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    Greater China
     Nov 2, 2012

China's insecurities laid bare
By Benjamin A Shobert

In the United States, it has become common to view China's rise, and thereby America's descent, as inevitable. Yet many structural challenges remain that could still prevent China from becoming the global economic powerhouse many assume is certain.

Many of these challenges are ones the average Chinese is wholly aware of, a realization the recently released Global Attitudes Project (GAP) by the Pew Research Center lays bare. Specifically, Chinese citizens are increasingly troubled by inequality and corruption they view as endemic in their country.

Pew notes, "... the side effects of rapid economic growth, including the gap between rich and poor, rising prices, pollution, and the loss of traditional culture are major concerns, and there


are also increasing worries about political corruption."

Given the events of the past month, concerns over corruption seem entirely reasonable - allegations that Chinese Premier Wen Jiaboa and family have squirreled away almost US$2.7 billion in assets became public came hard on a Bloomberg account of vast wealth linked to the family of president-to-be Xi Jinping.

Lower down the pecking order was the so-called "Cousin Watch" (also known to some as "Brother Wristwatch") scandal, which took down Yang Dacai, chief of the Xi'an Work Safety Supervision Bureau. Yang was sacked after being photographed in late August smiling at the scene of a traffic accident. Rubbing salt in the wound, the day after the accident photograph was posted on the Internet, several others of him were posted with him wearing on different public occasions a variety of expensive watches - one said to be worth US$30,000. [1]

The economic transformation that has swept across China since the early 1990s has made it difficult to argue against the so-called "Beijing Model". Whatever internal contradictions may exist between capitalism and state-controlled enterprises, China has pushed its way through.

The problems that beguiled Russia in the aftermath of the Soviet Union's collapse have not been issues for China; the country has found a way to live with the inconsistencies and inefficiencies, even if the price has been looking past the much lauded, if rarely attained, goal of the noble Confucian leader. While the problem of corruption presented itself much more clearly and much faster in Russia than in China, the problem in the latter is no less severe; in fact, by many measures China's problem with corruption is much, much worse.

Corruption is not something the average Chinese discounts. The Pew GAP shows that among the average Chinese, it remains the issue they are most concerned with. Specifically, while 39% of Chinese in 2008 rated it a "very big problem," by 2012 that had increased to 50%. In 2008, corrupt officials came in second to fears over the "gap between rich and poor;" by 2012, corruption had become the most pressing concern.

The Communist Party knows its history: one of the many compelling reasons it originally came to power over the Kuomintang was the latter's wide spread corruption, a burden born by rural Chinese in particular. Today's leaders in China know that they can ill afford to turn a blind eye forever on corruption; it took down their predecessors, and it could also curtail their leadership.
Income inequality remains a major source of insecurity. The Pew report notes "... there is a general consensus in China that the economic gains of recent years have not benefited everyone equally." In what is coming to be a common refrain not only in China, but in the United States as well, Pew found "81% [of Chinese] agree with the statement the 'rich just get richer while the poor get poorer,' and 45% completely agree." (emphasis original) This has obvious implications to the future of economic reform in China.

If the next group of China's leadership is not able to illustrate how additional capitalist reforms empower the individual and set in motion greater economic equality, it will be difficult for the trajectory of China's anticipated reform to match what the West has long hoped to see. Among the many insecurities touched on by the Chongqing Model and its emphasis on revisiting older tried and true Socialist policies and mantras was the nostalgia Chinese feel for a day when they felt more secure and, while still poor, felt more equal with one another. Pew found that "While 45% agree with the statement 'most people can succeed if they are willing to work hard,' one-in-three disagrees."

The Pew GAP suggests a China deeply unmoored from its culture and tradition, an issue Chinese are very aware of, and troubled by. Pew writes "Most (57%) think their way of life is getting lost and 71% want to see their way of life protected from foreign influence."
Trends, as Pew suggests, on this point are not promising. They add, "While 59% still say they like the pace of modern life, this is down from 71% four years ago." China's embrace of modernity has been breathtaking, so much so that even Western ex-pats who live in China struggle to feel connected; the sense of dislocation and anxiety fostered by those with less of a buffer is even more acute, a reality the Pew GAP illustrates.

These insecurities have profound implications to how China views itself and those around it. A country secure on its own, that believes its leaders are looking out for the citizens' best interests, is one that can engage the world more broadly, being more open to collaborations.

If this is accurate, then China's attitude towards the rest of the world and America specifically, is cause for concern. For all the friction President Barack Obama has faced domestically for how he has handled foreign policy, with many Republicans accusing him of going on a global "apology tour", this more humble American foreign policy has done nothing to address Chinese misgivings about America.

The Pew GAP finds that from 2010 to 2012, favorable Chinese views of America had decreased from 58% to 43%. The report also discovered that while in 2010 68% of Chinese believed their relationship with the US was "one of cooperation", by 2012 that had decreased to only 39%. Views of President Obama are hardly good: in 2010 52% of Chinese said they had "confidence in Obama". In 2012, that number had decreased to 38%. What explains these numbers?

Some of this decrease undoubtedly has to do with 2012 being a presidential election year in the United States, a time when anti-China rhetoric traditionally becomes problematic. This year has been especially disconcerting for Chinese because the traditionally pro-business Republican party has also felt obligated to attack China, a disconcerting realignment of American electoral politics that leaves China unsure what the next four years will bring.

In addition, that the 2012 presidential election aligns with China's own leadership transition has made for both countries encountering one another during a time of political transition, which makes demagoguing that much easier.

China remains sensitive to the idea that American power increasingly has come to believe China is its closest ideological and military competitor. The Pew report shows Chinese resent being viewed this way, when many believe it is American unilateralism and military adventurism that has made the world a less safe place. Similar to criticisms of the Obama administration from the Middle East, Chinese do not approve of America's prolific drone strikes. A Pew report from earlier this summer showed 55% of Chinese disapprove of America's drone strikes, while only 25% approve.

Right now, the United States and China are both deeply insecure countries. China harbors fears about where it is going, a drive to avoid slipping back from where it came. America harbors anxieties about never again having what it once did, and is growing angry at the economic dislocation and multilateralism globalization has made necessary. The potential for enormous strategic miscalculations on both parties for trivial matters is going to remain troubling for many years to come.

In both countries, worrying about what those outside are doing or saying about their respective agendas is going to be easily distracting and in some cases, politically toxic. The best course of action for both country is to pay attention to what each needs to do to ensure income inequality is addressed, that access to key social services is expanded, and that dislocated workers find productive outlets. If the governments of either the United States or China are unsuccessful doing this, the likelihood of conflict becomes not only more likely, it may be all but certain.

Note: 1. For "Cousin Watch" scandal, see here

Benjamin A Shobert is the Managing Director of Rubicon Strategy Group, a consulting firm specialized in strategy analysis for companies looking to enter emerging economies. He is the author of the upcoming book Blame China and can be followed atwww.CrossTheRubiconBlog.com.

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