China's Future: Implications for US Interests

September 1999

Strategic Estimates Program

China's Future: Implications for US Interests

Introduction and Key Findings

Robert Sutter
The National Intelligence Council and the Federal Research Division of the Library of Congress hosted an all-day seminar at the Library of Congress on September 24, 1999 assessing the five-year outlook for China's domestic development and international security behavior. Entitled "China's Future--Implications for the United States," the seminar featured seven formal presentations by prominent academic specialists complemented by commentaries by nine China specialists from the US Intelligence Community. The Directors of the China offices in the State and Defense Departments offered concluding remarks on the implications of the conference findings for US policy toward China. Panelists and commentators focused specifically on political leaders and institutions, economic and social trends, security and foreign policies, and the overall prospects for China through 2005 (see seminar program). The main thrust of the deliberations reflected cautious optimism about China's future. The regime appears resilient enough to deal with most anticipated problems internally. China is wary of the United States and is gradually building military power. But unless Beijing is challenged by unexpected circumstances, China is unlikely to break with the United States or engage in disruptive military buildups or aggressive foreign behavior.

Political Leaders and Institutions
China's current third-generation leadership and its likely successors will continue the process of political regularity and institutionalization that has made China's political behavior much more predictable than it was during the Maoist period (1949-76). The political leaders lack charisma but are more technically competent and much less ideologically rigid than past leaders; they are aware of the problems they must face and are prepared to deal with at least some of the most important ones.

Some of the seminar participants noted that the coming fourth-generation leaders did not share the same background; a number also questioned the capabilities of the leaders in comparison with their predecessors. Fourth-generation leaders came of age during the Cultural Revolution but often have diverse political views and lack the binding solidarity of experiences that the previous generations of leaders gained on the Long March and during the Anti-Japanese War, for example. Collectively, fourth-generation leaders are seen as less dogmatic and confrontational, more compromising, and more highly educated. The level of political skills of the fourth generation also was questioned.

Composed of large number of lawyers and economists, the fourth generation is more capable and innovative than previous leaders when confronted with economic and social problems; their behavior is more technocratic and pragmatic when dealing with domestic and foreign policies. Despite being more highly schooled than their predecessors and the beneficiaries of numerous and varied exchanges with the United States and other countries, the forthcoming leaders have a limited understanding of the West.

The institutionalization of China's politics is the result of a proliferation of institutions from the top down. Accompanying this growth in the number of institutions is a distinct break with the Maoist past as evidenced by growing regularization and routinization. Chinese Communist Party (CCP) and National People's Congress (NPC) sessions and plenums have been regularly scheduled and held since the late 1970s, and planning and budgetary cycles are adhered to. The principles of class struggle have been replaced by budgets geared to a socialist market economy and political constituencies. Socialist laws continue to be promulgated, although enforcement remains problematic. Some seminar participants argued that however important institutionalization is, one of the most significant changes in China's political landscape is occurring outside of the state--the growth of civil society amid the increasing wealth and influence of businessmen and academics.

A stabilizing factor, increasing institutionalization means less arbitrary decisionmaking. A disadvantage is that China's current (and future) leaders may not be as decisive as Deng Xiaoping because they are hemmed in by the growing bureaucracy and procedures.

The military has less representation at the top-level CCP Politburo. Some participants approved this development, but others saw a bifurcation between the CCP and the People's Liberation Army (PLA). This trend also occurred in the Soviet Union before its demise and could be a precursor to future instability in China. An urban, educated elite, the current leadership is civilian based: only two of the twenty-four members of the Politburo have military experience or could be considered "military politicians." The majority of Politburo members, seventeen of twenty-four, have experience in the more modernized, coastal provinces. Seminar participants pondered the meaning of the civilian majority and wondered if the military will be able to muster sufficient support for its modernization programs.

Leadership succession, nepotism and favoritism, and increased corruption also were discussed. Though China's politics are becoming more stable and predictable, with the battles being fought on the institutional level, personal rivalries and relations will remain important and cannot be ignored.

Economic and Social Trends
Economic growth will outpace population growth, continuing the overall rise in the standard of living that has characterized Chinese development over the past two decades. A young, highly trained labor force with modern technical skills will increase in numbers. The infrastructure of rail, roads, and electronic communications greatly reduces perceived distance and helps to link the poorly developed interior to the booming coastal regions. Chinese development remains heavily dependent and will deepen its dependency on foreign trade, investments, and scientific/technical exchange. The regime faces daunting problems--notably ailing State Owned Enterprises and a weak banking/financial system. Also worrisome are the increasing number of unemployed and laid-off workers, decreasing inventories, a high real-interest rate, the divestiture of military enterprises, and bad loans and bankruptcies. The leadership has taken concrete steps recently to remedy a few but certainly not all of these problems and weaknesses.

One result of China's external outreach will be the growing importance of ministries with outside thrust, such as the Ministry of Foreign Affairs (MOFA) and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC). The latter, especially, will become more important if Beijing joins the World Trade Organization (WTO). Central regulatory bodies such as State Economic and Trade Commission (SETC) also will become more important; the old bureaucracies and their stakeholders associated with the planning system, such as the State Planning Commission (SPC), will become less important and have to reinvent themselves for alternative functions. If China must privatize and institute a market economy to be successful, the changes this approach creates in society will clash with the very nature of the Communist ideology and authoritarian political system favored by Beijing.

Manifestations of social discontent seen recently with demonstrating peasants and laid-off workers and Falungong sect members are likely to continue, but these developments have a long way to go before they pose a major threat to the regime. Notably, they need to establish communications across broad areas, establish alliances with other disaffected groups, and put forth leaders prepared to challenge the regime and gain popular support with credible moral claims. Success also requires a lax or maladroit regime response. The attentiveness of the regime to dissidence and the crackdown on the Falungong strongly suggest that Beijing will remain keenly alert to the implications of social discontent and prepared to use its substantial coercive and persuasive powers to keep it from growing to dangerous levels.

A variety of current sources of social tension and conflict in China might present opportunities for expressions of discontent. Groups that might exploit such tensions include those people living in the poorer interior provinces (versus the richer coastal regions), ethnic minorities, farmers, members of the unemployed or underemployed floating population, laid-off state-enterprise workers and other laid-off workers, students and intellectuals, and members of sects such as the Falungong.

Security and Foreign Policies
China will remain dependent on its economic connections with the developed countries of the West and Japan. Nonetheless, Chinese nationalism will exert pressure to push policy in directions that resist US "hegemony" and the power of the United States and its allies in East Asia, notably Japan. Beijing will resolve these contrasting pressures by attempting to stay on good terms with its neighbors and by keeping open economic and other channels with the United States while endeavoring to weaken overall US power and influence in East Asia and elsewhere in its long-term attempt to create a more "multipolar" world. Military modernization will continue at its current or perhaps a slightly more rapid pace--an outlook that poses little direct challenge to the already modern and advancing militaries of the United States and its allies and associates in East Asia, except in such nearby areas as Taiwan, where the Chinese development of ballistic and cruise missiles poses notable dangers.

China also sees a challenging international security environment and is apprehensive about several international security trends. It is particularly concerned about the perceived US "containment" and military "encirclement" of China, US national and theater missile defense programs, and the potential for Japan to improve its regional force projection capabilities. Despite some successes in military modernization, the PLA remains limited in its ability to quickly absorb sophisticated weapon systems and to develop the joint operations doctrine necessary to use these weapons effectively.

Taiwan, however, is China's main security focus, and it is the biggest problem, both politically and militarily, in China-US relations. The issues of continuing US arms sales and missile defense deployments in the region remain problematic for the future. China and the United States are attempting to find common ground and interest in rebuilding in the wake of the Belgrade embassy bombing. Beijing will continue to press for reunification with Taiwan. China's overtures to South Korea and Japan are a possible counter to Washington's moves vis-a-vis Taiwan.

What Could Go Wrong
The relatively sanguine outlook noted above would be fundamentally called into question by possible scenarios addressed at the seminar.

Internal Paralysis/Overriding Crisis. A combination of political, economic, and/or social crises could overwhelm the Chinese regime and lead to policy paralysis or regime failure. A major downturn in the economy, a rapidly developing, politically oriented dissident movement backed by large numbers of economically and socially disaffected people, combined with leadership divisions and a struggle for power at top levels in Beijing, would be the main ingredients for this scenario to come about. The possibility of this happening over the next five years was noted by several speakers, though it was generally seen as less than likely.

Crisis Over Taiwan. This scenario assumed that Taiwan would continue down the path toward independence, continue to receive strong backing from the US, and Beijing would feel it had little recourse other than major military pressure on Taiwan (conferees generally agreed that PLA modernization would not be sufficient to enable it to invade the island successfully). The crisis would lead to a break in economic and other constructive US-PRC ties, resulting in a stand-off, developing into a new cold war between the United States and China in East Asia. Several speakers expressed worry that anticipated trends regarding Taiwan could lead to this scenario, though they judged it unlikely that the PRC would allow a standoff to reach the point of cutting off advantageous economic relations with the United States.

US Policy Implications. Seminar commentators were downbeat about the near-term outlook for progress in US-China relations, noting that domestic trends in both capitals make forward movement difficult, with the possible exception of an agreement on China's entry into the WTO. A few endeavored to defend the administration's efforts to "build a constructive strategic partnership" with the PRC--a concept roundly criticized by the nongovernment specialists at the seminar. US-China military relations were seen as likely to develop only slowly over the next few years.



(9:00-9:05 AM): Robert L. Worden, Chief, Federal Research Division

Opening Comments

(9:05-9:15 AM): Robert G. Sutter, Moderator, National Intelligence Officer for East Asia

Panel One

(9:15-10:45 AM): Political Leaders and Institutions

Li Cheng - Recent Leadership Trends and Changes

Lyman Miller - Institutional Trends and Prospects

Commentators: Kurt Hockstein and Clifford Edmunds

Panel Two

(11:00-12:30 AM): Economic and Social Trends

Barry Naughton - Evolving Economic Developments

Martin Whyte - Social Trends and Stability

Commentators: William Newcomb and Karen Jones

Panel Three

(2:00-3:30 PM): Security and Foreign Policies

David L. Shambaugh - Trends in International Security Policies

Commentators: Ronald Christman, Donald Kilmer, and Paul Heer

Panel Four

(3:45-5:15 PM): Summary: Overall Prospects for China

Ezra F. Vogel and Arthur Waldron - Political, Economic, Social, and International Security Trends, 2000-2005

Commentators: Stephen Schlaikjer and John Corbett


Ronald Christman is with the Defense Intelligence Agency.

John Corbett is with the Office of the Deputy Secretary of Defense for International Security Affairs.

Clifford Edmund is with the Foreign Broadcast Information Service.

Paul Heer is with the Council on Foreign Relations.

Kurt H. is with the Central Intelligence Agency.

Karen J. is with the Central Intelligence Agency.

Donald Kilmer is SIGINT National Intelligence Officer, National Security Agency.

Li Cheng is Professor of Politics at Hamilton College.

Lyman Miller, is a Senior Research Fellow at the Hoover Institution.

Barry Naughton is Professor of Economics, University of California, San Diego.

William Newcomb is with Intelligence and Research, Department of State.

Stephen Schlaikjer is China Director, Bureau of East Asian Affairs, Department of State.

David Shambaugh is Professor of Political Science and International Affairs and Director of the China Policy Program, George Washington University.

Robert G. Sutter is National Intelligence Officer for East Asia, National Intelligence Council.

Ezra Vogel is Henry Ford II Professor of the Social Sciences, Harvard University.

Arthur Waldron is Lauder Professor of International Relations, University of Pennsylvania and Director of Asian Studies, American Enterprise Institute.

Martin King Whyte is Professor of Sociology, George Washington University.

Robert L. Worden is Chief, Federal Research Division, Library of Congress.

Figure 1
China and Neighboring Countries


Fourth-Generation Leadership in the PRC: Collective Characteristics and Intragenerational Diversities

Cheng Li

While this generation of leaders will be diversified in their foreign policies as well, most of them tend to emphasize (or perhaps overemphasize) the importance of economic might, more specifically, the role of science and technology in what they often call the information age. They will work hard to change China's international image. They are cynical about the moral superiority of the West, resentful of Western arrogance, and doubtful about the adoption of a Western economic and political system to China. Yet, even at the time of crises, such as the tragic incident in Belgrade, they understand the need for cooperation rather than confrontation. Their policies toward the US will be firm, but not aggressive.

Shortly after Jiang Zemin and his so-called "third generation of leaders" replaced Deng Xiaoping, China began to face a new round of political succession. This is no surprise because Jiang is already 73 years old, and two other top leaders, Premier Zhu Rongji and head of the National People's Congress Li Peng, also are in their early 70s. The average ages of members of the Standing Committee, Politburo, and Secretariat of the 15th Central Committee (CC) of the Chinese Communist Party (CCP) in 1999 are 67, 65, and 65, respectively.1 When the next party congress convenes in 2002, these three pivotal, hierarchical leadership organizations all will be occupied by people with an average age of 68 to 70.

Jiang and other top leaders certainly are aware of the importance of selecting their own successors. Jiang reportedly will hand over, one at a time, three important posts that he currently holds (President, Secretary General of the Party, and Chairman of the Military Commission) to the new generation of leaders.2

The elevation of 55-year-old Hu Jintao to vice president of the state during the Ninth People's Congress (NPC) in 1998 was the first major sign of the rise of the fourth generation of leaders. Along with Hu, two other Politburo members in their 50s, Wu Bangguo and Wen Jiabao, are now in charge of China's industrial, agricultural, and financial affairs on the State Council where they serve as vice premiers. Zeng Qinghong, who is in his late 50s, is now the head of the Party's Organization Department and is in charge of personnel affairs in the CCP. The rise of the fourth generation of leaders is most evident at the provincial and ministerial levels. Li Changchun, 55, the youngest in the Politburo, serves as Party boss of Guangdong (now China's richest province). Li Keqiang, 44, was recently appointed Governor of Henan (now China's most populous province). Last year, all ministries and provinces went through a reshuffling of their top leadership. After the rearrangement, 14 of the total of 29 ministers in the State Council were born in the 1940s. So were 12 Party bosses and 21 governors and mayors in the total of 31 provinces and directly administered cities.3

Although the top Chinese leadership still is largely ruled by the third generation of cadres, elites in their 50s and late 40s (young by Chinese standards) are aggressively beginning to take the helm in both central and local administrations. Suggesting now that the political future of these prominent individuals in the new-generation leadership is assured would be premature. In PRC history, many appointed heirs (e.g., Liu Shaoqi, Lin Biao, and Wang Hongwen under Mao; Hu Yaobang and Zhao Ziyang under Deng) suddenly fell from favor. One of the current front-runners in the fourth generation of leaders--even if not Hu Jintao--however, probably will succeed Jiang in the not too distant future. More important, this generation most likely will govern China at the beginning of the next century.

What are the main characteristics of the fourth generation of leaders? In what ways do they resemble or differ from their predecessors, Jiang Zemin and the third generation of leaders? What are the principal criteria and institutional restraints for advancement to high office in this generation? In addition to intergenerational differences, are there any important intragenerational differences among the new leadership? The fourth generation of leaders emerges at a time when China faces many perplexing economic and socio-political problems such as unemployment, income disparity, and official corruption. What initiatives and constraints do the fourth generation of leaders have as they respond to all these challenges? To what extent will the coming of age of the fourth generation of leaders change the way Chinese politics operates? Research on Chinese politics in general, and its leadership in particular, will be invaluable if it can begin to address any of these questions.

Summary of Key Findings

This paper shows that this generation of leaders is truly unique because they had their formative years during the Cultural Revolution (CR) and therefore can be identified as members of the CR generation. The CR, arguably the most extraordinary event in contemporary China, and the dramatic changes thereafter, had an ever-lasting impact on the collective characteristics of this generation:

This paper also argues that the fourth generation of leaders is distinctive not only for its shared characteristics, but also for its intragenerational differences. The fourth generation of leaders is more diversified than previous generations of CCP leaders in terms of formative experiences, political solidarity, career paths, and occupational backgrounds:

All these changes and trends will have strong implications for the transformation of the Chinese political system.

Sources of Data and Methodology

This paper is primarily part of the author's ongoing study of Chinese technocrats and their generational differentiation. A more quantitative analysis of the fourth generation of leaders will appear in a coming issue of The China Quarterly.4 A detailed discussion of the generational change of the PRC leadership, including case studies and more qualitative analysis, will be published in the author's forthcoming book China's Leaders: The New Generation.5 The data of this study are largely from the following sources:

1. A quantitative analysis of biographical information about members of the fourth generation of leaders. The data are based on two pools of comprehensive biographical sources. The first pool includes data on 298 political elites, obtained exclusively from the 1994 revised edition of Who's Who in China, which lists a total of 2,121 current leaders at all levels above medium-sized city government.6 The 298 leaders under study are members of the youngest group included in the volume, all of whom were born between 1941 and 1956. The second pool is based exclusively on biographical data of all members of the 15th CC of the CCP and the 15th Central Commission for Discipline Inspection (CCDI), which were released to the public in 1999.7 This source contains a total of 459 top Party leaders and almost half of them, 224, who were born between 1941 and 1956, are under scrutiny. The biographical information of a total of 522 leaders from both pools, including their demographic distribution, educational backgrounds, and career paths, is coded for analysis through a Microsoft Excel program.8

2. An examination of informal networks of prominent figures in the new generation, especially those who have made their career advancement through school ties, blood ties, patron-client connections such as work experience as mishu. In addition to the above data, this study uses other sources from Hong Kong, Taiwan, and Japan, seeking verification from multiple Chinese publications and the increasing availability of Internet information from the PRC and elsewhere.9

3. A qualitative examination of values and policies of new leaders. For most of the PRC's history, differences and conflicts in views and policy preferences among leaders usually have been unknown to the public until the political winner announces the defeat of his enemy. But during the late 1990s, Chinese leaders seem more accessible and more open about their views and policies. In 1998, for example, almost all newly appointed cabinet ministers appeared, one at a time, on a prime-time talk show on China's Central Television.10 In 1999, all provincial governors and party secretaries did the same. Meanwhile, numerous books written by, or about, new leaders recently have been published in China.11 The Internet version of Renmin ribao (People's Daily) now routinely provides links to the writings and speeches of China's ministerial and provincial leaders. The increasing transparency of the views of individual leaders provides important information about their policy preferences in dealing with domestic issues and their perceptions of China's strategic interests in a changing world.

Each source represents a particular methodological approach. By putting all of them together, however, we can develop a comprehensive understanding of the main characteristics of China's fourth generation of leaders.

Defining Political Elite Generations in China

Analysis must start with concepts and their definitions. The term 'political generations' is frequently used but not carefully defined. Like many other biological and sociological categories "ethnicity," "class," and "ideology," "generation" can be imprecise at the boundaries.12 Defining "where one generation begins and another ends" is arbitrary.13 In scholarly writings, generational boundaries often are based on the combination of both birth year and shared major life experiences during formative years.14 In Chinese studies, a political generation is often defined as a group of birth cohorts within approximately 15 years.15 These age cohorts have experienced the same major historical events during their formative years (described as between approximately 17 and 25 years of age).16

The term "political generations" that many sinologists have used in their studies may be more accurately identified as "political elite generations" because the concept has often been based on the distinctive political experience of elites.17 One can identify five political elite generations in CCP history: 1) the Long March veterans, 2) the Anti-Japanese War officers, 3) the Socialist Transformation cadres, 4) the CR grown-ups, and 5) the Economic Reform elites (see table 1).18

This categorization is also identical to the generational classification of China's leadership used by the current Chinese authorities. This scheme is, of course, highly political because Jiang Zemin has identified himself as the "core of the third generation of leaders," and used this identity to consolidate his political legitimacy as an heir to Deng. As both a Communist student activist in France in the early '20s and a member of the Long March, Deng should not be seen in the same generation as Hu Yaobang and Zhao Ziyang. But by identifying Deng as the core of the second generation and himself as the core of the third, Jiang skipped the real core members of the second generation, such as Hu, Zhao, Wan Li, and Qiao Shi.19 More importantly, by appointing the core members of the next generation, Jiang has attempted to diminish the pressure of power contenders in his own generation, such as Li Peng and Zhu Rongji. Similarly, Hu Jintao, Zeng Qinghong, and their same-age cohorts, who used to be identified as the 'third echelon' (disan tidui), are now more inclined to be seen as the core of the fourth generation that is in line to succeed Jiang.

Table 1:
Political Elite Generations in Communist China
Generation Group of Leaders 1999Major Historical EventPeriod of EventParamount Leader (Core Figure)Representative FiguresPrimary Age
1st GenerationThe Long March1934-35Mao ZedongZhou Enlai, Liu Shaoqi, Lin Biao, Deng XiaopingLate 80s or older
2nd GenerationThe Anti-Japanese War1937-45Deng XiaopingHu Yaobang, Zhao Ziyang, Hua Guofeng, Qiao ShiLate 70s and 80s
3rd GenerationThe Socialist Transformation1949-58Jiang ZeminLi Peng, Zhu Rongji, Li Lanqing, Li Ruihuan60s and early 70s
4th GenerationThe Cultural Revolution1966-76Hu Jintao?Wen Jiabao, Zeng Qinghong, Wu Bangguo, Li ChangchunLate 40s and 50s
5th GenerationThe Economic Reform1978-present?UnknownUnknownEarly 40s

In studies of Chinese political elites, generational classification based on age should also allow for some exceptions. For instance, Hu Yaobang is usually seen as a member of the second generation of leaders, although he took part in the Long March (Hu was one of the youngest people in the March). Most political leaders in the PRC, however, fit into the generational classification listed on table 1. For example, the formative years of a majority of the third-generation leaders occurred after the Japanese occupation. Among the 24 members of the Politburo in 1998, only one joined the Party before 1945.20 Most of them began their careers during the Socialist Transformation in the 1950s.

The CR Generation and the Fourth Generation of Leaders

How is the fourth generation of leaders defined? On what basis does one determine the age cohorts of this generation? The fourth generation is composed of those who grew up, or had their formative years, during the CR. Generally, they acquired their first political experiences in the course of the CR. This study defines the CR generation as the one that consists of those who were born between 1941 and 1956. They were 10 to 25 years old when the CR began in 1966. They are 43 to 58 years old in 1999. Determining the cutoff age of this generation is somewhat arbitrary. Yet this definition is largely based on both the "15-year span of a generation" and "formative years between 17 and 25." The oldest among this group was 25 years old when the CR began, and some may have finished college and started working by the mid-60s. The youngest member was 10 years old, a bit too young to be an active participant, but certainly old enough to have memories of the beginning of the CR. Most of them were either in high school or in college in 1966, and therefore a majority of them served as Mao's Red Guards. They were the most active participants of the CR. The so-called three old classes (laosanjie), the high school classes of '66, '67, and '68, constituted a large portion of the CR generation. Some were among the twelve million young men and women who were sent to the countryside in the late 1960s and early 1970s. Some later returned to school to complete their education, especially after 1977, when Deng reinstituted entrance examinations for higher education. They managed to get their careers back on-track (see figure 2).

The CR certainly affected this generation of leaders in ways that were remarkably different from other generations. Despite some important differences between subgroups of this generation, virtually all of them believed in Mao and Maoism (at least in the early stages of the CR). Later, however, they were disillusioned and felt manipulated, or even betrayed. Their idealism was shattered, their energy wasted, their education lost, and their careers interrupted. Some scholars argue that, as a result of the CR, this generation also "acquired a variety of political skills and . . . the habit of independent thinking."21 As a Western journalist described them, members of the CR generation "learned hard lessons about their society and its political system."22 Many fourth-generation leaders are outspoken about how the CR affected their political attitudes. For example, Chen Zhili, new minister of Education and a rising star among the fourth-generation leadership, wrote in 1999 that "the great calamity of the CR inflicted upon my family and myself made me first wander and wonder, and then wake up to reality, becoming politically and intellectually mature."23

One important conceptual distinction should be made here: the fourth generation of leaders is the CR generation, but not vice versa. This is the distinction between political elite generation and political generation. In the CR generation, those who had a college education and/or became political leaders were only the tip of the iceberg. An overwhelming majority of the CR generation lost the opportunity to be educated during the CR and now often face unemployment and such other problems as the increasing cost of educating their children and caring for their parents. There are profound differences among the members of the CR generation.

Figure 2
China: PRC Fourth-Generation Leaders

An interesting phenomenon in China today is that many leading figures in various walks of life are members of the CR generation. These include leaders of the dissident community such as Wei Jingsheng, Wang Juntao, and Wang Xize; Zhang Yimou and Chen Kaige in film-making; Chen Yifei and Luo Zhongli in fine arts; Liang Xiaosheng and Wang Shuo in literature; Jing Yidan and Yang Dongping in mass media; Li Xiaohua and the Liu brothers in business; He Qinglian and Hu Angang in economics; Li Yinhe and Jin Dalu in sociology; and Zhu Xueqin and Qin Hui in history. They differ profoundly from each other, but they are all very much aware of their CR identities and often attribute their careers to the lessons learned, the hardship endured, and the wisdom derived during the CR.24 For example, Hu Angang, an economist at China's Academy of Social Sciences, spent seven years at a collective farm in Heilongjiang during the CR. He recently claimed that "one who has no knowledge of rural China does not know about China; one who does not understand China's poverty-stricken regions does not have a real understanding of China."25 After becoming a well-known economist in China's capital, Hu has continued to frequently visit the rural areas in poor and remote provinces.

Within the fourth generation of leaders, there are some important contrasting subgroups, shaped by variables such as when they graduated from college, when they joined the Party, and what their class or family backgrounds were. A survey of the period during which leaders joined the Party, for example, presents an interesting finding: about half of the fourth generation of leaders (50.9 percent in the first pool and 48.6 percent in the second) joined the CCP during the decade of the CR. This is surprising because one of the major criteria of the elite recruitment policy during the Deng era, particularly in the early 1980s, was to eliminate those "beneficiaries' of the CR," people who advanced their political careers during that decade. Apparently, no sanctions are taken against young political activists from the CR taking leadership positions. They differ significantly from those who joined the CCP either before or after the CR. Those who joined the Party before 1966 were often labeled "revisionists" or "capitalist roaders," and some were persecuted. Those who joined the Party soon after the CR were usually the people who had long been denied the opportunity for a political career because of their class and occupational backgrounds. Liu Mingkang, vice Governor of Fujian and a senior economist with an MBA from the University of London, did not join the Party until 1988. Xu Kuangdi, Mayor of Shanghai, joined the Party as recently as 1983. These people were politically inconspicuous before the 1980s, when many of them worked as engineers or college professors. In about a decade, they have risen to China's top leadership positions.

Within the fourth generation, variations in joining the Party suggest that seniority of Party membership, which was crucial in the promotion of political elites for most of the PRC history, has now become less relevant. More important, this generation of leaders lacks political solidarity. Similar to the leadership in post-Communist Russia, China's fourth generation of leaders may lack a common ideology and a willingness to commit to the existing political system. They also lack a fundamental consensus on major socio-economic policies.26

Quantitative Findings and Contrasting Trends

This section presents quantitative findings in three aspects of the fourth generation of leaders that deserve close attention: 1) the uneven distribution of birthplace, with local leaders often selected from their native places; 2) the dominance of technocrats and the emergence of lawyers, economists, and financial experts; and 3) the role of informal networks in elite promotion and institutional restraints on nepotism. In each of these three aspects, contrasting trends coexist. The interactions of these conflicting trends will determine the future direction of the elite formation and the political participation in the country.

Birthplace: Uneven Distribution, Localism, and Countermeasures
Several recent studies of post-Mao leadership show an over-representation of elites who were born in eastern China, especially in Jiangsu and Shandong Provinces.27 This trend of unbalanced representation by birthplace is also evident in this study of the fourth generation of leaders (see table 2). The largest proportion of the fourth generation of leaders in both pools, about 40 percent, are from eastern China, especially from Jiangsu and Shandong. In the 1999 pool, only 1.8 percent of the leaders were born in Guangdong and 2.7 percent in Sichuan. This contrasts with the early years of the reform when the country was controlled largely by "strong men" from Guangdong (e.g. Ye Jianying) and Sichuan (e.g., Yang Shangkun, Zhao Ziyang, and indeed Deng himself), who appointed many of their fellow natives to important positions.28

The large portion of the third and fourth generations of leaders who were born in Shandong and Jiangsu is due to several factors: the legacy of the Anti-Japanese War, during which many third-generation leaders joined the army from Shandong, more advanced educational systems in some regions, and the correlation between economic wealth and the formation of political elites. The high percentage of Shandong natives in leadership, some speculate, stems partially from the role of Zhang Quanjing, a native of Shandong and former head of the CCP Organization Department. Zhang did not get enough votes to be elected to the CC in the 15th Party Congress largely because of his history of regional favoritism.29 Similarly, the high percentage of Jiangsu natives in leadership may be, in part, because Jiang Zemin, a Jiangsu native, likes to promote his fellow Jiangsuese. Jiang was also known for favoritism in appointing many members of the "Shanghai Gang" to the central leadership.

Table 2:
Distribution of Birthplaces, by Province, of the Fourth and the Third
Generations of Leaders
 4th Generation 3rd Generation Population GDP
 1994 Pool 1999 Pool 1999 Pool    
 NumberPercent NumberPercent NumberPercent Number Percent
North3913.1 2912.9 4519.4 11.5 12.4
Beijing31.0 10.4 62.6 1.0 2.4
Tianjin31.0 73.1 62.6 0.7 1.6
Hebei227.4 114.9 219.1 5.3 5.0
Shanxi93.0 73.1 104.3 2.6 1.9
Neimenggu20.7 31.3 20.9 1.9 1.5
Northeast3311.1 3515.6 3012.9 8.7 9.7
Liaoning165.4 188.0 125.2 3.4 4.9
Jilin113.7 125.4 125.2 2.2 2.0
Heilongjiang62.0 52.2 62.6 3.1 2.8
East11839.6 8738.8 10444.8 25.6 35.5
Shanghai51.7 20.9 73.0 1.2 4.3
Jiangsu3913.1 2812.5 3314.2 5.9 9.0
Shandong3110.4 2511.2 3615.5 7.2 8.7
Zhejiang186.0 104.5 135.6 3.6 6.2
Anhui124.0 146.2 114.7 5.0 3.5
Fujian113.7 83.6 31.3 2.7 3.8
Taiwan27.0 00 10.4 -- --
Central3411.4 3515.6 3012.9 21.0 15.3
Henan93.0 104.5 73.0 7.5 5.2
Hubei93.0 62.7 52.2 4.8 4.2
Hunan134.4 156.7 125.2 5.3 3.8
Jiangxi31.0 41.8 62.6 3.4 2.1
South165.4 62.7 73.0 10.1 12.8
Guangdong124.0 41.8 62.6 5.7 9.4
Guangxi31.0 20.9 00 3.8 2.8
Hainan10.3 00 10.4 0.6 0.6
Southwest299.7 177.6 114.7 15.8 9.5
Sichuana155.0 62.7 83.4 9.4 6.2
Guizhou10.3 31.3 20.9 2.9 1.1
Yunnan62.0 52.2 00 3.3 2.1
Xizang (Tibet)72.3 31.3 10.4 0.2 0.1
Northwest299.7 156.7 52.2 7.1 4.5
Shaanxi134.4 114.9 10.4 2.9 1.7
Gansu31.0 00 20.9 2 0.9
Qinghai51.7 10.5 00 0.4 0.2
Ningxia51.7 10.5 00 0.4 0.2
Xinjiang31.0 20.9 20.9 1.4 1.5
Total298100 224100.0 232100.0 100.0 100.0
Source and Notes: Liao and Fan, Zhongguo renming da, (the 1994 edition); and Shen, Zhonggong di shiwujie zhongyang weiyuanhui zhongyang zhongyang jilü jiancha weiyunahui weiyuan minglu. China News Analysis, (July 1-15, 1997), Li and White"The Fifteenth Central Committee of the Chinese Communist Party," 246. Population and GDP data are calculated from Zhongguo tongji nianjian, 1996 (China Statistical Yearbook, 1996), State Statistical Bureau, comp. (Beijing: Zhongguo tongji chubanshe, 1996), 42-43, and 73. Percentages do not add up to 100 due to rounding. The data were accumulated and tabulated by the author.

Nepotism based on native places has faced much resistance even from the Party establishment. Some institutional arrangements have been made to curtail over-representation of certain regions in the central leadership. In the 15th CC, all but one of the thirty-one province-level administrations have two full members.30 No province as such has more than two full seats in the 15th CC. This pattern of distribution can also be found in China's six greater military regions of which each occupies two seats in the full membership of the CC. Also, each province and ministry has one representative in the CCDI. Hu Angang even proposed a "one province, one vote" system for the membership of the Politburo. In his view, this would give every province a voice in Party policy and narrow the disparity between coastal and inland provinces.31

Another important trend in the formation of provincial and municipal leadership during the reform era is the selection of local officials for leadership positions in their native areas. This trend challenges the "law of avoidance" by which mandarins were prohibited from serving in their native provinces and counties, a policy characteristic of traditional China for centuries that continued during the Mao era.32 But this has changed during the reform era.33 The trend of selecting local elites from the same region seems to continue in this new generation of leaders: 47 percent of provincial and municipal leaders in the 1994 pool and 46 percent in the 1999 pool work in their native provinces, percentages are higher than those of the third generation (37 percent).

These findings are closely connected with two recent developments in China's civil service: the reform of the Chinese nomenklatura system and the local cadre elections. The nomenklatura system has been the hallmark of the personnel systems of Communist regimes.34 Since the 1980s, the system has changed in China: the traditional policy was that appointees must be chosen by superior organizations two levels above; now, immediately superior administrative levels choose appointees.35 In practice, this means that provincial party secretaries and governors are responsible for appointing the "second tier" provincial level officials and mayoral and prefecture heads of medium- and small-sized cities. As a result, the total number of cadres who are supposed to be appointed by the CCP Organization Department decreased from 13,000 to 2,700.36 The lists of names for the province-level nomenklatura are now composed disproportionately of people from the province in question.

The trend toward recruitment of more native-born elites is strengthened by the local cadre elections and by the "election with more candidates than seats" (cha'e xuanju), which has been adopted in Party congresses in various levels (from grass-roots to the central committee) since 1992. As a result, governors and Party secretaries have increasingly acted as representatives of their provincial interests, rather than satraps of the central authorities. In the 1990s, local people's congresses occasionally even have refused to approve candidates endorsed by the central authorities, producing what the Chinese official journal, Liaowang, called "unexpected results."37

The central authorities certainly are aware of the trend in selecting local officials from their native places. The CCP Organization Department has recently made efforts to limit the number of provincial top leaders who work in their native areas. In June 1999, it issued "The Regulation of Cadre Exchange," which specifies that 1) county and municipal top leaders should not be selected from the same region; 2) those who head a county and city for over ten years should be transferred to another place; and 3) provincial leaders should be more frequently transferred to another province or to the central government.38 In 1999, only six provincial party secretaries served in the province in which they were born (seven in 1998 and nine in 1997). The tension between the demand for regional representation and the restraint on the rise of localism has become a crucial issue in Chinese politics. This is, of course, not entirely new in the PRC history. What is new is the growing public awareness of this tension and ever stronger institutional and popular resistance toward both the political control from the center and region-based favoritism.

Educational Background: Dominance of Technocrats and Rise of Lawyers and Economists
An important change of leadership in China during the reform era is the dramatic increase in the number of political elites with higher education, especially those majoring in engineering and the natural sciences. This study of the fourth generation of leaders confirms the trend (see figure 3). In the 1994 pool, approximately 90 percent of leaders received tertiary education or above; among them, 72.1 percent attended a university and 9.1 percent have postgraduate degrees. In the 1999 pool, over 98 percent of leaders received tertiary education or above. The percentage of those who received postgraduate degrees also increased to 17.4 percent, almost double that of the 1994 pool. The percentage of postgraduate degrees and four-year college degrees in the fourth generation (81.2 percent in the first pool and 76.3 percent in the second) is higher than that of the third generation (58.6 percent).

Figure 3
Education Trends of Third-and Fourth-Generation Leadership

While some leaders in the third generation attended schools in both former Communist-bloc and Western countries, no one in the fourth generation of leaders studied in the Soviet Union and Eastern European countries. This situation should not be surprising because between 1949 and the early 1960s, the period during which the third generation of leaders attended college, China sent about 11,000 students abroad, an overwhelming majority of whom went to the Soviet Union and Eastern European countries.39 Now some of them have become top leaders in the country. Seven of 22 current full Politburo members (32 percent) studied in the Soviet Union and other Eastern European countries, including four standing members: Jiang Zemin, Li Peng, Wei Jianxing, and Li Lanqing.

China did not send any significant numbers of students abroad until 1978. According to a recent report released from the official Xinhua News Agency, from 1978 to 1998, China sent about 293,000 people to 103 countries as students or visiting scholars.40 Over half of the total (160,000) went to the US.41 Among these 293,000 students and visiting scholars, 96,000 (32.8 percent) returned to China.42 From 1992 to 1998, the rate of those who returned increased by 13 percent each year, partly due to China's reform policy and rapid economic and social development.43 Returned scholars and students also have emerged in the fourth generation of leaders under study. In the 1994 pool, six leaders received their degrees from foreign universities (mainly Europe and North America). A few leaders had academic experience in the US as visiting scholars. For example, Chen Zhili worked at Pennsylvania State University from 1980 to 1982. Jiang Enzhu, director of the Hong Kong Branch of the Xinhua News Agency, was a visiting senior research fellow in both the Institute of International Affairs at Harvard and the Brookings Institution. The presence of the Western-trained elites in China's top leadership, however, is still marginal.

Probably the most important difference between the third and fourth generations lies in the distribution of disciplinary training. Table 3 shows the distribution of academic majors among those who have a tertiary education or above in the 14h CC and two study pools of the fourth generation of leaders. The members of the 14th CC consisted mainly of the third generation of leaders. This comparison reveals several important trends. First, the predominance of those trained in engineering and natural sciences is evident in both generations (the relatively low percentage on the 14th CC may be because the academic majors of 36.7 percent of the study pool were unknown). These engineers- or scientists-turned-politicians can be defined as technocrats, people who have three traits: technical educations, professional experience, and high posts. In a more inclusive definition, the category of technocrats also includes experts in economics and finance.44 Using this definition, technocrats account for 65.9 percent in the 1994 pool and 56.9 percent in the 1999 pool. The real number of technocrats in the fourth generation of leaders should be even higher, because some who attended the military academy also studied engineering.45

Table 3:
Comparison of the Distribution of Academic Majors of Members of the
14th Central Committee of the CCP and the Fourth Generation of Leaders
Majors14th CC 4th Generation
1989 1994 1999
NumberPercent NumberPercent NumberPercent
Engineering and Natural Sciences5937.3 15356.0 10749.4
Engineering4629.1 10939.9 7534.7
Geology31.9 20.7 20.9
Agronomy21.3 62.2 94.2
Biology10.6 20.7 10.5
Physics31.9 155.5 83.7
Chemistry21.3 103.7 31.4
Medical Science21.3 31.1 20.9
Mathematics00 51.8 52.3
Architecture00 10.4 20.9
Economics and Management53.2 279.9 167.4
Economics and Finance31.9 207.3 156.9
Business Administration10.6 20.7 00
Statistics and Accounting10.6 51.8 10.5
Military Science and Engineering1710.8 41.5 2210.2
Social Sciences and Law117.0 4115.0 2210.2
Politics and Party History95.7 228.1 146.5
Political Economy10.6 00 00
Journalism00 41.5 10.5
Law10.6 155.5 73.2
Humanities85.1 4416.1 3214.8
Philosophy00 72.6 31.3
History21.3 41.5 73.2
Education10.6 62.2 41.9
Chinese Language/ Literature31.9 217.7 146.5
Foreign Language21.3 62.2 41.9
Unknown5836.7 41.5 177.9
Total158100.0 273100.0 216100.0
Source and Notes: Data on the Fourteenth Central Committee are from Zang Xiaowei, "The Fourteenth Central Committee of the CCP," 797 and Li and White, "The Fifteenth Central Committee of the Chinese Communist Party," 250. Data on the fourth generation of leaders are from Liao and Fan, Zhongguo renming da, (the 1994 edition); and Shen, Zhonggong di shiwujie zhongyang weiyuanhui zhongyang zhongyang jilü jiancha weiyunahui weiyuan minglu. The data were accumulated and tabulated by the author. Percentages do not add up to 100 due to rounding.

Second, table 3 shows that the percentage of the fourth generation of leaders who are trained in economics and management, including finance, accounting, and statistics, is about three times higher than that of the 14th CC. Currently, young leaders who are in charge of China's financial system are usually economists by training. Dai Xianglong, governor of the People's Bank, Li Jinhua, auditor-general of the State Council, Jin Renqing, vice minister of Finance and director of State Administration of Taxation, and Wang Chengming, party Secretary of the People's Bank, are all economists who graduated from China's Central Institute of Finance and Banking before the CR. Just a few years ago, the most important posts in China's financial system were usually occupied by third-generation leaders who were trained as engineers.

Another important difference between the third and fourth generations is that the number of lawyers increased among the recently elected young leaders. In the 14th CC, the percentage of those trained in law was extremely low (0.6 percent), but in the fourth generation of leaders, 15 (5.5 percent) in the 1994 pool and 7 (3.2 percent) in the 1999 pool are graduates of law schools, such as the Beijing Institute of Political Science and Law. These lawyer-turned-politicians probably will follow the Party line in dealing with tough issues. However, the emergence of lawyers in provincial and ministerial leadership reflects the efforts of the central authorities to establish and consolidate the Chinese legal system during the post-Deng era. China probably has issued more laws and regulations during the 1990s than any other country in the same period. In the early 1980s, there were only 3,000 lawyers in a country of more than one billion people. By 2000, China probably will have 150,000 lawyers (the growth rate is even more rapid than in the United States, for better or worse!).46

The contrasts among these groups in terms of their educational experiences and occupational identities are important variables that contribute to diversity of the new generation of leaders. Engineers, economists, and lawyers all are professional experts, but variations in their expertise will likely lead to differences in their political perspectives and policy choices. While engineers and economists tend to rely more on their own expertise in policymaking, lawyers may be more concerned about the procedures of decisionmaking and the socio-political consequences of policies.

Informal Networks and Their Limits: School Ties, Princelings, and Mishu
One of the most important trends regarding the elite transformation in the reform era is the crucial role of informal networks, school ties (i.e., the Qinghua network), blood ties (i.e., children of high-ranking cadres), and patron-client ties (i.e., work experience as mishu), in the recruitment of elites. We now widely know that a significant portion of top leadership posts in both the Party and the state, in both central and provincial government, are occupied by graduates of Qinghua University, China's leading engineering school.47 The over-representation of Qinghua graduates is also evident in the fourth generation of leaders. It includes state leaders such as Hu Jintao and Wu Bangguo as well as provincial top leaders, such as Tian Chengping, 53, Party secretary of Shanxi, and Li Jiating, 51, governor of Yunnan, and Xi Jinping, 43, acting Party secretary of Fujian. The number of Qinghua-trained leaders in this study is twice that of graduates of Beijing University. About 18 percent of the 15th CC members are also Qinghua graduates. During the reform era, Qinghua has worked to form an active network of alumni associations. For example, the number of alumni association members exceeded 2,000 in Shanghai and 1,000 in Guangzhou as early as in the mid-1980s, a period in which Qinghua graduates occupied top leadership posts in these two cities. The over-representation of Qinghua graduates in leadership, however, has recently met resistance. For example, Zhang Xiaowen, president of Qinghua and alternate of the 14th CC, was not reelected in the 15th CC.

In addition to school ties, having "blood ties," such as being the child of a high-ranking official, is important for the career advancement of the fourth-generation leaders. Previous studies of the third generation of leaders in the post-Mao era had similar findings. Many of the princelings in the third generation of leaders suffered tough times in their childhood. Jiang Zemin, Li Peng, and Zhou Jiahua, for example, all came from the families of Communist martyrs. They participated in the Communist revolution during the early years of their political careers. But the princelings of the fourth generation usually have had a privileged life (though in some cases the privileged life was interrupted briefly during the first few years of the CR). Because of this, they are less secure than leaders of the third generation, who could stand on their own. This was reflected in the election of the 15th CC in 1997. Many candidates with princeling backgrounds did not get elected because of opposition by the congress deputies. Bo Xilai, son of Bo Yibo and mayor of Dalian, was an example. Four princelings, Deng Pufang, Xi Jinping, Liu Yandong, and Wang Qishan, were among the seven alternate members who received the fewest votes. This suggests that nepotism in its various forms has received growing opposition, not only from Chinese society, but also from deputies of the Party Congress.

Patron-client ties, especially work experience as personal assistants to senior leaders or as office directors, also play an important role in elite formation among the new generation of leaders.48 In the PRC the post of mishu long has served as a steppingstone for political elites. Song Ping, standing member of the Politburo in the 1980s, was Zhou Enlai's mishu in the late 1940s. Hu Qiaomu, also a member of the Politburo in the 1980s, served as Mao's mishu in the 1940s. During the CR, Chen Boda, standing member of the Politburo, served as Mao's mishu earlier in his career. Wang Ruilin, deputy director of the General Political Department of the PLA, served as Deng's mishu for over three decades prior to his current post. The fourth generation probably has had more mishu-turned-leaders than any previous generation. This study shows that, among the fourth generation of leaders, about 41 percent had work experience either as mishu, or as office directors. Table 4 shows some members of the fourth-generation leadership in the study pools who had work experience as office director and/or mishu. They usually work as mishu and/or office directors for a few years and then are promoted to much higher leadership posts.

The large number of mishu and office directors in the fourth-generation leadership is because senior leaders in the second and third generations relied heavily on the assistance from young, intelligent, and well-educated mishu. Hu Jintao and Wen Jiabao served as mishu and office directors. Indeed, Wen Jiabao served as an assistant to three top leaders, Hu Yaobang, Zhao Ziyang and Jiang Zemin, at different times. While Hu and Zhao were purged as a result of a power struggle, Wen remarkably survived and even was promoted. This example certainly shows Wen's "intelligence" and political capacity. In June 1999, the provincial Party committee of Heilongjiang selected a large number of young cadres with advanced degrees to serve as assistants to top municipal leaders in the province.49 The central authorities have made some efforts to limit the nepotism and corruption that are related to the growing power of mishu in provincial and ministerial levels.50 But this trend probably will not change, as some of the rising stars in the center such as Hu, Wen, and Zeng Qinghong have made important career advancement by having worked as mishu to top leaders.

Conclusions and Implications

What do all the data and analysis tell us about the real nature of the fourth generation of leaders, and what are the implications for Chinese politics in the future? What is fascinating about the fourth generation of leaders is their diversity, and many seemingly contradictory trends engendered. The memories of the CR of the fourth generation are shared while their individual experience in it varied. The demands for regional representation are made at the same time that restraints are placed on the rise of localism. Lawyers and economists have emerged as political leaders, while technocrats still manage to dominate most government and Party posts. The prevalence of political nepotism has met increasingly strong opposition even within the political establishment.

Table 4:
Some Members of the Fourth Generation of Leaders
Having Worked as Office Director and/or Mishu
NameBornCurrent PositionMishu/Office Director ExperiencePeriod
Office Director
Wang Zhaoguo1941Head, United Front Dept. of CCPSecretary general, Central Committee of CCP1984-87
Wang Yunkun1942Party secretary, JilinSecretary general, Jilin1988-89
Chen Yujie1941Deputy party secretary, JilinSecretary general, Hebei?
Fang Fengyou1941Deputy party secretary, TianjinSecretary general, Tianjin Municipal Govt.1989-91
Zheng Wantong1941Secretary general, CPPCCSecretary general, Tianjin1983-88
Wen Jiabao1942Vice premierSecretary general, CCP General Office1986-88
Li Tielin1943Vice head, Organization Dept. CCPDeputy secretary general, Organization Dept.1989-90
Gao Jiren1944Deputy party secretary, GuangdongSecretary general, Guangdong1991
Zhang Zuoyi1945Minister, Labor & Social WelfareDeputy secretary general, State Council1994-98
Huang Huahua1946Deputy party secretary, GuangdongSecretary general, Guangdong1992-95
Li Jianguo1946Party secretary, ShaanxiSecretary general, Tianjin1989-92
Li Shenglin1946Mayor, TianjinDeputy secretary general, Tianjin1983-86
Chen Liangyu1946Deputy party secretary, ShanghaiDeputy secretary general, Shanghai1992
Meng Jianzhu1947Deputy party secretary, ShanghaiDeputy secretary general, Shanghai1992-93
Zhao Hongzhu1947Vice minister, SupervisionDeputy secretary general, CCDI1996-98
Quan Zhezhu1952Vice governor, JilinDeputy secretary general, Jilin1990-91
Yuan Chunqing1952Secretary general, CCDISecretary general, National Student Union1985-87
Jin Daoming1953Member, CCDIOffice director, Minister of supervision1987-89
Wang Zhang1941Deputy secretary of NeimengguMishu to party secretary of Liaoning1980-81
Bai Lishen1941Vice chair of CCPCCMishu to Governor of Liaoning1984-85
Cai Changsong1941Deputy party secretary, HainanAssistant to Governor, Hainan1992-93
Wang Chengming1941Party secretary, People's BankMishu to vice premier1985-90
Chen Fujin1941Member, CCDIMishu to Minister of Coal Industry1975-79
Wang Gang1942Deputy director of General Office of the Central Committee of CCPMishu to party secretary of Xingjiang, Mishu to director of Taiwan Office of the CCP1977-85
Ren Qixing1942Deputy secretary of NingxiaMishu to party secretary of Ningxia1972-83
Xu Yongyue1942Minister, State SecurityMishu to Chen Yun, Politburo standing member1983-88
Huang Zhiquan1942Deputy party secretary, JiangxiAssistant to Wu Guangzheng, Governor, Jiangxi1991-93
Zhang Belin1942Vice head, CCP Organization Dept.Mishuto Minister of No. 6 Machine Building1978-81
Fan Xinde1942Member, CCDIMishu to president of Chinese Academy of Science1970-81
Hu Jintao1942Vice presidentMishu to chair, Gansu Construction Co. 1974-75
Zhao Hong1942Deputy procurator generalMishu to party secretary of Jiangsu1981-83
Tian Congming1943Vice minister, Radio and TVMishu to party secretary of Neimengguo?
Zhang Dingfa1943Commander, North Fleet, NavyAssistant to chief of staff, North Fleet, Navy1985-86
Zhang Li1943Head, Political Dept. Chief of StaffMishu to Central Military Commission1984-89
Lu Feng1944Member, CCDIAssistant to minister of Public Security1993-95
Li Jiating1944Governor, YunnanAssistant to Governor of Helongjiang1992
Jia Zhibang1946Deputy party secretary, ShaanxiMishuto Governor, Shaanxi1985-87
Lu Hao1947Mayor, LanzhouMishu to party secretary of Gansu1982-85
Bai Zhijian1948Vice minister, AgricultureMishu to Minister, Agriculture1977-83
Xi Jinping1953Deputy secretary of FujianMishu to Geng Biao, Minister of Defense1979-81
Source: Liao and Fan, [comp.] Zhongguo renming da cidian,1994 edition; Shen, Zhonggong di shiwujie zhongyang weiyuanhui zhongyang zhongyang jilü jiancha weiyunahui weiyuan minglu; and He Pin and Gao Xin. Zhonggong "Taizidang" (China's Communist "princelings"). Taipei: Shih-pao Ch'u-pan Kung-ssu, 1992. The data were tabulated by the author.

The replacement of an older generation of leaders by a younger one in any society can be viewed as a "regenerative force" for a stagnant country, or as an offering for greater change. This situation is particularly relevant to China today when the country is undergoing rapid transformation and faces many perplexing economic and socio-political choices. The Chinese economy, after over a decade of double-digit growth, has slowed during the past two years. This slow is related partly to the East Asian financial crisis, but mainly to the decline in domestic consumer spending. The Chinese people are not willing to spend money despite the fact that private savings are remarkably high. Under these circumstances, the rise of younger and more capable leaders at the top will psychologically influence the behavior of consumers. Consumer confidence will contribute to the economic growth of the country. One may argue that nothing is more essential to China now than a younger and dynamic Chinese leader, a figure like Mikhail Gorbachev in the mid-1980s or Bill Clinton in the early 1990s.

But paradoxically, what also is most evident in Chinese politics at present is the broad shift from an all-powerful single leader such as Mao and Deng, to greater collective leadership, as is now characteristic of the Jiang era. Post-Jiang leaders, because of institutional restraints and their own limitations including the lack of political solidarity, are highly likely to rely more on power-sharing, negotiation, consultation, and consensus-building than their predecessors. As compared with their predecessors, the fourth generation of leaders will be far more flexible, more pragmatic, and less dogmatic in responding to socio-economic pressures and political demands within the country. Tough life experiences fostered their political ability and practical strength in dealing with problems. This generation of leaders probably will have a better understanding of the needs and concerns of their CR generation peers, and therefore will make the regime more accountable to the Chinese people. Among the third generation of leaders, Zhu Rongji is famous for his intelligence, his eloquence, and his human touch. There are more leaders like Zhu in the fourth-generation leadership. A member of the fourth-generation leadership recently said, "for China the real issue is about the tension between economic efficiency and social justice. The real challenge for policymakers, therefore, is to achieve the best possible equilibrium."51

As for China's foreign policies, Yang Jieci, a newly appointed vice minister of Foreign Affairs and a distinguished member of the fourth generation, said that China's policymakers should learn from Deng whose foreign policies represent "a marvelous combination of principles and flexibility."52 While this generation of leaders will be diversified in their foreign policies as well, most of them tend to emphasize (or perhaps overemphasize) the importance of economic might, more specifically, the role of science and technology in what they often call the information age. They will work hard to change China's international image. They are cynical about the moral superiority of the West, resentful of Western arrogance, and doubtful about the adoption of a Western economic and political system to China. Yet, even at the time of crises, such as the tragic incident in Belgrade, they understand the need for cooperation rather than confrontation. What has emerged from the recent incidents should not be apprehension over how quickly and unpredictably Sino-US relations can change, but rather how rationally and capably current top leaders, on both sides, are able to respond to crises. A review of the recent writings and interviews of the fourth generation of leaders seems to reaffirm this observation.53 In short, their policies toward the US will be firm, but not aggressive.

The full ramifications of the rise of the fourth generation of leaders, of course, await further study. China is in the midst of rapid changes. Greater changes seem inevitable as this more diversified, more energetic, less dogmatic generation of leaders aggressively takes the helm of power in China at the dawn of a new century.

Institutions in Chinese Politics: Trends and Prospects

H. Lyman Miller

Barring unforeseen revolutionary change of regime or regime collapse, institutional developments in the PRC will likely continue trends begun at the beginning of the Deng era and continued under the post-Deng Jiang leadership. Continuity in the process of institutionalization of politics and in the fortunes of particular institutions is enforced by continuity in the leadership's agenda of goals and priorities. The commitment to the policies of "reform and opening up" has favored adherence to the predictable institutional processes.

Over the past 20 years, China has seen the advance of a pattern of steady institutionalization in its political processes. This pattern was deliberately promoted by Deng Xiaoping from the beginning of the reform era he inaugurated in the late 1970s because it served his larger agenda of accelerating China's rapid modernization. His relative success in promoting institutionalization has made China's politics far more stable, more orderly, and so more predictable than during most of the Mao era.

The Jiang Zemin leadership, both the beneficiary and the product of Deng Xiaoping's efforts to institutionalize China's political processes, has been strongly committed to the larger modernization agenda Deng promoted. Proceeding from this commitment, the Jiang leadership has also advanced the institutionalization of politics that Deng began. Aided by the steady decline of the conservative opposition that constrained Deng, the Jiang leadership has pressed farther ahead with Deng's agenda than Deng was able.

The logic of institutionalization and the fortunes of particular institutions over the past 20 years has derived from the agenda of regime priorities the Deng and Jiang leaderships have pursued. These have been economic development through marketization, integration into the broader international political and economic order, and military modernization. Because of this continuity in leadership agenda (and barring unforeseen revolutionary change of regime or outright regime collapse), the patterns of institutional change begun in the Deng years and continued by the Jiang leadership will likely continue.

Institution-Building in the Deng Era

Until Communist regimes confront their "post-revolutionary" transitions, institutions fare poorly in Communist politics. An ideology that preaches, as Marxism-Leninism does, that political institutions are transitory "superstructural" reflections of relations of ownership and power in the economic "base" of society, that institutions must therefore change through revolution as such relations change, and that the state itself will ultimately wither away is intrinsically anti-institutional. Under the leadership of both Lenin--despite his ruthless emphasis on organizational discipline--and especially Stalin, the institutions of the Soviet party and state were created, altered, shuffled, and sometimes discarded altogether according to momentary needs of ideological vision and personal power. With the passing of the founding revolutionary generation and the emergence of post-Bolshevik leaders, and beginning with the leadership of Nikita Khrushchev, the CPSU replaced its agenda of social transformation and adopted a post-revolutionary agenda of managing modernization, codified in the 1961 Party program's designation of the USSR as a "state of the whole people." Thereafter, Soviet institutions, processes, and routines stabilized--to the point of stultifying stagnation under Brezhnev--as the agenda of politics and the type of Soviet leader changed.

In China, it is hard to imagine a leader as instinctively suspicious of institutions as was Mao Zedong. Although he contributed to the creation of the institutions of the PRC modeled after those of the USSR in the early 1950s, he spent the remainder of his leadership years tearing them down for reasons of ideology and personal power. The pattern of Central Committee plenums after the 1956 Eighth CPC Congress signaled the breakdown of Party institutional processes at the top as the leadership lost the capacity to establish consensus around policy decisions and as conflict over power escalated. In the first three years after the Congress--encompassing the Hundred Flowers and anti-rightist campaigns and the Great Leap Forward--the Central Committee held eight plenums, down through the Lushan plenum in the summer of 1959. Over the next three years, through 1962, the Central Committee held only two plenums. And over the three years from 1962 to 1965, the Central Committee held none at all, a lapse indicating the leadership's inability to achieve sufficient consensus to warrant convocation of a plenum and place the final stamp of authority on any policy decision at all. When the Central Committee did finally meet in August 1966, its main order of business was to authorize Mao's full-scale assault on the institutional order itself, the Great Proletarian Cultural Revolution.

The institutions of the Cultural Revolution era reflected Mao's ambivalence regarding institutions. The revolutionary committees and reconstructed Party organizations Mao sanctioned after the demolition of Party and state institutions in the Cultural Revolution's first two years operated uncomfortably within a political order legitimated only by appeal to Mao Zedong Thought, not with the presumption of enduring institutional mandate. The 1975 state Constitution, itself a spare shadow of the elaborate Soviet-inspired 1954 PRC Constitution, incorporated provisions for the "mass democracy" tactics that had demolished the standing institutional order over the previous decade.

In the post-Mao period, Deng Xiaoping's emphasis on conducting politics through orderly institutional routines contrasted starkly with Mao Zedong's innate suspicion of institutions and his preference for spontaneous mass action in politics. Although Deng himself was a member of the generation of revolutionary founders, he inaugurated the PRC's post-revolutionary phase, signaled at the great watershed of PRC politics, the 11th Central Committee's Third Plenum in December 1978. Paralleling the transition in the CPSU's agenda in 1961, the plenum under Deng's leadership announced that the foremost mission of the CPC was no longer, as Mao insisted, "waging class struggle" under socialism, but was instead developing the economy and improving the livelihood of China's people. Where Mao had seen the Party as the agent of perpetual class warfare--of "continuing the revolution under the dictatorship of the proletariat"--Deng understood the Party as the manager of socialist modernization. In Mao's eyes the institutions of the Party and state were disposable at best and potentially oppressive, even under socialism itself. Deng saw the institutions of state as indispensable for implementing the Party's modernization policies and as the regulatory agent enforcing the discipline and order necessary for those policies to succeed.

Based on this transformed Party mission and alternative agenda, Deng embarked on what must be regarded as a vigorous program on institution-building. This was apparent in several respects:

Complementing the Deng leadership's efforts to foster the institutionalization of politics was a concurrent transformation of the Party membership. This effort attempted at once to encourage the retirement of the veteran revolutionary generation who founded the PRC and dominated its politics down through the 1980s, to purge cadres and members recruited according to the radically politicized criteria of the Cultural Revolution years, and to recruit members and promote leaders whose educational and professional expertise suited the emphasis on economic and technical modernization that Deng advocated in policy.

The success of these efforts has changed the composition and policy outlook of both the Party's top leadership and its broader membership profoundly. The third-generation Politburo leadership appointed around General Secretary Jiang Zemin at the Fifteenth CPC Congress in September 1997 differs starkly from previous top Party leaderships since 1949--including the so-called second-generation leadership around Deng Xiao-ping that dominated politics in the 1980s and early 1990s--in terms of education, military experience, career patterns, regional associations, and age on accession to top leadership posts.55

Specifically as compared to the Politburo membership appointed around Deng Xiaoping at the Twelfth CPC Congress in 1982, the Jiang Politburo, at 63 years old on average, was nearly a decade younger. Of the 24 members of the Jiang Politburo, 18 had university degrees; none of the 25 members of the 1982 Politburo had a university degree, and only two had any university training at all. Of the 18 university-educated leaders in the Jiang Politburo, 17 had engineering or scientific degrees. Where men from Sichuan and the provinces subsumed under the former Central-South Party Bureau predominated in the Deng leadership, 17 of 24 in the Jiang leadership either hail from or worked long portions of their careers during the reform era in the five coastal provinces of Shandong, Jiangsu, Zhejiang, Fujian, and Guangdong and the two province-level coastal cities of Tianjin and Shanghai. Of the 24 members of the Jiang leadership, 14 joined the Party after 1949 and so had no personal experience in the CPC's revolutionary struggle at all, while the remainder joined either in the closing years of World War II or in the 1946-1949 civil war years. By contrast, in the 1982 Deng leadership, 23 of 25 leaders joined the Party before the 1935-1936 Long March. Finally, only the two professional military leaders in the Jiang Politburo (Zhang Wannian and Chi Haotian) have military experience; the remainder has none at all. By contrast, 20 of 25 members of the Deng Politburo had firsthand military experience, and among them seven retained military leadership roles at the time.

Turnover of leaders at lower levels of the Party and state hierarchy suggest even greater contrasts in terms of education level, age, and expertise thanks to the changes Deng fostered in Party recruitment. Thus, future top leaderships are likely to replicate and even increase the "technocratic" bent of the present top leadership around Jiang Zemin as they draw new members from the pool of leaders at levels lower down. Also through the reform years, the Party has grown dramatically, from 35 million members at the time of the Eleventh Congress in 1977--immediately after Mao's death--to 58 million members at the Fifteenth. Much of this expansion reflected deliberate efforts to recruit new members according to the technocratic criteria reflected in promotions to the Party top leadership levels, and particularly from economic, managerial, and technical elites emerging in the course of the economic reforms. On the eve of the Fifteenth Congress, the Xinhua news agency announced that over 43 percent of the Party's members now had some level of university education. By contrast, in 1978 only 12.8 percent of the Party membership had at the senior high school level or above. Clearly, thanks to the deliberate efforts of Deng Xiaoping and his colleagues to transform the Party membership according the modernization goals he had established, the CPC has increasingly become a party of emergent urban industrial, entrepreneurial, and technical elites and no longer the vanguard of worker and peasant proletarians.

The concurrent efforts at institutionalizing the PRC's political processes and at transforming the characteristics and composition of the Party's leadership and broader membership have produced a political order altogether different from that which prevailed 25 years ago under Mao Zedong's leadership. This is apparent in several respects:

Institution-Building in the Jiang Era

Perhaps the foremost instance of the success of Deng's program of institution-building was the process of post-Deng succession and the consolidation of the Jiang Zemin leadership itself. Jiang Zemin's reappointment as Party general secretary at the 1997 Fifteenth Congress without visible challenge--after eight years in the post and following Deng Xiaoping's steady withdrawal in the early 1990s from day-to-day involvement in the leadership and his eventual death--stands as the sole example in Communist politics anywhere of the deliberate retirement of a paramount leader in favor of a successor. Jiang's gradual accretion through the early 1990s of the foremost positions in the Party, state, and military hierarchies--unprecedented since Mao's tenure in them in the 1950s--attests to the importance of institutional standing in contemporary politics, shored up by Jiang's gradual efforts to build a power base in Beijing based on personal ties by placing Shanghai cronies in the Central Committee departments and elsewhere.

The outcome of the most contentious leadership question at the Fifteenth Congress--the political fate of then NPC Chairman Qiao Shi and Premier Li Peng--also underscored the degree to which institutional rule-following has become established. The issue resulted directly from the 1983 PRC Constitution's provision that tenure as premier be limited to 2 five-year terms and from the informal expectation that, with the exception of the "core leader," members of the Politburo retire from that body at age 70. By the 1998 Ninth NPC, Li Peng would have served out his two terms as premier and was expected to step down. Qiao Shi by that time would have served only one term as NPC chairman, but at 71 years old was liable to the expectation that he retire from the Politburo. In the months leading up to the congress, the Hong Kong press was filled with rumors, leaks, and speculations about debates over proposals to accommodate Li and Qiao through the kind of institutional jerry-rigging long a staple of Communist politics and at the expense of institutional continuity. But these imaginings turned out (true to form for the Hong Kong press) to be wrong. In the end Qiao, together with all five other Politburo leaders liable to the age 70 rule, retired, and Li Peng stayed on and took up Qiao's post as NPC chairman the following spring.

The relative smoothness of the succession was aided by the decline of the conservative elders who complicated politics for Deng Xiaoping in the 1980s, both on policy questions and on succession, as the failed tenure of Hu Yaobang and Zhao Ziyang attests. The timely demise of Hu Qiaomu and Li Xiannian in 1992, of Yao Yilin in 1994 and then Chen Yun in 1995 isolated Li Peng as a conservative alternative without elder patrons, while Deng Xiaoping's characteristically well-timed passing from the scene only in 1997 abetted Jiang's unchallenged position. Since then, Li Peng's political strength has derived in part from his usefulness to Jiang as a political counterweight to more liberalizing leaders like Zhu Rongji, and in part to his capacity to speak at the top for those retaining an interest or ideological stake in preservation of the state-owned enterprise (SOE) sector. Those include cadres in the middle and lower levels of the State Council and regional planning bureaucracies and the SOEs themselves, as well as increasingly marginalized remnant ideologues like Deng Liqun who view preservation of the SOE sector as the badge of socialism itself in China.

In policy terms, this political evolution has aided the post-Deng leadership in pressing ahead with reforms planned in the early 1990s. At the Fifteenth Congress, Jiang Zemin made clear both the post-Deng leadership's allegiance to the broad framework of goals and priorities set down by Deng Xiaoping at the beginning of the reform era and its intention to press ahead aggressively within that framework. The centerpiece of such efforts sanctioned at the Congress was SOE reform, and some of the most significant institutional changes since then have derived from it.

A concerted push on SOE reform has been in offing since the 1992 Fourteenth CPC Congress, which authoritatively designated China's economic system as a "socialist market economy," and the "Fifty Points" adopted by the 1993 Third Plenum, which laid out general guidance for concurrent SOE, taxation, banking, and foreign trade reform. Action on these plans was stalled by the unanticipated spike of high inflation in 1994, which Zhu Rongji labored to curtail over the following two years. That the Jiang leadership intended to resume steps on the SOE front was clear by the summer of 1995, when Jiang Zemin began touring heavy industrial enterprises in Shanghai and the northeast provinces and the People's Daily began publishing front-page summaries of his remarks on this score. When the December 1996 national conference on economic work declared a victorious "soft landing" from inflation, the leadership renewed its intention to pursue SOE reform along lines set down in 1993. In April 1997, the State Council publicized detailed guidance on reorganizing viable enterprises and dissolving bankrupt ones, establishing re-employment centers for workers to be laid off in the process, and erecting a supra-ministerial leading group--reminiscent of a comparable group created to oversee implementation of the 1985 science reforms--to supervise the process. Jiang's political report at the Fifteenth Congress provided authoritative sanction for the dismantling of the SOE sector by stipulating that the predominance of the state-owned sector is not what defines socialism in China. The unanticipated Asian financial crisis seemed to strengthen leadership resolve to push ahead with the SOE reforms, not delay them.

In step with the SOE reform push, the leadership announced at the Ninth NPC in March 1998 a sweeping reorganization of the State Council and plans for parallel revamping of provincial state bureaucracies over a three-year period. These institutional changes were not new--they, too, had been sketched in the 1993 "Fifty Points," and Jiang Zemin signaled their resurrection in his Congress report the previous fall. While billed as a significant reduction of the State Council organizations--from over 40 ministries and commissions to 29--and a downsizing of its work force by half, the focus of the intended changes affected the industrial ministries and economic state commissions involved in the SOE sector. Specifically:

Most of these institutional changes underscored the Jiang leadership's activism behind reform. The rise in prominence of the SETC accompanied the steady ascent of Zhu Rongji. Its predecessor State Economic Commission had been downgraded to an office by then Premier Li Peng in launching a three-year program of economic retrenchment in 1989. Zhu was appointed to the office in moving to the center from Shanghai in June 1990. Similarly, the CRES had been created by the aggressively reformist Premier Zhao Ziyang, who directed it personally thereafter, but Li Peng relegated it to secondary status by appointing a lower-level official to lead it in 1990. Together with the changes in stature of the other two commissions, the elevation of CRES recapitulates the configuration of supra-ministerial commissions under Zhao Ziyang.

The other significant institutional changes in the post-Deng period have come in the military sector. These include:

These steps do not depart from the broader direction of institutional reforms in China's military begun in the 1980s by Deng Xiaoping, which included reorganization of forces and military regions, resurrection and revamping of military academy training, restoration of ranks, and other steps. But the defense industrial reform does underscore the emphasis given to military modernization through technological upgrading by the technocratic Jiang leadership, a trend evident in the publicity it has given in the past two years to science and technology as the key to China's defense in the future.


Barring unforeseen revolutionary change of regime or regime collapse, institutional developments in the PRC will likely continue trends begun at the beginning of the Deng era and continued under the post-Deng Jiang leadership. Continuity in the process of institutionalization of politics and in the fortunes of particular institutions is enforced by continuity in the leadership's agenda of goals and priorities. The commitment to the policies of "reform and opening up" has favored adherence to the predictable institutional processes. It has also fostered the emergence and consolidation of some kinds of institutions and has rendered others obsolete. As long as the regime persists in this policy agenda, the same logic will prevail. Also, interaction with the international political and economic order has in turn stimulated the creation of institutions--such as the Ministry of Foreign Affairs' Department of Arms Control and Disarmament--new to the Chinese political system. International expectations therefore now contribute to the stability of institutional processes in ways that were not true before. Finally, the relative success of Deng's program of institutionalization over the past 20 years has created incentives to abide by them and precedents making it harder to deviate from them in the future.

A clear test ahead of the progress of institutionalization will be the next round of leadership succession, perhaps at the Party's Sixteenth Congress and the Tenth National People's Congress, scheduled by Party and PRC constitutional mandate for 2002 and 2003, respectively. Aside from Jiang Zemin himself (who was already 71 at the time of the 1997 Party congress), 10 of the present Politburo line will be 70 or over and thus liable to the informal expectation that they retire. Among these 10 are four members of the Politburo Standing Committee, including NPC Chairman Li Peng and Premier Zhu Rongji. Neither Li nor Zhu is required to step down from their state posts, having served only a single term thus far, although no leader has served more than one term as NPC chairman since the 1983 PRC Constitution was promulgated. But tenure as NPC chairman and premier carry concurrent appointment to the Politburo Standing Committee, and, as in the case of Qiao Shi in 1997, Party rules may require they step down. By this time Jiang himself may also follow the precedent established by Deng and retire from his posts.

That the Jiang leadership intends an orderly succession seems clear from appointments at the 1997 Party congress and from events since. Politburo appointments included nine leaders who were 60 years old or younger at the time of the Congress and who therefore may be counted as an emerging "fourth-generation" leadership. These include Hu Jintao, who at 56 is easily the youngest member of the Politburo and who appears slated to succeed Jiang. At the time of the 1997 congress, Hu had already served a full term on the Politburo Standing Committee, during which he assisted Jiang in running the Party apparatus, a role that is a proven pathway to top Party leadership in Communist politics. Hu's appointment as PRC vice president at the Ninth NPC last year gave him a concurrent high-level state post that lacks real political power but that nevertheless gives him by state protocol increased international visibility. His public appearances since the 1997 congress also suggest a broadening of representational roles designed to prepare him to succeed Jiang. Whether events actually proceed along these lines is anyone's guess, but it appears that the Jiang leadership is preparing to act on the succession precedents established by Deng.

More broadly, presuming that the Jiang leadership's commitment to the Dengist reform agenda persists, the longer trends of institutional change begun in the Deng period will continue. Specifically:

In short we should expect to see more of the same, only more so.

The Chinese Economy Through 2005: Domestic Developments and Their Implications for US Interests

Barry Naughton

The economic there is likely to improve, and US corporations will continue to be interested in establishing a position in this large and growing market. The intense competitiveness of that market is likely to continue for the foreseeable future. As economic conditions stabilize and incomes grow, however, there will be substantial market opportunities in China. WTO membership for China would provide American businesses and farmers with direct access to a significant and growing market.


Since 1989, there have been many apocalyptic interpretations of China's future, including predictions of imminent disruption or collapse. So far, none of these visions has come true. Instead, China has proven to be a reasonably successful and rapidly growing economy. What lesson should we draw from this past record? To conclude that China is crisis proof, or immune to unexpected turbulence, would be wrong. But we should recognize that, in addition to factors potentially creating instability in China, factors also act as potential stabilizers, giving China a certain resilience and capacity to deal with problems. Policymakers still have significant economic levers at their disposal, and although their understanding and control of the economy are extremely imperfect, they can still take steps quickly to compensate for adverse economic developments. In addition, a policy community within China vigorously debates economic problems. When a degree of consensus forms about problems, policymakers are able to concentrate on one or two of the most critical problems and take steps to confront--and sometimes resolve--them. Indeed, critical outside analyses of China frequently seize on problems that are being the focus of discussion in the Chinese policy community. In such cases, although the problems are real, that the system can focus on and respond to the problems is in fact a sign of strength. Unanticipated turbulence and even crisis may occur anyway but probably in the wake of an unexpected and unpredictable coincidence of factors that simultaneously challenge the regime and cripple the regime's ability to respond to those challenges. Outside analysts probably will not successfully predict such a conjuncture.

In this spirit, the current paper reviews China's economic problems and prospects and argues for a scenario of relative continuity. Serious challenges exist, but the most likely scenario is that policymakers will resolve some challenges and pass others on to their successors. The first two sections briefly review the background and current condition of China's economy. The next two sections assess the policy response of China's leadership, in the short and medium long run. The final two sections discuss the prospects for the Chinese economy over the next five years, and the implication of these developments for US interests.


China's current economic conditions have been shaped by the approach to economic reform Premier Zhu Rongji has taken since he assumed effective control of economic policy in mid-1993. There are many important differences between Zhu's approach to economic reform and that which prevailed during the 1980s under Zhao Ziyang (see figure 4 for a summary). In some respects, Zhu builds upon Zhao's accomplishments, for example, in building a market infrastructure to support the markets Zhao helped introduce. Zhu's reforms seek to create a "level playing field" for the market participants created by Zhao's reforms. In other respects, Zhu's approach is the opposite of Zhao's. Zhu has stressed the building of authoritative and powerful central government institutions. These measures have involved strengthening the banking system and giving banks more ability to make decisions on commercial grounds, reducing their dependence on local government-industrial complexes. On the fiscal side, government tax revenues as a share of total GDP have grown steadily since reaching their low point in 1995 and are continuing to grow in 1999 (see figure 5). Macroeconomic policy has been relatively austere since Zhu took charge, with high real-interest rates and relatively restrained credit growth consistent features of the macroeconomic environment.

Some aspects of Zhu's policies have been unsuccessful. Attempts to re-establish the government monopoly in the grain trade are misguided and will probably fail. Restructuring of state-owned enterprises has been largely a failure. The initiative to convert state enterprises to a "modern enterprise system" in 1996 dissolved because government officials were unable to agree on the specific content of a "modern enterprise." Industrial policies for specific sectors have not had any obvious successes and are clearly being rethought.

Despite these setbacks, the overall impact of Zhu's approach has been positive. Fundamentally, this is because Zhu has been willing to preside over the greatly intensified play of market forces in China and allow market forces to determine the ultimate fate of many market participants. China has become a vastly more competitive economy over the past few years. This will have long-term positive effects on China's productivity. It already dramatically has affected the behavior of market participants.

Figure 4
Contrasting Atyles of Economic Reform: 1980s Versus 1990s

Higher levels of competition in the Chinese economy are due to the confluence of a number of factors. First, macroeconomic policy has been tight enough to control inflation and lead to deflation, beginning in early 1998 (see figure 6). Falling prices testify to the control of aggregate demand and reflect the intense pressures put on producers. Second, there has been a huge expansion of capacity, particularly in industrial sectors, following the inflow of $235 billion in foreign investment since 1993. Third, Chinese producers are increasingly finding it difficult to turn to banks or local government officials to provide financial bailouts in times of difficulty. Thus, firms face both tougher conditions on the market side (competing with private firms, township & village enterprises, and foreign invested firms) and tighter constraints on the financial side. The result has been that firms simply have nothing to buffer them against the forces of market competition. This fact is increasingly recognized in China.

Figure 5
Fiscal Revenues as Part of GDP

The most dramatic result has been the reduction in employment at publicly owned firms. This policy has caused substantial unemployment, which is significant as a social problem, and also significant as an indicator of changed economic behavior. Firms are being forced to shed labor, either because they are restructuring or because they are closing down. The government permits and encourages this activity. The magnitude of the change is quite striking. Table 5 shows that, between yearend 1992 and 1998, state and urban collective enterprises shed net 37 million workers, while the private sector added 30 million workers. Traditional public-sector enterprise employment shrank by one-third between 1992 and 1998, and the shrinkage is continuing in 1999. Some of this shrinkage was absorbed by joint stock companies, some of which may be thinly disguised state-owned companies. But all the joint stock companies in China employed only one-third the number of workers lost by traditional public-sector enterprises. A significant shakeout is under way.

A further important change relates to inventory accumulation. For years, publicly owned firms in China have routinely accumulated enormous stocks of materials and finished goods. Those goods then sat around unused and unsold--often unsaleable--for years until the value of the inventories was eventually written off. (This situation is one of the mechanisms of the bad debt problem in China.) One might assume that, with tougher market conditions, even more inventory accumulation would have occurred in recent years. In fact, the reverse is true. Net inventory accumulation averaged 6.6% of GDP from 1978 through 1996 and was never less than 4.7% of GDP. In 1997, net inventory accumulation was 4.3% of GDP, and in 1998, it was only 1.7% of GDP.56 Why this abrupt change? High real-interest rates, falling prices for goods, and the absence of bailouts for losses means firms are dumping inventories that they finally realize are costly to hold.

Figure 6
Consumer Price Inflation

These changes in economic policy and behavior form the context of contemporary developments in the Chinese economy. When the Asian crisis began to affect Chinese exports, during 1998, the economy was already feeling the impact of the changes described here. Macroeconomic austerity was biting into economic growth, but the full effects were greater than policymakers anticipated. The lag effect from earlier macroeconomic austerity was partly to blame; as was the increased responsiveness of enterprises to macroeconomic levers, because of their increased exposure to the marketplace. Increased layoffs and decreased inventory accumulation were slowing growth in aggregate demand. The "soft landing" engineered in early 1997 was already in danger, as the economy continued to slow. At this point, the Asian crisis began cutting into China's export growth, further threatening the economic growth rate.

Table 5:
Urban Workers, by Ownership
Million workers

State Administration35372
State Enterprises7453-21
Urban Collectives3620-16
Joint Stock, Limited Corps.01111
Foreign Invested165
Registered Unemployed3.66.22.6
Laid-Off Workers
Without Jobs

Contemporary Conditions

The economic problems China has encountered in 1998-99 are thus easy to understand. The economic environment is, to be sure, unprecedented in the Chinese context. Chinese commentators write incessantly about the shift from a "shortage economy" to a "surplus economy." Outside commentators focus on deflation, arguing that it is incompatible with the growth rates China is posting. In fact, the "surplus economy" is a normal part of a market economy, particularly one as competitive as China has become. Deflation is unfamiliar in our recent experience, but in economic history, growth and deflation often have gone together. China has economic problems, but they are not part of some mysterious new economic model.

Current conditions are most easily understood through the medium of the real-interest rate (see figure 7). Despite successive reductions in the nominal interest rate, inflation has dropped much more rapidly than have interest rates. (Subtract the growth rate of the consumer price index, shown in figure 6, from the nominal interest rate shown in figure 7 to get the real-interest rate, also in figure 7). From early 1997, real-interest rates were highly positive. This is unusual in the Chinese context: real-interest rates were positive in 1990-92, but were not this high for this long. Moreover, firms are much more responsive to interest rates, because they now anticipate serious pressure to repay loans.

The result of these economic forces was that, in 1997 and 1998, growth of aggregate demand decelerated significantly, as each component of aggregate demand weakened. Growth of fixed investment in industry slowed markedly (due to overcapacity, intense competition, and high interest rates). Additions to inventories dropped off, as described above. Consumption growth moderated, due to uncertainties among households about future employment and new responsibilities to pay for housing and medical care. On top of this, export growth, which still provided a substantial boost to the economy in 1997, disappeared in 1998. The only real impetus to growth in 1998 came from a government-sponsored infrastructure investment program, which pumped up investment--and associated heavy industrial output--during the latter part of the year.

Figure 7
Nominal and Real Interest Rates: Short-Term Working Capital

As of mid-1999, there are some signs that the bottom has been reached and that the economy is turning the corner. This change may partially reflect the upturn in the Japanese economy and yen, and the surprisingly rapid recovery in the rest of East Asia. But it also reflects the fact that the fundamental underlying growth determinants in China continue to be reasonably positive. Two indicators show some improvement around midyear 1999. Export declines were most serious in the last quarter of 1998, and since mid-year 1999 exports have been growing again, albeit slowly (see figure 8). In addition, as figure 6 shows, the rate of deflation appears to have slowed in the third quarter of 1999. These are weak signs, to be sure. Export growth is still slow, and deflation is ongoing. But they do indicate a turning point may have been reached at midyear 1999.

Export Growth Rates: By Trade Regime

Policy Response in the Short Term

While the underlying trends in the Chinese economy are reasonably satisfactory, the policy response over the past year has been mixed at best. Both in terms of macroeconomic policy and structural reforms, policy performance has been unimpressive.

Inconsistent Macroeconomic Policy
Despite the attention policymakers have been paying to keeping growth rates high, policy has by no means been consistently directed toward stimulating growth. Indeed, the most important central government policies have been in direct conflict with the objective of stimulating growth. The government has followed a policy of a strong (over-valued) currency, high real-interest rates, and increasing tax take from the economy. These all should, and do, slow growth. Moreover, the three policies are interrelated.

Interest rates remain high for a number of reasons. First is simply the slow responsiveness of policy. Interest rates are adjusted infrequently, and each adjustment is preceded by substantial debate and representations by various interest groups. As a result, despite six consecutive interest rate cuts, the nominal interest rate has declined more slowly than the inflation rate. Second, the government is loath to relinquish the revenue it derives from high lending rates. Ultimately, high interest rates shore up bank profitability, from which the central government extracts substantial tax revenue. Third, the government argues--without much convincing evidence--that lower deposit rates would encourage capital flight and put pressure on the Chinese currency. Thus, high real-interest rates contribute to a defense of the currency value.

The government continues to increase its tax take from the economy. In the long run, it is good to have a healthy tax base to support necessary government activities. In the short run, increasing tax rates definitely slows the economy. In China, it is most obvious in manufacturing enterprises that find their ability to generate internal investment funds crimped by a tax policy that extracts a substantial share of marginal profits. These policies all are clearly related to the Zhu Rongji policy regime sketched out in the opening section of this paper.

In contrast to these standard macroeconomic policies, the government has rolled out a substantial program of accelerated infrastructure investment, funded by special emissions of government bonds. The first round took effect during the second half of 1998, had obvious effects on growth in late 1998, and began to peter out at midyear 1999. The government has responded by authorizing a second round of bond-financed infrastructure investment in the second half of 1999. These common-sense Keynesian macroeconomic policies serve to replace aggregate demand curtailed by the factors described above. On balance, however, macroeconomic policies remain inconsistent, with some restraining and some stimulating aggregate demand.

Structural Reform Policies
Systemic policies have firmly tackled one area of the economy, the banking system. Finally focusing on the problem of non-performing loans and potentially insolvent banks, the government took several important steps during 1998 and 1999. First, the government has committed substantial funds to re-capitalizing the banking system. During 1998, the Ministry of Finance issued 270 billion yuan (about $33 billion) of special bonds for bank re-capitalization. This commitment is being substantially increased in 1999. Second, Asset Management Companies (AMCs), patterned on the US Resolution Trust Company, have been set up to liquidate bad loans. The first AMC was established at the beginning of 1999 and has purchased the majority of the bad loans of the Bank of Construction. Three more AMCs--one for each of the government-owned commercial banks--are being established in the course of 1999. Each AMC will have the authority to issue bonds guaranteed by the Ministry of Finance. Although funding authority of all four AMCs has not been finalized, knowledgeable sources in Beijing suggest a tentative total funding authority for all four AMCs, plus the State Development Bank, of 1.2 trillion yuan (about $150 billion). This is a substantial sum, equal to about 14 percent of this year's GDP. Third, the banks are in process of adopting a series of new internal monitoring systems, which are long overdue. They are shifting to a five-part classification of loan performance that is consistent with international practice. These changes are essential preconditions to the shift of the banking system to a commercial basis.57

These changes with respect to the banking system are important. They are also the only really important systemic reform initiatives adopted so far in 1999. While there has been some progress with clarifying the legal basis for private ownership and the stock market, these do not count as major changes from the status quo. An important opportunity to deregulate interest rates (instead of futilely trying to adjust them by administrative means) is being lost. Under current conditions, decontrol of interest rates would lead to falling rates, which would contribute to successful implementation of the policy. Unfortunately, opposition to decontrol from the Ministry of Finance, from the banks, and from the shaky insurance industry appears to have stymied such a change for now.

Policy Response in the Medium-to-Long Term

The pace of government-directed institutional change has slowed to a crawl during 1999. This slowdown reflects the obverse of the point made in the prologue: although the system can focus on a small number of pressing problems, it has trouble dealing simultaneously with a large number of necessary changes. During 1999, the system has been overwhelmed by multiple conflicting currents. The sclerosis seems traceable to events that have disrupted the previous policymaking procedures, under which Premier Zhu Rongji had a great deal of discretionary power in economic policy making. Zhu has faced extremely difficult economic conditions from the beginning of his announcement of ambitious reforms in March 1998.58 During 1999, those difficulties were greatly increased by Zhu's decision to push forward vigorously with WTO membership; the failure of his WTO offer in Washington; the Belgrade Embassy bombing; and the subsequent backlash against Zhu's efforts that followed these events. Under these circumstances, Zhu has not been in a position to push big new agenda items.

Although Zhu's ability to act proactively has been curtailed, he has continued to be the indispensable person in economic policy making. Jiang Zemin put a bit of daylight between himself and Zhu, but also re-affirmed his support for Zhu's policies.59 Close tracing of any important economic policy item will reveal that Zhu continues to be the single most important decision-maker. That is likely to remain true as long as Zhu retains the confidence of Jiang Zemin. Like anybody, Zhu Rongji makes mistakes, and his policies are not always optimal. But Zhu has a mastery of the details of economic policy that is quite unequaled among the Chinese leadership. If Zhu were to step down, the individual most likely to follow him in a smooth succession would be Wen Jiabao. It is widely felt, though, that while Wen is smart and well educated, he is simply not ready to step into Zhu's shoes. In this world, nobody is irreplaceable, but Zhu Rongji would be a very hard act to follow. For precisely this reason, an explicit or implicit threat to resign by Zhu Rongji gives him some leverage.

The policy process has also been on hold through much of the summer as political leaders jockey for position ahead of the Communist Party plenum, now scheduled to begin on September 19. The plenum is slated to make decisions on enterprise management system, marketization, and compensation. Uncertainty about the precise configuration of policy in the next year or two is greatly intensified by uncertainty over the fate of China's WTO accession negotiations. If a quick resolution of WTO membership comes this year, WTO accession will essentially drive the Chinese policy process for the next few years. In the absence of WTO membership, the challenge of stabilizing the growth path with new domestic sources of demand will become more challenging. However, there is no reason to expect that it cannot be done.

More important than the current policy vacillation is what appears to be an irreversible decision to let market forces drive the evolution of the economy. This decision is due to a number of factors. First, experience has taught the Chinese leaders the limitations of government direction of the economy. Government-led restructuring of the public-sector economy has met with limited success; sectorally oriented industrial policy, with almost no success. Second, government resources remain strictly limited. The government simply does not have the capability to run a stable economy and also continue to pump resources into the bureaucratic economy. This recognition seems clearly manifest in the government restructuring and shrinkage that was outlined in 1998 and has been chugging forward ever since. It is manifest as well in "small government, big society" principles that are repeatedly being evoked to guide reforms of the social security and health sectors. Moreover, as discussed below, intense pressure on government financial resources is not likely to ease in the coming decade.

A third force behind the willingness to yield to market forces is the recognition that the world is being swept with still another wave of technical innovation that is difficult to predict and that threatens to leave government-directed development programs in the dust. Chinese leaders are very aware that Chinese-Americans have played an enormous role in Silicon Valley and in the development of the Internet economy. They are also aware that the Chinese Government will not be able to devise an Internet development program, and they believe that Chinese scientists and entrepreneurs in China have the capability of leapfrogging technological development stages and propelling China to a point near the global frontier. As a result, they are willing to allow those entrepreneurs the freedom and security they need to go ahead.

This willingness is reinforced by a fourth factor. The frustration the Chinese felt after the Belgrade Embassy bombing brought home to them quite forcefully not only the extent of US strategic dominance, but also the extent to which the US represents the single-most-successful model of economic and technological performance. While on the one hand the indignation and anger has led to estrangement from the US, the recognition of powerlessness also led to an increased determination to follow US-based models of market development. The government, I believe, has become more willing to bear costs and impose costs on the population, that are associated with marketization. Beijing was already moving beyond a "reform without losers" approach toward a policy that implied completing marketization, even if significant social groups lost out in the process. That policy shift has now been confirmed by the feeling that only such a shift will allow China as a nation to maintain significant and growing stature in a US-dominated world. Nationalism will induce society to tolerate reforms that impose real costs on large social groups, such as laid-off state enterprise workers. Such attitudes are reflected in typical statements like this from the Communist press in Hong Kong:

After the embassy bombing, China's top leadership responded to the unprecedented awareness of the masses by repeatedly stressing the central policy of economic construction and the need to accelerate reform. Not only must SOE reform be accelerated . . . we also need to increase the degree of support for civilian (minban) high technology enterprises . . . Beijing observers feel that the leadership can quickly channel the indignation felt by the masses into accelerated economic reform.60

Whether or not this observation is correct, it reflects widely held attitudes among China's political elites.

The Chinese Economy Over the Next Five Years

Economic Growth
Based on the previous discussion, we should expect that the Chinese economy will continue to grow robustly over the next five years. There is no reason to believe the idea, held in some quarters, that China has somehow entered a Japan-like period of sluggish growth that will be difficult to shake off. Quite the contrary, if China were to align its macroeconomic policy instruments and single-mindedly pursue growth, it could quickly return to a rapid growth path (with potentially significant inflationary consequences as a result). The challenge is rather to develop a mix of policy instruments that will encourage slightly faster growth along with continued restructuring and development of market institutions. On balance, there is no reason to revise earlier projections that China can maintain real aggregate GDP growth in the 7% to 8% range through 2005.60 Growth rates should begin to decline somewhat after 2005: as labor force growth slows and structural transformation is primarily completed, around 2015, growth rates should dip further.61 But there is little reason to expect those effects to be manifest before 2005. Indeed, growth might actually be higher, if productivity improvements driven by more competitive markets start to have a major impact on the economy.

Indeed, in the medium run, there is some danger that China could return too quickly to rapid growth, igniting another stop-and-go macroeconomic cycle. East Asia is recovering rapidly, and the Japanese economy is beginning to play a positive role in regional growth again. As China's economy begins to recover, there is a danger that government fiscal stimulus programs may last too long. This is particularly true because of the key role of deflation in the recent downturn. Real-interest rates are high because of deflation: if deflation is halted because of a combination of improving external markets and government stimulus, expectations of the future could rapidly shift to an inflationary mode. A decision to devalue the currency, made after recovery has become firmly established, would contribute to inappropriately inflationary policies. These are not immediate dangers, but the Chinese Government should be alert to respond quickly to economic conditions that may change quickly.

A Young Labor Force
There is substantial additional reason to think that both growth and transformation will continue at high rates over the next five years: this is the unusual demographic structure of China's contemporary economy. China has an unusually young labor force, with an extremely low dependency rate. Elderly dependents are few because China has only recently emerged from poverty and extended individual lifespans. Young dependents are few because of China's strict birth control policies over the past 25 years. China's overall dependency rate is only about 32%, meaning that 68% of the population is of working age--an extraordinarily high proportion. Moreover, this structural condition will actually reach its peak around 2005, when more than 70% of the population will be of working age. As a result, China faces a demographic "window of opportunity." Today the work force is young, flexible, open to change, and relatively unencumbered. Conversely, after about 2010, the proportion of elderly will begin to increase rapidly. Growth will slow, and change may become more difficult. This makes it particularly pressing for China for press ahead with economic reforms in the next five years or so, and also improves the chances that society will accept and adapt to those reforms.

WTO or Not?
The largest source of uncertainty today is whether China will join WTO next year. A WTO agreement would create a new framework for exchange-rate policy, giving China new freedom to float its currency. Exchange-rate flexibility combined with import liberalization would probably result in depreciation of the Chinese currency, providing stimulus to exports and fueling renewed economic growth. However, the ultimate impact of WTO on exchange rates is not completely certain. WTO accession would probably stimulate capital inflows, creating upward pressure on the Chinese currency as well. WTO membership would discourage some manufacturing investment in China--since it would enable access to the China market without necessarily establishing a manufacturing presence. However, it would also create a new wave of investment in distribution and services. On balance, WTO membership will define China's policy orientation in coming years, affecting both macroeconomic policy and system reform.

Predicting the future policy configuration if China does not enter WTO is more difficult. WTO failure would increase pressure on Zhu Rongji's political position, possibly leading to his resignation. Although this situation would not necessarily lead to a fundamental change in economic policy, it would create new uncertainty and would probably produce a less competent and decisive economic leadership. In a non-WTO world, China's leaders would have a much more difficult task of stabilizing aggregate demand and generating new sources of domestic demand. Nevertheless, the potential domestic demand is huge. A program of accelerated rural electrification, rural roadbuilding, and telephone hookups, for example, could contribute substantially to future growth.

Chronic Unemployment
There should be little doubt that China is now entering an era of chronic unemployment. Unemployment at the end of 1999 will be worse than at the beginning. China's labor experts expect an additional 3 million layoffs from public enterprises in 1999, about the same as in 1998. Government layoffs are expected to total about 5 million over the next three years. Normal labor force growth will run 9 to 10 million new workers annually for the next few years.62 Clearly, the pressure of unemployment on China's economic policy will be unabated for at least several years.

The unemployment problem for China over the next few years probably will be chronic, rather than critical, for several reasons. First, the burden of unemployment falls disproportionately on middle-aged and older workers, particularly those with less education. Young workers are less seriously effected by layoffs and find work more quickly, particularly those who are well educated. Although this is unfair--particularly to those middle-aged workers who were deprived of the opportunity to get education because of the Cultural Revolution--it means that the unemployed are less likely to find effective leaders for their discontent. Second, a large proportion of the unemployed receive some support. Stipends for laid-off workers are small, but are not zero: in 1998, they were on average 27% of the average state wage.63 Many laid-off and unemployed workers have informal and part-time jobs; many live in households with two or more workers. Third, society has been prepared for a long time for the idea that the government cannot go on indefinitely supporting nonproductive public enterprises. Public acceptance of the need for layoffs appears to be relatively high, and if it turns out not to be, the government directs significant attention and coercive power to making sure that workers do not organize.

Increased Government Debt and Continued Concerns Over Fiscal Capacity
Despite the increase in the Chinese Government's ability to raise taxes from the economy, there will continue to be significant issues over the government's fiscal capability. In part, this is because financial sector bailouts and macroeconomic stimulus packages are adding to the government's total outstanding debt. The AMCs issuing bonds with the backing of the Ministry of Finance are not likely to realize more than a small proportion of the value of the assets they purchase from the banks. They are thus extremely unlikely to redeem the bonds they issue, and those will become part of the government debt. Government debt, which was only 12 percent of GDP at the end of 1997, is likely to rise rapidly to about 30 percent of GDP. Debt service obligations will put continuing pressure on the government budget.

At the same time, the budget management system desperately needs reform. Recently, the State Audit Bureau, established in 1996, issued its first real report to the National People's Congress on budgetary auditing. It was scathing, reporting that the current system of budgetary monitoring was simply not adequate to accurately track the flow of funds disbursed by the fiscal authorities. Over the next few years, we are likely to see a concerted effort to establish control over the budgetary process, subject it to normal accounting procedures, and establish a degree of transparency.

Continued Financial Turbulence
Government measures begun in 1998 make it much less likely that the state commercial banks will be the site of a major financial crisis. State commercial banks dominate the overall financial system. They are also the recipient of the strongest de facto government guarantee of depositors' assets. The remedial actions taken by the government over the past two years make it extremely unlikely that China's financial system will experience an overall meltdown precipitated by a collapse of confidence in the state banks.

Financial problems, however, exist in nearly every corner of the Chinese economy. Instead of a single, catastrophic financial crisis, we are likely to see a sustained series of financial crises affecting many different institutions. The 1998 bankruptcy of the Guangdong International Trust and Investment Company (GITIC) should be seen as the first in a long series of financial breakdowns and scandals. Several other so-called "ITICs" will likely be dissolved, and some will certainly dissolve amidst acrimonious wrangling. We should anticipate financial crises affecting both rural and urban credit cooperatives, as well as so-called rural cooperative funds (nongjinhui). Down the road, there are likely to be some major scandals surrounding some of China's pension funds, which have been locally managed and invested and in some cases have disappeared. Some of China's insurance companies are in precarious condition.

As a result, China's policymakers will be managing high levels of financial risk throughout the next several years. In the short run, this may even cause a flight to quality in which the state commercial banks increase their share of total financial system assets. Investors will need to differentiate much more sharply the degree of risk among different actors in China's financial system. This process has already begun.

Continued Privatization
Private-sector growth will continue and will accelerate in China. The new private company law provides sounder legal protection to private business than existed in the past. Restructuring of formerly public enterprises, especially from township- and village-level collectives, is rapidly swelling the private economy. Newly supportive policies toward private enterprise in the high-technology fields will ensure continuance of recent rapid-growth trends in that era.

The major uncertainty is whether a further round of state enterprise reform will lead to substantial privatization of state firms in the next few years. We may have much more information about this possibility after the Communist Party plenum that began on September 19. On balance, the plenum probably will approve policies that contribute to further privatization, without directly mandating mass privatization. In the medium run, state enterprise privatization probably doesn't matter as much as many think. Competitive sectors already have become extremely diverse, and even public firms have been forced to restructure. Monopoly sectors are still dominated by state firms, but those firms would have to be subject to an immature regulatory regime in the event of privatization. This change would restrain the pace of productivity-enhancing restructuring. Nevertheless, over the long run, more rapid privatization would clearly contribute to more rapid productivity growth and would increase China's growth prospects.

Implications for US Interests

China will continue to have an important economic impact on the United States. The economic picture there is likely to improve, and US corporations will continue to be interested in establishing a position in this large and growing market. Under the difficult economic conditions of the past two years, many--perhaps most--investors in China have had difficulty making money selling to the Chinese market. The intense competitiveness of that market is likely to continue for the foreseeable future. As economic conditions stabilize and incomes grow, however, there will be substantial market opportunities in China. Most obviously, Chinese membership in the World Trade Organization (WTO) would be strongly in the interests of the United States. WTO membership for China would provide American businesses and farmers with direct access to a significant and growing market. Today there are still very substantial limitations on access to that market, particularly to those who have not established an investment presence in China. WTO membership will increase American exports; in addition, it will allow US companies to earn additional income through operations in China. From an economic standpoint, discussion of American interests in China should be dominated by the question of WTO membership. WTO membership for China is strongly in our interest and should be actively pursued on the basis of the commitments already made by both sides.

The next few years are likely to see the emergence of a significant Chinese high-technology sector, based primarily on privately owned firms. This process is already under way, but has just begun to make an impact outside China. In the computer field, two of China's best known firms, Legend and Stone, have recently completed restructuring programs that make them much more effective corporations. Legend has been converted into a joint stock holding company, with managers and workers owning 35% of the stock. Stone has just been through China's first management buyout and is essentially being taken private. In the field of telecommunications equipment, an extremely capable employee-owned (not a collective) firm, Huawei, is rapidly taking market share away from foreign-invested equipment firms. What these firms have in common is a concentration of skilled manpower and an organizational form that allows them to harness high-powered incentives to create rapid growth.

These firms will sometimes be competitors to American companies and should be attracting the attention of their rivals. But more often, these firms will be potential partners to American firms. Despite their relative prowess within the Chinese context, these new private technology firms are still highly concentrated on the low end of their respective markets, succeeding and thriving precisely because they have responded to the incentives to enter at the relatively low-tech, labor-intensive end of the market. Nowhere is this more evident than in the personal computer business. Increasingly, American firms that design and brand computers actually manufacture through production chains that go through Taiwan and include mainland China. For example, a company like Great Wall--though not itself private--partners with IBM in China in two respects. At one end of the market it acts as a sales agent for IBM in the growing Chinese market; at the other end it produces and assembles some of the lower-end computer components. It also sells many of these lower-end components to Taiwan-based computer firms, which put them in products with many different brand names. As China's high-technology industry grows and becomes more private, a larger part of these production chains will relocate to China. This will help drive the process of productivity improvement in the industry, directly benefiting US consumers and indirectly improving the international competitive position of US companies, who manage the international production chains and profit from the final product.

Finally, the US should anticipate continued economic turbulence from China. China's young population is adaptable, but also inexperienced. China's financial institutions are fragile, and some are destined to fail. American businesses operating in China need to refine their risk management strategies. American policymakers need to anticipate continuing shocks coming from China. They should be prepared to manage the resulting impact. At the same time, it is important to see these shocks as growth pains, rather than as signs of an impending collapse. Financial turbulence in China indicates the growth of an economy in the context of immature institutions. Despite the institutional inadequacies, it is likely that the Chinese system will continue to display an adequate degree of resilience to sustain growth over the next several years.

Chinese Social Trends: Stability or Chaos

Martin King Whyte

. . . a continuum ranging from a very orderly stability to a revolutionary challenge to the regime . . . the analysis here suggests, the most likely prospect for the immediate future is closer to the "chaos" end of the scale, with a variety of kinds of popular turmoil repeatedly testing but not necessarily defeating the leadership's ability to maintain control.

In recent years attempts to analyze and predict political and social trends in the PRC have yielded wildly divergent scenarios. In what might be termed the "stability" scenario, China has been much more successful than Russia or Eastern European countries in implementing market reforms while simultaneously raising living standards. The general improvements in people's lives and the many new opportunities for enrichment available are seen as leading to acceptance of the political status quo, or even gratitude. When combined with the political lessons of the 1989 crackdown, these features of the Chinese situation are said to lead most Chinese to have little interest in politics or inclination to take risks to press for political changes. As long as China's leaders remain unified and can keep the engine of economic growth going, according to this scenario, they should be able to maintain the status quo and keep social tensions and conflicts under control.

A very different set of considerations is stressed in what might be termed the "chaos" scenario. This alternative stresses the wrenching and destabilizing impact of the shift from a socialist to a market system. As established ways of doing things and forms of security provided by socialist institutions are undermined, many Chinese struggle to cope and to learn how to operate in the new system. All around them they see reemerging the "social evils" that socialism was supposed to eliminate--foreign ownership, landlordism, prostitution, criminal syndicates, and so forth. Inequalities in income and wealth grow rapidly, and the conviction is widely shared that those who are monopolizing the gains are doing so through connections and corruption, rather than due to entrepreneurship, hard work, or great skill. The previous moral orthodoxy provided by Marxism-Leninism-Mao Zedong thought is in shambles, but no alternative moral vision has arisen to fill the vacuum. Increasingly Chinese see their society as characterized by an amoral, man-eat-man struggle, and in this context leaders at all levels are seen as venal and self-serving. Political controls and coercion may keep popular anger hidden much of the time and yield an appearance of political stability, but underneath the surface popular anger remains at high levels, and a variety of incidents and trends may lead to large-scale protests and political crises. In urban areas, in particular, residual hostility stemming from the Tiananmen massacre in 1989 increases the popular anger directed at the CCP. The chaos scenario, then, leads one to see China's leadership as sitting on top of a social volcano that may erupt at any moment.64

When confronted with such contradictory assessments of the situation, one is inevitably reminded of the fable of the blind men groping at different extremities of an elephant and trying to figure out what it is. As a sociologist I make no claim to be able to predict the future. This paper, however, will attempt to describe the broader context of the changes in China since 1978 in the hope that this context will help us judge the likelihood that a variety of social trends and tensions will threaten China's political stability. As the reader will see, this assessment will lead to the conclusion that there is considerable truth to the trends and dynamics stressed by both the "stability" and "chaos" scenarios, although not necessarily in the conclusions drawn from them. In other words, this analysis should lead to a greater understanding of the shape of the Chinese social elephant, but not necessarily to an ability to confidently predict whether that elephant will remain passive or go on a rampage.

Transformed State-Society Relations

Conventional wisdom holds that Deng Xiaoping and his colleagues presided over an attempt to reform the Chinese economy while preventing changes in the PRC's party-dominated political institutions. However, even cursory examination reveals that the major changes that have swept China since 1978 have not been confined to the economic realm. China is a very different society politically (as well as culturally and otherwise) than it was at the time of Mao's death, and the fundamental changes that have occurred in the nature of state-society relations increase the difficulty of ruling the world's most populous society. In order to understand these changes, it is necessary to briefly review the nature of the political and social order of the late-Mao era.

China at the end of the Mao era is sometimes characterized as an egalitarian socialist order, but the reality was more like a rigid, hierarchical form of feudalism with a strong admixture of Confucian statecraft. Individuals and families were either born into (in the case of rural communes) or bureaucratically allocated to (in the case of urban work units) relatively closed organizational cells where they served at the pleasure of the state. There was little in the way of free movement of people and information across the organizational boundaries of this cellular system. Although there were strenuous efforts to provide social security and relatively egalitarian distribution of income and social services within each cell, the cells themselves were arranged in a vast and very unequal hierarchy. Access to income, opportunities, information, and everything else varied sharply depending upon where you were in the bureaucratic system. The social world of those in advantaged cells (e.g., in resource-rich central work units located in urban areas) was profoundly different from those at the bottom of the system of bureaucratic ranks and castelike groups (e.g., individuals in poor villages in the hinterlands, political pariah groups).

Authority over this feudal-like hierarchy rested in the CCP and ultimately in its leader, Mao Zedong. The CCP used its control over information and communications to ensure that no rival ideas could compete with the official Marxist-Leninist-Maoist orthodoxy. Extraordinary efforts were regularly made to indoctrinate all citizens into this faith and to use political study, criticism rituals, campaigns, and coercion to ensure that critical and alternative viewpoints could not be spread and threaten faith in the official orthodoxy.65 That orthodoxy stressed themes such as individual and group sacrifice in the pursuit of the distant goals of socialism and communism, the constancy of class struggle, and veneration of Mao Zedong. Experiences of life in Maoist China produced personal hardship and family tragedies for many. However, any tendency to translate such experiences into shared grievances against the system, the CCP, and Mao was generally squelched by the quasi-totalitarian nature of CCP control over the social order and communications. No general public opinion could emerge within this social order, and individuals who harbored doubts or hostility toward Mao and the CCP tended to feel that they were isolated and out of step with the vast masses of enthusiastic citizens around them, comrades who were devotedly building socialism under the wise leadership of Mao. Getting ahead or just getting by depended primarily on currying favor with the bureaucratic gatekeepers in charge of your cell, rather than on any attempt to escape from your lot or to join with others to challenge the system.66

When the late-Mao social and political order is described in these shorthand terms, that this order has since been transformed in multiple and fundamental ways immediately becomes apparent. Those changes began to occur already during the Cultural Revolution and not simply after 1978. Although the Cultural Revolution appeared at times to be the zenith of totalitarian controls over the masses, the reality was more complex. The entire edifice of Party organizational controls and regular indoctrination of the masses fell apart for several years (roughly from mid-1966 until at least 1969), as did cellular controls on the movement of people and information. During periods of Cultural Revolution chaos, large numbers of people were on the move across the face of China (particularly, but not exclusively, young people). They had unprecedented opportunities to observe their society directly and to talk to individuals from other locales and walks of life without the normal supervision and controls of the organizational discipline of their unit. This period of extended personal autonomy had a profound impact on the outlooks of many Chinese citizens, especially as their observations of rural poverty, elite arrogance and corruption, and violence contrasted sharply with the faiths they had absorbed prior to the Cultural Revolution. Although Mao and his colleagues tried to revive the CCP and its systems of political controls and indoctrination after 1969, the damage proved irreparable. Many Chinese citizens by the early 1970s held an altered and darker picture of the nature of their social order, even though they knew that it was still dangerous to share this view with others.

The post-Mao changes ended this attempt to restore the former system of totalitarian control over people and ideas and fundamentally altered the nature of state-society relations. As noted earlier, there were multiple aspects of this transformation. The combination of the repudiation of the Cultural Revolution (and, by implication, of Mao's leadership) and the shift from a system of bureaucratic allocation to market distribution further undermined faith in the previous Marxist-Leninist-Mao Zedong Thought orthodoxy. The open-door policy also brought into China vast infusions of alternative ideas and cultural forms from which Chinese citizens had previously been isolated. At the same time, the belief that China was at the vanguard of the advance toward a better socialist future was replaced by official recognition that China was falling behind and needed to do whatever was necessary to avoid being left in the dust by more rapidly developing countries in Asia. The relaxation of CCP controls over acceptable styles of behavior, dress, culture, religion, and thinking combined with mass rehabilitations of victims of earlier campaigns had similar effects. These changes encouraged pluralism of thought and behavior and undermined any remaining view that there was only one proper, "proletarian" way for everyone to think and behave. The cellular walls of China's bureaucratic hierarchy also began to decay, with large scale migration occurring and a growing opportunity (or necessity) for individuals to leave the eroding security of their own units to compete in the new market environment. By the 1990s the socialist "social contract" had been fundamentally weakened, with security of employment, compensation, housing, health care, education, and other basics of life increasingly threatened, requiring individual and family decisions and investments in place of bureaucratic provision.

A variety of formulations have been used to characterize the changes in the Chinese political economy resulting from China's reforms. For example, analysts describe the shift of China from a totalitarian to an authoritarian system, from bureaucratic allocation to market distribution, and from a socialist social contract a new social contract based upon competition for individual and family enrichment. Whatever the particular rubric favored, there is general consensus that the political atmosphere in the PRC has been dramatically altered. Individuals and families have substantially more autonomy in most areas of their personal lives than they had in the Mao era, with their human rights less systematically violated.67 They are exposed to a variety of forms of culture, ideas, and values, rather than to the monochromatic proletarian straight jacket of the late Mao era. Public opinion has emerged as a political force in contemporary China, with the CCP hard pressed to counter attitudes and opinions that differ from the official line. Individuals no longer feel surrounded by zealous activists who will denounce them if they make a comment that deviates from the approved orthodoxy. Instead, in some instances, remaining "true believers" may feel isolated in the midst of increasingly critical and cynical colleagues. Political jokes at the expense of China's leaders that would have led to personal disaster in the late-Mao era are now widely shared and enjoyed. I imagine Jiang Zemin, Li Peng, and their colleagues feeling they suffer from a Chinese version of the "Rodney Dangerfield" syndrome--no matter what they do, they "don't get no respect." Clearly this is not a system that has maintained its political system intact while changing its economy.68

One might argue that in many respects the changes that have occurred in China since the 1970s, when taken as a whole, can be interpreted as indicating that the country is becoming a more "normal" society after a decidedly abnormal, totalitarian interlude during Mao's rule. And in any normal society, one might generalize, having vibrant and volatile public opinion trends and a healthy disrespect for political leaders should not pose a particular threat to the stability of the system. Indeed, it is a commonplace of political analysis that political systems that allow people to express their views and even their anger and thus provide "safety valves" for such sentiments are likely to be more stable than political systems that keep such feelings bottled up.

Several problems, however, arise with using this sort of "return to normalcy" argument to favor the "stability" over the "chaos" scenario. First, both China's imperial and socialist histories and the partial nature of the political changes since 1978 make the "safety valve" metaphor problematic. As Frank Parkin observed long ago in a related context, one of the virtues of a fully developed capitalistic system is that individual discontent tends to be vented in multiple directions--against rivals, one's own failings, the vagaries of the market, or fate, for example--and not primarily against the state. However, in a state socialist or other redistributive system, there is a very strong tendency for the state to be either credited or blamed for what happens in people's lives.69 Market reforms may have been calculated by Deng Xiaoping and his colleagues to eventually lessen the tendency of popular feelings to be focused on the state, but at present the state's hand in the PRC is very far from being "invisible." Thus, Jiang Zemin and his colleagues cannot take much comfort in the hope that their citizens will express their discontents in various and politically unthreatening ways. At present the leadership will continue to have good reason to fear the tendency for such popular feelings to be readily converted into anger at the system and the CCP itself.

A related reason why the expression of popular discontent cannot be presumed by the CCP to be normal and nonthreatening stems from the party's efforts to maintain its dominant organizational role in the altered political atmosphere of contemporary China. With intermediate associations and institutions remaining weak, hobbled by CCP supervision, or absent, the population may often feel that there are few or no viable channels through which their grievances and demands for redress may be fairly expressed and acted upon. Although some aspects of the reforms, such as legal institutionalization and experiments with labor arbitration, seem designed to overcome this problem, China's reality at present is one in which procedures for dealing with popular grievances remain weak and ad hoc. And as Samuel Huntington observed long ago, political systems that arouse high popular expectations without developing effective institutional mechanisms for handling such feelings within the system are asking for trouble.70

To sum up, the changes in China since the Mao era have produced a major alteration in the relationship between the CCP and the population. Although elements of these changes may eventually help to promote political stability, at the moment there remains a problematic situation. The CCP can no longer so effectively control mass sentiments and their public expression, and indeed a major reason for this change is that in the Deng era the CCP has not normally tried to do so. When popular discontent increases, however, and particularly when it gets translated into mass demonstrations, the CCP tends to feel threatened but at the same time to lack effective mechanisms for responding. The CCP's response is often to fall back on its repertoire of political rituals from the Mao era--for example, by declaring the actions in question a threat to the system, launching a political campaign, and using coercion to eliminate the leaders of such demonstrations while scaring any followers. (Witness the "three speaks" campaign aimed at elites and the over-the-top assault on Falungong currently under way in the PRC.) Given the wholesale loss of credibility of the ideological symbols used by the CCP to justify such responses, as well as the general popular distaste for the political rituals of the Mao era, these habitual regime responses are not effective ways to rebuilt respect for the CCP and its leaders.

The immediately preceding comments might be interpreted as leading to a prediction that favors the "chaos" rather than the "stability" scenario. However, such a conclusion would be premature and oversimplified. My comments to this point indicate that I agree with the portions of the "chaos" scenario that imply that many Chinese individuals and groups are suspicious, cynical, and angry about recent trends. As a result we can expect to see China's leaders at all levels struggling in the years ahead to deal with actual and potential mass contentiousness and fearful of the potential for "chaos." Evidence on mass movements and collective action around the world, however, indicates that it takes much more than grassroots discontent and anger to produce social movements that can threaten a nation's political stability. Translating popular resentments into serious threats to the system requires a large number of intervening conditions to be present. For example, the disgruntled need the opportunity to broadly share their sentiments with others, resources to use to pursue their interests and act on their demands while resisting official dependency and blandishments, effective leadership, a set of ideas and claims with mass appeal, opportunities to forge alliances with and recruit support from other groups, conditions that direct popular anger upward against the central state and its leaders, and weaknesses or constraints within the state leadership that prevent a unified and effective response (or lead potential demonstrators to feel they have support or even immunity from within the elite), to mention only a few key considerations.71 In other words, if China remains politically stable in the future, this could be due to some combination of popular satisfaction, passivity, and fear, as the "stability" scenario implies. It could instead, however, stem from the regime's skill and/or luck in squelching the many expected grassroots conflicts and protests that occur before they escalate into forms that threaten the system.

China's Current Social Tensions

With these comments as a background, we move into more speculative terrain. The remainder of this paper will be devoted to brief consideration of a variety of current sources of social tension and conflict in Chinese society, with some thoughts about which are likely to prove most serious or difficult to keep from escalating into a challenge to regime stability. Among those social tensions and disgruntled groups most often listed as potential threats to the system are the following:

What are the conditions likely to make each of these potential sources of tension either a manageable or a very serious threat to China's political stability?

Ethnic Tensions
The general relaxation of political controls in the post-Mao period reviewed earlier in this paper has allowed a significant resurgence of cultural and religious activity among China's nonsinicized minority nationalities. Particularly in Tibet and in Xinjiang, these trends have led to recurrent protests and challenges to Chinese rule, and to the mobilization of state coercion and controls in response. Several conditions seem likely to make these problems continue, including increased Han migration into minority regions and greater awareness of, and contacts with, ethnic and religious brethren outside China's borders. However, the peripheral location of the most serious conflicts and the lack of any signs of substantial support among Han Chinese for minority rights make it seem unlikely that these tensions could be translated into a general threat to China's political stability.72

Regional Inequality and Resentments From China's Interior
State policy and economic development trends since 1978 clearly have further exacerbated already large disparities in income and living conditions between interior regions and provinces and favored coastal locations. A number of Chinese political figures have worried aloud that if nothing is done to redress these growing disparities they will threaten China's stability. This situation, however, seems quite unlikely. Provinces and regions are large and amorphous units that do not lend themselves to strong popular attachments and protest mobilizations. Furthermore, the implied outcome of this kind of destabilization--a fragmentation of the Chinese state into component provinces or other subunits--would only compound the disadvantages of those presently living in interior regions. Unless other considerations argue for the benefits of separation (as with Tibet and Xinjiang), regional disparity trends are likely to lead instead to a variety of efforts by those in the interior to get a better share of the pie of a unified China--through changes in state policy, economic concessions, migration, etc.73

Angry Peasants
There are numerous signs that many in the Chinese countryside are angry about their lot and increasingly likely to become contentious. A variety of reasons for such sentiments exist. After being the prime beneficiaries of China's reforms in the early 1980s, China's peasants have increasingly been losing out as compared to urbanites. As a result, the gap between average rural and urban incomes has widened since the mid-1980s to levels that are higher than they were in 1978 and are unusually large compared to other developing societies.74 Chinese peasants also bear the brunt of an extraordinarily coercive state-mandated family planning system that makes difficult the ability of millions of families to realize cherished fertility goals. Many peasants find that they are at the mercy of local officials who regularly impose extra taxes and fees to support favored projects and blatantly ignore state efforts to outlaw such "excess burdens." Although they are freer than in the Mao era to move around and seek economic opportunities in the cities and elsewhere, the maintenance of the household registration system keeps most peasants confined to a lower caste position, subject to discrimination and mistreatment as compared to registered residents of the locales to which they move.

These kinds of problems have produced an upsurge of protest movements across the face of rural China in the 1990s, some of them quite large in scale.75 Given the fact that the CCP came to power on the basis of a rural revolution, again some analysts within China have seen peasant anger as a serious threat to the system. However, there are a number of reasons for skepticism about such analyses. First, whatever the modest weakening of the power of China's central authority in the reform era, conditions today are far different from those in the 1920s and 1930s, making the establishment of a rural "base area" of protest against the CCP seem quite unlikely. As with regions and provinces, it also seems quite doubtful that rural residents identify strongly with other peasants and feel hatred for urbanites in general. Most rural protests seem concerned with much more parochial violations of expected treatment of residents of particular locales due to the actions of local officials at one level or another. To date the authorities have been able, through a combination of concessions and coercion, to prevent such local contentiousness from translating into broader rural protest movements.76 China's rural residents may not be Marx's "sackful of potatoes" and their growing sophistication and knowledge of the system in which they live makes them increasingly vigorous defenders of their rights, rather than passive tools of their leaders.77 There is little reason to think, however, that recurring protest activity at the grass roots in rural China cannot be dealt with at that level without escalating into a regime-threatening protest movement.

The Floating Population
China's reforms have loosened the feudalistic bonds that tied China's rural residents to their villages, and as a result large numbers of migrants have flooded into China's cities. At any one time it is estimated that there are 80-100 million such members of the "floating population," and favored cities are awash in the resulting human tide. A recent count in Peking, for instance, led to an estimate that that city contained 3 million "floaters" in addition to its 10+ million regular urban residents.78 Many "floaters" manage to find short- or longer-term jobs, but even so they retain the stigma of their rural registration, ineligible for many of the benefits that urbanites receive, and they are often feared and looked down upon by the city's permanent residents.79 Their marginal connection to the urban system is often seen as making them less likely to play by the official rules, and they are often blamed for the upsurge in serious crimes in cities in recent years.

In this case as well, however, there are reasons to doubt that China's floating population will become a serious threat to the system. This doubt is informed partly by research on squatters and migrants in other developing countries. Fears of migrants as a source of social and political disorder are common, but instances in which they mobilize to challenge the state are extremely rare. Generally speaking, migrants lack many of the structural conditions mentioned above that might translate their resentments into an effective political movement. They come voluntarily in pursuit of advantages and generally stay only when they are successful in this pursuit; their frame of reference tends to be kinsmen back in their village rather than favored urban residents or fellow migrants; they often live dispersed among others with whom they are in competition; they lack the social space, resources, and leaders to effectively mobilize; and so forth. All of these considerations make it seem likely that China's urban migrants are more a source of stability than of instability.80

SOE Workers, Laid-Off Workers, and Pensioners
Although China's proletarians were never the "masters of the state" that Marxism proclaimed, within the bureaucratic structure of Mao-era China they were fairly well treated. They generally had relative incomes, job security, and fringe benefit coverage that workers in other developing countries could only envy. These advantages have been a primary target of China's reforms, particularly in the 1990s. With large proportions of SOEs operating at a loss and under great pressure to cut costs and downsize, millions of long-time SOE employees have been laid off. Even those who remain at work are often subject to an increasingly draconian industrial regime of rules, fines, and close supervision reminiscent of "scientific management" in early capitalism in the West.81 Furthermore, many of the subsidies and benefits that they formerly received have been weakened or eliminated, forcing them to pay much more of the cost of housing, medical care, schooling, and other necessities than in the past. Some hard-pressed firms are not able to meet their payrolls or pay the pensions of their retirees, actions that often spawn protests by workers and pensioners, who consider that long-standing commitments are being violated. As present and former SOE workers see the benefits they enjoyed under socialism being whittled away, all around them they can see new beneficiaries of the reforms--for example, private entrepreneurs, foreigners, rural migrants, and a "new class" of officials-turned-business executives. Given these trends it is understandable that worker protests have escalated in recent years, and that fear of worker protests is often seen as a primary obstacle to a more thorough reform of the SOE system.

In this instance the potential for serious challenges from China's SOE workers cannot be dismissed out of hand. Several structural features of the workers' situation are conducive to mobilization of worker protest movements. For example, SOE workers remain highly concentrated in relatively large units that long operated as highly integrated "urban villages." The potential for solidarity and sharing of grievances within this sort of structure seems particularly high. The potential for leaders of organized protests to emerge among people who have lived and worked alongside each other for decades also seems considerable. Anger over promises not kept, benefits withdrawn, and jobs lost seems likely to be more politically dangerous than the sort of envy at the more rapid improvement enjoyed by others that is characteristic of many other groups in China today. Furthermore, in this case the tendency to blame the state as the initiator of SOE reforms, rather than oneself, rivals, or local managers, seems relatively great.

To date, however, large-scale layoffs and other problems of SOE workers have not been converted into serious challenges to state authority; we can reasonably ask, why not? Several other features of the situation of workers seem to counterbalance the tendencies just enumerated, and thus to preserve the status quo. First, the writing has been on the wall for SOE workers since the mid-1980s, so that the loss of their privileges does not come as a shock. Their looming difficulties presumably induced many ambitious and dissatisfied SOE workers to find new employment elsewhere, whether directly from their SOE jobs or after having been laid off. The existence of this "exit" option makes life within an SOE less onerous than in the Mao era, and the selective nature of the exit flow probably acts to ensure that those who remain tend to be individuals who are relatively grateful for retaining their dented iron rice bowls and concerned about how they will fare if they lose the remaining pay and benefits. In other words, it seems likely that individuals who are potential militants for workers' rights are also more likely than others to leave in pursuit of better opportunities elsewhere.

That most SOE downsizing has taken the form of layoffs rather than outright terminations is also a factor. Those who are laid off continue to receive some pay and often remain in unit-supplied housing as well, benefits that they may fear losing if they rock the boat. The fact that at least until recently China's buoyant economy has provided new job opportunities for many of those laid off, sometimes without jeopardizing the subsistence pay and benefits they receive from their SOE former employer, again seems likely to reduce the potential for worker unrest to escalate into serious challenges. We must also take into account the regime's extraordinary vigilance against any sign of autonomous organizing among workers to advance proletarian claims. The paranoia of China's leaders about the dangers of a Polish-style "Chinese Solidarity" movement makes any effort to mount a worker challenge against the state extraordinarily risky.

Another stabilizing factor is that to date most worker protests seem to have been directed at immediate managements and sometimes at local officials as well, and not upward against the central leadership. There are a variety of possible reasons for this myopic state of affairs.82 In part what may be operating is a perception that higher levels of the state, while ultimately the inspiration of the reforms that are whittling away worker rights and benefits, are paradoxically also the main source of potential protection against overly aggressive or arbitrary SOE management. In other words, when a reformist manager implements a threatening new practice that workers want to challenge, their primary recourse is to do such things as stage a sit-in outside local or higher government offices to demand that their grievances be heard. One common response to such protests is for besieged officials to pressure the SOE managers involved to work out concessions in order to restore order, with the state perhaps providing new funding to facilitate such concessions. To the extent that this process recurs, the state may be able to burnish its image as a protector of worker rights, rather than as the ogre who pulled the rug out from under the workers.83

A final consideration is that many SOE workers and pensioners may accept the justifications the regime provides for its reforms. China's proletarians are only too aware of how inefficient and unproductive SOEs were in the late-Mao era. Even if they resent the threats the reforms pose to their own livelihoods and work habits, they may nonetheless accept the state's claim that radical SOE reform is necessary in order for China to compete economically. If the legitimacy of such claims is accepted, then worker anger will be directed at those who are seen as unfairly implementing the reforms, not at the central state that launched them. To the extent that this is the case, worker anger as a result of SOE reforms is not likely to translate into a serious challenge to the state.

Alienated Students and Intellectuals
Students and intellectuals have been leading participants in the major demonstrations and crises that have shaken post-1949 China, ranging from the 100 Flowers Campaign of 1956-57 to the Tiananmen demonstrations in 1989. Student protest activity of course has a much longer history in modern China.84 Research on mass movements elsewhere (as well as of Marxist theory) commonly indicates that other groups in society rarely mobilize beyond parochial concerns unless allied with or led by students and intellectuals. For a variety of reasons, then, we logically should look to China's intellectual elite when contemplating the prospects for stability or chaos in that society.

A variety of considerations are likely to sustain high levels of alienation among China's students and intellectuals. Although some of the major criticisms of the regime raised in 1989 are not currently so important--inflation, for example (deflation is now more of a danger)--others continue to generate discontent. Corruption continues to be pervasive, with the official campaigns launched against this evil considered highly selective and ineffective. The shopworn socialist slogans and rituals that the regime tries to use to legitimize its programs are widely rejected, and the absence of an alternative moral vision is particularly troubling to the inheritors of China's literati tradition. Also, the legacy of the events of 1989 convinced some members of China's intellectual elite that the regime was so repugnant that it could not be reformed.

Although these considerations indicate that a reservoir of alienation among many students and intellectuals will remain a threat to China's leadership in the years ahead, other developments may make another large-scale student uprising less likely. Several features of student life have changed in ways that may reduce the potential for student activism somewhat. University enrollments have expanded substantially in the last decade, a trend that may dilute the likelihood of college students to see themselves as a deserving elite. The system of bureaucratic assignment to jobs after graduation, which still dominated in 1989 despite official promotion of individual competition for employment opportunities, has for the most part collapsed. Thus students are likely to feel that they have much more control over their own professional futures, and are less subject to the arbitrariness and favoritism of university bureaucrats. In addition, the authorities are much more vigilant and even paranoid in trying to nip in the bud any early signs of revived campus activism. Regular threats and the annual spring "lockdown" of Beijing area campuses indicate that any future student-led demonstrations will have much more difficulty building up the kind of momentum and support that they received in 1989. The sense of partial immunity to potential regime coercion that helped embolden student protestors in 1989 also is no longer present.

In regard to intellectuals in general, both official policies and economic trends have to a considerable degree altered the situation of the late-1980s, when the rewards of the reforms seemed to be passing them by. Both state-sponsored wage increases for intellectuals and the rapid growth of new high technology employment opportunities in the 1990s substantially have eliminated the situation in which returns to education were abnormally low in late Mao-era and early reform-era PRC.85 Now once again China's knowledge workers can have some confidence that excelling in school and at work will lead to economic as well as spiritual rewards. Insofar as the hypocrisy of the gap between meritocratic slogans and China's residual bureaucratic/virtuocratic reality was a factor in student and intellectual anger in 1989, this should be less of a factor in the future. In sum, although past history makes discounting the potential for a student-led mass movement in the future dangerous, on balance this potential source of regime instability also appears somewhat more manageable than in the past.

Alternative Faiths and Sects
The discussion to this point has focused on a fairly conventional set of potentially aggrieved social groups and has involved a sociological analysis of the forces likely to promote or counteract the tendency of these groups to mobilize to redress grievances. The challenge presented to the regime in 1999 by Falungong alerts us to the need to consider alternative sources of challenge to regime stability. Although we do not yet have very much research on the membership and organization of this Qigong sect, its reported millions of members span regions and social groups, rather than representing a well-defined social constituency.86 There appears to be a tendency for the members to be middle-aged or older and to represent a variety of occupations in urban areas (including party cadres) more than rural China, but still the absence of a common social origin is notable. The sect's members are united not by common social origins, but by their mode of response to China's current moral vacuum. They have found new meaning and moral guidance in an eclectic mixture of Qigong rituals and Buddhist and Taoist practices devised by sect founder Li Hongzhi, and in the discipline and solidarity they find among fellow believers in this new (but in some ways very old) faith.

There are several good reasons for China's leaders to be concerned about the challenge posed by Falungong. They were taken completely by surprise by the 10,000 or so highly disciplined Falungong members who staged a sit-in outside Zhongnanhai in April. They were presumably very dismayed to discover that their longstanding and vigorous efforts to prevent the formation of any autonomous organizations in China had failed to halt the rise of a movement claiming millions of members nationwide. Knowledge of the key role played by alternative faiths and charismatic leaders in movements that shook or overthrew earlier Chinese dynasties (Li Hongzhi as Hong Xiuquan?) must compound these worries. The dispersed and diverse nature of the membership and the apparent strength of their alternative beliefs seem to make them immune to the kinds of carrots and sticks the regime uses to deal with dissatisfied workers, peasants, or students.

Despite these ominous indicators, there are reasons to question how much of a threat to regime stability this movement can or will pose. Its leader is living in exile in New York, and even with the aid of the Internet, how well the movement can respond to regime coercion without its charismatic leader on site to lead the charge is unclear. The main thrust of Falungong activities seems to revolve around personal salvation rather than alternative social and political programs for China. Thus members may "tune out" the political and commercial messages of the society around them without challenging them directly (although that could change as a result of the current official suppression campaign). There are no signs to date that Falungong has tried to link up with aggrieved peasants, workers, or other groups, a development that would make them much more threatening. Although the movement is very large, at the same time it is also basically a sectarian movement in which one has to believe in order to join and participate. This factor cuts off large and influential parts of China's population, including many young people, Westernized intellectuals, and even supporters of rival Qigong masters. In short, the regime seems to have overreacted in claiming that Falungong represents a serious political threat to the system. Nonetheless, the continuing moral vacuum produced by the collapse of beliefs in Marxism and socialism provides fertile ground for new faiths to arise in China, and if such faiths develop political and social agendas and embed themselves in aggrieved social groups, they could pose serious challenges to the regime.


This survey of potential threats to system stability in China obviously is not exhaustive. One can think of a number of other possible sources of instability--for example, from a military angry about its loss of status and forced divestiture of lucrative business assets, or from diehard Marxist intellectuals attempting to appeal to workers and peasants. Given our inability to anticipate the events of 1989 and the rise of Falungong, the possibility of new and unforeseen groups and movements mounting a challenge to China's leaders cannot be discounted. However, given this major caveat, the analysis presented here suggests several primary conclusions.

The Future of China's Foreign Relations and Security Posture,2000-2005

David Shambaugh

We are likely to see a China that feels increasingly insecure and nervous about its security environment, with increasingly strained relations with major regional powers, driven increasingly by nationalism and impatience over Taiwan.

"Prediction is difficult--especially about the future." --Yogi Berra

The New York Yankees star may not have been a Sinologist or intelligence analyst, but his common sense wisdom applies to this collection of assessments and estimates. Given the spotty track record of China watchers, it behooves us to be modest in our attempts to forecast China's future evolution--even five years out. Yet, this is a narrow enough timeframe to do what is possible: extrapolate from current realities and trends and weigh the possibilities of intervening variables affecting the existing trajectories of China's behavior and future course. Identification of existing variables and extrapolation of existing conditions, however, constitutes incomplete intelligence analysis. Forecasting also involves considering the potential for the unexpected--the radical event that could disrupt straight-line trajectories. When considering the potential future evolution of China's foreign relations over the next five years, therefore, one must begin by considering the possible impact of profound domestic change.

The Internal-External Nexus

Although the possibility of major social upheaval, leadership divisions, systemic political change, and prolonged economic retrenchment do exist in China, the likelihood of each should not be considered as high or probable.89 Many experts, including the contributors to this symposium, believe that China will likely "muddle through" in these areas without dramatic change. Yet, neither should these possibilities be ruled out. To assume essential stability and continuity in China would be an analytical and intelligence failure of colossal proportions, as historical experience has proved different. In China, expect the unexpected.

Although the probability of major upheaval is low, each possibility would necessarily have an impact--positive and negative--on China's relations with the world and strategic posture. A prolonged economic downturn would exacerbate existing social tensions and could trigger more widespread protests.90 Social upheaval and aggravated economic dislocations would also impact negatively upon the confidence of foreign investors and traders--thus exacerbating the crises. It would also restrict funds available for military modernization. Generational turnover in the CCP, which will bring the "fourth generation" of leaders to power at the Sixteenth Party Congress of 2002, will affect China's external posture--although, as the contributions by Li Cheng and Lyman Miller indicate, how their view of the world will differ from their predecessors is not clear. Elite factionalism could affect approaches toward the United States and--as was witnessed in 1989--elite paralysis could fuel social discontent. Out of social unrest could come fundamental regime change, but the process would no doubt be protracted and bloody. Social upheaval in China would not be positive for China's neighbors or the global community, even if it did result in regime change. It would no doubt result in a refugee exodus from China, endangering foreign investments and citizens, could negatively affect China's proliferation stance (and could even create a problem of "loose nukes"), and would certainly require military action to quell disorder--thus producing human rights abuses on a mass scale. Although social unrest in China would bring pressure on the regime, whether it would produce regime change and bring to power a more liberal variant is not clear. It could, in fact, result in the emergence of a more draconian government in Beijing. On the other hand, systemic political change could have a positive effect on China's relations with the United States and its neighbors--presuming that it produced a proto-democratic system and more liberal regime emerged to replace the Chinese Communist Party. While a non-Communist Chinese Government would no doubt pursue many of the same goals as has the CCP--economic modernization, bringing Taiwan under national sovereignty, resisting an expanded regional role for Japan, and enhancing China's military power--a post-Communist government would likely also hold more appeal to Taiwan, would be more transparent economically and militarily, would be less corrupt and more accountable to its citizens, would have an improved human rights record, and would have less reason to challenge the role of the United States in Asia and the world.

Notwithstanding these domestic variables and their potential impact on China's external posture, the balance of this paper extrapolates from current realities and examines prospects for the future evolution of China's foreign relations and strategic/military posture over the next five years. It is divided into two principal sections. The first considers China's overall foreign policy orientation and strategic posture and assesses the potential for continuity and discontinuity in this sphere. It essentially concludes that China's relations with major powers on its periphery, possibly including Russia, are likely to become more strained in the next five years, and that China will face a more unsettled and stressful national security environment. The second section examines the Chinese military more directly. While it notes that the People's Liberation Army (PLA) is in the midst of implementing sweeping and comprehensive reforms in a variety of sectors and institutions, particular attention is paid to the weaponry that the PLA currently fields and will likely acquire over the next five years. Each of the sections concludes with a section assessing the potential impact on US interests.

China's External Orientation

Ambivalent Security
The People's Republic of China (PRC) currently enjoys an unprecedented period of peace and security on its borders, yet its officials and international affairs analysts live with a strong sense of insecurity and suspicion about potential instability and threats on its periphery--primarily from Taiwan, the United States, Japan, and India. This ambivalence is manifest as follows.

As China enters the 21st century, the nation seemingly faces no immediate external military threat to its national security. China's borders are now peaceful, the former Soviet threat has disappeared, and Beijing has forged normal diplomatic relations with all its neighbors. Ties to the member states of the European Union are also sound. Relations with the United States and Japan, however, remain fluctuant and sometimes fractious. But this has been the case for at least a decade. The possibility for conflict to erupt over Taiwan's and China's maritime claims remains, and are increasing as potential flashpoints, although China does not at present have the military capability to force its will in either case.

This pacific situation is striking when compared with China's security in the past. For many years, China faced virtual military encirclement by antagonistic nations. For much of its history, the PRC experienced a very threatening external security environment. Today, the PRC has been able to pacify its borders and build stable and cooperative relationships with all fourteen nations on its periphery.

China and Russia: New "Strategic Partners"

The transformed nature of China's regional posture is perhaps nowhere more notable than in Sino-Russian relations, which have moved from the brink of nuclear war to a "strategic partnership."91 This designation was first proposed by the Yeltsin government in April 1996, and has since become a blueprint for Beijing's relations with other major and medium powers. Two-way trade remains relatively minuscule ($5.5 billion in 1998, representing only two percent of total PRC trade volume and less than five percent of Russia's) and is largely limited to compensation trade and some exchange in the spheres of machine building, electronics, power generation, petrochemicals, aviation, space, and military technology and weapons. The two countries set a target of $20 billion for two-way trade by 2000, although this seems far too ambitious as the two actually have few economic complementarities. Indeed, two-way trade declined from $6.8 billion in 1997 to $5.5 billion in 1998. In an ironic historical reversal, in an effort to help alleviate its basket-case economy, Beijing even offered a $5 billion loan to Moscow in 1998.

Reciprocal summits between the heads of state now take place annually, where the leaders regularly pronounce solidarity against the "hegemonic" United States. Lower-level governmental contacts are regular and apparently warm. The two former enemies have now completely demarcated their long-disputed 4,340-mile border and have demilitarized the border region. Both sides have placed limits on ground forces, short-range attack aircraft, and antiair defenses within 100 kilometers of the joint frontier. As part of two landmark treaties--the Agreement on Confidence Building in the Military Field Along the Border Areas and the Agreement on Mutual Reduction of Military Forces in the Border Areas--signed together with Russia, Tajikistan, Kazakhstan, and Kyrgyzstan in April 1996 and April 1997, respectively, China and the other signatories agreed to force reductions that will limit each to maintain a maximum of 130,400 troops, 3,900 tanks, and 4,500 armored vehicles within this 100-kilometer zone.92 China and Russia have also signed several other bilateral agreements to stabilize and enhance their mutual security--including a nuclear non-targeting agreement (1994) and an agreement to prevent accidental military incidents (1994). The two military establishments have forged particularly close relations--including the transfers of substantial numbers of Russian weapons and defense technologies to China (including training). Russian arms exports to China in 1996 were an estimated $2.1 billion, comprising nearly one-third of their total bilateral trade. Overall, China has bought approximately $8 billion in Russian weapons between 1991 and 1999.

Although claiming that Russia has turned from China's adversary to ally would be an exaggeration, and both countries profess that this is not their goal, the new "strategic partnership" has substantially enhanced their mutual and regional security and gave them common cause in opposing "hegemonism and power politics"--Beijing's codeword for the United States.93 The 1999 Kosovo crisis helped to cement the new-found Sino-Russian strategic solidarity, but even before they had increasingly begun to side together by voting in opposition to the United States in the UN Security Council and other international forums. There is little doubt that Chinese leaders and strategists view the United States as the greatest threat to world peace, as well as China's own national security and foreign policy goals. China's 1998 Defense White Paper is only thinly veiled on this point:

Hegemonism and power politics remain the main source of threats to world peace and stability; the cold war mentality and its influence still have a certain currency, and the enlargement of military blocs and strengthening of military alliances have added factors of instability to international security. Some countries, by relying on their military advantages, pose military threats to other countries, even resorting to armed intervention.

Thus far, Sino-Russian opposition to the United States and its allies has remained only rhetorical, but it could become more tangible over time.

China's Other Regional Relations: Pacifying the Periphery

During the decade of the 1990s, China also mended fences with India and Vietnam. While border disputes still exist in each case, various confidence-building and security measures (CBSMs) have been put into place along the common borders and negotiations proceed to resolve more longstanding territorial disputes. The November 1996 Agreement on Confidence-Building Measures in the Military Field Along the Line of Actual Control in the China-India Border Areas was a very significant initiative to lower tensions and reduce the possibility of accidental conflict. Although diplomatically correct, Beijing's ties to Hanoi remain fragile, while Vietnamese officials and analysts remain deeply suspicious of their northern neighbor.94

In the case of Sino-Indian relations, strengthened ties literally went up in smoke with New Delhi's detonation of five nuclear devices in May 1998. Pakistan followed suit and could not have done so without China's assistance to its nuclear development program over many years. Beijing was quick to join the international condemnation of India and has since worked to keep pressure on New Delhi to freeze its nuclear program and development of delivery systems. Chinese security specialists have long viewed India as a "regional hegemon." Similarly, many in India have long seen China as a threat to its security. In justifying its nuclear testing, the government in New Delhi cited the Chinese nuclear "threat" as well as a perceived containment policy by Beijing. As a result, Sino-Indian relations are again filled with mutual animosity and suspicion and have the potential for long-term rivalry and friction.95

Following the collapse of the Soviet Union and independence of Central Asian states, China moved quickly to establish diplomatic relations and has subsequently built sound ties with its new neighbors. One of Beijing's motivations for solidifying ties with the CIS states is due to its own fears of ethnic unrest among its Muslim and minority populations in Xinjiang Province. Small arms and other support have flowed to insurgents in China's northwest from Iran, Afghanistan's Taliban, and sympathetic brethren in the CIS states. Another motivation is China's growing energy need. Central Asian oil reserves are estimated at about 200 billion barrels, and this has become strategically important to China as the PRC became a net importer of crude oil in 1996 and relied on the Middle East for 53 percent of its total imports in the same year. The PRC has paid particular attention to Kazakhstan, with which it has signed several accords for joint energy exploitation. Accordingly, an oil pipeline has been built between the two, which began to carry crude to China in 1997.

During the 1990s, China has also recognized and normalized diplomatic relations with the Republic of Korea, Singapore, and Indonesia--thus taking significant steps to stabilize its periphery and regional security. Despite ASEAN suspicions arising from contested claims to islands in the South China Sea, the China-Myanmar relationship, China's military modernization program and long-range strategic objectives,96 Beijing has also been able to build amicable ties to Southeast Asian states. Indicative of these improved ties, China-ASEAN trade reached $23.5 billion in 1998 (quadruple that of 1990) despite the impact of the regional financial crisis. China's trade with South Korea has similarly mushroomed, also rising from a negligible amount in 1990 to $21.3 billion in 1998.

Among its foreign relations, China's relations with Japan and the United States have been the most difficult and strained in the post-Cold War period. But even here, bilateral relations have improved from the depths of post-1989 period. To be sure, these relationships are imbued with much historical residue and complexity, and it is likely that they will both continue to be characterized by a combination of limited cooperation and friction for some time to come.

China and Japan: Suspicious Neighbors

The palpable tensions revealed at the disappointing Sino-Japanese Summit of November 1998 (the first visit by a Chinese head of state to Japan) are indicative of the continuing deep distrust harbored on both sides. President Jiang lectured his hosts at every opportunity about Japan's need for further atonement for World War II aggression. Jiang and other Chinese officials also regularly chide Japan about the ambiguity in the renewed US-Japan Defense Guidelines and Mutual Security Treaty, suspecting it to be a ruse for intervention in a Taiwan crisis or elsewhere in Asia. The Sino-Japanese dispute over the Senkaku/Diaoyu Islands remains an additional irritant. For its part, Japan eyes Chinese nationalism and military modernization warily. Corporate Japan is also uncertain about the business climate in China, resulting in a 27-percent drop in direct investment by Japanese companies in 1998 (to $3.16 billion).97

Despite these mutual suspicions and difficulties, both governments have worked to keep a floor under the relationship so that it does not devolve into a hostile confrontation. Prime Minister Obuchi's visit to China in July 1999 was indicative of this effort, as the two sides agreed to further institutionalize cooperation in several fields (including bilateral agreement on the terms of China's accession to the World Trade Organization). Tokyo and Beijing are likely to continue to cooperate at a governmental level, while harboring deep distrust of each other at a societal level.

The United States and China: From "Strategic Partners" to "Strategic Competitors"?

Deep suspicions also underlie Sino-American relations.98 These existed prior to the Kosovo crisis and Yugoslav War, but they significantly worsened as a result of the conflict and particularly the mistaken bombing of the Chinese Embassy in Belgrade. The revival of Sino-US relations during 1997-98, which accompanied the exchange of presidential visits, produced a fragile and temporary stability in the relationship. Domestic opponents in both countries continued to undermine the warming trend, while the two governments remained hard pressed to show tangible results of cooperation to verify the "constructive strategic partnership" both sides professed to be building. Although some important agreements were reached--particularly in the areas of arms control, environment, and military ties--a subterranean skepticism existed among many observers.

NATO's use of force against Serbia, and particularly the bombing of the Chinese embassy, shattered the fragile rapprochement of the two powers. These events produced a sea change in Chinese perspectives--civilian and military alike--on the United States. Images of America turned from cautiously critical to hostile overnight. The attacks by thousands of Chinese demonstrators on the US Embassy in Beijing and consulates elsewhere expressed the depth of public hostility, but it was also evident in elite attitudes and commentary. A torrent of anti-American invective was unleashed in the Chinese media the likes of which had not been seen since the Cultural Revolution. The official People's Daily, the mouthpiece of the Communist Party, published a series of authoritative "Observer" and "Commentator" articles lambasting American "hegemonism," "imperialism," "arrogance," and "aggression," and "expansionism." One article accused the United States of seeking to become "Lord of the Earth" and compared contemporary American hegemony to the aggression of Nazi Germany.

The residue from the embassy bombing and Kosovo crisis has introduced new instability to an inherently fragile relationship. It has also added to the growing strategic competition between the two countries. China lacks the political influence and military power to contest the United States globally, nor does Beijing seek to wage a Cold War-style competition with Washington. The new strategic competition between the United States and China is being waged over the very structure and norms of international relations, as well as the behavior of the United States in the world. China seeks a "multipolar world" in which American "hegemony" is diluted and dissolved, while the United States seeks global "leadership." The United States has been working to expand and strengthen bilateral and multilateral security alliances in the post-Cold War period, while China calls for the abrogation of all such alliances. Differences over sovereignty and the issue of "humanitarian intervention" are particularly nettlesome, and there are divisions over the role of the UN in peacekeeping operations.

Thus far, Sino-US strategic competition has largely been a war of words, despite the mistaken bombing of the Chinese Embassy in Belgrade and Chinese "missile diplomacy" near Taiwan in 1995-96. Increasingly, though, the two nation's hard national security interests rub up against each other in the Asia-Pacific region--particularly with regard to Taiwan's security; US alliances and military forces in the region; strengthening of the US-Japan Mutual Security Treaty and expanded Defense Guidelines; and prospects for theater and national missile defenses (TMD/NMD). Beijing's opposition to Washington's "dual containment" of Iraq and Iran is an added irritant. Institutionally, the competition is increasingly apparent in the United Nations Security Council and other forums, where diplomats of the two countries debate each other. While not yet a new Cold War of geopolitical competition or a clash of civilizations in the Huntingtonian sense, the essence of the new Sino-American strategic competition is very much a clash of worldviews about the structure and nature of international relations and security. The contested weltanschauung is buttressed by the growing strategic competition over the balance of power and structure of East Asian security and the Persian Gulf.

Although I anticipate increased friction between Washington and Beijing in the years ahead, these strategic competitors need not become adversaries. Indeed, they can cooperate in some realms while competing in others. While having strong differences over issues of "high security"--Taiwan, the US-Japan alliance, TMD and NMD, NATO and other security alliances, Iran and Iraq, etc.--the two governments do cooperate in areas of what may be described as "low security": fighting narcotics production and smuggling, organized crime, alien smuggling, and environmental security. They can also cooperate in "high security" areas such as North Korea, stemming proliferation, and weapons of mass destruction (WMD). Thus, as figure 9 illustrates, relations between the United States and China will embody elements of both cooperation and competition, but I would expect that in the strategic/security realm, they will increasingly gravitate toward the antagonistic end of the median point on the continuum.

There remains an opportunity for the United States and its allies and security partners to establish a strategic relationship of competitive coexistence with elements of cooperation with the PRC. Even this kind of relationship will require constant high-level attention to policy and hard work by both sides, if a real adversarial relationship is to be avoided. As apparent recently, the Chinese leadership has realized that, despite its differences, it must coexist with the United States and that the United States holds the key to numerous goals Beijing seeks economically, politically, and in terms of China's security. For its part, the US administration continues to ignore public distrust of China and work toward "building a constructive strategic partnership for the 21st century."99 The joint desire of the two governments to arrest the downward spiral in relations, and to cooperate together where possible, may "cushion" bilateral ties from further deterioration.

Figure 9
China/United States: Elements for Harmony and Antagonism

China's External Posture: Implications for the United States

Looking out toward 2005, I foresee both continuity and potential for change in China's foreign relations and general strategic posture.



When considered together, these potential continuities and changes suggest substantial strains in China's external relations over the next five years. We are likely to see a China that feels increasingly insecure and nervous about its security environment, with increasingly strained relations with major regional powers, driven increasingly by nationalism and impatience over Taiwan. In such an environment, the Chinese military is an increasingly important variable.

China's Military Modernization and Reform

The most important fact to grasp about the future development of the People's Liberation Army (PLA) is that, as an institution, it is trying to implement an unprecedented and highly complex range of reforms simultaneously. The PLA is currently being reformed from top to bottom and across every service arm, military region, and functional department. Both incremental and fundamental reforms are being thrust on the military in the areas of doctrine, training, logistics, conscription, command and control, computerization, procurement and defense production, budgeting and external sources of funding, force structure, and other areas. Hardly a sphere of military life is going untouched. Any military would have difficulty adjusting to, and absorbing, such a full range of ongoing reforms, and they are undoubtedly causing difficulties for the PLA.

Although not seeking to minimize these thoroughgoing reforms, space constraints in this paper do not permit full consideration of them.101 As many of the reforms are known to experts on the PLA and are increasingly available in the public domain,102 discussion in this section will be limited to the weapon systems and capabilities of the PLA--with an eye toward the kinds of weapons and capabilities that the PLA will have at its disposal over the next five years.103

How Capable Is the PLA?
There has been a growing debate among "PLA watchers" over the competence and capabilities of the Chinese military at present and in the near-to-medium term future.104 The truth probably lies somewhere toward the middle of the debate: the PLA remains very backward in virtually all conventional and nuclear capabilities, but it is improving its capabilities and readiness steadily, and could inflict serious damage on an adversary in a war on its periphery. Let us explore the reasons for this general assessment.

Deriving lessons learned from the 1991 Gulf war and the 1999 Yugoslav War, and combining them with the PLA's new operational doctrine of "limited war under high-technology conditions," air and missile power have become the weapon systems of choice in building the PLA arsenal for the 21st century. New generations of intercontinental, medium, and short-range ballistic missiles with improved warheads are being developed, while priority has been placed on acquiring MIRV and cruise missile capabilities.105 As table 6 illustrates, the PLA now has in service a full range of ballistic missile systems. The successful test of the DF-31 (8,000-kilometer range) in August 1999, the apparent readiness of the DF-41 (12,000-kilometer range) for testing, and an aggressive program to develop and deploy the JL-2 SLBM, all are notable improvements for China's nuclear forces.

The PLA is also hard at work developing land-attack cruise missiles (LACMs). A variety of programs are under way--most trying to adapt the existing sea-launched C-801 and C-802 for air- and ground-launched systems. The reengineered C-801, which is cloned from the French Exocet and designated the YJ-8, could enter production as early as 2000. It has a 135-km range, would incorporate GPS navigation and terrain contour mapping (TERCOM) guidance systems, and is likely to have accuracy up to ten meters.106 China may also turn to Russia for supply of cruise missiles over the next few years.

At least two new indigenous fighters also are under development. The development of the F-10, a fourth-generation multirole fighter, has been plagued with problems (engine thrust, airframes, and avionics), but may be ready for serial production in 2001-2002. It uses a delta wing canard configuration, incorporates stealth-like design features, advanced avionics (from Israel), and is far advanced over the current top-of-the-line F-8II.107 The JH-7 (FBC-1) is a twin-engine strike fighter designed for long-range air cover missions and is also in the flight-testing stage. There are also recent reports of another new multirole fighter, designated the XXJ, which is supposedly modeled on the Russian Su-27.108 The PLA Air Force has already bought 46 Su-27 fighters, with a contract for production of two hundred more (designated the F-11). The 1997 contract called for the first fifty to be assembled from kits at the Shenyang Aircraft Corporation factory (the first two were flight-tested in late-1998), with licensed production to commence thereafter. The PLAAF also reportedly closed a deal in August 1999 for purchase of 50 to 70 Su-30 multirole strike fighters from Russia.

Once--and if--all these aircraft come on stream and phased retirements of antiquated aircraft are completed, China will still be short of strategic lift and in-flight refueling capabilities, and thus will remain incapable of fighting beyond its borders and immediate periphery. But, as table 7 indicates, these additions to the force structure will provide a more diversified fighter complement, and will give the PLA Air Force (PLAAF) a mixture of approximately 1,350 second-, third-, and fourth-generation fighter/interceptors--but this will not come to pass unless all goes well in production and testing. This would be a substantial air force by regional standards. However, one cannot be too optimistic on this score, given the chronic problems that have plagued the civilian and military aircraft industry in China. Further necessities include pilot training for combat situations in all-weather conditions, and regular maintenance--and the PLAAF's record on both scores has not been commendable to date.

Table 6: China's Nuclear Arsenal
System/TypeStatusPropellantRange (km)Warhead(kg)Number Deployed
DF-3/3A (MRBM)DeployedLiquid2,8002,15040+
DF-4 (ICBM)DeployedLiquid5,5002,20020
DF-5 (ICBM)DeployedLiquid13,0003,20020
DF-11/M-11(SRBM)Developed, under deploymentSolid300500NA
DF-15/M-9 (SRBM)DeployedSolid600500100+
DF-21 (MRBM)DeployedSolid1,80060010+
DF-25 (MRBM)Not testedSolid1,7002,000--
DF-31 (ICBM)TestedSolid8,000700--
DF-41 (ICBM)Under developmentSolid12,000800--
JL-1 (SLBM)DeployedSolid1,70060012
JL-2 (SLBM)Near testingSolid8,000-10,000700--
Sources: Shirley Kan and Robert Shuey, China: Ballistic and Cruise Missiles (CRS Report, 1998); Department of Defense, The Security Situation in the Taiwan Strait (Report to Congress Pursuant to the FY99 Appropriations Bill, February 1, 1999); International Institute of Strategic Studies, The Military Balance 1998/99 (Oxford: Oxford University Press, 1999); National Intelligence Council, Foreign Missile Developments and the Ballistic Missile Threat to the United States Through 2015 (September 1999).

The PLA's doctrine of peripheral defense has, of course, also included increased attention to developing a blue-water naval capability (yuanyang haijun)--although this ambition has been severely hampered by lack of funds, an inadequate indigenous production base (to produce, for example, heavy cruisers, aircraft carriers, and nuclear submarines), and lack of access to Western sources of supply for key technologies and armaments. China's top-of-the-line destroyers, the Luhu and Luhai (of which the PLA Navy possesses two and one, respectively) are outfitted with German and American engines, French and American radars and sonars, French helicopters, Italian torpedo launchers, and French surface-to-air and ship-to-ship missiles. Since 1989, China has been prohibited from purchasing Western military equipment and there is little sign of a relaxation on this ban anytime soon, despite some loosening in European Union restrictions on some electronics. Despite restricted access to Western naval technologies and platforms, the PLAN has upgraded electronic countermeasures, radar and sonar, fire-control systems, and onboard armament on refitted Luda destroyers and Jianghu frigates. These are being supplemented by new-generation Luda III destroyers, Jiangwei class frigates, Houjian and Houxian missile patrol craft, and Dayun class resupply vessels.

In all, the PLAN has added nearly twenty surface combatants to its fleet over the last decade. The most important addition to the PLAN will be the two Sovremenny destroyers currently being built in Russia's St. Petersburg shipyards (the first began undergoing sea trials in late-1998), and could be ready for delivery in 2000. These vessels are armed with Moskit (SS-N-22 "Sunburn") anti-ship missiles and Uragan (SA-N-7 "Gadfly") surface-to-air missiles. Once incorporated in to the fleet, these ships will pose a distinct danger to aircraft carrier battle groups (CVBGs). Russia has also sold four Kilo diesel electric submarines in recent years, although the PLAN has experienced substantial maintenance and operation difficulties with them. There are also recent reports indicating the possible sale of two Russian Akula class nuclear attack submarines to the PLAN. Also under indigenous development are several Chinese-built Song class Type 093 and 094 (SSN and SSBN, respectively) submarines; the former may join the fleet around 2000, and the latter around 2005 if all goes well.109 Submarine construction and operation is extremely complicated, and the Chinese record in each has been very poor to date. Submarine operation, especially for SSBNs, is even more complex--and it should not be assumed ipso facto that the PLAN will be able to operate its new subsurface assets.

Great emphasis is also being placed on achieving long-range precision strike capability (LACMs) and also working on new information warfare (IW) and other innovations associated with the Revolution in Military Affairs (RMA). There is no doubt that China is actively studying these technologies (including in laser-guided munitions, electronic countermeasures, computer viruses, antisatellite weapons, high-powered microwave weapons, satellite photo reconnaissance, GPS, over-the-horizon sensors, phased-array radars, high-speed telecommunications, etc.),110 but ambition should not be confused with capability. These are extremely complicated technologies to master, test, produce, deploy, assimilate, and maintain. There exist numerous impediments--financial, human, technological--to China's ability to build, deploy, and maintain such high-tech systems.

From the desire to develop these latter technologies and weapon systems, one could infer that China is preparing for asymmetrical military contingencies against opponents possessing state-of-the-art militaries (e.g., Japan or the United States), particularly in potential conflict over Taiwan. The purchase of aircraft, submarines, and destroyers from Russia all appear to be "contingency driven." They seem to indicate preparations to present a credible threat to Taiwan in the first decade of the next century (probably around 2005-2007). Moreover, these purchases and the emphasis on improving ECM and IW capabilities further suggest a readiness to engage and disrupt US CVBGs and forces in a potential Taiwan conflict.111 The persistent attempts to acquire in-flight refueling capability, and the development of fourth-generation fighters, perhaps also indicate a desire to project air power into the South China Sea and beyond.

Table 7: PLAAF Fighters
FighterEntered ProductionNumber in Force 1999/2005 (projected)
Sources: Kenneth Allen, Glen Krumel, and Jonathan Pollack, China's Air Force Enters the 21st Century (Santa Monica: RAND, 1995); Zalmay Kalilizad, The United States and a Rising China (Santa Monica: RAND, 1999); IISS, The Military Balance 1998/99 (Oxford: Oxford University Press).

The 1999 Kosovo conflict has also seemed to add a greater sense of urgency to the PLA's modernization program. PLA analysts paid close attention to the military dimensions of the Yugoslav War and NATO's strategy, tactics, and weapons. They also noted that similar tactics and firepower had been employed in the Gulf war, including initial attacks against Yugoslavia's command and control infrastructure; extensive electronic jamming of both military and public communications; remote targeting by long-range cruise missiles, launched from sea and air; achievement of "information dominance," making extensive use of space-based sensors and satellites; and airstrikes launched from as far away as North America, utilizing in-flight refueling. PLA analysts were surprised, however, by new features evident in the Yugoslav conflict--for example, the use of several new weapon systems, such as improved laser-guided precision munitions that use a variety of new active homing and direction-finding devices. One of these was the GBU-28/B laser-guided "smart" gravity bomb--five of which were launched from B-2 strategic bombers, mistakenly striking the Chinese Embassy in Belgrade.

The extensive use of cruise missiles and other precision-guided munitions from ranges outside Yugoslav point defenses had a major impact on PLA planners (although they had witnessed it previously during the Gulf war); they were particularly impressed by the increased accuracy of such weapons. This prominence of "smart weapons" reminded the PLA that modern wars can be prosecuted from great distances, far over the horizon, without visual range targeting or encountering antiair and ballistic missile defenses, and not even being able to engage enemy forces directly. Even the Gulf war involved ground forces and force-on-force engagements--but not in Yugoslavia. This realization was stark for PLA commanders whose whole orientation and doctrine to date had been one of fighting adversaries in land battles on China's soil or in contiguous territory. PLA analysts were profoundly disturbed by the very idea that, in modern warfare, a stealthy enemy could penetrate defenses and devastate one's forces without the ability to see or hear, much less counterattack, the adversary. This perceived vulnerability reportedly prompted a review of the PLA's strategic air defenses and defensive capabilities for jamming and confusing incoming smart weapons.

Implications for the United States
These lessons will undoubtedly have an impact on PLA priorities (allocative, doctrinal, and organizational). Although money is scarce for dramatically increased defense expenditure in China, and China's access to Western defense technologies and weapons is severely limited, expect to see increased priority placed on the PLA's ballistic missile and cruise missile programs, information and electronic warfare capabilities, C4I networks, and antiair defenses. These new priorities will supplement--but also will have to compete with--the existing emphasis on building up tactical air force, blue-water naval, and subsurface assets.

Without access to equipment and technologies from the West, however, the PLA will never be able to appreciably close the conventional weaponry and defense technology gaps vis-à-vis Japan and the West--which are, in fact, steadily widening. To be sure, transfers from Russia are meeting certain "niche" needs of the PLA, but they are far from sufficient to provide the PLA with a power projection capability, much less the ability to carry out a successful attack against Taiwan. With the exception of a few "pockets of excellence" (or what one analyst calls "pockets of adequacy"), most Western analysts place the PLA's conventional capabilities twenty to thirty years behind the state-of-the-art, with the gap widening. However, vis-à-vis China's neighbors, particularly Taiwan, the gap is narrowing. Today, China's best conventional military capabilities, across-the-board, presently resemble early-1980s European equipment. In many areas the technologies and hardware are of 1960s or 1970s vintage. To be sure, the PLA is attempting to plug some of its most glaring gaps through purchases of select equipment from Russia and Israel, but the PLA's overall conventional order-of-battle remains extremely antiquated.

In the area of ballistic missiles, however, China's capabilities are considerably better--and improving. The buildup of SRBMs opposite Taiwan is an obvious and serious concern for the security of the island and will challenge US responsibilities under the Taiwan Relations Act.112 The same applies to the PLA's emphasis on developing land attack cruise missiles. China's emphasis on building up its ballistic missile forces will also have important implications for the United States--for both its forward-deployed forces in East Asia as well as defense of the continental homeland.113

Although the PLA's overall capabilities remain limited, a bona fide nuclear deterrent does exist, and progress is being made in acquiring new air and naval platforms. It is important to recognize that these conventional capabilities do not and will not threaten, directly or indirectly, the United States or its Asia-Pacific allies for the next five years. This key assessment also applies to various scenarios surrounding a Taiwan conflict--when the PLA can bring force directly to bear on US forces and the island itself. For the next five years, Taiwan's defenses should be adequate to repel any major assault or blockade against the island. While the PRC does currently possess the unencumbered ability to attack the island with ballistic missiles, it does not possess the conventional capabilities to follow up with a successful follow-on invasion during this period. Despite this key judgment, it is also clear that the window of Taiwan's self-defense is steadily narrowing. The trendlines of the PLA's indigenous production and exogenous procurement indicate that Taiwan's current qualitative superiority in weapons is eroding, and by 2005 the island will likely find itself unable to match a more powerful PLA across a range of systems. The window of vulnerability is widening. This judgment has certain implications for US military sales to Taiwan, US diplomacy toward Beijing and Taipei, as well as the disposition of America's own forces in the East Asia.114

Comments: China's Future--Implications for US Interests

Arthur Waldron

Let me start with the image of China as a volcano, which has been repeatedly invoked today but not really explored. Instead of exploration we have heard some tremendous expertise, but it has been applied only to the immediate past and the present; the future, to the extent we have heard about, it has been a rather upbeat straight-line projection of the present.

With reason or not, however, plenty of people--not in the least Chinese--do think of China along volcano-type lines. I know so from reactions to a speech of mine, which I've given in Hong Kong and Singapore among other places, and most recently at the Jiaozi Club in Washington, the topic of which is "Would China have a different foreign policy if it were a democracy?"

My own view is that China is ripe for democratization: its people are better educated and more affluent than ever before and certainly at least as well prepared to vote as are Mongolians and Nigerians and South Africans, all of whom have done so recently. Furthermore, in a real and honest election, I suspect that rural and farming interests would be dominant--and that as a result the focus of Chinese politics might shift, and this would be a good thing, from territorial disputes and ballistic missiles to things such as drinking water supply, irrigation, education, and so forth.

That is not how everyone in my audiences have seen things, however. Some people get tremendously agitated and tell me that democracy in China would bring to power an extreme nationalist regime. Indeed, twice I have had questioners--well-educated, well-informed people--tell me that "Hitler" will come to power if China democratizes.

I don't believe this for a minute--and of course even in Germany, Hitler came to power from a minority position via a back-room deal--but what these responses show is that many people have a sense that explosive forces lie just under the surface in China. So even though our experts today have told us that society is pretty inert, some people clearly disagree, and we should bear that in mind as we make our scenarios about the future. The question is, how do we relate those fears to today's decidedly bland presentations?

Begin with Barry Naughton. The most important insight I will take home today comes from Barry's paper. It is that China's economy will continue to develop, perhaps chiefly because there is simply no alternative that will work to more privatization and greater competition. The government may not be very enthusiastic. Barry showed just how contradictory their various interventions and measures are. But still, the net result will be a continued if bumpy forward movement. (Ezra also made this point with respect to the continuing development of basic infrastructure and so forth.) This seems a very plausible prospect to me, and it raises the question of parallel political change or lack thereof?

Let's take Barry's trend and project it to its conclusion. The result, say in a decade or so, is a functioning Chinese economy in which all property is privately held and in which markets rather than bureaucrats make decisions. This is of course more than a purely economic result. Such a Chinese society is completely different from the one that exists today, and has completely different needs as far as institutions, software, and so forth, than what China possesses today. Briefly stated, to function that society will require clear and objective rules and laws, and impartial and consistent institutions to enforce them.

And in such a society, no role exists for a Communist party. Given the existence of rules and institutions, party directives and so forth are unnecessary; indeed, if they continue to meddle in such an economy they will only undermine it. It is like the old deist argument about the clock-maker: the best one sets up a clock in the town square that works thereafter with no more attention from him. If it keeps stopping and the clock-maker has to be called, then something is very wrong.

Well, if the economic trajectory is as Barry describes it--and I think he has made the case rather persuasively--then clearly it is in contradiction to Beijing's current political trajectory. The sorts of property and other rights that must exist for a market system to function simply preclude further exercise of the sort of absolute power to which the Communist Party is accustomed and this means that some other sort of political system must replace it both if economic liberalization succeeds and for economic liberalization to succeed. Enduring success economically, in other words, is incompatible with a continued role for the Chinese Communist Party.

What will replace the Party? The answer, nearly everywhere else in the world, among all sorts, conditions, and cultures of men, is today liberal, participatory democracy and it is difficult to see how China can avoid this and still be strong economically. But we see, today, absolutely no movement whatsoever in that direction in China--nothing even parallel the sort of bumpy and sometimes confused forward economic movement. If anything, we see the opposite. The current leader, Jiang Zemin, speaks out regularly and authoritatively against liberalization and democracy, and from what we have heard today about his putative successor Hu Jintao, it is hard to imagine that he will have any contrary vision. So what happens? We have economic and political trains on one Chinese track, and they are pulling in opposite directions.

Lyman talked about the "institutionalization" of PRC politics. I noted that because in the detailed discussion that followed I heard nothing about institutions. It was all the usual detailed personal political inside baseball in which China watchers revel. Like the fellow in the market who hangs up the sheep's head, we put up the respectable social science rubric of "institutionalization" but what we talked was the same old contentless Chinese politics of personalities. Some opening was suggested by Li Cheng's optimistic remark that today the political elites have "no choice" but to negotiate and compromise. I have to say I don't believe that is the case. Even as we speak, there is a very powerful faction of the Chinese Communist Party that has been forcibly repressed and excluded from any activity. This is Zhao Ziyang and his followers--and remember he was once the head of the whole thing. Today he is still under strict house arrest in Beijing. Only his daughter is permitted to visit him. He cannot meet anyone else and has to write a letter to the Party requesting permission to go out at all. I ask Chinese officials about him and they say in effect--"irrelevant, a burnt out case, everyone has forgotten about him." Perhaps so. But if that is the case, why not release him . . . ?

As most of you know I am not a specialist in post-1949 China. My work is mostly on the first half of the twentieth century--which to me is a much more typical chunk of Chinese time than were Maoism and even the rule of Deng--and also a period of great creativity and dynamism. Most every great Chinese artistic achievement of this century--the only exception I can think of is cinema--was created before 1949; the same is true for education--that is when the great universities were founded, when the first generations of Chinese went overseas to set new standards of academic achievement in Japan and the West. The press was incomparably freer and the newspapers much better then than they are now (try reading the old Chen Bao if you don't believe me), and the economy thrived as well--consider the Shanghai Bund, or old Hankou, or any number of other places. But politically there was instability.

Zhao Ziyang is locked up because his person and his ideas and his followers pose a mortal threat to the current holders of power. In a democratic country, the ballot box would decide. But in China, personal rivalries have regularly been resolved by arrest, by assassination, by civil war--which brings us to the very real danger Ezra mentioned, which is that in the increasingly complex reforming Communist China with losers as well as winners that we have been considering, the interests of some aggrieved group or some particular view on an important policy matter will be folded into normal political rivalry--the example, Ezra gave was Peng Dehuai and Mao--thus greatly raising the stakes. PRC right now has no mechanism for resolving such a dispute--except for the means adopted against Zhao, and one can question who exactly will listen in say five years' time if Hu Jintao instructs, "Off with his head!" Such disputes can escalate; they can also ramify downward into the Chinese society that Marty [Whyte] has described, to provide the connections and common focus that he found lacking.

Nothing at all is being done by the Party today to avoid this danger but consider what is going on. As we meet, preparations are being made for the fiftieth anniversary of the PRC--with, of all things in this day and age, a military parade of the sort that even the Russians can no longer stomach, through, of all places, Tiananmen Square. We have the forthcoming publication of Jiang Zemin's "thought" in four volumes (Deng only got three. How may will Hu Jintao merit?) And we have the crude atavistic rhetoric of the anti-Falungong campaign with strident Cultural Revolution-style TV denunciations, and the equally primitive media campaigns against Lee Teng-hui and the United States--in the People's Daily and elsewhere. This is the sort of thing that embarrasses many Chinese, and rightly so. But what is it all about? It struck me the other day. This is a leadership struggle.

What we are seeing now is the full repertory of leadership struggle techniques, everything from the otherwise obscure philosophical issues (Falungong) to the thought reform sessions to the mass propaganda spectacles. But who is the target of this struggle? Who is Jiang Zemin's opponent? There seems to be no one.

A longtime foreign resident of Beijing had the answer. "These guys are sick of calling people up and issuing orders and having no one obey them." In other words, this is a struggle for leadership. It is not against anyone--except, collectively, the entire Chinese foot-dragging independently minded mass of the Chinese people and even the Communist apparat, for whom the "leadership" at the "center" is no longer a source of fear, let alone an object of respect. These people need to be shaken up, and a good old-fashioned struggle campaign is seen as the way to do so.

If Chinese economics are gradually moving forward toward private property and free markets, the direction set politically is reverse--back toward the days of totalitarianism. This situation is a fundamental incompatibility between China's current economic and political systems, and this will grow in the future.

Let us now move quickly to international relations. The same sorts of contradictions exist there. I think it is useful to recognize--I know Paul Heer and others disagree with me about this--that foreign policy is not an autonomous realm. There is no obvious set of Chinese "national interests" that define a "Chinese foreign policy" in the absence of domestic choices of preferences. What those preferences will be will depend on who is in power and how he got there. In other words, regime type makes a huge difference. I believe a democratic China would have a very different foreign policy from what a Communist China has: this is obvious if the country in question is Japan, or England, or Germany, but when it comes to China, for too many people the only adjective you need is "Chinese." In truth, however, regime type is the independent variable and foreign policy is the dependent variable.

In foreign policy we see the same sorts of contradictions we encountered in domestic policies. Let me begin with a Barry Naughton-style statement of a basic truth. China is deeply and profoundly dependent economically on the rest of the world, both for the import of the huge quantities of foreign capital that have financed so much of her economic development (and accounts for almost half her exports) and for access to foreign markets for the export of goods. Were either of these to change--were foreign investment to drop or foreign markets to close--China would be thrown into crisis.

Yet, much of China's foreign policy directly undercuts these interests. David has listed all the modern military equipment China is developing and importing and deploying, and some of the territorial and other claims this new armory is designed to support. Asian states want to work with China and cooperate with her, but China's government, I think, aspires not so much to the international condominium that is offered as to the sort of hegemonic position in the Asian region that it already enjoys at home. What is the result? China has pushed forward rapidly with nuclear and ballistic-missile technologies---but hegemony is still elusive, and the military quest for it is counterproductive, for long-somnolent India has bestirred herself to build missiles capable of reaching Beijing and tested nuclear warheads for them, and Japan, which could acquire such capabilities overnight, is now seriously reconsidering its security needs. China has assisted North Korea to build intercontinental missiles--and now South Korea, which has long forsworn them under US pressure, is now developing missiles at least capable of hitting all of the north. Jiang Zemin has ventured into territory that Deng Xiaoping, a wiser man by far, conspicuously avoided: namely, the making of military threats against Taiwan, and the predictable result is--more and better defense for Taiwan.

And suppose China really did use force against Taiwan? What would be the result? At an absolute minimum, the closing of US markets to Chinese trade. As a Senate staffer put it to me with great weariness--"I know the wording by heart [he had drafted South African and other sanctions]--'no article, good, product, or other item manufactured, assembled, extracted . . . in China . . . shall be permitted to be imported into the United States of America'" or words to that effect.

Clearly the Chinese Communist party's foreign policy is as self-contradictory as is its domestic policy. It makes no sense, if you are a trading state dependent on capital imports and markets for exports, to threaten and alienate your primary capital sources and chief markets, and even if you are not, it makes no sense to stir up arms races with neighbors who, as Japan is, are bound to win if they decide to enter the race. I don't take these contradictions as somehow inherent aspects of being China--and I would urge all of us to think more seriously about the alternatives: why couldn't China be another democratic state, with a thriving economy and adequate self-defense capabilities, like England or France or Japan or India or even Russia or perhaps Indonesia very soon? I don't think that Beijing's current policy is an aspect of being Chinese: it is an aspect of being a dictatorship and being Communist--and, as George Kennan pointed out fifty years ago, such states find external enemies, real or imagined, very handy as a way of diverting attention away from internal problems.

(I'd apply this analysis to PRC policy toward Taiwan as well: we have heard several speakers today speak of Taiwan as the most important problem from China's viewpoint. I don't believe that for a minute. There is no reason Beijing can't just forget about Taiwan as it has forgotten about Mongolia [which was part of the Qing empire far longer than was Taiwan, and was separated from China much later]. Taiwan is a "problem" only because Beijing says it is and for as long as it says so. Compare that as a problem to a suspicious and even better armed Japan or and India that takes an interest in securing the basic human rights of the Tibetans. Those are real problems for Beijing, even if they pretend it is not).

As for Japan specifically, I would argue that Beijing (with a little help from Pyongyang) has already started the train, and what we will see now is now is not the emergence of China as a power, which David has so carefully outlined, but rather the simultaneous emergence of China and Japan as military powers, which David [Shambaugh] has not mentioned at all, but which will be a terrible headache for Beijing and will strain Washington at both ends. A China that rattles its missiles is a problem--but by the same token, a US alliance with a nuclear-armed and independently capable Japan is going to be very different from what we have been used to.

To conclude. We have seen two basic sets of contradictions, one in Beijing's domestic policy and the other in her foreign policy, and we have reason to expect that Zhongnanhai will do little to resolve any of this, based even on the very cautious straight-line projections of our panelists that put into power in Beijing in a few years by far the weakest and generally low-candlepower government we have seen since 1949 (Ezra [Vogel] was very upbeat about the dynamic and creative Chinese he is meeting in his programs at Harvard, and I know just what he means--but what about the top? Can it be that the dynamic ideas of reform echo a lot louder at 1737 Cambridge Street than at Zhongnanhai?) So if you ask, can these vectors intersect? Can these trains running in different directions conceivably crash into each other? The answer is: of course they can.

Flying has been described as hours of boredom punctuated by instants of panic. Things work fine until something small goes wrong, and that affects something else, and that something else, and systems begin to fail and failure cascades--all in a matter of moments--until even that smart well-trained Swissair pilot can't do anything and the whole plane goes down. Given the structural defects that we have described today, and the policy vacuum, and the weakness of leadership, it seems quite possible to me that China will encounter a system crisis in the years ahead. The only way to avoid it is to begin genuine liberalizing political reform--and all the signs are the opposite.

What are the implications for US policy? Obviously our interests and those of the world will be served if China begins political change to go with its economic change and we should do everything we can--which is not a great deal, unfortunately--to promote that. At the same time we must hedge against failure in China, by constructing an international order in the region that can welcome and accommodate a China willing to join and play by the rules, but that can also survive and not be destabilized if things go wrong, even very wrong, in China, and that means strong and durable alliances with our democratic friends in the region, Japan most importantly, but also South Korea, Taiwan, and the others.


1 For a detailed discussion of the age distribution of leadership bodies of the 15th Party Congress and its comparison with previous Party congresses, see Li Cheng and Lynn White, "The 15th Central Committee of the Chinese Communist Party: Full-Fledged Technocratic Leadership With Partial Control by Jiang Zemin," Asian Survey 38, No. 3 (March 1998), 231-264.

2 Shijie ribao (World Journal), 3 March 1998, A1.

3 China News Analysis, No. 1607 (April 1, 1998), pp. 4-5; and No. 1613-14 (July 1-15, 1998), pp. 18-20; and Liaowang (Outlook), No. 23 (June 8, 1998), p. 4.

4 Cheng Li, "Jiang Zemin's Successors: The Rise of the Fourth Generation of Leaders in the PRC," The China Quarterly Issue 161, March 2000 (forthcoming).

5 Cheng Li, China's Leaders: The New Generation (Lanham, Maryland: Rowman & Littlefield Publishers) (forthcoming).

6 Liao Gailong and Fan Yuan (comp.) Zhongguo renming da cidian xiandai dangzhengjun lingdaorenwujuan, (Who's Who in China, the Volume on Current Party, Government, and Military Leaders), 1994 edition, (Beijing: Foreign Languages Press, 1994), for the complete list of the categories of leaders included in the volume, see pp. xi-xv. An overwhelming majority of the fourth generation of leaders are not included in the previous 1989 edition.

7 Shen Xueming and others, comp., Zhonggong di shiwujie zhongyang weiyuanhui zhong-yang jilü jiancha weiyunahui weiyuan minglu, (Who's Who of the members of the 15th Central Committee of the Chinese Communist Party and the 15th Central Commission for Discipline Inspection) (Beijing: Zhonggong wenxian chubanshe, 1999).

8 Two pools of data have some overlaps. The first pool includes 95 members and alternates of the 15th CC of the CCP. In the second pool, four people are members of both the 15th CC and CCDI.

9 For example, Renmin ribao (People's Daily, Internet version), Duowei xinwenwang (Multimedia News Network:, China Directory (Tokyo: Rapiopress, Inc.); China News Analysis (Taipei); Guangjiaojing (Wide Angle), (Hong Kong); and Zhonggong yanjiu (Studies of Chinese Communism) (Taipei).

10 The collection of interviews with ministers was later published in book form. See Li Dongsheng, ed. Buzhang fangtan lu, (Interview with ministers). (Beijing: Zhongguo Jiancha Chubanshe, 1998).

11 For example, Wu Yi, Nüshizhang: Zhongguo nüshizhang zhuizhong shouji (Woman mayors: interview reports). Beijing: Zhongguo funü chubanshe, 1999; Zhang Yuan, Chongsu zhengfu '98 zhengfu jigou gaige jiaodian da toushi (Remolding the government: an analysis of governmental reform in 1998). (Beijing: Zhonghua gongshang lianhe chubanshe, 1998); Zhong Qiujü, Kua shiji de xinyijie zhongguo zhengfu (The new Chinese government at the turn of the century). (Beijing: Renmin chubanshe, 1998); and Yu Zhen and Shi Dazhen. Buzhang yanzhong de weilai Zhongguo (China From the Eyes of Ministers). (Changsha: Hunan chubanshe, 1995).

12 William Strauss and Neil Howe, Generations: The History of America's Future 1582-2069, (NY: William Morrow and Company, Inc, 1992), p. 59.

13 Ruth Cherrington, "Generational Issues in China: A Case Study of the 1980s Generation of Young Intellectuals," British Journal of Sociology, Vol. 48, No. 2, June 1997, p. 304.

14 For a theoretical discussion of political generation, see Karl Mannheim, "Consciousness of Class and Consciousness of Generation," in Karl Mannheim, Essays on Sociology of Knowledge. (London: RKP., 1952).

15 Carol Lee Hamrin, "Perspectives on Generational Change in China," unpublished scope paper for the workshop organized by The Paul H. Nitze School of Advanced International Studies, Johns Hopkins University, June 1993, p. 1.

16 See Michael Yahuda, "Political Generations in China," The China Quarterly, No. 80 (December 1979), p. 795; Marvin Rintala, "Generations: Political Generations" in The International Encyclopedia of the Social Sciences (New York: Macmillan and Free Press, 1968); and Rodolfo Garza and David Vaughan, "The Political Socialization of Chicano Elites: A Generational Approach," Social Science Quarterly, Vol. 65 (June 1984), pp. 290-307.

17 Yahuda, "Political Generations in China." Also see Carol Lee Hamrin, "Perspectives on Generational Change in China," p. 2.

18 At present, the reform generation, or the fifth generation of leaders, has not emerged as a significant elite group on both the central and provincial levels, although the formative years of a handful of leaders in this study occurred during the reform era.

19 For studies of some members of this generation of leadership, see David M. Lampton, Paths to Power: Elite Mobility in Contemporary China. (Ann Arbor: Center for Chinese Studies, University of Michigan, 1986; and John Israel and Donald Klein, Rebels and Bureaucrats: China's December 9ers (Berkeley, CA: University of California Press, 1976).

20 For the average age distribution of the 15th Central Committee of the CCP and its Politburo, see Li and White, "The 15th Central Committee of the Chinese Communist Party," pp. 252 and 254.

21 Yahuda, "Political Generations in China," p. 802.

22 Steven Mufson, "The Next Generation," Washington Post, June14, 1998, p. A1.

23 Zhonghua yingcai (China's Talents), No. 5 (March 1999), p. 12.

24 For more discussion of these CR generation critics, see Wen Lin and Hai Tao, eds. Zhongguo xinyidai sixiangjia zibai (Recollections of China's New Generation of Thinkers) (Beijing: Jiuzhou Tushu Chubanshe, 1998); and Li Hui and Ying Hong. Shiji zhiwen: Laizi zhishijie de shengyin (The Question of the Century: Voices from the Intellectual Community). (Zhengzhou: Daxiang Chubanshe, 1999.)

25 Hu Angang, Zhongguo fazhan qianjing (Prospects of China's Development). (Hangzhou: Zhejiang remin chubanshe, 1999), p. 6.

26 For a discussion of the contrasting subgroups of post-Communist leadership in Russia, see David Lane, "Transition under Yeltsin: the Nomenklatura and Political Elite Circulation," Political Studies, Vol. 45, No. 5, Dec. 1997, p. 874.

27 Li and White, "The 15th Central Committee of the Chinese Communist Party," 246-247.

28 As Lyman Miller observes, "The coalition of leaders that governed China in the 1980s consisted mainly of leaders who either were from or had had long career experience in China's southwestern province of Sichuan or south China." See "Overlapping Transitions in China's Leadership." SAIS Review 16, no. 2 (Summer-Fall 1996): 24.

29 Shijie ribao (The World Journal), September 22, 1997, p. 2.

30 These two seats are usually occupied by the Party secretary and governor of the province. In the municipalities where one full CC member concurrently holds the positions of both Party secretary and mayor, for example, Jia Qinglin in Beijing or Zhang Lichang in Tianjin, usually a deputy Party secretary in the city also holds a full membership in the 15th CC.

31 Quoted from Wu An-chia. "Leadership Changes at the Fourth Plenum." Issues and Studies, Vol. 30, no. 10 (October 1994), p. 134. Hu Angang also argues that the Financial Committee of the National People's Congress should consist of 30 members (each province has one representative in the committee). Hu Angang, Zhongguo fazhan qianjing, p. 312.

32 Ying-mao Kau, "The Urban Bureaucratic Elites in Communist China: A Case Study of Wuhan, 1949-1965," in A. Doak Barnett, ed. Communist Chinese Politics in Action (Seattle, WA: University of Washington Press, 1972), 227.

33 Li Cheng and Bachman, "Localism, Elitism and Immobilism: Elite Formation and Social Change in Post-Mao China." World Politics 42 (October 1989): 64-94.

34 John P. Burns, "China's Nomenklatura System." Problems of Communism 33 (September/October 1987): 36-51; and John P. Burns, "Strengthening Central CCP Control of Leadership Selection: The 1990 Nomenklatura," China Quarterly 138 (June 1994): 458-491.

35 Burns, "China's Nomenklatura System," 37-38, and 40-41.

36 Wu Guoguang, Zhulu shiwuda: zhongguo quanli qiju (Toward the 15th Party Congress: Power Game in China). (Hong Kong: Taipingyang shiji chubanshe, 1997), 215.

37 Quoted from Burns, "Strengthening Central CCP Control of Leadership Selection," 473.

38 Liaowang, June 7,1999, pp. 15-16.

39 John H. Jia and Kyna Rubin, "China's Brain Trust Abroad: Students are Pivotal Players in China's Reform and in US China Relations." International Educator (Spring 1997).

40 Among these 293,000 people, 47,000 were sent by the government, 92,000 sent by universities or research institutes, 154,000 were "self-sponsored" or sponsored by relatives or foreign institutions. See Shijie ribao (World Journal), 12 January 1999, A9. China Daily, however, gave somewhat different statistics. It was reported that over the past 20 years, the country has sent 320,000 students and scholars to 103 countries. To date, more than 100,000 of them have returned to work in the country. See China Daily, 4 February 1999.

41 About 130,000 of them have remained in the US now. The Chinese Student Protection Act passed after the events of June 4, 1989, which enabled roughly 50,000 PRC students and scholars to obtain permanent resident status. Liu Ningrong, "Niuzhuan guoyun de liumei xuesheng" (American-trained Chinese students are changing China) Yazhou Zhoukan (Asia Week), 8 November 1998; and Jia and Rubin, "China's Brain Trust Abroad."

42 About 83 percent and 57 percent of those sent by the government or universities returned to China. Only 4 percent of self-sponsored returned to China. Shijie ribao (World Journal), 12 January 1999, A9.

43 China Daily, 4 February 1999, 1.

44 Most studies of technocrats in Latin America and Asia have identified those trained economists as technocrats. See, for example, Patricio Silva, "Technocrats and Politics in Chile: From the Chicago Boys to the CIEPLAN Monks," Journal of Latin American Studies 23, no. 2 (May 1991): pp. 385-410.

45 Among the total 116 military schools in the PRC at the end of the 1970s, for example, 40 are command schools, 5 political schools, 54 engineering, medical and other technical schools, and 17 flight schools. See Li, "Organizational Changes of the PLA, 1985-1997," p. 335.

46 Henry S. Rowen, "The Short March: China's Road to Democracy," National Interest, (Fall, 1996): 63.

47 For a discussion on the Qinghua network, see Cheng Li, "University Networks and the Rise of Qinghua Graduates in China's Leadership," The Australian Journal of Chinese Affairs, No. 32 (July 1994), pp. 1-32.

48 For a discussion of the role of mishu, see Wei Li and Lucian W. Pye, "The Ubiquitous Role of the Mishu in Chinese Politics," The China Quarterly, No. 132 (Dec. 1992), pp. 913-936.

49 Baokan Wenzhai (Newspaper Digest), July 29, 1999, p. 1.

50 A good example is the corruption case in the Beijing, which involved Chen Xitong, Wang Baosheng and their mishu. See Mishu, No. 7,July 1998, p. 11-12. For the central authorities' effort to restrain the growing power of mishu, see Mishu, No. 1, January 1998, pp. 2-5.

51 Jin Dalu, Shiji yu mingyun: guanyu laosanjie ren de shengcun yu fazhan (The century and fate: survival and development of three old classes). (Shanghai: Shanghai renmin chubanshe, 1998), p. 258.

52 Zhonghua yingcai (China's Talents), No. 3 (February 1999), p. 26.

53 See Li, China's Leaders: The New Generation.

54 Vivienne Shue, "State Sprawl: The Regulatory State and Social Life in a Small Chinese City," in Deborah S. Davis et al., eds., Urban Spaces in Contemporary China (New York: Woodrow Wilson Center Press and Cambridge University Press, 1995), pp. 90-112. For an extended analysis, see also Marc Blecher and Vivienne Shue, Tethered Deer: Government and Economy in a Chinese County (Stanford: Stanford University Press, 1996), and especially pp. 202-220.

55 The following comparison of the 1982 and 1997 Politburo leaderships draws on a more extensive analysis in the author's chapter, "The Foreign Policy Outlook of China's 'Third Generation' Elite," in David M. Lampton, ed., The Making of Chinese Foreign and Security Policy, 1978-2000, forthcoming.

56 Zhouguo Tongji Zhaiyao [Statistical Abstract] 1999, p. 22.

57 Xie Ping, "The challenges currently facing Chinese financial reform," Zhongguo Gongye Jingji 1999:4, pp. 23-28.

58 For an overview of the March 1998 reform "program," see Wang Chengxu, ed., Da Fanglue: Zhongguo Xinyijie Zhengfu Kuashiji Tazheng Gangling [Grand Strategy: The Cross-Century Program of China's New Administration]. Beijing: Taihai, 1998, four volumes.

59 Jiang took over the role of visible spokesperson and putative architect of SOE reforms in the second half of 1999, but so far it is unclear what, if any, difference this makes. SOE reform has been the most thankless task of policy reform in the 1990s. Jiang has now created some expectations of SOE policy initiatives coming out of the party plenum. Perhaps there will be some new information available by the time this paper is discussed: it will be interesting to see what Jiang will produce. It is proper to have low expectations on this issue. If the plenum calls for the withdrawal of government ownership from competitive industrial sectors, that would be an extremely positive sign.

60 Xin Rong, "China Reexamines China-US Relations; The Top Leadership Decides To Accelerate Reform," Jingbao 1999:6, p. 23.

61 This assertion is based on methodologies similar to that used in the World Bank, China 2020: Development Challenges in the New Century. Washington, DC: World Bank, 1997, pp. 20-22; 110-14.

62 Barry Naughton, "China's Emergence and Future as a Trading Nation," Brookings Papers on Economic Activity. 1996:2, pp. 283, 286.

63 Yang Yiyong, "Only reform can really put people back to work," Zhongguo Guoqing Guoli, 1999:3, p. 8.

64 Wu Yan, "Laid-off workers to get extra pay," China Daily, August 30, 1999, p. 1.

65 For an informative journalistic version of the "chaos" viewpoint, see James Miles, The Legacy of Tiananmen: China in Disarray, Ann Arbor: University of Michigan Press, 1997.

66 See the discussion in my book, Small Groups and Political Rituals in China, Berkeley: University of California Press, 1974.

67 These comments are inspired by the framework for analyzing subordinate orientations and actions introduced by Albert Hirschman in his book, Exit, Voice, and Loyalty, Cambridge: Harvard University Press, 1972. That scheme helped inspire a number of studies of organized dependency in Mao-era China. See, in particular, Gail Henderson and Myron Cohen, A Chinese Hospital, New Haven: Yale University Press, 1984; Andrew Walder, Communist Neo-Traditionalism, Berkeley: Univ. of California Press, 1986.

67 The one clear exception to this generalization is in the realm of family planning. See my article, "Human Rights Trends and Coercive Family Planning in the PRC," Issues and Studies, 1998, 34: 1-29.

68 Obviously not everything has changed. The CCP still clings to its exclusive role at the center of the political system and tries to prevent any autonomous organizations from emerging and becoming influential. Furthermore, there are clearly limits to what kinds of political views can be expressed and how, with individuals and groups that go beyond those limits getting into serious political trouble. However, on balance the boundaries of tolerated attitudes and expression have widened considerably since Mao's death.

69 See Frank Parkin, Marxism and Class Theory: A Bourgeois Critique, London: Tavistock, 1979.

70 Samuel Huntington, Political Order in Changing Societies, New Haven: Yale University Press, 1968.

71 The social science literature on the preconditions for regime-threatening mass movements is extensive. See, for example, Charles Tilly, From Mobilization to Revolution, Reading, MA: Addison-Wesley, 1978; Theda Skocpol, States and Social Revolutions, Cambridge: Cambridge University Press, 1979. For an analysis applied to the 1989 Tiananmen demonstrations, see Andrew Walder, "The Political Sociology of the Beijing Upheaval of 1989"; Problems of Communism, 1989, 38: pp.30-40. See also Dingxin Zhao, "Ecologies of Social Movements: Student Mobilization during the 1989 Prodemocracy Movement in Beijing," American Journal of Sociology, 1998, 103: pp.1493-1529.

72 Ethnic tensions in Tibet and Xinjiang, however, could under some circumstances escalate into a serious movement in favor of secession in these regions. If China's leaders were unable to successfully quell such a challenge and lost control of either of these provinces, that loss might precipitate serious challenges to the leaders from their colleagues on nationalistic grounds. In other words, it is possible that ethnic succession threats, while not generally endemic in China and not inherently a threat to the rest of the system even in the cases of Tibet and Xinjiang, could, if successful, produce the potential for a more thoroughgoing threat to the regime.

73 By the same general reasoning, it is not clear that rising inequalities in China generally will provide a major impetus for social discontent and political challenges (a specter raised in the recent, controversial book by He Qinglian, The Pitfalls of China's Modernization). Although we lack systematic research on Chinese popular beliefs about inequality and distributive justice issues, it seems likely that as in other societies, it is not so much the size of inequalities but perceptions of the predominance of illegitimate and corrupt means of getting ahead that generate most popular anger. And such anger is likely to be focused on specific groups that are seen as unfairly benefiting or causing such unfair benefits, rather than at inequalities in general.

74 On the size of the rural-urban income gap, see my article, "City versus Countryside in China's Development," Problems of Post-Communism, 1996, 43:9-22; see also Azizur Khan and Carl Riskin, "Income and Inequality in China: Composition, Distribution, and Growth of Household Income, 1988 to 1995," China Quarterly, 1998, 154:221-53.

75 The best-known example is the popular protests in Renshou County in Sichuan Province in 1993. See the discussion in Miles, The Legacy of Tiananmen, pp. 169-73; see also Thomas Bernstein, "Instability in Rural China," in David Shambaugh, ed., Is China Unstable?: Assessing the Factors, Washington, DC: Sigur Center for Asian Studies, 1998.

76 In some cases, such as in the Renshou demonstrations, several townships within one county have mobilized together, and in others demonstrations have erupted in several nearby counties over the course of several weeks. See the discussion in Bernstein, especially pp. 107-09. However, peasant mobilizations into a movement spanning several counties seems to have been avoided so far.

77 See Lianjiang Li and Kevin O'Brien, "Villagers and Popular Resistance in Contemporary China," Modern China, 1996, 22:28-61.

78 Hao Hongsheng, personal communication to the author, June 1999, concerning a Beijing floating population census conducted in 1997.

79 See the works on China's migrants by Dorothy Solinger, particularly her recent book, Contesting Citizenship in Urban China, Berkeley: University of California Press, 1999.

80 See also the discussion in Dorothy Solinger, "China's Transients and the State: A Form of Civil Society?," Hong Kong: Institute of Asian-Pacific Studies, Chinese University of Hong Kong, 1991.

81 See the discussion in Minghua Zhao and Theo Nichols, "Management Control of Labour in State-Owned Enterprises: Cases from the Textile Industry," China Journal, 1996, 36:1-24; see also Wenfang Tang and William Parish, Chinese Urban Life under Reform: The Changing Social Contract, Cambridge: Cambridge University Press, forthcoming, Chapter 6.

82 Many of the most angry worker protests have been outside of the SOE sector, particularly in the sweatshop enterprises financed by Overseas Chinese, Taiwan, and Korean capital. In such cases abuses of workers, avoidable industrial accidents, and other causes of protests understandably are directed at what are perceived to be their source--local managers and owners--rather than the central state.

83 The conclusion here is similar to that of Dorothy Solinger in her essay, "The Potential for Urban Unrest: Will the Fencers Stay on the Piste?," in D. Shambaugh, ed., Is China Unstable?.

84 See the discussion in Jeffrey Wasserstrom, Student Protests in Twentieth Century China, Stanford: Stanford University Press, 1991; and in his essay, "Student Protests and the Chinese Tradition, 1919-1989," in Tony Saich, ed., The Chinese People's Movement, Armonk, NY: M.E. Sharpe, 1990.

85 See the evidence presented in Tang and Parish, Chapters 3-4.

86 For a discussion of the revival of Qigong masters and followers in urban China since the 1980s, see Nancy Chen, "Urban Spaces and Experiences of Qigong," in D. Davis, R. Kraus, B. Naughton, and E. Perry, eds., Urban Spaces in Contemporary China, Cambridge: Cambridge Univ. Press, 1995.

87 The latter term is used in Steven Jackson, "Conference Summary," in Shambaugh, ed., Is China Unstable? Assessing the Factors, p. 4.

88 It is worth noting that the unwillingness or inability of the new generations of East European leaders to resort to large-scale coercion to put down growing protests in 1989 was a key factor in the collapse of their regimes. (When the one old-generation leader involved, Ceausescu, proved willing, the troops wouldn't obey.)

89 See the judgments contained in David Shambaugh (ed.), Is China Unstable? (Armonk, NY: M.E. Sharpe, 1999), as well as the other contributions to this symposium.

90 See Barry Naughton's and Martin King Whyte's contributions to this symposium.

91 See Jennifer Anderson, The Limits of Sino-Russian Strategic Partnership (London: IISS Adelphi Paper No. 315, 1997); Sherman W. Garnett ed., Limited Partnership: Russia-China Relations in a Changing Asia (Washington, DC: Carnegie Endowment for International Peace, 1998).

92 Other provisions of the agreements prohibit exercises exceeding 40,000 personnel, prior notification of exercises and mandatory observers for any involving over 35,000 personnel, and a limit of one exercise each year of 25,000 personnel or above.

93 See, for example, "China-Russia Relations at the Turn of the Century," Joint Statement of Presidents Jiang Zemin and Boris Yeltsin, November 23, 1998. Text is carried in Beijing Review, December 14-20, 1998.

94 This judgment is based on interviews with Vietnamese scholars and diplomats in Washington.

95 Perhaps in an effort to defuse the rising tensions, former Russian Prime Minister Primakov proposed a three-way "strategic triangle" during his December 1998 visit to India. Subsequent to the Kosovo crisis, Sino-Indian ties began to warm somewhat.

96 See Koong Pai-ching, Southeast Asian Perceptions of China's Military Modernization, Asia paper No. 5 (Washington, DC: Sigur Center for Asian Studies, 1999); and Allen S. Whiting, "ASEAN Eyes China: The Security Dimension," Asian Survey (April 1997), pp. 299-322.

97 Michiyo Nakasone and James Kynge, "Obuchi Faces Some Tough Demands From His Chinese Hosts," Financial Times, July 7, 1999.

98 A Wall Street Journal/NBC News poll published on September 14, 1999 indicated that between 60 and 80 percent of those polled considered China to be an "adversary" of the United States: liberals 60%, women 61%, Democrats 64%, union households 69%, Republicans 75%, men 75%, and white southern conservatives 80%.

99 See National Security Adviser Samuel Berger's press conference statements at the New Zealand APEC meeting.

100 In this regard, see my "Chinese Hegemony over East Asia by 2015?" Korean Journal of Defense Analysis, Vol. IX, No. 1 (Summer 1997), pp. 7-28.

101 For a fuller exposition of these reforms, see my Reforming the Chinese Military (University of California Press, 2000).

102 See, for example, James C. Mulvenon and Richard H. Yang (eds.), The People's Liberation Army in the Information Age (Santa Monica, CA: Rand, 1999); James R. Lilley and David Shambaugh (eds.), China's Military Faces the Future (Washington, DC and Armonk, NY: AEI Press and M.E. Sharpe, 1999); David Shambaugh and Richard H. Yang (eds.), China's Military in Transition (Oxford: Clarendon Press, 1997); C. Dennison Lane et al (eds.), Chinese Military Modernization (London: Routledge Kegan Paul, 1996); Hans Binnendijk and Ronald Monteperto (eds.), Strategic Trends in China (Washington, DC: National Defense University Press, 1998); Ming Zhang, China's Changing Nuclear Posture (Washington, DC: Carnegie Endowment).

103 Recognizing, of course, that the PLA's ability to employ force requires all of the other reforms noted above.

104 See Bates Gill and Michael O'Hanlon, "China's Hollow Military," The National Interest (Summer 1999); James Lilley and Carl Ford, "China's Military: A Second Opinion," ibid. (Fall 1999). Also see the contributions to James R. Lilley and David Shambaugh (eds.), China's Military Faces the Future (Washington, DC and Armonk, NY: AEI Press and M.E. Sharpe, 1999).

105 See Mark A. Stokes, China's Strategic Modernization: Implications for the United States (Carlisle, PA: U.S. Army War College Strategic Studies Institute, 1999); and Report of the Select Committee on US National Security and Military/Commercial Concerns with the People's Republic of China, declassified version published by US Government Printing Office, May 25, 1999.

106 Mark Stokes, China's Strategic Modernization: Implications for the United States (Carlisle Barracks: US Army War College Strategic Studies Institute, 1999), p. 86.

107 "Air Force Frontliners to See New Fighter Breed," Jane's Defence Weekly, op. cit., p. 26.

108 Zalmay Kalilizad et al., The United States and a Rising China: Strategic and Military Implications (Santa Monica: RAND, 1999), p. 57.

109 "New PLAN to Train, Purchase Vessel Mix," Jane's Defence Weekly, op cit, p. 25.

110 See Stokes, China's Strategic Modernization, op. cit.

111 It lies beyond the scope of this paper to pass judgment on whether the projected complement of conventional forces around 2005 will be sufficient to defeat Taiwan's forces or to sufficiently disrupt American support in such a conflict.

112 These are currently estimated by DoD as approximately 150, growing to 600 by 2005. See Department of Defense, Select Military Capabilities of the People's Republic of China (1999).

113 See National Intelligence Council, Foreign Missile Developments and the Ballistic Missile Threat to the United States Through 2015 (September 1999), p. 11.

114 Kalilizad et al. argue that such forces will have to be built up, with logistic lines strengthened, and readiness improved. See Zalmay Kalilizad et al., The United States and a Rising China, op. cit.

Source: National Intelligence Council