Overreach, page 15
Some of these groups were pursuing bigger budgets and more ships, planes, and bureaucratic influence in the guise of defending Chinese sovereignty in the South China Sea. Each of these relatively narrow interest groups had an overlord who represented it in the Politburo or on the Standing Committee, someone whom no one dared deny, not even general secretary Hu. Some of these organized interests—such as the fisheries bureau or the oceanographic bureau—were not known as bureaucratic heavy hitters. But in a logroll with the Chinese Navy, state oil companies, Hainan island (China’s southernmost province), and a number of other agencies, they had an unobstructed path to overreach.
The CCP Propaganda Department and its affiliated organizations joined in the logroll. Muscle flexing is easier to sell than self-restraint in a country that is experiencing double-digit rates of economic growth. The overconfidence that followed China’s rapid recovery from the 2008 crisis made the ground for territorial claims more fertile. The propagandists concocted a history in which the entire South China Sea, not just its atolls and islands, belonged to China because its “historical rights” had been established in 1948 by a line drawn on a map by the Kuomintang government.83 The media coverage of the ships and planes operating in the South China Sea under the banner of “rights defense” (weiquan) soon turned the South China Sea into a popular cause. Elites started to believe their own propaganda—a phenomenon known as “blowback.”84
Although China was using the white-hull vessels of civilian agencies in the South China Sea rather than the People’s Liberation Navy and Air Force, the military and the military industries joined in the logroll and lent it greater heft. The PLA Navy had been waiting for years to extend its mission to the defense of the South China Sea. The navy’s shipbuilding, training exercises, and public rhetoric powered the actions of the civilian interest groups. China’s state-owned shipbuilding industry, the largest in the world, which produces both commercial and military vessels, started churning out naval ships, including aircraft carriers, at a rapid pace. In his report to the Party Congress in 2012, Hu Jintao declared that China’s objective was to become a maritime great power. Between 2015 and 2020 it crossed a threshold by fielding more battle force ships (360) than the US Navy (297). Adding in the Coast Guard and Maritime Militia, China’s three naval fleets total over seven hundred ships, making it the biggest maritime force in the world. Their quality is also improving, as is their sophistication. According to Andrew Erickson, a leading expert on the Chinese Navy, China is “modern history’s sole example of a ‘land’ power successfully becoming a ‘sea’ power.”85
As these groups logrolled their interests, in combination they generated more aggressive outcomes than any of them may have desired individually.86 As I noted in the prologue, China’s overreaching in the South China Sea sullied its reputation as a benign power. Chinese coast guard cutters and fishing militia clashed with the fishing boats and drilling vessels of their neighbors. They went so far as to challenge US Navy research and surveillance ships. Their aggressiveness radically revised the international narrative about the kind of rising power China was. Hu-era maritime overreach sparked a recoil that over time would build an international coalition to contain it—the costly self-encirclement that Deng Xiaoping and Jiang Zemin’s more accommodating strategy had sought to avoid.
Stability Maintenance (Weiwen)
At roughly the same time as the Hu regime started overreaching internationally during his second term (2007 to 2012), it also started overreaching domestically by intensifying its social control. Logrolling by the control coalition, consisting of the propaganda and Party disciplinary agencies as well as intelligence, internal security, and the military, produced a gargantuan machine for what was called “stability maintenance” (weiwen) that brought the country closer to being a police state. The 2002 expansion of the Politburo Standing Committee to include the propaganda and internal security heads had increased the control coalition’s clout. When the ambitious Zhou Yongkang replaced Luo Gan as security boss in 2007, the weiwen juggernaut was unstoppable.
The interest groups didn’t have to invent the threats to the Party’s rule. By the middle of Hu’s second term, everyone could see that China’s transformation toward a market-based, internationally integrated economy was making Chinese society more restive. Multiplying local protests raised the specter of a bottom-up revolution against Party rule. The dramatic increase in the number of people getting their information on the Internet also caused alarm. Social media postings revealed the extent of discontent to the leaders and to other netizens. Seeing safety in numbers, these netizens could use social media to organize collective action that might spill over onto the streets.
During his first term, Hu Jintao had tried to head off potential unrest by seeking to improve governance and opening up channels for public feedback. At the 2006 Party Congress he stated that “strengthening social management and maintaining social stability are the necessary demands of constructing a socialist harmonious society.” He aimed to pre-empt unrest by gauging public opinion and satisfying it as best he could.87 Indeed, both Hu and Wen had sought to make government more responsive to public concerns. They allowed investigative journalism and citizen criticism of local officials on the Internet. The censors and police used a relatively light hand when dealing with political dissent. To shore up the government’s credibility, Hu allowed the official media, including the Xinhua News Agency, to start reporting negative news, and in 2008 lifted the ban on reporting on protests. People were permitted to petition the upper-level officials to complain about misdeeds by lower-level officials, although group petitioning was discouraged and counted against local officials. Party leaders, including Hu himself, talked frequently with netizens in online chat forums to take questions and respond to criticisms of public policies. Environmental NGOs, charities, and other forms of civil society sprouted up. When protests did break out, the central government stood on the side of the protestors and blamed local officials for causing the problems. This strategy succeeded. The Chinese public focused their negative feelings on local powerholders and lent positive support to the central government and Party.88
Another strategy Hu and Wen used to forestall social discontent was to make a populist swerve to move the priorities in development policy away from growth and toward redistribution and quality of life. This required more state intervention in the economy. The central government transferred fiscal revenues to the poorer inland regions and rural areas; ordered local governments to increase expenditures on social needs like health, education, and welfare; and set hard environmental targets for local leaders to meet.
But the protests grew larger and more determined, nevertheless. Outside China, popular uprisings in the former Soviet states of Georgia (2003), Ukraine (2004), and Kyrgyzstan (2005), which had come to be known as the “color revolutions,” heightened the political paranoia of CCP leaders, who believed that the Americans had instigated them and that they could extend to China. As the control coalition highjacked leadership’s fears, they steered the strategy toward a more authoritarian form of weiwen, necessitating tighter controls over the media, Internet, and civil society.89 The 2008 Beijing Olympics were supposed to showcase a vibrant, open China; the International Olympic Committee had required Beijing to commit to journalistic freedom and allow peaceful demonstrations during the games. But these promises were not fulfilled. Petitioners were waylaid by police before they arrived in Beijing; as a result, the small spaces allocated for protests stood almost empty. The Ministry of Public Security had spent an entire year perfecting its methods of monitoring and control to guarantee that there would be no demonstrations in Beijing during the Olympic events. Although foreign journalists were treated respectfully, censorship tightened for Chinese reporters and has not loosened ever since. Large-scale eruptions of discontent convinced the leadership that it had to clamp down harder on all protest activities. The Tibetan demonstrations on the eve of the Olympics and the harassment of Chinese Olympic torchbearers by pro-Tibet demonstrators in Paris and other cities were followed in 2009 by violent clashes between Uighurs and Han Chinese in Xinjiang province.
Then China’s cybersphere expanded with a big bang following the creation of Weibo, Sina’s hugely popular microblogging platform that is similar to Twitter. By 2011, Weibo had become the primary source of public information,90 and it metamorphosed from a simple communication tool into a channel possessing “social power and even political attributes,” according to Caijing magazine.91 Celebrities and other opinion leaders—called “Big V’s”—with tens and hundreds of thousands of followers shared complaints about official corruption, air pollution, and other social ills. As a Beijing professor observed, “Weibo created a real public sphere, so by 2011 it was ‘show-down time.’ ”
President Bill Clinton famously said that China’s effort to control the Internet was “like trying to nail Jell-O to the wall.”92 Hu’s collective leadership compounded the problem. As of 2011, China had at least fourteen agencies with administrative power over Internet regulation.93 Bureaucratic competition and the dispersion of authority frustrated the drive for weiwen by creating niches where protestors and whistle-blowers could escape scrutiny; bureaucratic competition also was conducive to corruption by the officials who were gate-keepers and censors.
The control coalition pressed for more investments in “social management” to nip sources of instability in the bud at the local level. In 2010, the spending on public security exceeded the defense budget.94 Grid-based management tracked the population. Those charged with ensuring weiwen at every level hired more personnel, enlisted volunteers, and subcontracted with security companies in what became a lucrative and corrupt business. Special off-budget “maintaining stability funds” (weiwen jijin) were set aside to buy off the demonstrators.95 Weiwen became one of the most important indicators in local cadre evaluations. Officials lost their chance for promotion, or (more rarely) were demoted, if just one incident occurred on their watch. Predictably, such stringent criteria bred overcompliance by local officials, who went all-out to suppress group petitioning and other forms of protest activity.
Weiwen took on a life of its own, increasing social conflicts instead of reducing them. Tsinghua sociologist Sun Liping wrote in 2010 that China had succumbed to a vicious cycle, where “the more weiwen, the less stability (yue weiwen yue buwen).”96 As one netizen wrote, “Weiwen has become an industry. ‘Relevant departments’ have used this excuse to increase budget, expand staff and equipment, and go to banquets and spend lavishly. Only exaggerating dangers and prolonging imprisonment [of dissidents] can maximize their interests.”
The State Advances and the Private Sector Retreats (Guo jin min tui)
Simultaneously with the mid-2000s transformations in foreign and domestic policy, the country’s economic development model also changed significantly. The economic miracle that had lifted more than 400 million people out of poverty during the 1980s and 1990s was achieved by what might be called the “Decentralized China Model.” The economy was liberated from Soviet-style central planning and economic autarky, and the responsibility for managerial decision-making and creating incentives devolved to local governments, firms, and family farms. Today, when people talk about the “China Model,” they mean something quite different from the decentralized market-oriented economy. Instead, they mean a “Centralized China Model”: a strong central state that directs resources and policies toward ambitious economic, technological, and political goals.
The shift from Decentralized China Model to Centralized China Model began around 2003, a year into Hu’s leadership. Central Party and state agencies and state-owned enterprises (SOEs) reclaimed their dominant role in the economy after twenty-five years of market-oriented decentralization. When China gained admission to the World Trade Organization in 2001, the bureaucratic and industrial interest groups with ties to the central government and the Party made the case that having foreign multinational firms flocking into the country might present a dangerous competitive and national security threat. People’s Daily wrote that multinational firms would “control our country’s major industries, hoping to become the overlords of some sectors, and only strong state-owned enterprises have the ability to contend with them.”97 Another rationale for strengthening the central-state interest groups was the aforementioned populist shift initiated by Hu and Wen from market-driven growth to the redistribution of the benefits of growth from the coastal cities to poorer inland regions and rural areas. Party leaders also can command SOEs to contribute to pet state projects, such as building infrastructure in inland regions and the Belt and Road Initiative.
Zhu Rongji, the premier who served under Jiang Zemin, spearheaded a reorganization of SOEs in 1997 that spun off smaller firms to restructure, close, or privatize but kept 196 large central SOEs, a number that shrank to 153 in 2006; the number as of 2020 is 97.98 The central SOEs, some of which originated as industrial ministries or bureaus during the era of central planning, never completely disappeared during the period of market decentralization. Now their privileges as “the eldest sons of the republic” were restored.99 SOE executives could join the CCP Central Committee and had entrée to the private offices of Party and government leaders.
In contrast, private firms have never gained a voice into the policymaking process. Even during the heyday of market reforms in the 1980s and 1990s, state banks favored the SOEs in their lending while private firms struggled to raise capital. Until 2014, private entrepreneurs could be executed for “illegal fundraising,” defined vaguely. The business capital and personal safety of private entrepreneurs remain, to this day, vulnerable to the Party-state. Private businesspeople must spend a lot of their time and money cultivating ties with officials who can offer them and their companies informal protection from government predation.
China opted to keep the central state-owned enterprises under the Party leaders instead of ceding control to insider oligarchs, as the Soviet Union had. In 2003, a new body, the State-Owned Assets Supervision and Administration Commission (SASAC) was established to hold the state’s shares in the central SOEs and serve as their secretariat. The CCP leaders also successfully resisted Zhu Rongji’s effort to professionalize the personnel control of SOE executives by moving it under the government State Council, retaining this significant source of patronage for the Party instead. Powerful families in the Party aristocracy populate the C-suites and boards of directors of the large SOEs and use the SOEs to “harvest wealth from the system,” as journalist-businessman James McGregor has put it.100
In 2006 the Hu-Wen administration issued a number of directives that protected strategic and pillar sectors such as telecom, power generation, automobiles, and aerospace for SOE monopolies or oligopolies.101 Party leaders favored the central SOEs as “national champions,” as they called them—a team of corporations that they hoped would make China victorious in the contest for global economic leadership. But by coddling them with special treatment—by providing them rent-free land, access to low-interest bank loans, and lower taxes—they failed to create efficient or productive companies. Once the state’s subsidies were subtracted, corporate profits pretty much evaporated. Whatever profits the firms did earn, moreover, were shunted into speculative real estate or retained by SASAC as the SOE holding company. The government said in 2013 that it wanted 30 percent of the after-tax profits of the central SOEs to go into the state coffers for public goods like education, health, and welfare, but as of 2019, only 2.4 percent actually did.102
Beijing also ramped up a state-led campaign to make China into a global technology superpower. Wen Jiabao, as head of the CCP Leading Group on Science, Technology and Education, initiated a centrally planned and funded drive focused on megaprojects (sixteen in all) called the National Medium- and Long-Term Plan for Science and Technology Development, which was launched in 2006 and ended in 2020. Drafting of the plan took three years and involved thousands of scientists, engineers, economists, and military experts in a manner similar to earlier cold war central planning. The techno-nationalist drive was aimed at nurturing indigenous innovation as well as the absorption and repurposing of foreign technologies. The megaprojects meant big research and development budgets for a broad swath of government ministries. The leadership lavished special attention on projects with military applications and strategic objectives, such as manned space flight and lunar exploration, which progressed faster than those related to purely civilian applications, such as environmental pollution and healthcare.103 In 2009 Wen launched another ambitious drive to identify “strategic emerging industries,” where China could take the lead in cutting-edge technologies. These state-led initiatives were the progenitors of the Xi Jinping–era Made in China 2025 drive that set ambitious goals for China to overtake foreign competitors and dominate global high-tech sectors.
Enthusiastically backing these statist industrial policies were powerful central agencies that logrolled to protect the SOEs. Leading the coalition was the National Development and Reform Commission (NDRC), the giant super-ministry formed in 2003 that steers the economy in a way similar to Japan’s Ministry of Industrial Trade and Industry, which directed that country’s industrial policy in the 1970s and 1980s. The DNA of the commission derives from the State Planning Commission (SPC) that issued mandatory plan targets in the Soviet-style command economy from the 1950s until the 1980s. Many of today’s National Development and Reform Commission bureaus originated in the old State Planning Commission; the Ministry of Industry and Information Technology, created in 2008 from the merger of a number of previous military-affiliated ministries, was also a key player in the logroll benefiting from the techno-nationalist priorities of the central government. The SASAC became a powerful holding company for the central SOEs. The political clout of the state energy companies surpassed that of many government agencies, in large part because of their patron-client ties to leading Party politicians.104 Party politicians like to send their children to work in SOEs, where they learn business skills and, as James McGregor says, “gather assets for the family.”105
