A Contest for Supremacy is a book that thoroughly examines the history of Sino-American relationship and provides a clear view of the challenges and risks for the United States as China’s power continues to grow.
Despite the fact that author Aaron Friedberg inevitably touches on recycled opinions made by other Western China experts, he indeed offers unique insights and assessments on this widely discussed topic, proving to the readers that the book is unlikely to collect dust on the shelf for the upcoming years.
Friedberg’s core argument is two-fold: China and the U.S. are on the path to compete for power and for influence worldwide, with an emphasis on the Asia region — a newfound source of economic dynamism. The Sino-U.S. relationship, according to Friedberg, is increasingly intensified while the power gap narrows. Furthermore, Friedberg argues that an emerging Sino-U.S. rivalry is not the product of easily correctable policy errors or misperceptions, but rather is driven by the differences of ideology and political agenda.
While delivering the keynote speech at the recent Asia-Pacific Economic Cooperation summit in Bali, Chinese president Xi Jinping stated that the government was drafting a “master plan for reform.” Speaking to a group of leaders who invariably have a stake in China’s continued development, Xi touched upon topics including politics, society, and the environment. Given the recent slowdown in growth, Xi’s remarks mainly aimed to assuage the concerns of economic and business leaders regarding the stability of China’s economy.
Some of the most discussed topics that come to mind when thinking about economic reform in the Middle Kingdom include liberalization of interest rates, freer access to capital for small firms, and correcting market distortions such as real estate prices. These factors are admittedly extremely important to rectify if the economy is to avoid stalling out, but there is also another issue on the minds of many business leaders looking to become or stay involved in China’s economy – corruption.
President Xi Jinping at the APEC summit in Bali, Indonesia. (Photo: South China Morning Post)
In recent years, China has seemed to take a more central place on the world stage. But is it really as important a player as its image suggests?
In a recent book review event held at George Washington University, Professor Robert Sutter talked about his new book: Foreign Relations of the PRC: The Legacy and Constraints of China’s International Policies since 1949. Sutter’s overarching assessment of foreign relations in China carries a negative tone throughout—for now, China is not as important in international affairs as it was in the past. To support his statement, Sutter provided an overview to address the following points:
- Does China have any strategy in foreign affairs?
- Has China come to follow modern world order/Is China a status-quo power?
- How is China important in world affairs?
- Does China have principles for its actions?
Sutter’s answer to the first point is a solid “no.” He argues that while China does have certain goals it desire to achieve, its policies change constantly based on circumstances inside and outside of China, causing competition between its different priorities. China positioning itself in a triangular relationship with the United States and the Soviet Union while its priority was (supposedly) nation building, according to Sutter, was an example of China’s lack of foreign affairs strategy. This assessment reminds me of Professor David Shambaugh’s lecture on China’s foreign policy—“policies in China are made by the top leaders, but its process remains a myth.”
While all four points are crucial in Sutter’s assessment, I am particularly interested in the discussion of the second point because he used free market in China as an example— a major theme that CIPE focuses on in its programs. In Sutter’s analysis, China uses its capacities in the realm of the military, economy, and technology only to fulfill its interests. China’s overall trade policies, Sutter said, “degrade the free market, which contradicts international norm.”
Recently, I read a widely discussed book called “China’s Trapped Transition” by Minxin Pei. Pei challenges popular arguments about China’s development as a neo-authoritarian regime: that economic development will provoke better governance; that gradualism works well to promote economic growth; that economic growth in China will eventually lead to democratization; and that authoritarianism is a better system to sustain economic development.
The underlying assessment of Pei’s book is that China has reached a phase in which its growth is stagnant. China’s political system, Pei argues, cannot be reformed because of its deep-rooted corruption issues and due to the lack of institutional infrastructure to address these issues. Pei labels China’s situation as “self-destructive political dynamics inherent in an autocracy caught up in rapid socioeconomic change.” While Pei provides credible statistics and evidence to support his assessment, he fails to incorporate an ongoing major factor of competition between China’s socialist ideology and capitalist ideology in other parts of the world. A re-visit of Pei’s assessment, published in 2006, is necessary because China has hitherto maintained its growth (more or less) while its system remains unchanged, and in some ways seems even stronger.
Property is the basic building block of all business interactions that occur in our daily lives. But as a recent report from The Property Rights Alliance shows, the lack of secure property rights is holding many countries back from reaching their true economic potential.
Long before the United Nation’s enshrined it as a human right, property has been the medium through which we trade. Without the right to property, an individual is left with no means to securing the basic necessities and is left reliant on others. When property rights are secure, we have the freedom to seek innovative business opportunities. Through property rights, we are able to invest in our future, improve our circumstances, and, in turn, contribute to the growth of the market and economy in which we function.
As an extension of this human right, small businesses and entrepreneurs must have secure rights to their property. Peruvian economist and expert in the informal sector and property rights Hernando de Soto has termed the absence of such security “dead capital.” He pointed out that even though a business might have the physical resources such as land or a building, its hands are tied in putting it to work unless property rights to such resources are well established and secure. When such assurances are absent, businesses and individuals are forced to operate in the informal sector, costing all parties in potential revenues in the forms of taxes and the subsequent services from the state.
As we have seen through countless studies and recent articles, property rights go hand in hand with the development of families, communities, and nations – especially women’s ownership. When women own their property, they invest more in food, education, and the security of the next generation. Yet, in many places around the world today, property rights are under siege and women’s property rights are not guaranteed because of inheritance laws or through outright gendered policies favoring men.
It is within this context that The Property Rights Alliance released its 2013 International Property Rights Index (IPRI). The IPRI report is an annual evaluation of 131 nations on their performance in property rights in four categories: overall property rights, the legal and political environment, physical property rights, and intellectual property rights. The IPRI report demonstrates the connection between a nation’s property rights and its economic development. In this year’s Index, Finland receives the highest overall score of 8.6 (out of 10), while Yemen is ranked last at number 131.
By Xingyuan Feng, Christer Ljungwall, and Yeliang Xia
This article originally appeared in the 2013 International Property Rights Index report, a project of the Property Rights Alliance.
In 2010, China became the world’s second largest economy in terms of GDP and joined the list of middle-income economies with a per-capita GDP of USD 5,432 and 6,100 in 2011 and 2012. However, a number of political, economic and social problems have created a bottleneck in maintaining sustainable economic growth. As has been seen in many other middle-income economies, this can result in a “middle-income trap”. To escape this “trap”, China must work to improve the efficiency of production factors to maintain high economic growth over an extended period of time. This is a necessary step for any country that ultimately wishes to move into the high-income bracket.
A steady stream of rural workers coming into urban areas has fueled China’s rapid economic rise. Yet, these migrants remain constrained in their upward social mobility by the household registration system – hukou – that assigns an individual residency status as either “rural” or “urban” and is very hard to change. As a result, some 260 million migrants – or about 20 percent of the country’s population – live as second-class citizens in their adopted cities. In the biggest cities, as much as 40 percent of the population does not have the city hukou.
In the 1950s, the Communist Party started using the ages-old hukou family tracking system to restrict population movement. The intent was to spur industrialization through the “iron rice bowl” deal: urban workers were compensated for low wages by the promise of lifetime employment, health care, pension, and education for their children. For the system to work, rural workers had to be kept on farms to supply cities with cheap food.
Many now recognize hukou as unjust and an obstacle to China’s further development, and the government is contemplating reform. For the time being migrant workers still lack the status of permanent urban residents and the access to public services that city residents enjoy. This, in turn, makes just paying rent a struggle and creates high demand for affordable housing.
Enterprising farmers on the outskirts of fast-growing cities took notice. They started renting or selling their houses to migrants and building new ones. In some cases the entire villages invested in such developments – which include not just housing but also small factories, shops, and hotels. The owners received certificates of “ownership” (actually a limited land use right that can’t be sold, inherited, or mortgaged) recognized by their rural collectives. But when cities expand, these so-called “small titles” have no outside legal standing. The owners are supposed to be fairly compensated for expropriation but that rarely happens given the incentive structure: city governments have a monopoly on buying rural land and converting it into urban land by reselling to commercial property developers at a considerable financial gain.
The central and city governments maintain that construction and sale of “small title” properties are illegal. Yet for decades they were tolerated or even encouraged by local governments to facilitate their land take as “sideline payments” or accommodate migrant workers or lower-income city residents. Once urban land prices exploded, and following the 1994 fiscal reform that centralized fiscal revenue and put more pressure to raise revenue on local governments, the incentives changed. Not surprisingly, though, the central government’s efforts to remove “small title” properties and re-develop the land are encountering strong local resistance. In fact, conflict over land accounts for 65 percent of the more than 180,000 mass protests occurring in China annually.