchange of power for wealth, in the sense that they made use of their political power to obtain economic wealth. To return to He Qinglian's arguments introduced at the beginning of this paper, this means that China's widespread corruption is an integral part of the economic reform process itself, not a temporary by-product. Because the wealth of this new group depends on their access to power, they should not be expected to provide a base of support for efforts towards political change that would undermine that access; rather, they will fight such efforts vigorously. A second factor limiting the potential for political reform is the increasing level of labour unrest, discussed above. The new middle class in China, be they private entrepreneurs or successful managers of SOEs, are employers of labour. Economically motivated unrest threatens their economic position, and so rather than forming alliances with labour groups, as some theories of democratic transition would predict, they are more likely to support continued authoritarianism in the interests of stability.⁽²⁸⁾ This is not to say that reforms will not continue in other areas, such as strengthening the rule of law or of the National People's Congress, but simply that the current trends do not indicate a shift to multi-party politics, or a government directly responsible to an electorate, in the next five years.

In sum, pressure for political reform will probably not be a major source of instability in the period. The forces calling for reform from outside the state are weak and divided, and the state seems willing to exert whatever force is necessary to suppress them. Meaningful political reform from the top down seems highly unlikely. The current senior leadership can actually be seen as a force for stability, in that it can be expected to continue to stifle any and all challenges to its rule.

Instability from Within the State

The issue of succession by the 'fourth-generation' leaders will dominate elite politics in China in the run-up to the Sixteenth Central Committee (16th CC) of the Chinese Communist Party in 2002. This will involve transitions in state, party, and military leadership. There appears to be a broad consensus in favour of continued economic reform and against any political reform, as well as a recognition of the importance of not adding needlessly to the pressures for instability at this crucial time, that would mitigate against a difficult or contested leadership succession. The current plan is for Jiang Zemin to step down from his position as President at some time prior to the 16th CC, from his position as General Secretary of the Party at the 16th CC, and from his position as Chairman of the Central Military Commission at some point between the Sixteenth and Seventeenth Central Committee, scheduled for 2007, after which he will continue to wield some power as a behind the scenes leader, in the manner of Deng Xiaoping. The number-two man in the party hierarchy, Politburo member Li Peng, is unpopular, and also beyond the mandatory retirement age of 70. Number-three man Premier Zhu Rongji has so far indicated his intention to retire from politics in 2002, though there have been some calls for him to be given the top job in the NPC.

So who will replace Jiang? Hong Kong analysts identify several men as the Warrior-Attendants (jingang) of the fourth-generation leaders, among whom Vice President Hu Jintao and Guangdong Party Secretary Li Changchun are the most prominent.⁽²⁹⁾ Zeng Qinghong, an old associate of Jiang Zemin, now head of the Organization Department of the CCP Central Committee, has also been mentioned as a possible successor. These contenders for fourth-generation leaders have a number of things in common. Most were trained as engineers, most are committed to continued market reform, and all are united in their opposition to political reform that would challenge the primacy of the CCP. At the moment, Hu Jintao is widely tipped as Jiang's most likely successor. With his appointment to the Politburo in 1992, as Vice President of the PRC in 1998, and Vice Chairman of the Central Military Commission in 1999, Hu now holds top positions in party, state, and army, though he is thought to lack a strong power base in any of these organizations. His policy inclinations are mostly unclear. He first came to the attention of Western observers in 1989, when as Party Secretary in Tibet he oversaw the suppression of separatist demonstrations. In 1999, he served as chief spokesman after the NATO bombing of the Chinese embassy in Belgrade. He has said nothing to suggest he supports political reform, and has indicated no clear economic platform.

A number of factors might interfere with Hu's smooth succession to Jiang Zemin. First, Jiang Zemin may try to remain in control. Given the mixed results of reform, Jiang may be tempted to hold on to power in order to secure his historical legacy, perhaps seeking to make measurable progress on the Taiwan issue (discussed below). Concerned that without Jiang's support the development of Shanghai may be jeopardized, powerful Shanghai officials are said to have asked him to stay on until 2007.⁽³⁰⁾ There is a two-term constitutional limit on the Presidency, which in Jiang's case will expire in 2003, but there are no similar limitations on the key offices of Party General Secretary or Chair of the Central Military Commission. If Jiang does choose to stay on, there is probably little Hu or anyone can do to stop him. Second, there are Hu's personal limitations. Both his role in Tibet and his inexperience in economic policy may make it difficult for him to move into the position of supreme leader. Third, there are possible rivals. The popular Li Changchun is the only member of the fourth generation with any political flair. Having gained most of his experience in the northeast, Li was sent to tame unruly Guangdong, a posting that many thought would kill his national career. Should he succeed at eliminating corruption, tax evasion and other unregulated activity there, he could be a candidate to succeed Zhu Rongji as Premier, but his current absence from national politics makes it unlikely that he could challenge Hu for top position. A more likely challenger is Zeng Qinghong, who enjoys the support of the powerful Shanghai faction. The need to defuse a head-on clash between Hu and Zeng might further encourage Jiang Zemin to stay on in some positions until the 17th Central Committee in 2007.

Since its establishment in 1949, the PRC has undergone two major transitions in leadership, from Mao to Deng in the late 1970s and from Deng to Jiang in the early 1990s. Both provide insight into the upcoming third transition. Given the broad consensus on economic reform of the whole fourth generation leadership, the chances of a tumultuous transition, along the lines of the overthrow of the Gang of Four, seem slim. But those who hold high office in the buildup to the transition are not necessarily secure. Jiang Zemin was never mentioned as a possible successor to Deng until 1989, when the predicted successors were undone by the Tiananmen massacre, either because like Zhao Ziyang they had opposed the ultimate government line, or because like Li Peng they became associated with the massacre. Deng turned to Jiang because he was untainted by the events of 1989. Thus should economic or political unrest build dramatically at any point in the next two years, and the current leadership feel compelled to suppress that unrest with force, the leadership succession would become much more unpredictable.⁽³¹⁾ But on balance this outcome seems unlikely. With some qualifications, it is more probable that the civilian leadership will remain largely united, and thus it is a factor for stability, not instability.

The People's Liberation Army

Informed analysis of any issue connected to the People's Liberation Army (PLA) is extremely problematic in the absence of much objective data. Our picture of the relationship between the army and the civilian leadership is particularly murky. The fallout from the order to the PLA to divest itself from the economy is unclear; senior generals Liu Huaqing and Zhang Zhen are known to have retired but retain much influence behind the scenes; tensions between Jiang Zemin and the current senior generals over such issues as budget and the use of force against Taiwan are obvious.

Many analysts believe that the PLA has basically been pushed out of national political decision-making as a result of Jiang's consolidation of power, the absence of any PLA leader of real national stature (unlike Liu and Zhang Zhen, the current senior generals Chi Haotian and Zhang Wannian owe their positions to Jiang, and cannot outshine him on the basis of a revolutionary past), and the rising professionalism of the military. Two developments are cited in support of this argument. First, there has been no PLA leader on the Standing Committee of the Politburo since 1997. Second, in 1998 President Jiang and Premier Zhu succeeded in forcing the PLA to give up its lucrative business empire, in return for a one-time payout and an ongoing budget increase.⁽³²⁾

On the other hand, there is some question of how far the PLA has really been pushed out of politics. Even without a formal presence, the informal influence of senior generals, even retired ones, is undeniable. There has also been considerable resistance to the divestiture order, and more importantly, there is little that the civilian leadership seems able to do to enforce compliance. Ellis Joffe of the Hebrew University of Jerusalem argues that there are important underlying reasons not to dismiss the PLA's political influence prematurely. While Jiang has successfully consolidated his power, military support for him is not axiomatic or immutable, as it was for Mao or Deng. He has no military background, revolutionary credentials or long-standing connections. PLA support for him, or his successors, is conditional on the maintenance of social stability, a nationalist policy, and basic military demands for the budget support that will enable military modernization to be effected. Should these conditions not be met, military support could be transferred to an opponent. While no middle-aged PLA general has real national stature, neither will Jiang's civilian successor. Finally, while the professionalization of the Chinese army has made its institutional separation from party and state clearer, it has also made the military more unified, and hence provides a stronger potential power base for defying the civilian leadership.⁽³³⁾

While there is no doubt that specific issues such as dissatisfaction over the handling of divestiture and allocations to military spending have something to do with civil-military tensions, it is probably also true that these tensions are shaped by the larger civil-military dynamic. The PLA may be exploiting disagreements, particularly over issues where it has a legitimate say such as Taiwan and defence spending, so as to increase PLA influence over policy-making today, leadership succession tomorrow, and the budget. So long as the party leadership can maintain domestic stability, and it was suggested above that it can, then it can nip army opposition in the bud by increasing its budget for modernization and maintaining a hard line against Taiwan. Thus civil-military tensions should not seriously threaten Chinese stability in the period 2001-2006. There seems to be no prospect of a real military challenge to the primacy of the CCP.

The Taiwan Issue

The level of tension across the Taiwan Straits has fluctuated dramatically in recent years. While it rose with the release of China's White Paper on Taiwan and the election of Chen Shui-bian as President of the Republic of China (ROC) in March 2000, Chen's subsequent more moderate mainland policy seems to have brought the level of tension back down again. An invasion of Taiwan and the tremendous national and regional instability that would result is not imminent, but not necessarily for the reasons usually given. Western analysts who claim military action against Taiwan is unlikely usually do so with the argument that the PRC's military forces are inadequate to support a full-blown blockade and invasion, especially if the United States became involved as a consequence of ambiguities in the U.S. Taiwan Relations Act or as a result of coverage of Taiwan by any U.S. regional Theatre Missile Defense (TMD) system. But a review of China's history of using military force suggests that this argument is flawed. Historically, the PRC has a pattern of using force even when the overall military balance is unfavourable, in order to achieve surprise and administer a strong psychological or political shock, and thereby persuade their adversary to acquiesce in a new status quo. Force has also been used to create a crisis, in order to probe intentions, weaken the resolve of the enemy, or create problems between the enemy and its allies.⁽³⁴⁾  Thus just because the military balance of power is not in China's favour does not mean it will not risk an attack.

There are indications that at least some elements in the Chinese leadership favour an attack. Hong Kong sources report growing hawkishness since early 2000, as the likelihood of peaceful reunification is perceived to be diminishing, and Taiwan's de facto independence is increasingly confirmed simply by the passage of time. Jiang Zemin appears to be under growing pressure to authorize military measures. PLA Generals are participating in Politburo discussions, and there is rumoured to be a five to seven year timetable for reunification. Chinese media report substantive military preparation, and editorials in leading newspapers like the People's Daily and People's Liberation Army Daily indicate growing impatience with Taiwan and a growing conviction that the use of force may be inevitable.⁽³⁵⁾  The Hong Kong media has recently claimed that PLA leaders currently favour an attack strategy very much in keeping with the historical pattern of the use of force, and also shaped by NATO successes in Kosovo. It would involve a short and rapid campaign of surgical air strikes and short-range ballistic missile attacks to destroy military facilities and civilian infrastructure, forcing the ROC to acquiesce to reunification on China's terms.⁽³⁶⁾  The plan is attractive for several reasons. Ballistic missiles is the one area where China enjoys a definite advantage over Taiwan. Its navy is inadequate for a sustained blockade of Taiwan, and it is not clear how its army would fare in a full-scale invasion. Moreover, Chinese military planners believe the United States would be less likely to open hostilities in the absence of a full military occupation.

But despite the historical and recent evidence on the Chinese willingness to use force, there are deeper factors that in the period 2001-2006 will probably limit Chinese military action. Since the 1980s, China's top strategic advisers have been working with a strategic model based on the notion of comprehensive national power (zonghe guoli) (CNP), that is, a combination of diplomatic, military, and economic power.⁽³⁷⁾  China's overarching goal is to become a 'medium-sized great power' by 2050. Economic and industrial development are the keys to achieving this goal. This means continuing economic reform and if at all possible maintaining good relations with neighbouring countries and the United States. Attacking Taiwan would have enormous political and economic costs, threatening foreign investment and access to markets.⁽³⁸⁾  At a minimum, the flow of investment from Taiwan, which has been one of the largest investors in China in the 1990s, would surely dry up. Chinese planners concur with the general view that a strong modern military is impossible without a strong modern economy.⁽³⁹⁾  A recent Pentagon report concludes that the chance of Beijing taking major military action against Taiwan in the next decade is slim. 'In initiating a military conflict with Taiwan, Beijing would run the risk of jeopardizing both its continued economic development and its political standing.'⁽⁴⁰⁾  Beijing has other measures short of military attack that might be used to put pressure on Taibei, including leaning on Taiwanese businesses with activities on the mainland, as well as a range of other sabre-rattling approaches.⁽⁴¹⁾

A number of factors could change this assessment. Should Chinese leaders feel the opportunity for resolution of the Taiwan issue is slipping away, they might be compelled to take military action. One possible scenario would involve Taiwan taking greater steps towards de jure or de facto independence, perhaps because of domestic politics in Taiwan. A second scenario would involve changing perceptions of the balance of military power across the Straits. China is trying to develop its abilities to project military power. Should military planners perceive a U.S. effort to undercut this attempt, for example by transferring improved ABM technology or ultimately implementing some form of TMD, there may be intensified pressure to attack. Alternatively, factors in China might lead to a change in the likelihood of the use of force. Jiang Zemin's desire to establish his historical legacy on the basis of settlement of the Taiwan issue has already been mentioned. Perhaps more worrying is the possibility that domestic unrest might rise dramatically in the next decade, and China's leaders decide to use an invasion of Taiwan to unite or at least distract the populace. Even casual conversation in China today suggests strong popular support for the use of force against Taiwan, so long as this can be done quickly and relatively painlessly and does not lead to serious conflict with the United States. If, as expected, the next stage of economic reform leads to more expressions of dissatisfaction, if demonstrators become less focussed on immediate economic issues in their demands, if they unite with other groups opposing the regime, the leadership will be strongly tempted to reconsider an attack on Taiwan.

The possibility of Taiwan becoming a source of division within the PRC leadership has already been raised above. Decisions about Taiwan may also affect Chinese stability in other ways. If the two sides are able to restart talks and reduce overt tension, this will contribute to stability by allowing the leadership to focus on more critical problems like corruption and economic reform. On the other hand, a major gamble such as invasion or war would, if it resulted in stalemate or defeat, have further negative consequences for the legitimacy of the leadership. Even the successful recovery of Taiwan by military means would have enormous consequences for continued economic reform, with serious negative effects on China's international trade relations and foreign investment.

Conclusions and Implications for Canada

To sum up, though many factors are likely to deteriorate in the years ahead, the likelihood of serious political instability in China over the medium-term period of 2001-2006 is low. The challenges posed to China by the present stage of economic reform and the domestic and external environment are many and complex. In the period 2001-2006, the Chinese state will probably be able to contain the individual factors creating domestic stability, but may be less able to manage the situation if these different factors become interconnected, if economic, political, ethnic or religious dissent become linked, or if economic dissent rises to a level that the leadership decides its best guarantee of survival would be to move against Taiwan. Furthermore, while the Party will not agree voluntarily to significant political reform, many of the steps it is taking to shore up power will nevertheless raise new problems which potentially undermine the existing political system. Should the state not succeed at containing instability, the consequences will be profound. Canada will have little direct leverage on the situation, but will be affected in a number of ways. Instability would have an important bearing on Canadian trade and investment in the region. The flow of illegal emigration would probably escalate dramatically. If the Chinese leadership did choose to attack Taiwan, Canada would face pressure to support whatever policy its American ally adopts, and this might include military action in response.

Even if major instability is contained, China's current problems will affect Canada. Continued suppression of ethnic minorities and religious groups will generate tension within Canada between those who favour a policy of engagement and those who call for criticism of human rights violations. The same tension may arise over the issue of labour standards. If, as appears to be the case, the Chinese leadership intends to shift the blame for China's economic turmoil after accession to WTO onto the West, then Canadian investments in China could become the target of attack. Finally, the uneven pace of Chinese development will continue to lead to both internal and international migration, as people try to take advantage of economic differentials both within China and between China and other countries. Even in the best-case scenario, illegal emigration from China to Canada, and from China to the U.S. via Canada, will increase in the years to come and will require vigorous efforts to prevent it.

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1. Ma Licheng and Ling Zhijun, Jiaofeng: dangdai Zhongguo sanci sixiang jiefang shilu (Crossed Swords: A True Account of Three Periods of Ideological Liberation in Contemporary China)(Beijing: Jinri Zhongguo, 1998); He Qinglian, Xiandaihua de xianjing: dangdai Zhongguo de jingji shehui wenti (The Pitfalls of Modernization: Social and Economic Problems of Contemporary China)(Beijing: Jinri Zhongguo, 1997). He's ideas are updated in a recent and even more pessimistic article, 'Dangdai Zhongguo shehui jiegou yanbian de zongtixing fenxi' (An Overall Analysis of Contemporary China's Social Structural Evolution), in Shuwu (Bookstore), 2000 no. 3.

2. See Edward Steinfeld, Forging Reform in China: The Fate of State-owned Industry (Cambridge: Cambridge University Press 1998).

3. Nicholas Lardy, China's Unfinished Economic Revolution (Washington DC: Brookings Institution Press 1998). The banking system was reorganized in 1999 to deal with the problem, but it is too early to tell how effective this reform will be.

4.  See World Bank, Sharing Rising Incomes: Disparities in China (Washington DC: World Bank 1997)

5.  The frequently cited figure of 100 million for the floating population is, however, often misunderstood. It is defined as those persons living in places other then the location identified on their household registration. It thus includes not just unemployed migrants, but also people who have found permanent employment and effectively settled in urban areas.

6.  Wen Tiejun, China and the WTO: WTO and China's Agriculture, Rural Villages and Farmers', Huasheng Bao, included in Hua Xia Wen Zhai, 457, 31 December 1999.

7.  Yuan Yue et al, 'Shiji zhi jiao Zhongguo gongzhong guanzhu de shige wenti' ('Ten Concerns of Chinese citizens at the turn of the century') in Ru Xin et al ed, 2000 nian shehui lanpishu: Zhongguo shehui xingshi fenxi yu yuce (2000 Social Bluebook: Analyses and Forecasts of Social Trends in China) (Beijing: Shexui kexue wenxian, 2000).

8. Wang Shaoguang, 'Openness, Distributive Conflict, and Social Insurance: The Social and Political Implications of China's WTO Membership,' unpublished paper, 2000.

9. See Jack Goldstone, 'A Tsunami on the Horizon? The Potential for International Migration from the People's Republic of China,' in Paul Smith, ed., Human Smuggling: Chinese Migrant Trafficking and the Challenge to America's Immigrant Tradition (Washington: Center for Strategic and International Studies, 1997); Li Minghuan, "'To Get Rich Quickly in Europe!' - Reflections on migration motivation in Wenzhou" in Frank Pieke and Hein Mallee, Internal and International Migration: Chinese Perspectives (Richmond: Curzon, 1999)

10. 'Police-Civilian Clash Leaves One Dead, Three Seriously Wounded in Zhongshan City', Hong Kong Ming Pao, FBIS-CHI-2000-0110; 'Shanxi Villagers Beat, Injure 22 Bailiffs, Hong Kong Ming Pao,' FBIS-CHI-2000-0113.

11.  '1000 Protest in Shaanxi, 100 in Jiangsu,' Hong Kong AFP , FBIS-CHI-99-016.

12. These groups, which like falun gong are mostly based on traditional Chinese breathing and meditation exercises known as qigong, include the Mentuhui (Church of Disciples) in Qinghai, the Guogong (National qigong) in Sichuan, the Cibeigong (Compassion qigong) in Hubei, and the nation-wide Zhonggong (Chinese qigong).

13.  These estimates appear in United States Department of State, Annual Report on International Religious Freedom for 1999: China. Underground churches must be distinguished from the state-authorized churches. The Research Directorate of the Immigration and Refugee Board has prepared a number of reports on the treatment of unregistered churches and their members, including Response to Information Request CHN33002.EX (October 1999), CHN33638.EX (February 2000)

14. The long-term danger of environmental degradation, an issue beyond the limited scope of this paper, are nowhere more serious than in Tibet. For details, see Nicolino Strizzi and Robert T. Stranks, 'The Security Implications of China's Environmental Degradation,' CSIS Commentary 67 (1996).

15.  'Chinese delegation member killed in Bishkek,' Moscow Interfax, FBIS-SOV-2000-0526.

16. In the absence of more convincing evidence, Chinese assertions of links between separatists and organized crime should be taken with a grain of salt, as such explanations are obviously in part politically motivated and self-serving, since they absolve the PRC and its government of any responsibility for unrest.

17. 'AFP Reports Ethnic Rioting in Xinjiang,' Agence France Presse, FBIS-CHI-97-028.

18. Indeed, these are some of the major reasons why Deng Xiaoping decided to initiate major reforms. I am grateful to an anonymous reviewer at CSIS for pointing this out.

19. World Development Indicators 2000 (World Bank: 2000), 228-30.

20. A People's Daily report cited in The Economist provides an official figure of 120 billion yuan (approximately CDN$20 billion) in misused state funds, equivalent to 20% of central government revenue. 'Honeycomb of corruption,' The Economist, 8-4-2000.

21. He Qinglian, 'Dangdai Zhongguo shehui jiegou yanbian de zongtixing fenxi' (An Overall Analysis of Contemporary China's Social Structural Evolution), in Shuwu (Bookstore), 2000 no. 3.

22. Personal communication with senior economic adviser to the PRC government.

23. The term neo-statist is taken from Joseph Fewsmith. Hu Angang's ideas are most fully expressed in his Zhongguo fazhan qianjing (The Future of Chinese Modernization) (Hangzhou: Zhejiang renmin, 1999). A brief summary of these ideas appears in his 1999 article 'Zhizai cuijin jingji fazhan de Zhongguo zhengzhi gaige,' translated as 'The Aim of Political Reform in China is to Promote Economic Development,' in The Chinese Economy, Vol. 32, no.5 (Sept. 1999).

24. The author of a report on the poll, a member of the Institute of Sociology of the Chinese Academy of Social Sciences, writes, 'The poll indicates that these experts consider lagging political reform to be the chief constraint China faces in the first decade of the new century... This shows that the experts expect... that the serious current problems can be ameliorated or resolved through political reform. Political reform has great significance for putting the whole of society onto a healthier and more orderly development path.' Lu Jianhua, 'Mianlin xinshiji tiaozhan de Zhongguo' ('China facing the challenges of the twenty-first century'), in Ru Xin et al ed, 2000 nian shehui lanpi shu, 114.

25. Ibid. Interestingly, this phrase was not carried in the official Xinhua account of the speech. 'Jiang Zemin on 3 Stresses Education,' Xinhua, FBIS-CHI-2000-0220.

26.  Kang Xiaoguang, 'Develop Democracy and the Rule of Law-the Chinese Government's Long-Term Action in Rebuilding Its Legal Foundation,' Ta Kung Pao, FBIS-CHI-1999-0730.

27.  'China Democracy Party Calls for Political Reform,' Agence France Presse, FBIS-CHI-1999-0412.

28. See the articles in Zhanlue yu guanli (Strategy and Management), 5 (1998), especially Sun Liping, Li Qiang, Shen Yuan, 'Zhongguo shehui jiegou zhuanxing de zhong-jin-qi qushi yu yinhuan' translated as 'Major trends and hidden concerns in China's Social-Structural Transformation for the Short- and Mid-Term Future' in The Chinese Economy, 32.3 (1999). David Zweig provides a similar and persuasive argument in 'Undemocratic capitalism: China and the Limits of Economism.' The National Interest 56 (1999).

29. Others include State Council Vice-Premier Wu Bangguo, and Politburo member Wen Jiabao. See Ding Wang, Hu Jintao: Beijing ershiyi shiji lingxiu (Hong Kong: Celebrities, 1999).

30. Willy Wo-lap Lam, 'Shanghai factor in leadership battle,' South China Morning Post, 17/5/2000.

31. The foregoing discussion relies heavily on the analysis of Willy Wo-lap Lam, associate editor of Hong Kong's South China Morning Post.

32. 'PLA chief accepts $47b Payout,' South China Morning Post, 9/10/1998.

33. Ellis Joffe, 'The political angle - new phenomena in party-army relations,' in Larry Wortzel, ed, The Chinese Armed Forces in the Twenty-first Century (Carlisle PA: Strategic Studies Institute, 1999).

34. Mark Burles, Abram N. Shulsky, Patterns in China's Use of Force: Evidence from History and Doctrinal Writings (Santa Monica: Rand, 2000).

35.  See for example 'PRC Shows 1st Signs of Impatience With Taiwan's Chen,' Agence France Presse, FBIS 2000-04-07.

36.  'Dual edge to 'liberation' timetable,' South China Morning Post, 1/3/2000.

37.  One classic expression of this model is Huang Shuofeng, Zonghe guoli lun (On comprehensive national power)(Beijing: Zhongguo shehui kexue chubanshe, 1992).

38.  Hong Kong media report that teams of advisers are already working on how to handle an anti-Chinese embargo, and on providing legal rationales for the use of force. 'Dual edge to 'liberation' timetable,' South China Morning Post, 1/3/2000.

39.  See for example the excerpts from Huang Shuofeng, Guojia shengshuai lun (Theory of the Rise and Fall of Nations)(Changsha: Hunan Renmin 1996) in Michael Pillsbury, ed, China Debates the Future Security Environment (Washington: National Defense University, 2000).

40.  Annual Report on the Military Power of the People's Republic of China (U.S. Department of Defense: 2000).

41.  Stratfor Intelligence, 'China Targets Taiwan's Wallet' (http://www.stratfor.com/asia/com-mentary/0006270117.htm accessed 20/6/2000)

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