The year of the rat: interesting times ahead for China?

25 February 2008

Du Qiwen, Vice Minister, Central Foreign Affairs Office, China, believed his speech should be more aptly titled “China in the year of rat: exciting times with opportunities, challenges and progress ahead”.

Focusing on China’s peaceful development and its relations with the outside world, he said that at its 17th National Congress in October 2007, the Chinese Communist Party had reaffirmed the path of socialism and “scientific, harmonious, peaceful development” to make China into a “moderately prosperous country” by 2020.

Peace, development and cooperation are the “irresistible trend of our times” in a world of profound changes, said Mr Du. China does not want to close its door to the outside world, or use force to impose its will on others. In the 1980s, Party Chairman Deng Xiaoping launched a plan for socialism with Chinese features to boost domestic productivity and promote world peace. In 2007, Chairman Hu Jintao reiterated China’s opposition to hegemony and power politics, and its pursuit of a ‘win-win’ strategy of progress.

Mr Du said China engages in dialogue with major powers to enhance mutual trust and expand cooperation and global stability, and pursues a policy of friendship, partnership and good-neighbourliness with its immediate Asian neighbours. It works for peaceful solutions in ‘hotspots’ like North Korea, Iran and Darfur, and participates in international discussions on issues like climate change and environmental protection.

This year marks the 30th anniversary of China’s reform and ‘opening up’ policy. Since 1978 it has enjoyed annual economic growth averaging 9.67% and Mr Du said most Chinese now lead a “fairly comfortable life”, the country’s rural poor population has dropped from more than 250 million to just 20 million, and last year its imports and exports reached $2.17 trillion (the third highest in the world).

Mr Du said no one questions now whether China’s development is an opportunity or a threat, as in recent years his country has contributed 10% to world economic growth, which in 2007 topped 17%, surpassing the US for the first time.

Given the current US economic fluctuations, China’s stability is important for global economic development, he said, as it accounted for more than 15% of global trade growth between 2003 and 2006. In 2007, its trade volume reached $2,1738 trillion, an increase of 23.5%, and in future years China will import more than $1 trillion worth of goods annually.

While people point to China’s trade imbalance, Mr Du said the government had introduced measures such as export duties to prevent continual helter-skelter growth. This is paying off, with both EU and US exports to China growing faster than their imports. China also attracts considerable foreign direct investment, said Mr Du: $74.8 billion in 2007, with a year-on-year increase of 7.78%.

A “scientific path to growth”

The Chinese Vice Minister said his country could maintain its current growth momentum because it has adopted it own scientific development path. This puts people first, balancing all development aspects: urban/rural, economic/social, domestic/international and economic growth/environmental protection.

Turning to the question of whether a strong China would now ape the colonial powers in pursuing an expansionist policy towards other countries, Mr Du said Beijing preferred mutually beneficial, win-win solutions, rather than “zero-sum games”.

China has five development goals:

  • maintaining fast, but steady growth and preventing the economy from overheating;
  • shifting growth from investment in exports to stimulating domestic consumption, boosting the service industry and downgrading the industrial sector, making advances in science and technology, and training the workforce;
  • enhancing its capacity for product innovation;
  • promoting sustainable development and reducing energy intensity by eliminating backward production facilities in polluting industries;
  • Removing any institutional obstacles blocking its socialist market economic system.

Despite its growth record, China remains a developing country, said Mr Du, with a per capita GDP that ranks 100 in the world, so it still has a long way to go.

Etienne Reuter, Senior Adviser on Asian Affairs, European Commission, said the EU welcomed China’s peaceful rise, which consists of:

  • maintaining peace in its external relations;
  • generating domestic harmony;
  • consolidating relations across the Taiwan Straits.

He admitted that China sees the US, rather than the EU, as its most important partner, but said EU officials are aware of China’s importance for the global economy and other international issues. The Union’s drawback in dealing with China is that it cannot negotiate as “one block” or “speak with one voice”, which weakens its negotiating stance.

China’s priorities are Asian stability, and its own territorial integrity, said Mr Reuter. Other countries in the region see China as the strongest regional power: at a recent ASEAN meeting, the Philippines President welcomed “China - ASEAN’s big brother”.

Trade and investment are the Commission’s main priorities in EU-Sino relations, and it is setting up a high-level economic dialogue to discuss trade and monetary imbalances, much as the US has done. Despite the current trade imbalance, the currency should not be revalued, as these imbalances will be reduced as China develops a strong domestic market.

The EU’s second priority is to involve China as a partner in world affairs on issues like the United Nations, natural resources and the environment. At the same time, any Sino-EU dialogue must cover issues like civil, human and minority rights, said Mr Reuter. Overall, China must be seen as an opportunity, not a threat.

Gudrun Wacker, Senior Fellow, Asian Division at the German Institute of International Security Affairs (SWP), said Mr Du’s speech demonstrated how deeply China has become integrated in the global economic and international system.

China’s phenomenal growth also poses some basic dilemmas, she said. The current negative aspects of fast, unrestrained economic growth are a deepening of the regional/rural/urban divide, engendering environmental problems, and energy wastage. However, as long as quantifiable growth is the top priority, it will be difficult to deal with other issues.

There are three big events in 2008 which will affect China, said Ms Wacker. The first is the Olympic Games: on the one hand, they will demonstrate how far China has come in terms of reform, opening up to the world, modernising and becoming integrated into the international scene; on the other, they will highlight China’s domestic problems, such as the lack of human, minority or migrant rights or freedom of expression. They will also raise questions about the environment, and issues such as air quality and traffic congestion in Beijing.

Can China fulfil the expectations it has raised? With its permanent seat at the UN and its own space programme, it can no longer be considered a developing country, said Ms Wacker. Given its increased status, Beijing should accept that it must play a bigger role in world events and share responsibility for solving issues such as Darfur or Burma.

Two other important issues for China in 2008 are the elections in Taiwan and the US Presidential elections, particularly given the importance of the US-China bilateral relationship.