Interpreting China's Development

The following sections are included:

• Contents

• Introduction

The following sections are included:

• China Under Jiang and Zhu

• Hu Jintao: Searching for a New Development Model

• Building the Party: Educative Campaign and Fighting Corruption

• Coping with Social Discontent

• Looking to the Future

The following sections are included:

• Political Institutionalisation

• Factional Dynamics

• Institutionalisation and Factional Dynamics

Only in their fourth year of office and China President Hu Jintao, along with his political partner Premier Wen Jiabao, has already left a distinctive political trademark in China's politics. Right in their first year, Hu and Wen impressed with the dismissal of incompetent senior officials for their mishandling of the severe acute respiratory syndrome (SARS) epidemic, and their projection of a people-loving image at home and an unyielding leadership image abroad. To cap it all, Hu-Wen's new policy initiatives have even earned a positive term, the Hu-Wen New Deal.

The Chinese Communist Part (CCP) is a party in transformation. China's “open door” policy and rapid globalisation process in the post-Cold War era have generated increasingly high pressure for changes on the CCP leadership. Once deemed the vanguard of the Chinese State, the CCP's failing ideological appeal, its equally unattractive and clumsy structure, and disillusioned party cadres are increasingly making the Party's sustainability problematic. The CCP now needs to review its continued relevance to the ongoing and fast-changing economic, social and political climates in China. Party reforms appear to be the most logical and urgent choice.

The following sections are included:

• China's Propaganda Machinery

• Media Channels: Diversity and Proliferation

• Vocalness Versus Control

• Reform or Obsolescence

The following sections are included:

• One-Party “Democracy”

• The Increasingly Assertive Society

• In Search of Good Governance

• Towards Rule of Law

• Growing Democracy under a One-Party Regime?

The following sections are included:

• Institutional Reforms for Anti-Corruption
  • Completing Market Transitions
  • Public Sector Management Reforms
  • Greater Political Accountability
  • Stricter Institutional Restraints
  • International Norms and Obligations

• Reforms and Results

After a 12-year trial of regulations on civil servants, on 27 April 2005, the Standing Committee of the 10th National People's Congress of the People's Republic of China adopted The Civil Servant Law which took effect on 1 January 2006.

Beijing's relations with provinces have never been so dynamic, fluid and interdependent as in the past ten years. In central-local relations, local governments were often out of sync with central themes. The biggest challenge for the central government is to rein in local governments without jeopardising economic growth.

The following sections are included:

• Implementing Law-Based Administration

• Administrative Transparency

• Judicial Remedies

• An Unfinished Task

Party-army relations in China under Mao Zedong were highly symbiotic for lack of clear institutional boundaries. This is due to Mao's emphasis on “politics taking command” and “human factors”, but not division-of-labour-based technical expertise. As a result, political alliances and conflicts were largely defined by personalised factions that cut across party-army boundaries. Under Deng Xiaoping, however, clearer party-army boundaries emerged because Deng had allowed for more institutional autonomy, so that the People's Liberation Army (PLA) could stay away from politics and pursue technical upgrading. The only caveat is that at the top leadership level such as the Central Military Commission (CMC), Deng relied on his personal influence and his pre-1949 Second Field Army comrades to control the army. These enabled him to employ the military against political opponents in the party and from society at critical moments such as the popular rebellion in 1989.

The following sections are included:

• The PLA's New Path to Modernisation

• The Generation Leap Strategy

• Informatisation and War Preparation

• A Crucial Decade

The economic and political developments in Hong Kong and Macau after the handover of sovereignty (Hong Kong in 1997 and Macau in 1999) follow different trajectories. Before the handover, Hong Kong's economy was shining. The Asian financial crisis in 1997 and the SARS outbreak in 2003 pushed up unemployment rate and welfare expenditure while a fall in tax and land sale revenue undermined the government budget (from a surplus of HK$77 billion in 1997–98 to a deficit of over HK$60 billion in 2002–03).¹ Deflation badly hit property market, a powerhouse of Hong Kong economy. Real GDP growth rate dropped from 5.1 percent in 1997 to minus 5.5 percent in 1998, 0.6 percent in 2001 and 1.8 percent in 2002. The economy was unable to rebound until the Chinese government relaxed its control on outbound tourism to its two SARs in mid 2003, fuelling the tourism industry.

On 1 June 2006, Taiwan President Chen Shui-bian made a startling public announcement: he declared he was surrending authority over domestic affairs to his premier, Su Tseng-chang, effective immediately. Why the sudden move to shed part of his job?.

The following sections are included:

• Harmonious Society: The Party's New Focus

• Personnel: Mid-Term Adjustments

• Political Reform: Beyond the Congress

The following sections are included:

• Significant International Impact

• Is High Growth Sustainable?

• Fixing Many Growth Problems

• Not Just High Growth, But Better Growth and Its Sustainability

The following sections are included:

• Causes of Twin Surpluses

• Why Are China's Twin Surpluses Unsustainable

• Policy Remedies for China

The following sections are included:

• Factors Affecting Productivity Growth

• Productivity Growth at the Industry Level

• Productivity in China's Economic Growth

On 11 October 2005, the 16th Central Committee of Chinese Communist Party (CPC) concluded its Fifth Plenary Session where a draft proposal for formulating China's 11th Five-Year Programme for National Economy and Social Development was approved. Detailed guidelines were prepared and revised in the following months and later approved at the Fourth Plenary Session of the 10th National People's Congress (NPC) in March 2006.

China's investment in science and technology (S&T) is steadily increasing. Total Research & Development (R&D) expenditure increased from 34.9 billion yuan in 1995 to 245 billion yuan in 2005, with an annual compound growth rate of about 21.5 percent. Meanwhile, gross domestic expenditure on R&D as a percentage of GDP was boosted from 0.6 percent (1995) to 1.34 percent (2005). However, it is still low when compared with developed countries. For instance, the R&D expenditure already accounted for 2.51 percent of GDP in 1995 in the US, and about 3 percent as of overall GDP in Japan in recent years.

The year 2006 was a significant year for the Chinese banking sector. It marked the fifth anniversary of China's entry into the World Trade Organisation and the last year of China's transition period to fully open its markets. On 11 December 2006, China was obligated to fully open its financial market in line with its WTO commitments of ensuring equal national treatment for foreign banks to engage in the Chinese currency business. This poses a big challenge to China's indigenous banks, as they face not only significantly more intensive competition, but also considerable changes in the regulatory environment.

Reforming China's state-owned enterprises (SOEs) has been one of the most important objectives for the Chinese authority, and probably the most challenging one. The reforms have gone through roughly two phases with different objectives and measures. In discussing China's SOE reforms, one needs to keep in mind that the government has been extremely reluctant to privatise SOEs on a mass scale, especially those considered as of strategic importance to the economy.

The following sections are included:

• Chinese Domestic Brands (Private and State-Owned)

• Foreign Brands

• Government Industrial Policies

The following sections are included:

• Dramatic and Unbalanced Urbanisation

• Local Innovations with Territorial Competition

• Let Southeastern Regions Get Rich First

The following sections are included:

• Historical Background

• Yangshan Deep Water Port in Shanghai's Development Strategy

• Regional Implications

• Constraints and Challenges

The following sections are included:

• Oil

• Natural Gas

• Coal

• Electricity

• Environmental Issues

• Energy Consumption Efficiency

• Global Implications

The following sections are included:

• Growing Income Inequality

• Stagnating Poverty Reduction

• Persisting Disparities in Education and Healthcare

• Declining Acceptance of Social Inequality

• Moving Towards More Balanced Development

The following sections are included:

• The Historical Perspective

• The Confused Notion of Nongmin

• The Diminishing Role of Nongye (Agriculture)

• Lessons of Experience for China

• A Happy Ending for the San-Nong Issue?

The following sections are included:

• Rising Inequalities and China's Remedies

• China's Remedies

• Achievements and Challenges

The following sections are included:

• Migration Control as a Focus of Earlier Reform

• Labour Protection as a New Focus

• “De-link” as a Dominant Reform Approach

The following sections are included:

• Social Insurance for Working People in Formal Sectors

• Public Assistance to Protect People in Vulnerable Groups

• Social Safety Net as Social Infrastructure

The following sections are included:

• Prosperity with Pollution

• Made-in-China Pollutants Around the Globe

• Dirty Dragon Trying Hard to Clean Itself

• Challenges Ahead

The following sections are included:

• A Differentiated View of Culture

• China's First Five-Year Programme for Cultural Development

• Social Participation in Cultural Development

The following sections are included:

• The Issue of Educated Unemployment

• The Issue of Financing

• Looking Ahead

Since the late 1970s, the Chinese government has introduced a series of reform and open-up policies to replace central planning with a “market economy with Chinese characteristics", where growth and efficiency are given top priority. The transition so far has been successful according to major macro-economic indicators. Progress has also been made in poverty reduction and improving people's living standard. However, fast economic growth has caused a number of unwanted side effects. Among others is the widening income gap between the rich and poor, rural and urban areas and across regions. At the same time, a “classless” society of pre-reform China has also begun to stratify as well. In recent years the emergence of a middle class has attracted increasing attention.

A majority of mainland Chinese who left China over the last decades have chosen to stay in their countries of adoption. For those who have decided to return to resettle on the mainland, they were called “Haigui”, or overseas returnees, a contemporary term used to describe returning graduates, scholars and professionals. Collectively, these returnees can be informally called the “Haigui-pai”.

The following sections are included:

• Objectives of Harmonious and Peaceful Orientation

• From Confrontation to Cooperation

• Good Neighbour and Partner

• Mutual Cooperation and Mutual Benefit

• Expanding Common Grounds and Managing Differences

• Peaceful or Aggressive Power

The following sections are included:

• Matching Interests

• Issues and Problems

• Prospects

Rapid globalisation, the uncertainties posed by a post-Cold War international environment, the rise of China and the momentous shifts in economic and strategic balances in East Asia have transformed the way China and Japan see each other. In China's eyes, Japan is facing prolonged stagnation following four decades of economic boom, and is naturally not as respected as it used to be; China, on the other hand, appears to be on the roll — economically, technologically, militarily and politically — and its weight is growing exponentially in East Asia. Japan's perception of China is greatly coloured by the latter's potential security threat led by a communist regime that Japan has always deemed suspect.

The following sections are included:

• Abe's Domestic Agenda

• Abe's Diplomatic Agenda

• Challenges Ahead for Abe

China's decision in 1992 to establish diplomatic relationships with South Korea was perhaps the biggest challenge to its “good-neighbour policy” (mulin youhao zhengce). The inherent problem was how to achieve a balance between the two Koreas. During this transitional discourse, a de jure and de facto policy was fully in use to complement the good-neighbour policy in the face of changes in not only the Korean peninsula, but also the domestic, regional and global arena. It was only in May 1999 when the North Korea's Supreme People's Assembly President Kim Yong Nam visited Beijing that a normalisation of relationship was declared. With this, China was able to achieve the desired balance in its relationship with both Koreas and overcoming the litmus test of recognising two rival regimes.

The following sections are included:

• Beijing's Initiatives to Better Relations

• Problems Still Persist

The following sections are included:

• Recalibration of Malaysia's “Look East” Policy

• Factors to Better China-Malaysia Relations

• Not a Zero Sum Game

The following sections are included:

• Trade Relations with China

• Political Relations with China

• Treaties and Agreements

• Continuing Good Relations

The following sections are included:

• The Emergence of EU-China Relations: Towards a “Strategic Partnership” ?

• China's European Policy

• EU-China: A Not So Easy “Working Relationship“

• The Lifting of the Arms Embargo

• The Taiwan Issue

• Human Rights

• Trade Issues

• Other Issues: The Impact of China's Rise on World Affairs

• Uncertainties Ahead

The following sections are included:

• Burgeoning Relation

• African Reactions

• Not Without Challenges

The following sections are included:

• Index