The China Dream: Beyond the Purge…Arresting Decay

Thirty years ago, China set out boldly to transform itself by building a strong economy, a commercial and industrial powerhouse and a civil society based on creating mass opportunity for its citizenry. China’s leaders at the time saw clearly the mistakes being made by the Soviet leadership in managing the USSR’s political and economic transition, and accordingly embarked on a different path that created economic opportunities while maintaining social stability and an unwavering hold by the Communist Party on power.

Now, after three decades of rapid fire growth, the leadership recognize that China’s economic slowdown is the new reality, the country’s investment and manufacturing led growth model have reached maturity and there is an increasingly severe economic unbalancing between investment and consumption. As the Sign of December 2013 on the 3rd Plenum of the 18th Party Congress reported, China’s leaders accordingly announced a much needed new path of economic reform. However, although we are still in the early days, the moves thus far still leave open the question of how well China will transition to the next phase. “Despite the relative youth of its economic miracle, aspects of the country are already starting to look old, and it is becoming clear that the high rate of growth has to date masked what appears to be a high rate of corresponding decay”Now, as at the start of the transformation 30 years ago, bold moves are expected and required. Amazingly, despite the relative youth of its economic miracle, aspects of the country are already starting to look old, and it is becoming clear that the high rate of growth has to date masked what appears to be a high rate of corresponding decay. It is “decay” – deterioration, or decomposition - rather than merely a slow down or a dip. The need for speed in China’s pursuit of growth and development has led to compromises on planning and execution quality and the cracks are now appearing. These cracks are both literal, and the shabby state of thousands of high rise buildings that have gone up in China’s cities are a visible indicator of China’s decay , as well as figurative, created by the growing pressures on the supporting regulatory, legal, commercial and societal fabric of China too.

With breakneck growth, this decay was not very evident or even relevant. After all, the country was still growing strongly, net-net. But with the consensus that economic growth has now slowed for the longer-term, the decay is not only clear but it creates the risk of overall decline. China’s problem is not unique: all empires (defined here as large powerful and politically and economically expansionist states) follow a cycle of growth that sees an initial phase of rapid expansion, and second phase of maturing and a final third phase of decline. What is new about China is the timeline on which its cycle is unfolding, the country appears to have aged prematurely, growing old while growing up, so to speak. However, looking at the cycles of empires past the timelines have been becoming increasingly compressed, with previously nearly millennium long cycles unfolding first in centuries and now in a matter of decades.

If China is to arrest the trend of decay and move to a phase of consolidation that enables a prolonged period of gradual but positive development it will need to focus on the quality of growth, valuing sustainably over “naked” growth. This shift in the development model will require a fundamental rethinking of the very model of China’s power that has propelled China successfully both domestically and internationally. While the first phase of China’s growth was built almost solely on the build-out and use of hard power, the next phase of development will require the use of both hard power, focused on physical infrastructure, industry, natural resources, foreign currency reserves, international relations and military strength, as well as soft power, focused on intellectual property, innovation, improving the quality of life and conduct in an open society and the approach to international alignment. China’s citizens, have to date been incentivized primarily with the promise of material gain; in this next phase they will need to be co-opted to buy into a broader set of national (and societal) goals. The transformation of China’s economy will require an accompanying transformation of society, itself requiring the creation of a new social contract based on a broader set of values than those implied by the pursuit of material wealth. The alternative, an attempt to preserve the status quo, will lead to an accelerating rate of relative decay and decline as China is unable to sustain it achievements to date in the face of competition from the developing world.

Shifting from Hard Power to Hard/Soft Power

China’s growth of past decades has been based on the build-out of hard assets and the country today remains focused on the accumulation of hard infrastructure, hard power and hard cash, as evidenced by the actions and priorities of the country’s leaders. This is not to say that hard power is something new to China’s modern day reformers. Indeed, amassing and using hard power in modern times, in the form of military strength, infrastructure, industrial capacity, among others, has been the cornerstone of China’s leaders’ mode of behavior since the establishment of the People’s Republic in 1949.

Since assuming the presidency in 2013, President Xi Jinping has very effectively used the legacy of hard power in consolidating executive power, purging over 37,000 party officials, more than at any time since the Cultural Revolution, as part of the ongoing anti-corruption campaign. Internationally, President Xi has continued China’s build-out as a superpower, acquiring resources and trading cash and aid for influence in a wide range of developing and developed countries. The table aide places China’s more recent “wins” in the history of a long line of hard power initiatives that have shaped the development and state of the country today. The value of hard power during the first phase of China’s development, post liberalisation, and the unparalleled achievements of that it enabled are undeniable. It is hard to imagine China could have made similar economic progress had it taken another path. Nor is it to appropriate to assert that hard power has no place in China’s future. This is not a question of either hard or soft power, and no superpower has been able to focus on one while neglecting the other over the long term. The assertion is that without combining elements of both hard and soft power, a more sustainable model for the country’s development will be near impossible to achieve over the long term.-

While the speed of China’s development places it in a league of its own, it is not alone in facing the need to choose a sustainable long-term mix of hard and soft power. The world is still recovering from a crash caused seven years ago by western financial over-reach and mismanagement, the implosion of capitalist systems of enterprise and a culture of excess. Further, the threats to the West and the broader developed world and their way of life have been increasing: a continued weak macro-economic outlook, a Russo-Ukrainian war at Europe’s doorstep, and the growth and growing power of ISIS, to name a few. In this world it is not only China that will be tempted to rely on the overwhelming use of hard power. A decade ago, in the face of the unprecedented 9/11 attack on America, the US under President Bush used, some would say abused, hard power extensively at the expense of soft. While the Obama administration has sought to rebuild some of the goodwill and moral right that was lost (with moderate success, according to the Pew Global Attitudes Study, the average increase between 2008 and 2014 in the number of people across 62 countries who hold a favorable view of America was 10%) and eschewed things like military interventions with boots on the ground, it is not certain that the next administration will not revert to the ways of its predecessors. China’s challenge itself is therefore not unique, but its solution will need to be tailored to its own critical issues.

President Xi appears to have recognized this and his vision of the “China Dream” contains the seeds of a domestic soft power strategy. However, the dream to date, most often understood as the reemergence of China and the renaissance of the Chinese people, has been only loosely defined. For all the slogans appealing to national greatness, the China Dream remains elusive to most of the country’s citizens. President Xi’s speeches have been parsed and analysed to provide more clarity on the overall objectives. Beyond its messages of power, wealth and status, the China Dream appears to also touch on values, behaviours and a way of life (“improvement of people’s livelihoods, prosperity, construction of a better society” ) as well as about "In my view, realizing the great renewal of the Chinese nation is the Chinese nation's greatest dream in modern history."

President Xi Jinping co-operation and social responsibility (“the Chinese Dream is not about individual glory, but about collective effort” ). To date only a little has been said about what needs to be done to achieve the dream and how to go about doing so. Tellingly, to date, the tangible actions following the announcement of the dream have been a resurgence of nationalism (which include increased rivalry with regional rivals such as Japan) as well as, what is often interpreted openly internationally and privately internally, as populism mixed with opportunism (the elimination of political rivals as part of the anti-corruption drive). These interpretations may well be off the mark, since the President may well be clear that to plant the seeds of a new society with a new dream requires weeds to be removed from the roots. Weeding out the abusers of hard power is critical to establishing the state as the only legitimate wielder of hard power and helping “For to win one hundred victories in one hundred battles is not the supreme of excellence. To subdue the enemy without fighting is the supreme excellence.”

Sun Tzu, The Art of War, China, 5th Century BC to pave the way for a new method of using power. However, intentions aside, thus far, the public has only seen the continuing use of hard power as a means of successfully achieving one’s objectives. Fulfilling the vision laid out by the China Dream will require the leadership to demonstrate the effectiveness of another way, namely the use of soft power, and to teach by example to citizens how effective that way can be. The example of hard power has been too well learned, phase two now requires the ways of exercising power without conflict and the value of empathy in creating win-win to be taught. In China in 5th century BC, Sun Tzu recognized this well. Whereas the Art of War has been often interpreted as a manual for waging war and conflict, a deeper study reveals that it is a manual on how to avoid ever needing to go to war or becoming embroiled in conflict. This is a lesson China will need to relearn, not just its leaders but society as a whole.

Hard Power and How it Defines Society

China’s hard power has been defined by 65 years of absolute communist rule, a ten year Cultural Revolution that wiped out old established millennia-old social structures and value systems, and 30 years of turbo-charged capitalist growth. This has also created one of the world’s most materialistic cultures. A recent survey conducted by global research firm IPSOS across 20 countries, found that 71% of Chinese surveyed said they gauge their success by the things they own, against only 21% of respondents in the US, and a global average of 34%. Ever since Deng Xiaoping declared that: “to become rich is glorious” there has been no looking back for China or its citizens. As one would expect, the success of “To become rich is glorious!”
Deng Xiaoping
China’s hard power focus - reflected in state propaganda, national celebrations, literature, and education systems – has defined the values, culture and behavioural norms of the nation. And the flipside of the coin is that the prolonged de-emphasis of soft power in the national agenda also sends an important message about its lack of value. Together, the almost singular use of hard power and the corresponding absence of use of soft power have defined the consciousness of modern China. The benefits of this have been significant: political stability, social stability, economic growth and stability, powerful trading and political relationships with nations the world over and first world levels of political clout in major international institutions such as the UN. These are prizes that many leaders in lower-performing democracies would not only envy but would trade in their democracies for, if they could.
However, the key symptoms of this materialism are pervasive in China and play to many of the emerging stereotypes about the country: government corruption, the prevalence of fraud, growing conspicuous consumption, “I would rather cry in the front seat of a BMW than be in love on the back of a bicycle”.
Internet meme started by contestant on popular TV
dating show: “If You Are the One” autocratic rulers in every walk of life from the state to local governments, companies and social contexts, the stratification of society into have and have nots (with little empathy by the former for the latter) and even classes that teach women how to marry rich . This materialism and its consequences are experienced by China’s counter-parties- (and internal participants) in all walks of life: negotiations at the UN, in the WTO, on climate change, territorial disputes, negotiations on resources, M&A deals, investment deals and so on and so on. Manifestations of the hard power culture include zero-sum game thinking, where one party’s gain must be another’s loss,destructive brinkmanship in negotiations, predatory competition, the over-riding and bypassing of basic ground rules and accepted conventions, contraventions of agreed contracts, a sense of entitlement to others assets, sometimes the circumvention of the country’s at times laxly implemented legal system and security in the knowledge that the legal system cannot be used against the powerful transgressor.

Such materialism often leads to a behavioural pattern that runs deeper than a simple focus on the pursuit of material wealth. Among other things, it leads to a lack of questioning, a need for speed (in achieving outward success) and a desire for more, On the commercial front, it leads to a shallow "fast food" commercial culture focused on the number rather than the quality of transactions, an accompanying lack in the quality of investments, a culture of workarounds to bypass all the obstacles that get in the way of success (even if the obstacles themselves are in pursuit of worthy goals, such as environmental or consumer protections) and the blaming of others, most likely the State in China’s case, when the economic or political environment does not support their need for material wealth. All of these manifestations are issues not just for China’s society but for the country’s government and the longer term stability of the communist party’s rule. One can see why President Xi might wish to purge the nation of those who have abused hard power. However, today, when the question is posed, what comes after the purge, the oft answer is another purge. The real antidote to this is the promulgation of more balanced values than the pursuit of naked materialism alone. President Xi’s vision of the China Dream recognizes the need for this. If this is to materialise, it implies a fully blown cultural renewal with the aim of creating a more sustainable, fair and equitable society for citizens based on meritocracy and empathy. Over the long term, this will be the safest way for China’s leaders to avoid what they most fear about reform: that it will lead to the USSR’s descent into corruption, oligarchy and ultimately economic stagnation, the loss of power for the communist party and the decline of the country from superpower status.

Given the above, addressing the question of soft power is therefore not a “nice-to-have” for China’s leaders, it is an increasingly pressing requirement for the long term development and stability of the country. Where to start, though, in fundamentally transforming the economy, society and government? Firstly, it would need to begin at the top; China’s government will need to lead by example if it is to pave the way for the emergence of a civil society that invests deeply into a broader set of values. China’s economic transformation in the past 30 years was the result of top down policies enacted by visionary leadership. The transformation of the country’s civil society will be a challenge of similar magnitude for this generation’s leaders.

Defining The Way Forward

When it comes to the skilled use of hard and soft power, comparisons to other countries don’t help. The US despite having an unparalleled cache of soft power is no role model. Indeed, perhaps the best lesson from the US is that soft power amassed over decades can be quickly squandered . Other countries also provide little guidance with regards to moving beyond a materialistic society. There is also the simple truth that capitalism is the only economic model that survived the last century’s two physical World Wars and one Cold War and it is ultimately materialist rather than spiritual. China will need to develop its own new blueprint for the integration of hard and soft power in the transformation of its society.

While other countries are not good role models, there is an instructive comparison to be drawn between contemporary China and the history of the US. The US in the 19th century was a pioneer country whose opening up, geographically, created successive waves of development and economic opportunity, not unlike the recent history of China. This phase of development in the US led to a Gilded Age accompanied by unsustainable social and economic structures that subsequently underwent decades of reform to find a new equilibrium that is the US as we largely know it today. This modern US exhibits a mix of raw materialism alongside a deeper search for self-actualisation. Contemporary China is in many ways comparable to the Gilded Age in the US during the last quarter of the 19th Century. Both included breakneck economic growth, rapid industrialization, the creation and concentration of wealth, the jump in the quality of life combined with a stratification of the have and have-nots (the latter being immigrants and migrant workers in the US and China too), and poorly enforced or outdated regulatory and legal frameworks open to manipulation by insiders. The comparison is of course not perfect: the executive power of the US federal government in the 19th century was very weak compared to China’s today, for example. However, in some ways it is an encouraging one given that the US subsequently evolved into the world’s first post-industrial economy. This equilibrium many would agree is far from perfect, the US created and oversaw the system that led to the Global Financial Crisis, is home to a justice system where 40% of death row inmates are black, despite their representing only 13% of the population, and even today fails to provide basic healthcare and social security to all of its citizens. So, while its end state cannot be a role model, its development path does hold potentially valuable lessons for China today. The US transformation was a gradual one that occurred over time and was driven by a number of key factors. They include the following:

1. Clear rules and regulations for society and business that are consistently enforced through legal and other enforcement system, creating mass opportunity and something close to a level playing field (ranked 7th in the world survey of ease of doing business).
2. A mutually re-enforcing system of government agencies, non-government organisations and journalism that fights corruption and abuses of power to improve governance (some of the biggest scams have been perpetrated and exposed in the US; the US system of governance ranks 17th in the world ).
3. The development of a strong and educated middle class as the backbone of civil society (which has been getting squeezed in the US, currently ranking only 27th in terms of median household wealth).
4. Implementation of accountability mechanisms for the country’s leadership to its people (21st in terms of democratic freedoms ).
5. The creation of a very basic social security net for all citizens to unlock capital and productivity , (nowhere near that which first world EU countries would consider adequate).
6. The freedom of information, press and ideas (18th in world in terms of press freedom ).

The list above is instructive to China today, given that its leaders are clearly focused on some of these items while largely discounting or actively resisting others.

What would a soft power approach need to look like if it is to galvanise society to meet the China Dream? For one thing, it needs to recognize that propaganda and censorship of dissent is about hard power. Soft power is about positively embracing a series of values and behaviours focused on win-win outcomes. If it is to motivate society, China’s government will need to be the role model for the use of soft power. This will require a real commitment to factors other than economic growth. Luckily, the agenda for China’s leadership is ripe with examples demanding a different approach. The table below lists some of the key issues along which China will need to make a choice along the hard and soft power spectrum:

China’s government will not just need to exercise soft power in selling the China Dream, it will also need to make the achievement of the Dream both possible and attractive to the country’s citizens. China’s people will need to both embrace the dream and do their part in seeing it turn into reality. If China wants to create a modern post-industrial economy it will first need to create the mature society that can enable and sustain it.

Conclusion

The transformation of society is a gradual process. However, given the speed of China’ ageing – the slowing of China’s growth and the speed of its decay - it will not have the luxury that America did of a century of trial and error. For all of its faults, the US has found a steady state in which high levels of materialism co-exist in a society which is also searching for meaning and self-actualisation. America has of course never been perfect, but it is the place where 40% of the top income earners vote Democrat and thereby in favour of social programs that they pay for without directly benefitting from them in most cases. Constructing a society in which a significant percentage of the population behaves this way requires striking a balance between materialism and a sense of individual accountability and empathy within a shared value set. China as one of the cradles of civilization is home to both an ancient spiritual philosophy (Taoism) as well as one of the oldest set of rules governing society (Confucianism). However, given that its revolutionary history in the 20th century involved the death of 76m of its people and the systematic cleansing of many of its oldest and richest philosophies, Chinese society will need to rediscover and reinterpret these schools of thought in a modern incarnation to match the time. The government recognized this in its promotion of the 2013 film about the life of Confucius; however, when it forcibly yanked the blockbuster hit Avatar off China’s screens to make room for the domestic production and improve ticket sales it once again exercised hard power. The Party needs to set the example that enables people to emulate and learn the value of soft power and come to see it as a hard currency in the creation of a happier society. Without these shared values, China will lack one of the key ingredients that helped make America great.

Taking philanthropy in China as an example, it is unsurprising that today’s Chinese billionaires did not line up to sign Bill Gates’s and Warren Buffett’s “Giving Pledge” committing to give away most of their newly made wealth to charity during their own lifetimes. On the other hand, if newly minted internet tycoons in the US have signed, why cannot China’s billionaire entrepreneurs? Perhaps the answer may lie in the stage of China’s development. As Chinese society begins to value soft power, this is more likely to become the norm. It requires China’s leaders to kick-start the process of transforming society and society itself to willingly follow.

What will success for China look like? Perhaps an example will serve best to illustrate what will undoubtedly be a multi-faceted process. A commentator on China recently remarked that there were no solidarity marches in China for victims of terrorism like the ones that occurred in Paris following the Charlie Hedbo killings. If China finds a suitable mix of hard and soft power and transform society as a result, success would be the emergence of such mass expressions of solidarity following attacks in China (requiring not just empathy on the part of the China’s citizens but fundamental changes to censorship and freedom of assembly rules and regulations on the part of the government). If China however truly embraces the values underling soft power, success would be manifested in solidarity marches in Paris for victims of terrorism in China.

For President Xi, the opportunity to preside over the transformation of China is unique given he is now seen as having more power and freedom to manoeuvre than any leader since Mao. His choice remains to what ends he will use this power: set himself as an autocratic ruler, a well-trodden path both in China and around the world, or be the transformative agent to take China to its next stage of development, a bigger challenge and one fraught with uncertainty.

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