East Asian Policy

China's new leadership pins high hopes on New Urbanisation as the engine to transform China into a domestic consumption-driven economy and solve its sannong issue to ease rural and urban disparity. The recently released National New Urbanisation Plan pinpointed the external economic conditions and the problems that had emerged in the previous urbanisation orbit, and is expected to serve as a strategic, comprehensive and instructional compendium for future urbanisation.

In March 2014 China unveiled plans for a “new type” of urbanisation largely to revamp public service provision. Rapid urbanisation has made public service provision in urban areas imperative. Urban population in China hit 731 million (53% of total population) by end-2013, from about 191 million people (less than 20% of total population) in 1980, representing an average annual growth rate of four per cent.

Some Chinese cities are now notoriously known as “ghost cities” for their empty skyscrapers, luxury apartments and magnificent squares. These “ghost cities” are a result of excessive housing and infrastructure construction, and speculation on property demand. The emergence of ghost cities is a consequence of China's land-centred urbanisation. Land-centred urbanisation is rooted in local GDPism, which in turn results in aggressive developmentalism and excessive investment among China's local governments.

The powerful Leading Group for Comprehensively Deepening Reforms faces three main challenges: overcome resistance from status quo interests, establish the “new norm” and make the Chinese Communist Party rule compatible with new reality. The reform package enacted at the Third Plenum will need broadbased support and active participation from the entire cadre corps. These however may not be forthcoming since these reforms tend to undermine their interests.

Xi Jinping's “New Deal” to restructure China's top government along the lines of power recentralisation is an endeavour to revitalise China. In full operation it will reshape Beijing's national security (NS) decision-making process, from the formulation of NS strategies, crisis management at home and abroad, coordination of NS policies and actions by Party/army/state agencies to institutional links with its foreign NS counterparts. Primarily it is Beijing's response to rising internal state security challenges.

China's public finance is characterised by a pro-growth taxation system, growth enhancing government expenditure and an expansionary fiscal policy. However, reforms are needed to tackle rising income inequality and worsening social and environmental problems, including more public spending and more progressive taxes. Measures are also needed to resolve rising local government debt. The recently concluded Third Plenum has made these its top priorities and announced various policy initiatives.

As Chinese government policy has evolved, so have the models adopted by foreign banks for developing their branch networks in China. Burdensome regulation and unequal treatment compared to those for Chinese banks have impeded the speed and scope of foreign banks' operation. China's deepening financial reforms could provide a fair and competitive environment for foreign banks' penetration, offering openings for foreign banks to participate more extensively in the Chinese economy.

Observers saw US “pivot” to Asia announced by Secretary of State Hillary Clinton in 2011 as a strategic policy to balance China's rise. But the Obama administration denied this, making the goals of the pivot unclear. President Obama added an economic element to the pivot with the Trans-Pacific Partnership. This complicated the pivot. Defence spending, needed to make it work, was cut. Currently it is difficult to discern where the pivot stands.

Visiting China for the first time in spring 2013, French President François Hollande reaffirmed France's commitment to a policy defined more than 15 years ago by the Jacques Chirac administration. The Paris' unshaken position towards Beijing is nonetheless puzzling. This “global strategic partnership” has incurred significant economic, ideational and political costs for France, while benefits have remained at best meagre and questionable.

Southeast Asian countries have refused to accept China's proposal to set aside disputes and pursue joint development since 2009. Why? This paper argues that China is becoming too powerful and has increasingly possessed more hard power such as economic and military capability. It, however, has not agreed to limit its power by institutional frameworks. Southeast Asian countries have little sympathy for China's cooperative projects given the lack of “constitutional order”.