While Beijing has reiterated its willingness to help combat the international financial crisis, the Hu Jintao-Wen Jiabao administration has stopped short of making substantial commitments to the global rescue effort. This is despite the fact that the ongoing crisis has afforded China a golden opportunity to demonstrate its credentials as an emerging quasi-superpower as well as a respectable member of the world community. Remarks made by senior officials and media commentators have given the impression that Beijing is taking advantage of the perceived demise of “American-style capitalism” to play up the success of "socialism with Chinese characteristics." And the Hu-Wen leadership’s apparent self-complacency regarding the superiority of the "China model" could impede further economic and political reforms.
Statements made by top officials at the Asia Europe Meeting (ASEM) in Beijing late last month have given the best indication of whether Beijing aspires to a leading role in fighting the financial tsunami. Speaking at the ASEM conference, President Hu said “China will work in a responsible manner with the global community to diligently safeguard international financial stability and economic stability.” Yet the top leader also noted that as China is a developing country with 1.3 billion people, the CCP leadership would devote its main attention and resources to maintaining domestic growth. As Hu put it, “maintaining a good development trend for China’s economy is itself an important contribution” to stabilizing the global financial system. Both at ASEM and in talks with foreign dignitaries, Hu and Premier Wen reiterated that for Beijing, “the most important thing is to manage our own affairs well” (Xinhua News Agency, October 24; China Daily, October 25).
At the very least, however, Beijing has given subtle hints that it will continue buying American government bonds. With foreign exchange reserves exceeding $1.9 trillion in September, the Chinese government has been looked upon by Western and Asian countries as a “savior’ with deep pockets (Xinhua News Agency, October 14). A late October dispatch by the Xinhua News Agency quoted an unnamed Chinese banker as saying that “American bonds are still a major direction for Chinese [foreign exchange] investments.” The banker added that U.S. treasury bills remained a “safe and stable investment vehicle” (Xinhua News Agency, October 29; Financial Times, October 24). Yet a big question mark hangs over how much more the People’s Bank of China and other central government agencies will buy. So far, Beijing has purchased some $600 million of treasury bills, $360 million worth of bonds issued by Fannie Mae and Freddie Mac, and several hundred millions dollars worth of other securities issued by American companies. Since the eruption of the financial upheaval in September, numerous Chinese economists and editorial writers have called upon Beijing not to put all its eggs in one basket. Well-known economist Kuai Zheyuan asserted that given fast-depreciating American assets, “there will be disastrous results if Beijing were to try to save the U.S. market by buying even more American bonds.” Other commentators have claimed it would be misguided for the central government to “throw in good money after bad” by snapping up more U.S. securities (Yazhou Zhoukan [Hong Kong weekly], October 12; People’s Daily October 7).
So far, the Chinese leadership seems more interested in firing subtle shots across the bow of an American-dominated economic order, which is perceived to be a key reason why the subprime mortgage disaster in the U.S. has mushroomed into an international crisis. Premier Wen and other top cadres have talked about the need for a "novel world order." While speaking in Moscow last week, Wen dwelled on the imperative of “building a new international financial order” partly through attaining “new levels” of financial and industrial cooperation between China, Russia and other members of the Shanghai Cooperative Organization, which includes Kazakhstan, Uzbekistan, Tajikistan, and Kyrgyzstan. The premier’s Moscow talk focused on the need to give developing nations more say in global institutions such as the International Monetary Fund; improving international regulatory mechanisms, including tighter supervision over financial institutions in countries whose currencies are held as reserves around the world; and building a diverse international currency system (Xinhua News Agency, October 29; People’s Daily, October 31). While stopping short of railing against “American financial hegemony,” Wen had launched an indirect but vehement attack on American preponderance in the global economic system.
At the same time, senior cadres and state-media pundits have played up the superiority of the “China model,” including the fact that thanks to the Hu-Wen leadership’s “scientific theory of development,” Chinese financial institutions have remained viable. “We must shatter our superstitious belief [in the superiority of] foreign banks and foreign financial markets,” said the President of China Construction Bank, Guo Shuqing. Guo, an economist who was Premier Zhu Rongji’s protégé, added: “Foreign banks should learn from Chinese banks. For example, we are more cautious and conservative … and we understand the needs of our customers” (People’s Daily, October 7). In addition, mainstream Chinese newspapers have given extensive coverage of how, in the wake of rescue packages that American and European authorities have put together to save their crumbling economies, quasi-socialist practices have come back into vogue. Xinhua reported that Karl Marx’s classic Das Kapital was climbing up bestsellers’ lists in both China and Europe (Xinhua News Agency, October 29). The message of the powerful state propaganda machinery is clear: American-style laissez-faire policies are out, Chinese-style authoritarian market economics is in.
In ideological study sessions routinely conducted in party cells, government units and universities all over the country, party members and cadres have been asked to read a recent article by the Director of the CCP Department of Publicity Liu Yunshan entitled “The Chinese system is incomparably superior.” “Chinese-style socialism has exhibited nonpareil superiority,” Liu wrote. “The China model has demonstrated strong vigor and energy” (Apple Daily [Hong Kong], October 24; Xinhua News Agency, October 5). Exaltation of the China model is also the theme of a nation-wide ideological campaign to study President Hu’s vaunted “scientific theory of development,” a code word for the current leadership’s policies of promoting the well-being of the masses under stern CCP guidance. Hu’s “scientific” approach to development, which strives to strike a balance between growth and stability—and between market initiatives and state control—is seen as an antidote to the kind of unbridled capitalism that underpins the financial woes in the Western world. While kicking off the campaign at the Central Party School in late October, Vice-President Xi underscored the imperative of “systematically grasping the Marxist stance, viewpoints and methodology that are manifested by the scientific outlook on development.” In other speeches about the Chinese experience, Xi extolled Chairman Mao’s wisdom in upholding the primacy of Marxism and the principle of party dominance in political and economic matters (People’s Daily, October 17; Xinhua News Agency, September 8).
The apparent complacency displayed by the top leadership has raised fears that the Hu-Wen team may put reform in the back burner for the rest of their four-year term. U.S. Treasury Secretary Henry Paulson expressed concern that “some in China look at the recent failures in our financial markets and conclude that they should slow down their reforms.” Paulson urged Chinese officials to “learn from our significant mistakes and move forward with reforms that have the potential to produce important gains for China and its people” (Wall Street Journal, October 22). It is nonetheless true that particularly given the fact that economic growth will likely slip to around 9 percent in 2008—compared to 11.9 percent last year—the focus of the Hu-led Politburo is on maintaining socio-political stability, not reform (Time Asia, October 23). That is why at the just-ended Third Plenary Session of the 17th Central Committee, which is devoted to agrarian issues, much-anticipated liberalization measures such as speeding up peasants’ migration to the cities failed to materialize (see China Brief, “Hu’s New Deal and the Third Plenary Session of CCP’s 17th Central Committee,” Volume 8, Issue 20).
Changes in what late patriarch Deng Xiaoping called the daqihou or “macro-level, global climate” have also affected the future of political reform, which has remained largely frozen the past decade. Last year, hopes for some form of liberalization were raised when Premier Wen, deemed the most liberal member of the Politburo, surprised observers by heaping praises on certain “universal values and institutions.” Wen said in early 2007 that “values such as science, democracy, rule of law, freedom and human rights are not the monopoly of capitalist [countries],” but “universal values that should be pursued by all mankind” (Open Magazine [Hong Kong], October 2008; Xinhua News Agency, February 26, 2007). The corollary of Wen’s message was that it was okay for socialist China to try out these international norms.
Owing to the apparent decline of American-style capitalism, however, “universal values” associated with U.S. democracy have been discredited within the majority of CCP members. Even before the onset of the financial tsunami, several noted conservative cadres had assailed the concept of “universal values,” saying that these were but “sugar-coated bullets” to lure China to morph into a capitalist country through “peaceful evolution.” These conservatives are echoing a speech made by the president of the Chinese Academy of Social Sciences, Chen Kuiyuan, in the summer. Chen indicated in his much-quoted CASS talk in July that “we must establish self-respect and confidence in our own people.” “We must not engage in blind worship [of the West] and we must not extol Western values as so-called universal values,” the ideologue said (CASS.org.cn, September 2). Orthodox theorist Feng Yuzhang added that eulogizing “global values” amounted to “an advocacy of all-out Westernization, which is an effort by [Western powers] to change the socialist order in China” (People’s Daily, September 10; Open Magazine, October 2008).
From now until mid-December, much of the energy of the top leadership will be occupied with licking into shape a seminal document to mark the 30th anniversary of Deng’s reform and open-door policy. The paper, which is drafted under the supervision of President Hu and Vice-President Xi, will also lay out a road map on how the CCP will push economic and political reform forward. Given that the focus of the nation has shifted to maintaining GDP growth under the harsh climate of diminishing exports to major Western markets, the Hu-Wen leadership is likely in no mood to take the type of risks that bold reforms will entail. And should the party elite succumb to a kind of triumphalism over the supposed superiority of authoritarian socialism with Chinese characteristics, the prospects for liberalization could be dealt a severe blow.