China On The Home Stretch

by: Scott Sumner

When I started studying economics (1973), you’d read stories about how China’s per capita GDP was about $100. Then a few years later, it would be $200, then $400, then $800, then $1600, then $3200, then $6400. Some of that is inflation, but you get the idea.

Now the IMF has China at about $10,000 and the World Bank says $12,000. In comparison, places like Japan, France and Britain are all around $36,000. China is 2 more doublings away from being a rich country. This tells me that the next two decades will be crucial. One of two things will happen, either of which would dramatically affect China:

1. China quickly becomes rich (and probably democratic.)

2. More likely, China’s growth slows dramatically. They still become rich, but it takes more than 2 decades.

Westerners often frame this issue in terms of politics. Will China become democratic or will the Communist Party hang on to power? Why does it have to be an either/or choice? Singapore seems to be the model for many Chinese policymakers, and in that country the quasi-dictatorship keeps winning elections as the political system becomes increasingly democratic. This is probably the long-term goal of China’s leaders (although I’m not at all confident they will succeed.)

Tyler Cowen linked to an excellent essay that discusses how economic forces are pushing the government toward a shift in the economic model. Michael Pettis has been talking about this problem for years. The old model simply won’t work much longer. After reading the first link, consider the political angle discussed in this news story:

President Xi Jinping told top officials he was disregarding “life, death and reputation” to fight corruption in a terse speech signalling a possible dispute and doubts among party elites over the campaign.

An official mainland newspaper and a person familiar with the matter confirmed the president’s statement.

Xi was believed to have made the remark in a closed-door Politburo meeting on June 26, the details of which were publicly revealed only when the city newspaper Changbaishan Daily on Monday reported that local officials received instructions from the president.

”[I] had left life and death, as well as my personal reputation, out of consideration in the combat against corruption,” Xi said, according to Changbaishan city’s party chief, Li Wei.

Li said the top leadership’s remarks emphasised a sense of crisis, and some of the words were “shockingly” sharp and harsh. However, he did not provide more details.
. . .

The Changbaishan Daily also said that Xi urged graft busters to focus on four types of officials: those who are strongly opposed by the public; those who have not restrained themselves after the party’s 18th congress in 2012; younger cadres in key positions; and those who might potentially take on more important roles.

The daily’s article was soon deleted from the website as some internet operators said they received a gag order from propaganda authorities.

A person familiar with the president’s speech told the South China Morning Post earlier that Xi made the strongly worded speech to the Politburo to counter some critics and silence doubts against his anti-corruption campaign.

Xi warned the party elites that nothing would be off limits in his anti-graft drive, the person said.

The president also rebuked the “school of thought” that the relentless drive against errant officials would only plunge the country in chaos and that Xi, in the end, would “eat humble pie.”

According to the person, Xi retorted: “What is there to be scared of?”

Zhang Ming, a political scientist at Renmin University in Beiing, said the remarks showed the anti-corruption campaign had certainly threatened some interest groups in the upper echelons.

”The combat between Xi and the interest groups has been white-hot and Xi also realised that [it] is make or break,” he said.

I think the best way to read this is not to focus on the veracity of Xi’s claims, but rather the purpose that is being served by this statement. Especially by the fact that it was published. It seems pretty obvious that Xi is much more of a politician that Hu Jintao, everyone agrees on that point. My impression from talking to Chinese people is that Xi’s anti-corruption campaign is very popular. There’s a lot of resentment at the lavish lifestyle of corrupt officials. Westerners often view China as being “corrupt,” but it’s also worth noting that Chinese culture puts a lot of emphasis on the importance of merit. As we’ve seen in Singapore, Chinese culture is also consistent with a strikingly non-corrupt bureaucracy, a meritocracy. In a political sense, China is up for grabs. As an analogy, both North and South Korea are in some sense embodiments of “Korean culture.” Ditto for Mao’s China and capitalist Taiwan. Culture is surprisingly plastic in some dimensions, less so in others.

China will probably start moving toward democracy long before it becomes democratic in the Western sense. It seems to me that Xi’s speech should be viewed as a sort of campaign speech, trying to position the Communist Party, or at least his wing of the Communist Party, in the way that Lee successfully positioned the ruling party in Singapore. If there is to be a battle, Xi wants the public on his side, especially the 90 million members of the Communist Party (most of whom are average urban residents.)

P.S. Tyler also linked to a review of a book on Chinese minorities, which seemed somewhat misleading to me:

Thousands of Western tourists visit the temples of Tibet, the spice markets of Xinjiang and the lush jungles of Yunnan each year. David Eimer did, too, repeatedly, over the past decade, but he had a larger purpose in mind: to investigate the nature of Chinese rule in the restive border regions where its 55 ethnic minorities live.

Those minorities number more than 100 million but as a group are all but invisible to the outside world, their situation complicated by the seeming paradox of being citizens of China without being part of the Chinese people...

Because Mr. Eimer is not bound by diplomatic or journalistic niceties, he can be blunt in the terminology he uses. To him, China is not so much a state or a nation as a “huge, unwieldy and unstable empire,” with the Han in the dominant position that the Austrians, Turks or English once enjoyed in empires now vanished. Uighurs and Tibetans, consequently, are peoples resisting “the colonization of their country,” that last word being one Beijing abhors and considers an expression of “splittism.”

It’s hard to think of a worse comparison for China than the “English” empire. First a few numbers. Of the 105 million minority population in China, 6.3 million are Tibetan and 10 million are Uyghurs. That’s slightly over 1% of China’s population. These are the two groups that one can at least imagine might form independent countries some day (although I doubt it). The rest tend to live in eastern China, in provinces where the Han population is larger than the minority population. Even Yunnan province is 67% Han. The other groups are not pushing for independence, and it seems inconceivable to me that any majority Han province would ever break away from China.

If you look at a map of China by ethnicity, the Tibetans are a particularly interesting group. Although not at all numerous, they occupy an enormous region spanning several different provinces. Almost all of Qinghai is Tibetan, as is the entire western half of Sichuan. Yet they have 1.5% of Sichuan’s population. If you add in Xinjiang, (where the Uyghurs are concentrated) you are basically talking about the entire western third of China. (China is roughly the size of the US, including Alaska.) That’s a big region, and it helps explain why the issue is so sensitive to the Chinese. Terrorism in Xinjiang is a rapidly growing problem for China. The province is 43% Uyghur and 41% Han, to give you a sense of how difficult the ethnic situation would be to resolve. Think Northern Ireland, or Israel/Palestine, or some other chronic trouble spot, not British Empire.

A better analogy for China (in terms of demographics, not human rights) would be Canada, where there are lots of indigenous people in the vast, thinly populated north, or the US, or Brazil, or Australia. But none of those 4 countries has a large indigenous muslim population. The human rights abuses currently taking place in China can (hopefully) be fixed over time. But I’m not at all sure that would make the Tibetan and Uyghur issues go away. Xinjiang is nothing like India, where the British could just walk away.