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Internal Domestic Policy Will Drive Chinese Foreign Policy
Captain Graeme Mackay

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ROYAL COLLEGE OF DEFENCE STUDIES
Internal Domestic Policy Will Drive Chinese
Foreign Policy
A DISSERTATION
BY
Captain Graeme Mackay
Royal Navy
July 2011
© British Crown Copyright 2011/MOD
Published with the Permission of the Controller of Her Britannic Majesty’s Stationery Office

ROYAL COLLEGE OF DEFENCE STUDIES 2011
‘Internal domestic policy will drive Chinese foreign policy’
‘Nothing could be more fallacious than to judge China by any European standard’ – Lord
Macartney, Ambassador to Beijing, for the Court of King George III (1792). 1
‘China’s ability to continue to manage its emergence as a great power, side by side with its
internal transformation, is one of the pivotal questions of our time.’
Dr Henry A Kissinger. 2
Captain Graeme Mackay Royal Navy (99)
Member - RCDS 11.
1 Alain Peyrefitte, The Collision of Two Civilisations (London: Harper Collins, 1993), 1.
2 Dr Henry A Kissinger, ‘IISS Global Strategic Review,’ http://www.iiss.org/global-strategic-review-2010.
(accessed 20 Jun 2011).
1

EXECUTIVE SUMMARY
‘Internal domestic policy will drive Chinese foreign policy’
China’s vast economic transformation and re-emergence as a great power has
implications for global peace, security and stability. This dissertation examines the
hypothesis that internal domestic policy will drive Chinese foreign policy, by focusing on the
primacy of China’s internal transformation in shaping foreign policy. The alternative
hypothesis that a transformed and internally strong China will act as a hegemonic global
power is also examined and is found wanting. The analysis from the dissertation leads to
the conclusion that China will choose a foreign policy path that falls between these two
hypotheses. China will protect her growing global interests, whilst the Chinese Communist
Party (CCP) maintains a firm grip on internal stability through economic development.
2

I. INTRODUCTION
II BACKGROUND
CONTENTS
III
POLITICS AND GOVERNANCE
A. Introduction
B. Evolution of Modern Chinese Politics
C. Chinese Communist Party - Ideology
D. Political Stability
E. Five Year Economic and Social Development Programme
F. Political Reform
G. Political Leadership
H. Summary
IV
ECONOMY
A. Introduction
B. Economic Development
C. Future Direction
D. Access to Resources and Markets
E. Regional and International Economic Issues
F. Summary
V
VI
FOREIGN POLICY
A. Introduction
B. Evolution in Foreign Policy
C. Foreign Policy Strategy
D. US and Chinese Foreign Relations
E. Chinese Institutionalism
F. Regional Foreign Policy
G. Maritime Dimension
H. International Foreign Policy
I. Morality and Values in Foreign Policy
J`. Summary
CONCLUSION
3

INTRODUCTION
China’s vast economic transformation and re-emergence as a great power has
implications for global peace, security and stability. This dissertation examines the
hypothesis that internal domestic policy will drive Chinese foreign policy. The analysis
focuses on the primacy of China’s internal transformation shaping foreign policy. The
alternative hypothesis that a transformed and internally strong China will act as a
hegemonic global power is found wanting. The dissertation is in three parts covering
politics, the economy and foreign policy. The analysis starts with a brief review of politics,
governance and transformation. The aim is to examine the political landscape, focusing on
the Chinese Communist Party (CCP) and the implementation of domestic policy. This
leads to the economy and China’s use of a ‘socialist market economy,’ to generate wealth.
The economic model has two important outcomes. First, a successful economy gives
legitimacy to authoritarian CCP rule. Second, the economy drives many foreign policy
choices, principally connected with access to markets and resources. In the subsequent
analysis, the dissertation debates between the benefits of a Realist foreign policy and the
alternative, a foreign policy shaped by needs of internal transformation – often referred to
as a ‘peaceful rise’ by the CCP. The result of all of the analysis is that China will choose a
carefully choreographed middle path. China will protect her growing global interests and
firmly focus on economic development to ensure political stability. However, as the
Chinese proverb says, ‘sometimes the ladles clash when scooping rice from the same
bowl.’
BACKGROUND
China is following a unique trajectory with a programme of modernisation through rapid
industrialiation and growth in the economy. China has capitalised on the opportunities of
globalisation, invested in manufacturing, secured access to resources and transformed
from a rural to an urban-based economy. This rapid internal transformation brings unique
socio-economic challenges, which the CCP will seek to manage without touching off an
internal revolution. This requires deft balancing of the economy, gradual easing of
restrictions and experimentation with political reform. However, the benefits of
transformation are huge and China is developing a prime position with wealth, power and
influence at a regional and international level.
Before examining modern China, it is important to understand a little of the legacy from
China’s long history. The early emergence of Chinese identity, ethnicity and culture has led
to an enduring Chinese civilisation in the sub continent of East Asia. This can be
characterised by:
The huge size of China was a consequence of natural borders [...] with the Qin Dynasty
building as many roads as the Roman Empire, with sophisticated state-craft, based on the
teaching of Confucius.’ 3
Additionally the theory of tianxia – literally ‘under heaven,’ led to imperial sovereignty over
all people in the Middle Kingdom. Neighbouring countries existed within a sphere of
influence as ‘tributary’ states. Unification and this concept of sovereignty has given China
some lasting characteristics, which are quite unlike the Westphalia agglomeration of states
in Europe. As a result, China has a sense of destiny as the Middle Kingdom – at the centre
of the world.
3 Martin Jaques, When China Rules the World (London: Penguin, 2009), 76.
4

China thrived under this centralised system consciously eschewing external contact. By
the 1800s, due to advances in agriculture, China had a five-fold increase in the population,
leading the Economist Adam Smith to claim: ‘China is richer than any part of Europe.’ 4
With plenty of labour, security based on physical borders and a commitment to an agrarian
empire, China remained isolated. Imperial strategy curtailed any aspirations for an
expansive foreign policy. With the exception of some limited maritime trade to the Indian
Ocean, the Chinese civilisation was shut off to the outside world. This long period of
isolation has left an enduring legacy. China views the rest of the world as the ‘outside,’
despite the intensity of the current transformation and globalisation. This inherent sense of
China and Chinese civilisation being separate and in some ways better than the rest of the
world, is an important standpoint. This tends to concentrate the Chinese population
towards domestic rather than external issues, except when China’s national interests are at
stake.
Although isolated, China enjoyed superiority over all its neighbours until the first serious
foreign incursion by the British, through the Opium Wars (1839 & 1856). China endured a
period of internal chaos (a century of humiliation) with revolution, rebellion, intervention and
occupation by foreign powers. In the early part of the 20 th century, the Communist Party of
China (CPC) and Kuomintang (KMT) emerged after the overthrow of the Qing Dynasty in
1911. China struggled in the subsequent years, with a split between the KMT and the CPC
(led by Mao Zedong), leading to civil war. The Second Sino-Japanese War (1937-45)
interrupted this civil war and the KMT/CPC formed the Second United Front to fight the
Japanese. This United Front ended after the defeat of Japan in 1945 and by 1946, a fullscale
Chinese civil war had resumed. This ended with Mao Zedong proclaiming victory and
establishing the People’s Republic of China (PRC) on the 1 Oct 1949, under Chinese
Communist Party (CCP). To many Chinese, the CCP represents the continuity of the
sophisticated imperial Dynasties. 5 Despite the century of humiliation, China has never lost
its self-confidence or feeling of superiority as a civilisation. This is an important perception,
which is evident in foreign affairs. For example through the establishment of a global
network of institutions which teach Chinese culture and language.
POLITICS, STATE AND GOVERNANCE
Introduction
The Chinese have a special relationship with politics based on their experience of the
CCP, the state and China’s historical practice of central government. The association is
based on the state providing a ‘better level of existence’ 6 for the citizen. This is delivered
through economic growth, the equitable distribution of wealth, and the provision of
adequate services. The bond is pragmatic, with the citizen and the state trading economic
growth now, against the promise of political reform, better accountability and liberalisation
later. 7 This section will review how China’s recent political history has formed modern
thinking before examining socio-political policy, the shaping of foreign policy and then the
implications of the arrival of the new ‘fifth generation’ 8 of CCP leadership.
4 Jaques, When China Rules the World, 78.
5 ibid., 96.
6 Premier Wen Jiabao, ‘Report on the Work of the Government of China 2011’ at the 4 th Session of the 11 th
National People’s Congress, 5 Mar (2011), http://wenku.baidu.com/view. (accessed 20 Jun 2011).
7 Joshua Cooper Ramo, ‘The Beijing Consensus’, The Foreign Policy Centre, (2004): 3-12.
8 Jamestown Institute, ‘CCP Succession - Leadership Positions,’
http://www.jamestown.org/programs/chinabrief/single. (accessed 20 June 2011).
5

The legacy of chaos, disunity and famine associated with earlier periods of instability
gives the current authoritarian system a sense of resilience. The Chinese prefer unity and
effective central control having experienced the traumatic effects of events like the Taiping
Rebellion in the mid 19 th century and the Second Sino Japanese War. This collective
experience leads to support for the CCP commanding the centre of modern state politics
and physically governing the entire country through their bureaucracy. History enforces
this concept of central control, through the philosophical code of the Analects of Confucius.
This ancient philosophy conceived 2,500 years ago gives form and foundation to the
values and morality of Chinese society. Confucianism is based on an individual’s desire for
group identity, with paternalistic government and self-discipline. It gives a sense of
belonging to family, to society along with a strong attachment to race and nation. 9
Conversely, it is a fact that the Chinese have an inherently boisterous element to their
character too. In business, in everyday life, the Chinese tend to push to the limit against
laws. This is exemplified by China’s entrepreneurial and raucous business behaviour.
Between these contrasting moral approaches, the strong arm of the central state maintains
order, through rule by law. This approach cleverly balances the ‘acceptable’ elements of
Confucianism with the needs of an authoritarian system and entrepreneurial requirement to
support a developing economy – a fascinating confluence and an interesting dynamic in the
system.
A final perspective is China has never developed a tradition of conquest beyond her
natural borders, preferring a system based on influencing neighbours (tributary system),
rather than colonialism or being overtly hegemonic, as the basis to foreign policy. In sum,
all of these perspectives are important, still shape policy today, and are partly responsible
for CCP’s concept of a ‘peaceful rise.’
Evolution of Modern Chinese Politics
In China, politics and the bureaucracy run on ‘Soviet hardware.’ 10 However, that is only
part of the issue. This section will examine the evolution of politics and the bureaucracy,
and the inherent tension and potential dangers to stability. This is important because
different elements are evolving at very different speeds and directions. Only by looking at
the actual policies and plans is it possible to discern the likely route forward. First is the
policy of the CCP allowing an increasingly entrepreneurial economy - a ‘socialist market
economy’ 11 - to develop. Here the CCP philosophy is to steer the country away from chaos
by embracing economic development. Second, the CCP uses a combination of
nationalism, choreographed historic lessons, along with the important pronouncements of
previous leaders, to ensure its legitimacy. President Hu Jintao, in his speech to the 17 th
Party Congress, linked the evolution of the CCP through Mao Thought, Deng Theory, and
Jiang – The Three Represents, adding his own Scientific Development, to the CCP
Constitution. The key objective is evolution not revolution. The CCP must retain power,
whilst gradually developing and introducing a carefully controlled agenda for gradual
reform. Bitter and potentially catastrophic struggles like the protest in Tiananmen Square in
Beijing in 1989, are seminal moments, which re-united the leadership in their goal of
preserving order and unity.
Recent economic management has been impressive and this ensures the current
legitimacy of the Party. In Playing Our Game, Edward Steinfeld reflects on the quantum
9 ibid., 135.
10 Richard McGregor, The Party – Secret World of China’s Rulers (London: Penguin, 2010), 12.
11 ibid., 33.
6

leap forward between 1989 and 2009, moving the agenda from the simple mathematics of
economic growth to now, a ‘quality of existence.’ 12 The economic growth policy was reinaugurated
by Deng Xiaoping (following Tiananmen Square) whilst conducting a tour of
the experimental zone in the South (1992). This launched a re-invigoration of the ‘socialist
market economy’ with new commercial companies becoming part of the global market
too. 13 This initiative has given China impressive year on year economic growth. The
resulting increase in household incomes has alleviated some of the political angst
originating from the Tiananmen Square pro-democracy protests. The CCP made a
calculated judgement. Loosening the constraints of the command economy has been a
success and worth the risks to internal stability.
Conversely and taking a different direction, economic success has allowed the CCP to re–
enforce some of its bureaucratic Communist ‘tools’. Richard McGregor (the former FT
Beijing Bureau Chief), explains the three principal tools for control by the state. First is the
appointment of all key personnel, through the CCP Central Organisation Department. This
is unlike any other organisation in the world. This department appoints all key officials in
China, in business and in the bureaucracy. Second is the control of the media, although
more difficult now the Propaganda Department has broad tentacles. Third, control of the
military is an inherent part of the CCP philosophy and the People’s Liberation Army (PLA),
is under the Central Military Commission.
Although these tools are in place, the reality is actually far more complex at the interface
between the entrepreneurial economy and the political bureaucracy. Here the Party has to
reform yet retain firm control, keep pace with the open market economy yet maintain
control of economic development. The CCP leadership claim reform is akin to turning an
‘armada of super tankers at full steam ahead.’ 14 However, there is an imperative for action.
Social inequality is running amok and the level of petitions (complaints) underlines the
sense of frustration amongst ordinary people. 15 The biggest threat to the CCP would be a
well-funded, self-contained private network in society and in business, which no longer
needs to report through the CCP. This would be a peaceful evolution, with CCP’s grip
slowly eroded by groups not under CCP sway. 16 In this dynamic situation, with huge
variables caused by the process of transformation, the leadership knows the primary
concerns are politics, stability and the pace of evolution.
CCP - Ideology
Although an outward sense of unity is vital to the public image, China’s internal
transformation brings a continual battle about ideology within the CCP. However, only
around the leadership elections and in the lead up to the production of the Five Year
Economic and Development Programme is there any visible political discussion among the
top leadership. Positively, Mark Leonard, in his book ‘What Does China Think,’ reflects a
growing intellectual debate, which does influence the leadership. There are academics
who are defining China’s re-emergence based on China’s own norms and standards – as a
civilisation and as a nation. As an example, Zharg Weiwei states,
12 Edward Steinfeld, Playing Our Game (NY: Oxford University Press, 2010), 11.
13 Steinfeld, Playing Our Game, 57.
14 McGregor, The Party – Secret World of China’s Rulers, 180.
15 Susan Shirk, China- Fragile Superpower (NY: Oxford University Press, 2007), 56.
16 ibid., 209.
7

’it is beyond the West's comprehension that a civilization-state and nation-state can be
merged, and that this fusion can define modernity in a way different from the nation-state,
the universally accepted form in the West.’ 17
In practice, Chinese politics is divided along ideological lines. On one side is the New
Left, so called because of their instinctive desire to consider what should be done with the
newly generated wealth – how to foster a model of economic development that benefits all
citizens. Leonard describes the New Left as arch enemies of the management buy out, or
the sale of land under the cover of privatisation. The New Left say the State Owned
Enterprises (SOE) should pay a greater socialist dividend. 18
On the other side is the New Right, who support full exposure to the capitalist based
market. The New Right perceives that market success is being unravelled, with the current
CCP leadership succumbing to populism, and following ‘balanced development rather than
accelerating the growth of privatisation.’ 19 The third strand is the Old Left – Communists
who believe in the virtues of the Marxist-Leninist model. With this diverse and competing
range of ideologies, the CCP leadership steers a consensual course between the opposing
ideas.
Another important political interface is with the expanding Chinese economy, which brings
global interests too – China is a huge cog in the global economic gearbox. Whilst the
Chinese leadership can choose the size of the economic cog, globally the speed and
complexities in this gearbox are beyond even China’s absolute control.
The financial crisis in 2008 is a good example because it caused a sharp downturn in the
global consumption of Chinese manufactured goods. This showed how dependant China
had become on the global economy for its own economic stability. The CCP leadership is
responding with the Twelfth Five Year Economic and Social Development Plan. Elements
of the plan seek ways to alleviate her dependence on the vagaries of the global economy.
The plan is a political shift towards the Left, based on a need to address some fundamental
inequalities in the domestic economy too, 20 - a need to return to basics. Through petitions
and demonstrations, there is a rising sense of disquiet, reflected in China’s ‘Gini’ coefficient
having risen. 21 There is a call in the Five Year Plan for better working conditions, fairer
pay, the provision of adequate pensions, land reform and less dependence on exports. As
a practical example, the Chinese Academy of Social Sciences (CASS) reported that 40
million peasants had land confiscated to build airports, roads, dams, factories, (2 million a
year). 22 The leadership knows this level of impact amongst the population is
unsustainable.
At the macro level, the CCP are trying to tackle the imbalances in the economy, they have
changed the tax system to re-distribute wealth, and used other levers. The Twelfth Five
Year Programme is plain about the problems; however implementing the changes is
difficult, especially when the economic foundation has very strong capitalist credentials.
The ideology of the CCP will need to evolve to meet this challenge. Additionally, the pace
of change makes it difficult for the CCP to lead. Rather, the CCP is led by some of the
17 Zhang Weiwei, ‘China – Civilisation State,’ http://www.chinadaily.com.cn/cndy. (accessed 20 Jun 2011).
18 Mark Leonard, What Does China Think, (London: HarperCollins, 2008), 34-39.
19 ibid., 44.
20 Leonard, What Does China Think, 49.
21 CIA World Fact Book, https://www.cia.gov/library. (accessed 20 Jun 2011).
22 Leonard, What Does China Think, 73.
8

actual changes, which are beyond even their control. This loss of total command will force
the CCP to adapt their current system - the direction is not yet known.
Political Stability
From a western perspective, it is not clear what the Chinese people want from politics or
the nature of political reform. Chinese academics like Yan Xuetong emphasise the need
for morality in politics – with ‘China as a superpower modelled on humane authority.’ 23 The
Oxford Professor, Bent Flyvbjerg, uses four value-rational questions: ‘where are we going;
who gains and who loses by which mechanism of power; is development desirable; and
24
what should we do about it.’ This ‘phronetic’ approach assists in teasing out some of the
different ideas about stability.
Professor David Shambaugh characterises the political situation as ‘atrophy and
adaption,’ he believes that the CCP will survive in power through incremental political
reform. ‘Experimenting with new methods, expanding them gradually, with a new kind of
party-state being born.’ 25 His view is that the CCP has swapped Marxism for nationalism
and socialism with Chinese characteristics. The core CCP values remain unity, avoiding
chaos, nationalism and seeking international dignity. His evidence points to the Chinese
people making a rational choice - supporting the CCP leads to economic development and
a moderate improvement in living standards. This model has lifted millions out of poverty –
it is successful and brings legitimacy to the CCP. An alternative view, by Menxin Pei, sees
China stagnating. Pei identifies the fractures between the ‘closed system, increasingly an
anachronism, incapable of facilitating or being representative of China’s diverse social
interests or mediating the conflict between an authoritarian state and a liberalising
society.’ 26 Pei cites under investment in: education, human capital, and public health – not
immediately visible, but emerging now for example with a reduction in national literacy
figures. The truth is somewhere between Shambaugh and Pei. On balance, the simple
fact that the authoritarian system has delivered an enormous reduction in poverty supports
the CCP retaining power.
However China is entering the second stage of economic development and growth is
always much harder and this introduces the risk of political instability. The scholar and
diplomat, Susan Shirk emphasises the point. The CCP leadership need to avoid public
splits and focus on consensual leadership at the top, 27 to ensure economic development.
The CCP leadership acknowledges that the Party is on a journey of domestic reform. 28
They know that the phronetic questions will not go away; the solution is not simply more
consumer spending, taxing and reducing inequality. It is deeper than that – a discourse
about priorities for education, healthcare and welfare is required. The Twelfth Five Year
Economic and Social Development Programme is the CCP’s solution to these phronetic
questions however it is not a dialogue, rather it is an attempt to impose direction.
Five Year Economic and Social Development Programme
The Twelfth Five Year Plan is a programme for the development of China. It comprises
social, economic and political direction for the entire nation, which cascades from central
government to the provinces and municipalities. A key question of any programme of this
23 Yan Xuetong, ‘Sources of Chinese Conduct,’ http://www.project-syndicate.org/commentary/xyan1/English.
(accessed 20 Jun 2011).
24 Bent Flyvbjerg, Making Social Science Matter, (Cambridge: Cambridge University Press, 2001), 60.
25 David Shambaugh, Atrophy and Adaption (Washington DC: Woodrow Wilson Centre Press, 2008), 181.
26 Menxin Pei, China’s Trapped Transition – Limits of Developmental Autocracy (London: Harvard University
Press, 2008), 206.
27 Shirk, China- Fragile Superpower, 38.
28 Premier Wen Jiabao, ‘CPC Speech, 5 Mar (2011),’ http://wenku.baidu.com/view. (accessed 20 Jun 2011).
9

scale is the ability of the state, the bureaucracy and the other instruments to deliver. It
covers a huge amount of business and encompasses issues to satisfy both the Left and the
Right.
29 Included for the Left are: a socialist market economy, housing for those on low
incomes, social security, health care insurance, free education and support to the rural
economy. On the Right: further globalisation, provision of stock markets, boosting of
consumerism, real estate markets, commercially funded health institutions, and a vibrant
service industry. The policies look sensible and appropriate for China.
However, like all manifestos, the difficulty is in the implementation – taking the programme
and actually implementing the changes on such a dramatic scale. Equally difficult will be
implementing the programme vertically through the CCP structure, where there will be
inherent differences between the political Left and Right in the Party. Whilst the economy
continues to grow and household incomes increase, the Chinese judge that the CCP is
delivering. This keeps the CCP firmly at the helm. However, implementation of the
programme is an enormous challenge. Any faltering by the CCP may cause even larger
scales of social unrest. The issue of domestic stability is acute in the minds of the CCP
leaders. The legitimacy of the CCP is measured by their competence to implement this
programme. Joshua Ramo makes the broader point. ‘The pursuit of stable reform itself
now serves as one of the regime’s major claims to its monopoly on power, a shift from
30
regime justification based on ideology, to one based on competence.’ Areas like foreign
policy must support the key tenets of this economic plan and ensure security along with the
unimpeded access to resources and markets.
Political Reform
A closely associated political issue, which influences domestic policy, is political reform.
The leadership are aware of the need to develop, modernise and reform the Party, along
with the state bureaucracy. The current political system is not stable for the long term. The
CCP describe political reform as a one hundred year journey: ‘this is the primary stage of
socialism,’ 31 with a transition to a higher and superior form of socialism in the future. As
part of a choreographed process, the CCP released the ‘Chinese Socialist Democracy
White Paper’ for circulation in 2007, and in a similar way, President Hu Jintao spoke of
political reform:
We must expand the citizens' orderly participation in political affairs at each level and in
every field, and mobilize and organize the people as extensively as possible to manage
state and social affairs, as well as economic and cultural programs, in accordance with the
law. 32
From a CCP perspective, political reform could easily transform into political chaos, and
Premier Wen Jiabao said, ‘China’s greatest challenges and greatest threats to its stability
come from within.’ 33 It is no surprise that the approach to reform by the CCP is tentative,
conservative and gradual. Assuming this gradual reform is accepted, then a sensible
deduction is that the CCP will remain in power for at least the medium term. The
revolutionary conditions of an ‘Arab Spring’ are not present in China. Whilst repressive and
29 ibid,.
30 The Foreign Policy Centre, ‘Chinese Political Reform,’ http://fpc.org.uk/fsblob/244.pdf, 30 and 36.
(accessed 20 Jun 2011).
31 CCP Constitution, http://english.gov.cn/index.htm. (accessed 20 Jun 2011).
32 President Hu Jintao ‘Political Reform’ http://news.xinhuanet.com/english2010/china/2011-
03/14/c_13777623.htm (accessed 20 Jun 2011).
33 Kerry Brown, China Between Global Responsibilities and Internal Transitions, in America and a Changed
World, Robin Niblett (London: Chatham House Press, 2010), 147.
10

autocratic, the comparison ends there. Sustained growth, employment and a five yearly
change in the leadership make the situation quite different to either North Africa or the
Middle East. However, China has its own issues over political stability, and the new CCP
leadership under Xi Jinping will need to determine a new direction. The choice of political
reform will have a huge effect well beyond China.
There are many reforming ideas; some advocate a ‘federalist possibility,’ 34 a loosening of
the centrally planned socio-economic system, with authority devolved to the provinces,
along with tangible demarcation of power within the Executive. This approach is unlikely to
find support because central control is judged vital to stability. The term democratisation is
used widely, and whilst much is made of the current grass roots village electoral system,
this process is not used more generally nor is there any plan to widen representative
democracy. The reality is at the national level, only approved delegates are selected to the
unicameral National People’s Congress (NPC) from the provinces. 35 Similarly, at the next
level up, the NPC only approves the pre-ordained State Council and the Politburo.
Therefore, the Party and the Party leadership are uniquely powerful and any sense of
political reform will be gradual, and follow extensive experimentation. An example is in
Chongqing, a mega city in the new province of Sichuan and Chongqing. The influential
Party academic, Mr Fang Ning, cites experimentation in deliberate polling in this city. This
involves the random selection of sample elements of the population, involving them in a
consultation process with experts, before asking them to vote on a single issue –
36
‘democratic heart to heart.’ Whilst this polling is carefully scripted and certainly not a free
choice - it is the start of an engagement process.
The problem is that there are no other models for political evolution or reform offered by
the CCP. The Constitution is limited to phrases about a one hundred year socialist journey.
The key part, the destination of the journey, is not clear. Eruptions like Tiananmen Square
(1989), are not be tolerated, however the volume of discussion throughout the country is on
the rise. The CCP are adept at using all the instruments of the state to keep the situation
under control, however the conditions have a dynamism of their own - it is very difficult to
predict the outcome.
Moving to consider the other elements of the Executive, the most important is the power
of law making. The accepted norm is individual freedom is based on the rule of law not the
rule by law. In China rule by law, is the norm, with rules, regulation and laws principally
empowering the state over the individual. An evolution to a different constitutional model
would need a transition to the rule of law. Pei makes the point for complex political reform
and a need for the introduction the rule of law: ‘remove the political monopoly of the
authoritarian regime, the ineffective monitoring and policing of the State agent’s and the
absence of rule of law.’ 37 However, real and substantive change is not evident. This can
be characterized by a Chinese White Paper on, ‘The rule of Law,’ 38 published in 2008. The
paper explained a consultative process, for making laws, however the weakness is the
consultation and approval is only within the Party, and is not representative. The text of the
White Paper says, ‘this democratic process, focusing on full consultation before a bill is
submitted for final voting, displays a distinctive feature of the system of the National
34 Jae Ho Chung Charting China’s Future (Plymouth: Rowman & Littlefield, 2006), 81.
35 EIU Country Report China (Dec 10), 41.
36 Leonard, What Does China Think, 71.
37 Pei, China’s Trapped Transition – Limits of Developmental Autocracy, 207.
38 Chinese Gov White Paper, ‘China’s Efforts in Promoting the Rule of Law,’ Beijing, Feb (2008),
http://english.gov.cn/official/2005-08/17/content_24165.htm. (accessed 20 Jun 2011).
11

People’s Congress (NPC) of China.’ 39 Pen Wei advocates the need for an independent
civil service, judiciary and anti-corruption agency. The failure to provide an effective
independent Executive, especially a judiciary, leads to corruption.
The other quandary for the CCP leaders is that economic prosperity also means the
formation of a civil society, who may require more consultation and participation in politics.
There is a inevitability to the whole situation of evolution and reform. Circling the CCP
Constitution within an impregnable wall will not work in the longer term. Nor will the CCP’s
approach of substituting political reform, with economic development and improvements in
household incomes. The reality is the CCP will need to decide on a path towards actual
political reform. The Left and Right factions in the CCP will need to negotiate a consensus
if they are to secure their long-term position in power, as a one party system.
Political Leadership
The Chinese constitution allows the State Council, which includes the President and
Premier, to serve for two consecutive five-year terms. The next NPC is scheduled for the
end of 2012. This will entail the transition to a ‘fifth generation of CCP leadership,’ with a
change in the President and the Premier. Succession politics will be a feature in the lead
up to the NPC – with some risks to internal stability. There will be changes among the NPC
delegates, right through to the Politburo itself, with changes amongst the Standing
Committee of nine senior leaders. The most important change is that Xi Jinping (current
Vice President) is expected to become the new President in 2013 and Li Keqiang (Vice
Premier) is expected to replace Premier Wen Jiabao. Xi Jinping is an experienced leader,
an ex-governor of the highly successful municipality of Shanghai, with military experience,
a successful Olympics Minister, and from a highly acclaimed Revolutionary family. Li
Keqiang is a professional economist, and ex-governor of Henan Province.
This new leadership team will have a profound influence on China and far beyond, during
this next decade. Little is known about their character or their policies because the actual
composition of the new Politburo will only emerge at the NPC. Only then can the political
pedigree of the new Politburo be judged. Unless there is a dramatic event, the most likely
scenario is the new Politburo will operate consensually. As China’s global interests grow,
the Politburo’s approach to foreign policy will evolve. The ‘outside world’ and in particular
the US will influence their behaviour. However, the new leadership will remain focused on
economic development - the prime source of political stability.
Summary
A sense of the Chinese perspective emerges through an analysis of the internal
challenges facing China, the enormous scale of the current transformation, along with the
experiments in political reform. China appears to be riding a huge wave, which has height,
speed, and enormous potential power. Never before has a developing country transformed
at this scale whilst coincidently emerging as a great power. 40 This will require expert
political direction and strategic leadership. The priorities of internal transformation and
political evolution will come first, however foreign policy choices loom large too. The prime
issue for the CCP is their nervousness over political instability. Whilst there is not much
evidence or opportunity for a serious opposition to emerge, internal transformation brings
innumerable pressures to the political system. Economic growth, Social and Economic
Development Plans and a change in the leadership (2012) all give a sense of progression,
39 Chinese Gov White Paper, http://www.china.org.cn/government/whitepaper. (accessed 20 Jun 2011).
40 Mearsheimer, Tragedy of Great Power Politics, 67-74. Paul Kennedy, Rise and Fall of Great Powers
(London: Fontana Press, 1989), 587.
12

not stagnation, but within the constraint of the one party system. A natural desire for
political participation will emerge, particularly as wealth generates a civil society. The CCP
will maintain a tight grip and focus on economic development. However politically the New
Left and the New Right will have to agree on a consensus and close the ideological gap.
Principally this is over the extent of adopting the ‘socialist market economy’ and deciding on
a path to actual political reform. Sustaining economic development will be the goal of the
new CCP leadership and an overtly hegemonic approach to foreign policy is not likely to be
in their immediate interest.
ECONOMY
Introduction
The economy has a central role generating wealth and stability within China. Equally,
China’s economic power has a profound global impact. In this section, the first objective is
to examine the domestic economy and the link between economic development and
social/political stability. The second objective is to evaluate the link between economic and
foreign policy, by examining Chinese access to markets and resources.
In the late 1970s, China adopted ‘economic development’ as the prime method of setting
China onto a steep trajectory to re-emerge as a great power. The CCP’s public aspiration
is for China to become a ‘moderately prosperous society.’ 41 The tacit understanding of the
Chinese people was that through sustained economic growth and the generation of wealth,
appropriate levels of funding would be available for welfare programmes, and for modest
consumer prosperity. The economy has become central to political stability through the
generation of wealth, to fund Chinese socialism.
Economic Development
China is the fastest growing economy in the world. This has transformed the lives of the
Chinese and has lifted millions of the population out of poverty. 42 This has a profound
effect and provides much of the logic behind the ‘Beijing Consensus’ 43 - China foregoing
political liberty for fast economic development. History provides an important perspective
about China’s current development. In the 18 th century China had a sophisticated
civilisation, however as others rapidly industrialised, China remained closed to the outside
world. Manufacturing only began with the reforms introduced by Deng Xiaoping from 1977,
which were re-enforced following his ‘Southern Tour’ in 1992 after Tiananmen Square.
With very rapid industrialisation in the coastal east, based initially in the Provinces
surrounding Hong Kong, there was considerable experimentation to find out what worked
best for China. Economic growth became the central objective of the state as a route to
stability. Deng Xiaoping’s famous pronouncement: ‘don’t care if the cat is black or white, as
long as it catches mice,’ captured the essence of this economic drive. Equally, a ‘postmortem’
after the collapse of the USSR re-enforced economic development as China’s
prime objective to avoid similar political collapse. 44 This link between political stability and
the economy is illustrated by Ian Bremmer’s ‘J curve analysis.’ 45 The J curve plots the
move of a stable, closed country through an inevitable trough of instability towards an open,
stable country. As China moves from a closed stable state through the unstable bottom of
41 Premier Wen Jiabao, ‘NPC Speech,’ 5 Mar (2011), http://wenku.baidu.com/view. (accessed 20 Jun 2011).
42 ibid.
43 Joshua Cooper Ramo, ‘The Beijing Consensus’, The Foreign Policy Centre, (2004): 3-12.
44 Shambaugh, Atrophy and Adaption, 76-80.
45 Ian Bremmer, The J Curve: A New Way to Understand Why Nations Rise and Fall (NY: Simon and
Schuster: 2006), 243.
13

the J curve to an opening state, the sustainability of authoritarian CCP rule is in question.
This haunts the Chinese leadership, who promote domestic stability through economic
development to avoid the issue of political transformation.
China’s approach to economic development has been overwhelmingly successful and the
Chinese economy is now the second largest in the world after the USA, 46 over taking
Japan in 2010, and surpassing Germany as the largest exporter. Economic expansion has
brought great social changes. First is the relative contraction of agriculture’s contribution to
to
GDP, which is now only 10%, but replaced by a rise in the service industries, growing
43%, whilst manufacturing at 47%, remains stable. 47 The figures are only part of the
narrative. There has been a large and ongoing programme of urbanisation – some forced
and some voluntary. This has meant some of the poorest have lost access to land in the
sprint towards urbanisation. This is a source of socio-political instability. Millions of the
newly urbanised are in fact suspended between the urban and rural ‘Hukou’ registration
system, 48 which is overly bureaucratic and unfair. Additionally the scale of reform means
the distribution of wealth amongst the population is uneven, with the rural population of 700
million left with a net income of around $2 per day. 49 Many ordinary Chinese feel that the
‘socialist market economy’ has brought inequality and respond with increasing levels of
domestic unrest. The CCP are busy trying to address this wide scale inequality through
taxation reform, public housing programmes and wide scale wage increases. However,
inequality is rooted deeply in the economy and recognised by the CCP as a serious socioeconomic
issue. Political moves to alleviate inequality have similar constraints to any other
economy with the risk inflation or choking off growth. The CCP have a challenge
maintaining balanced economic development. Equally, as China moves from a closed
economy to being open to the ‘outside world’ the economic control levers available to the
CCP reduce.
The shape and nature of the various sectors in the domestic economy feed into this sense
of insecurity amongst the CCP leadership too, as business moves beyond CCP control.
Traditionally the Communist State Operated Enterprises (SOE) dominated, however this
situation has changed because SOE performance does not match private enterprise.
According to Qiao Liu of Hong Kong University the SOE average a 4 % return whilst the
private companies average 10% higher. 50 These private companies are a major force in
the economy and the Chinese Bureau for Statistics states that they account for two thirds of
industrial output. 51 The range and diversity of the private companies, some stock market
listed and some not, echoes the argument that business beyond state control performs the
best. The CCP are coming to terms with this fact, and responding by encouraging
entrepreneurs (previously banned) to join the CCP as full members. However, in reality the
pace of change presents an enormous challenge for the CCP leadership, who try to keep
up with the scale and breadth of economic development. For example, Volkswagen
manufactures and sells nearly 2 million vehicles per year in China, a figure that is set to
grow – the scale of this consumer market is a practical example of the wealth created
throughout the economy. The CCP knows the consequences of economic development
will lead to the emergence of a civil society and to calls for socio-political reform. 52 The
46 CIA World Fact Book 2011, https://www.cia.gov/library/publications. (accessed 20 Jun 2011).
47 Freeberne, Far East and Australasia Year Book, 223-239.
48 Kam Wing Chan, and Will Buckingham, ‘Is China abolishing the Hukou system.’
http://faculty.washington.edu/kwchan/Chan-WSB-Hukou. (accessed 20 Jun 2011).
49 Xinhua News Report, http://news.xinhuanet.com/english2010/china/2011-04. (accessed 20 Jun 2011).
50 Economist, ‘Entrepreneurship in China – Let a Million Flowers Blossom’ Economist, 12 Mar (2011).
51 ibid,.
52 Shambaugh, Atrophy and Adaption, 167.
14

CCP leadership have a very complex programme of economic and political transformation
ahead. Some important elements of the transformation will be beyond CCP control and
this will cause political friction within the CCP, with some elements in the Party embracing
reform and others looking to retrench. The dynamics here are very unpredictable.
Future Direction
The Chinese government has a policy to re-balance the economy away from over reliance
on manufacturing and exports, towards consumer spending through moderate increases in
wages and the provision of social welfare programmes. This policy-led approach aims to
slow GDP growth to around 7%, 53 to prevent the economy over heating. Premier Wen
Jiabao said: ‘we are keenly aware that we still have a serious problem in that our
development is not yet well balanced, coordinated or sustainable.’ 54 The latest CCP
programme provides targets for urbanisation, education, social security provision,
increases in minimum wage and medical insurance. Many elements of the programme
would look entirely at home in a European centre/left political manifesto.
There are, however, notes of caution. The Economist, 55 reports on a working paper by
National Bureau of Economic Research (NBER) on ‘why fast growing economies slow
down.’ The paper described that when Purchasing Power Parity (PPP) reaches $16,740,
the economy tends to slow the growth rate. In China, adding in the risk factors of an aging
population, low levels of consumer spending and an under valued currency, the odds of a
slow down in 2016 are high. 56 Whilst not definitive, the CCP knows absolute command of
the economy is slipping away from them. Following the opening up of the economy, the
CCP still holds some of the economic levers, whilst other levers are unattached - the
leadership has less control now. The change from being a ‘command’ economy to a
‘socialist market economy’ is profound and resonates throughout society – from the top to
the bottom. The ramifications are important politically too, because economic development
is central to the CCP’s plan for the entire country to emerge. However ‘market forces’ have
a habit of surprising, especially when exposed to the vagaries of the global market, and the
CCP has considerably less control as the economy moves beyond even their extensive
tentacles.
Economic Maturity
In international business, China is making significant inroads. Chinese companies are
active in the global ‘mergers and acquisition’ market, financed by cheap loans from the
China Development Bank. This supports the government policy of Chinese companies
‘going global.’ 57 This changes China’s perception of national interests and gives China
another dimension to her rapidly expanding global web of economic interests. Equally, the
very nature of business in China is changing too. It should have a bi-lateral focus, if foreign
companies can gain access to the Chinese home market. ‘A lot of companies are looking
at China as a burgeoning consumer market, and with [Chinese] wage increases in certain
Provinces of 10 to 20%’ 58 there are huge opportunities for those exporting into China too,
53 Xinhua China Daily, ‘Economic News Report,’ http://www.chinadaily.com.cn/china/2011-
04/07/content_12289265.htm. (accessed 20 Jun 2011).
54 Premier Wen Jiabao speech at the NPC 5 Mar (2011), http://wenku.baidu.com/view. (accessed 20 Jun
2011).
55 The Economist, ‘BRIC Wall,’ The Economist, April 16 (2011):84.
56 Eichengreen Barry, Donghyun Park, and Kwanho Shin, ‘ When Fast Growing Economies Slow Down -
China.’
http://www.nber.org/s/search. (accessed 20 Jun 2011).
57 Jamil Anderlini, ‘Deal and Deal Makers,’ FT, 6 Apr (2011): 4.
58 De Swaan (Princeton University) ‘Rising Chinese Consumer,’ http://www.cfr.org/china/rising-chineseconsumer,
14 Oct (2010): 1-3. (accessed 20 Jun 2011).
15

with ‘a real dynamic and stimulating consumption.’ 59 Equally as the economy matures,
Chinese businesses are looking to move industry ‘up the value chain,’ and the ‘R&D’
expansion announced in the CCP Twelfth Five Year Plan perhaps signals a move away
from energy intensive to more sustainable and valuable business development. This
situation is potentially very positive.
As China grows its overseas economic interests and, assuming China is open to foreign
companies operating within the country, a ‘peaceful economic rise’ is more practicable.
However, this will take confidence by the CCP, as the rest of the world wants equitable
economic competition with China. Action by the CCP to open China to foreign business will
speak louder than simple words like a ‘peaceful rise.’ Adopting an equitable approach to
economic competition will not be easy for the CCP leadership as there are other future
economic issues too. For example, China’s population ages rapidly, to 31 percent by
2030 60 and China will need to make adequate provision for this increase in pensioners.
These sorts of dynamics may curtail further bi-lateral opening up of the economy – the
worst option would be protectionism.
Access to Resources and Markets
Chinese industry relies on access to resources and markets. A prime example is oil.
China is the third largest global oil importer and analysts from ‘Platts’ predict China will be
the largest importer in two- three years. 61 This trend is endorsed by the International
Energy Authority (IEA) who predicted that by 2030, China will represent three quarters of
global oil consumption. 62 Angola and Saudi Arabia supply around a third of Chinese crude
oil imports, with 77% of China’s imported oil passing through the Malacca Straits. Oil is a
good illustration of the link between China’s economic and foreign policies, particularly
around access to adequate reserves. These issues drive many of China’s main foreign
policy decisions, both securing access and the transportation of resources to China. The
scale and diversity of the supply of natural resources means China has a truly global
business. The rate of demand is without equal - China’s natural gas demand grew by 22%
in 2010 alone. 63 China is the largest importer in the world of coal, iron, copper, zinc and
lead, by a very considerable margin. From Peru to Russia’s Far East, there is a very
effective template for securing access to the necessary resources.
First is the provision of Chinese capital. China owns the world’s largest banks, 64 and the
central bank has over $2.4 trillion worth of foreign exchange reserves, along with sovereign
wealth funds of nearly $300bn. With these financial resources, the scale of investment to
secure resources and a distribution network 65 is unparalleled. In the Russian Far East to
take a typical example, the capital investment is made, infrastructure built and extraction of
the resource, using Chinese labour begins. The relationships are complex. They have a
socio-political dimension, with aid and cheap loans providing the levers used to gain longterm
access. The relationships also bring natural tension at different levels. Locally the
sense of Chinese intrusion into a country can be strong when Chinese labour and capital
59 Geoff Dyer ‘Move from Investment to Consumption,’ FT, http://media.ft.com/cms. (accessed 20 Jun 2011).
60 Xinhua News Report, ‘Aging Population,’ http://news.xinhuanet.com/english2010/photo/2010-
08/13/c_13443875.htm. 13 Aug (2010). (accessed 20 Jun 2011).
61 Rachel Morison, ‘Platts -China seen overtaking US as biggest oil importer’ http://www.risk.net/energyrisk/news.
(accessed 20 Jun 2011).
62 Freeberne, Far East and Australasia Year Book, 233.
63 Julie Jiang and Jonathan Sinton, ‘Overseas Investments by Chinese National Oil Companies,’ IEA Report,
Paris, Feb (2011): 11.
64 The Economist Pocket World in Figures 2011 (London: Profile Books, 2010), 67.
65 Ken Miller, Foreign Affairs, Issue 4, Jul/Aug (2010): 97.
16

exert a direct physical influence in a country. At the other end of the scale are relations
with the US, when China allies with ‘what are perceived by mainstream international
community, peripheral rogue states.’ 66 Iran, Sudan and Burma spring to the fore.
However, reality and perspective are important. China’s engagement has a geo-political
sophistication rooted in its national interests. Iran is a useful example. On one hand,
respective Trade Ministers meet to confer special trade relations, which secure oil supplies
for China and hard currency for Iran. However, in balancing the bigger strategic issues
China recognises US sensitivities. It has avoided the use of the veto for any UN Sanction
on an Iranian nuclear issue. This pragmatism demonstrates China’s sophisticated
approach and its concerns about the universal nuclear non proliferation issue. China
makes a similar calculation in developing Sino-Pakistan relations, as a response to US-
India re-engagement. All are classic balance of power politics and diplomacy, and show
practically China’s growing dexterity and use of comprehensive national power. 67 This
sophistication translates into the rapid growth in her global business corporations too.
Chinalco is an aluminium company and is a good example of a new breed of global
Chinese corporation, which is hungry for growth and economic power. This shows the
global diversity of Chinese business, which is now emerging at the multi-national level.
Reported by the FT, ‘Chinalco can learn a lot [about business] from Rio Tinto, (world’s
largest mining company),[...] Chinalco is hunting for high grade copper, bauxite, iron ore
and coal resources – the minerals to fuel urban development.’ 68 Global business means
China has global interests and inevitably a responsibility to protect these growing interests.
From a Chinese perspective, this is not being hegemonic. However, the scale and
inevitable growing web of China’s global corporations will bring its own friction and other
countries may well perceive China as intruding. China’s ‘peaceful rise’ may feel to others
like a direct threat.
Faced with the choice of either using her power abroad to secure resources or face a
resource induced economic slow down – the CCP would favour maintaining access to
resources first – using all the levers of power if necessary – to protect the economy, which
is vital to her own stability. With a very diverse manufacturing basis to the economy, it is
difficult to predict where and how a spike in resource supply might manifest into a crisis. It
is speculative, however, what would China do in response to the 1973 oil crisis, the answer
is certainly not a single-track solution. China would use the full spectrum of her
comprehensive national power (diplomatic, economic and military) to resolve the issue.
Regional and International Economic Issues
The Chinese economy has a large impact at the regional level. This started in the 1980s,
when market driven regionalism emerged. The international economist Richard E Baldwin
explains this as: ‘Asia is like one big factory with intra regional trade flows acting like
conveyor belts moving partly processed goods to the next production bay, [...] not driven by
governments, but by private companies establishing production sites.’ 69 Trade flows
between economic hubs and spokes with Free Trade Agreements (FTA) negotiated bilaterally
tending to favour the hub. China, as the major hub, benefits the most rather than
the spoke supplying economies. 70 Looking into the future of trade in East Asia there are
66 Kerry Brown and Loh Su Hsing, ‘Trying to Read the New Assertive China,’ Chatham House Programme
Paper, Jan (2011): 3.
67 Harsh Pant, China’s Rising Global Profile (Eastbourne: Sussex Academic Press, 2011), 37.
68 Lionel Barber and Leslie Hook, ‘Chinalco Pledges to Keep Stake in Rio’ FT, 4 Apr (2011): 22.
69 Richard E Baldwin, Hub and Spoke Bilateralism in East Asia (Oxford: Oxford University Press, 2004) 52.
70 Baldwin, Hub and Spoke Bilateralism in East Asia, 55.
17

two choices. Either continue with the bi-lateral FTA or take the regional step to the
formation of an East Asia FTA. The final decision will rest with China as the regional
economic super power. Currently the bi-lateral FTA system suits China however as her
economy matures, there will come a moment when adopting a broader trading regime may
suit her interests.
China is the prime investor in the neighbourhood too, with Chinese investment in
infrastructure a major activity. Typically, investment programmes bring mutual benefit. For
example in Burma, the Chinese are investing in the Schwe oil and gas fields, which will
help supply 10% of China’s oil imports. Building the associated port and pipeline
infrastructure is ‘without any strings,’ with Burma drawn to China out of necessity. However
even Burma is wary, and in the words of an old Burmese Monk, ‘we are China’s kitchen.
They take what they like and leave us with the rubbish.’ 71 Regionally countries typically
engage with the US/EU to balance this dependence on China.
Internationally, she is advancing too, with profound medium term transitions in economic
power looking inevitable and favouring China. This means that China can finance foreign
policy regionally and internationally, either to balance or transition economic power,
depending on her national interest. However, there is a reality. China needs global trade
for her own survival and international stability will remain a prime goal for the CCP. To
illustrate, even the two largest economies are wedded together. China is the principle
lender to the US, and the US is the principle consumer of Chinese manufactured goods.
Ian Bremmer goes further and talks about mutually assured economic destruction – ‘so
Beijing knows bad days for the US are bad for China’ 72 because she holds $900bn of US
debt and needs US consumer spending. Whilst there is a notional G2 (US and China), the
global context is exemplified by the G20 Forum in 2009 – ‘when the answers to global
economic problems are no longer from NATO member list countries, rather from new
centres of economic power and new forms of global cooperation.’ 73 This started with the
1997 Asian Financial Crisis, which led directly to the formation of the G20, because of the
G8/IMF’s inability to intervene in the crisis and the willingness of the Chinese Central Bank
to step in. This situation may be interpreted as the beginning of the decline of US
economic supremacy and consequent decline in absolute power. Given China’s size,
shape and the content of the economy, China has an important influence on global trade
and the world economy. In practise, China’s trade policies are broadly supportive of a rules
based trading order, using the system to advance its interests rather than changing it. 74
Summary
China’s economy has many dimensions. Internally it is responsible for generating wealth,
which leads to political stability. Equally, the international scale of the economy is a key
component of China’s emergence as a global power too. The economy is a principal link
between domestic and foreign policy. Decisions about fiscal and monetary policy,
investment, and manufacturing all have a foreign policy element. Whether in the G20,
WTO or regionally as a free trade hub, China has immense international economic power.
However, the converse is true also. Internal domestic policy is dependant on economic
development too. Welfare provision, education, health, housing, infrastructure all demand
investment. Any global instability would effect China at home. Taking the two
71 Economist, ‘Chinese Takeaway Kitchen, Economist Magazine 11 Jun (2011): 60.
72 Bremmer, ‘Gathering Storm America and China in 2020’, World Affairs, Jul/Aug (2010): 71.
73 Stefan Halper, The Beijing Consensus (New York: Basic Books 2010), 212.
74 Robert Z Lawrence, (Harvard university), China and Multilateral Trading (Oxford: Oxford University Press,
2008), 146.
18

perspectives, of either, a hegemonic or a foreign policy shaped by internal transformation,
China fits somewhere in between. The main argument supports the CCP’s emphasis on a
‘peaceful rise,’ as China transforms internally, the economy provides for the rising
expectations amongst the Chinese population. The CCP’s political legitimacy is locked into
successful economic development, which is based to global economic stability – and not
hegemonic expansion. However in securing this goal there will be inevitable tension. In
the final analysis, it is the relative power of the political Left and Right factions in the CCP,
which will drive economic policy and in turn foreign policy choices too. Politically the CCP
will weave between diplomacy and a more hegemonic approach. This will suit the
demands of the economy alongside the ebb and flow of internal political reform.
FOREIGN POLICY
Introduction
The aim in this section is to test the hypothesis that internal domestic policy will drive
Chinese foreign policy, rather than the alternative hypothesis, of a transformed and
internally strong China acting as a hegemonic global power. As has been said, China
portrays her trajectory as a ‘peaceful rise,’ however to many in the rest of the world used to
‘power politics’ and Realism, China fits the analogy of a huge wave sweeping around the
globe – as an emerging great power. For China, their perspective is quite different. The
CCP leadership relies on global stability to feed China’s economic development. However
to achieve this foreign policy goal of a ‘peaceful rise’ a transparent dialogue will be critical
to reducing misunderstandings. The CCP is not open or clear in conveying the broader
context behind a ‘peaceful rise.’ In addition, history is short on examples of authoritarian
governments following a benevolent foreign policy. China is pursuing a hitherto
unachieved goal for an emerging great power. So, this section will analyse the
complexities of China’s foreign policy using the framework of three International Relations
theories - Realism, Social Constructivism and Institutionalism.
Evolution in Foreign Policy
Practically, China’s foreign policy has many layers, dimensions and complexities. It is
rather like a three-dimensional puzzle with numerous players representing those of the
political Left and the Right, business, entrepreneurs, and the military. Those shaping policy
do not act coherently despite the public image of the all-powerful CCP. Recent Chinese
foreign policy can be characterised into three distinct phases, reflecting the character of the
CCP leadership. Drawing on information from Dr Lanteigne, 75 ‘Dengist’, was a period of
gradual rapprochement with West, and the ‘non-export’ of Maoist ideology. Next ‘Jiang’,
post Tiananmen Square (1989), sought stable productive relationships with China’s
periphery, to concentrate China on deepening domestic reform. This period marked the
beginning of ‘China as a joiner of international institution’ like the WTO – (2002), which
shaped the emerging domestic economy – with a profound impact internally and on the
global market. Finally, ‘Hu’, uses scientific development: focused on economic
development, adopting some of the norms of the international system, moving China
towards universal issues like nuclear non-proliferation, anti-terrorism, environment, 76 but
also nationalism.
Foreign Policy Strategy
The starting point in foreign policy is to identify China’s national interests – the ends. In
2009, President Hu Jintao said, ‘China’s diplomacy must safeguard the interests of
75 Marc Lanteigne, Chinese Foreign Policy (London: Routledge, 2009), 149.
76 ibid.
19

sovereignty, security and development.’ 77 Dai Bingguo, the Chinese State Councillor for
External Affairs, further defined those core interests as:
‘First China’s political stability, namely, the stability of the CCP leadership and of the
socialist system; second sovereign security, territorial integrity, and national unification; and,
third, China’s sustainable economic and social development.’ 78
Practically, the current Twelfth Five Year Social and Economic Development Programme
and the Defence White Papers 79 articulate China attaining sovereignty over Taiwan;
maintaining a firm grip on Tibet and Xinjiang Province and focusing on economic
development through access to resources and markets. Following the National People’s
Congress of March 2011, His Excellency Liu Xiaoming, the Chinese Ambassador to
London, spoke at Chatham House to explain this programme further. The Ambassador
said, China is not hegemonic, or expansionist, nor interferes in sovereignty or security, but
prefers mutual trust and equity. He said China’s actions provide the evidence - UN
peacekeeping participation, anti piracy patrols, leadership of six party talks on Korea, global
governance in G20, engagement of the developing ‘BRICS’, climate change and most
recently the rescue effort for the Japanese/New Zealand earthquakes – in every way China
presents as a facilitator and an upholder of peace and stability. 80 However, in reality
China’s foreign policy has a more complex pedigree. By analysing China’s foreign relations
with the US, within International Institutions, with her neighbours and internationally, it is
possible to determine a little of the reality behind the policy.
US - Chinese Foreign Relations
China’s primary strategic relationship is with the US, which has implications for global
peace, security and stability. Each country has unique strength, power and global
influence, which leads to both cooperation and competition. To analyse this relationship,
two opposing theoretical perspectives may be used. First, China follows a route defined by
Offensive Realism, as described theoretically by EH Carr and John Mearsheimer. China
becomes a regional hegemon, and a great global power, engaged to maximise advantage
and national interest. John Mearsheimer, in The Tragedy of Great Power Politics argues
that, ‘great powers fear each other and always compete with each other for power, at
expense of other states [...] China and the US are destined to be adversaries as China’s
power grows.’ 81 The second contrasting perspective is China and the US balance power
by accommodating China’s revisionists, who seek change, whilst maintaining the US as a
status quo power 82 , through a range of supporting alliances.
The more likely outcome is China using a combination of these two approaches based on
the CCP narrative of a ‘peaceful rise’, which uses trust and co-operation – almost a Social
Constructivists approach. This is because the principal objective of the CCP leadership is
internal stability through sustained economic development. This requires global stability
too, which explains the graduated approach to competition and cooperation with the US.
Shambaugh supports this view and he says stability in Sino-American relations can endure
77 PRC Government Website http://www.china.org.cn/china/node_7075080.htm. (accessed 20 Jun 2011).
78 Wang Jisi ‘China’s Search for a Grand Strategy,’ Foreign Affairs Vol 90 Mar/Apr (2011): 69.
79 Chinese Government ‘White Papers - Index’ http://english.gov.cn/official/2005-08/17/content_24165.htm
(accessed 20 Jun 2011).
80 His Excellency Liu Xiaoming, ‘CCP 12 th 5 Year Plan,’ Chatham House Speech 18 Mar (2011),
http://www.chinese-embassy.org.uk/eng/. (accessed 20 Jun 2011).
81 John J Mearsheimer, The Tragedy of Great Power Politics (New York: WW Norton 2001), 2-4.
82 Professor AFK Organski, Power Transitions (NY: Chatham House Publishers, 2000), 6.
20

if ‘wisely managed by both sides [..] and if key sensitivities are not provoked.’ 83 Equally,
former Secretary of State Henry Kissinger says, ‘why would it be rational to expect that a
China, which is surrounded by major countries with significant military budgets, would
challenge the US militarily and exhaust itself in rivalry whilst doing so well economically.’ 84
These opinions are a little too optimistic; it is more likely that the US and China will mix
balancing power, with the more dangerous transition of power, depending on their specific
interests. Dr Aaron L Friedberg, speaking at the IISS, 85 enforces this ‘dual strategy’
between China and the US. Principally, China has three strands to her strategy, avoid
confrontation with US, build comprehensive national power (economic, political and
military) and undermining the US opportunistically. He goes on to describe China’s
assertiveness in four elements: first, relative power is shifting to China; second, China’s
stronger nationalism; third, leadership is now by Politburo consensus, (lowest denominator
is cautious assertiveness) and fourth, the military is more assertive and engaged. 86
In contrast, at the end of her book China - Fragile Superpower, Shirk provides another
view. She emphasises that China’s weakness is America’s danger: with Chinese domestic
challenges, inequality, lack of adequate healthcare, or provision of sufficient education 87
conspiring against a hegemonic foreign policy. Striking an optimistic note, Charles
Freeman in China’s Rise - Challenges and Opportunities, makes the case for China/US
providing world leadership on common issues like climate change, energy security,
international trade, and development. 88 However, the longer-term view, from Martin
Jacques (LSE), on a new political pole - a Pax Sinica, ‘based on the steady reconfiguration
of the world on China’s terms,’ 89 seems inevitable. However currently, the judgement is
China will secure her national interests by balancing power internationally with the US.
Regionally, China will transition power, through a combination of her geo-political position
and her sheer regional economic power. This will reduce US regional influence. A
graduated competition, with some cooperation, will suit China in the medium term, and
safeguards the principle objective of domestic stability - to protect the legitimacy of CCP
rule. This agrees with the broad deduction on the future of US-Chinese competition by
Joseph S Nye, in his recent book on The Future of Power. 90
Chinese Institutionalism
China has an Institutionalist dimension to foreign affairs and is an important member of all
major international organisations including the WTO, IMF, World Bank, and the Nuclear
Suppliers Group. 91 In Realist terms, China should be revisionist, seeking to change the
global norms and rules in favour of China’s own image. However, China is arguably more
‘non-participative’ 92 than disruptive in multilateral frameworks. China has only very rarely
used the UNSC veto, considerably less than US/UK or France. 93 Chinese foreign policy
has a competitive edge, when it suits China’s best interests. Equally, with the transition of
83 Quansheng Zhao and Guoli Liu, “The Challenge of Rising China,” The Journal of Strategic Studies Vol 30,
No 4-5, Aug-Oct (2007): 593.
84 Quansheng Zhao and Guoli Liu, “The Challenge of Rising China,” The Journal of Strategic Studies Vol 30,
No 4-5, Aug-Oct (2007): 588.
85 IISS Lecture by Dr Aaron L Friedberg http://WWW.iss.org/events-calendar/2011. (accessed 20 Jun 2011).
86 ibid.
87 Shirk Fragile Superpower, 254.
88 Charles Freeman, China’s Rise Challenges and Opportunities, (Washington DC: Peterson Institute), 236-7.
89 Jaques When China Rules the World, 370 and 431.
90 Joseph S Nye The Future of Power (NY: Public Affairs Books, 2011), 202-4.
91 Lanteigne, Chinese Foreign Policy, 69.
92 Kerry Brown and Loh Su Hsing ‘Trying to Read the New Assertive China Right’, Chatham House ASP (Jan
11): 10.
93 ibid.
21

power towards the East and a more multi-lateral world, China certainly derives power from
an Institutionalist approach too. An example is abstaining from the recent UNSC vote for
UN Sanction 1973 ‘humanitarian Intervention’ on Libya. This avoids a public endorsement
of any obligations under the concept of a responsibility to protect (R2P) or crossing the
nation state or sovereignty threshold. However, China is pragmatic and derives legitimacy
from the rules, norms and values 94 associated with institutions, for example, funding the
UN Chinese- African Business Partnership or UN Poverty Reduction Centre based in
Beijing.
Although keen and drawing Institutionalist legitimacy from these institutions, China does
and will seek new ways. Professor Callahan, ‘China sees itself shifting from rule follower,
to rule maker – new norms and values, with ancient Chinese wisdom on world stage.’ 95
Taking in the lessons of Joseph Nye on soft power, China’s goal orientated foreign policy
wields charm, and mediates in disputes. 96 Less transparent is the reaction when China
does not get what she wants. This is an important issue. In an encounter, will the political
Left or the Right prevail. The extremes of a Constructivist type approach, advocating trust
and co-operation competing with the Offensive Realists, who follow a theoretical line similar
to Mearsheimer - that a highly interdependent world economy is no protection against the
survival of a great power. 97 It is difficult to be definitive on which political side of the CCP
will prevail. Recent experience and looking at the new leadership, there is unlikely to be a
change away from the consensual approach by the Politburo. So, for the moment foreign
policy is likely to be shaped by the needs of internal transformation, recognising political
stability is heavily reliant on economic development.
Regional Foreign Policy
The region resonates with China’s primary national interests. Geographically, China has
fourteen land neighbours and eight sea neighbours. Practically, China’s size and economic
power gives China natural influence over her neighbours. 98 Jaques argues that ‘in regional
foreign policy China is seeking out ways to be the regional leader, embracing
multilateralism and free trade agreements.’ 99 This is true; China switches between Realism
and Institutionalism depending on her requirements for security, regional sovereignty or
economic development.
However, there are red lines in China’s regional foreign policy. First is national
sovereignty over Taiwan and upholding the ‘one China principle.’ 100 Second is Tibet; the
Chinese perspective is that ‘without Tibet, China would be but a rump [...] and India
already, is a blunt geographic wedge in China’s zone of influence in Asia.’ 101 Third is the
underlying enmity in the relationship with Japan. The Japanese invasions and occupations
between 1894 until 1945, has left an indelible mark, with scars like the ‘Rape of Nanking’
testament to unforgiveable Japanese aggression. Practically the Japanese and Chinese
have border disputes around islands to the south of Japan, which spark incidents at sea
too. Additionally, Japan and the US have a unique regional alliance, which includes the
94 John Baylis, Steven Smith and Patricia Owens, The Globalisation of World Politics (Oxford: OUP, 2011),
255.
95 William Callahan, China the Pessoptimist Nation (Oxford: Oxford University Press, 2010), 4.
96 Joshua Kurlantzick, Charm Offensive (London: Yale University Press, 2007), 159.
97 Mearsheimer, Tragedy of Great Power Politics, 371.
98 Kerry Brown and Loh Su Hsing “Trying to Read the New Assertive China Right”, Chatham House ASP
2011/02, (Jan 11), 8.
99 Jaques, When China Rules the World, 277.
100 Shirk, China: Fragile Superpower, 198.
101 Robert D Kaplan ‘The Geography of Chinese Power’, Foreign Affairs, Vol 89, No 3, May/June (2010): 26.
22

asing of a substantial US military presence in Japan (Okinawa). Fourth is Korea. Both
North and South are contained within a dialogue, the UN Six Party Talks, chaired by China.
Again, South Korea is protected by a US military presence, which is an issue for China’s
own sense of regional insecurity. The other great power in the region is Russia. This
relationship is punctuated by mutual containment. Whilst, China dwarfs Russia in East
Asia, in demographic terms, 102 each is wary of the other. However, the Shanghai Cooperation
Organisation (SCO) looks to enhance security cooperation on this long land
border into Central Asia.
Pragmatically, economics and trade are high on the regional agenda, which tend to bear
down on any military skirmishes in the region. Even sovereignty over Taiwan is not a bar to
Taiwanese companies, like the massive Foxconn, owning and operating mega factories in
China. Historically the Chinese Dynasties operated a ‘tributary system,’ 103 based on
China’s superior civilisation and regional domination. Smaller countries paid tribute to
China’s wealth and regional power and, in return, gained geographic and political
sovereignty. China claims her new re-emergence as ‘neither hegemonic nor colonial, but
founded on non-interference, with no claim of sovereignty over other nations.’ 104 However,
there is a natural consequence, and the smaller countries of South East Asia have formed
an association following their independence in the early 1960s, the Association of SE Asian
Nations 105 (ASEAN). Conscious of the dominance of China, the ASEAN countries seek to
balance China’s power through engagement with the US. In response, China uses all the
diplomatic tools in managing regional relations. In many ways China’s current Scientific
Development is little changed from Deng’s: ‘accommodating your neighbours [.....] to
concentrate on economic modernisation, China must have a peaceful, stable
environment.’ 106 Whilst there is little cooperation in East Asia, because of a legacy of
regional competition, economies are thriving and highly interlinked, which dampens the
effect of those who exert too much power. In this environment, China will exercise her
power selectively – although it will be clear, she is the great power in the region.
Maritime Dimension
China’s military strategy is concentrated on investment in the instruments of maritime
power, including aircraft carriers, reflecting the geography of the military competition in the
region. China will avoid direct confrontation with the US, adopting an oblique approach
whilst building further capability. Robert Kaplan further explains, in the ‘Geography of
Chinese Power,’ 107 the concept of comprehensive national power in the maritime domain.
With a 9,000-mile temperate coastline, China has a natural advantage, physically at the
and
‘hub of geopolitics’ 108 and this maritime dimension will act as a lever, both regionally
globally. The South China Sea was recently designated an area of special Chinese
National Interest. Although later retracted, it is advances like this claim (which are contrary
to the UN Convention on the Law of Sea - 1982), which cause nervousness amongst
regional neighbours, who reach towards the US. In response, the US will base a new
combat ship in Singapore to enforce their commitment to SE Asian security. 109 Beyond SE
Asia, China’s maritime influence is creeping into the India Ocean. Pakistan and Burma are
102 ibid., 28.
103 Jonathan Fenby, The Penguin History of Modern China (London: Penguin Group, 2008).
104 Premier Wen Jiabao, ‘Speech - 12 th 5 Yearly Plan at the 11 th National People’s Party Congress’, 5 Mar
(2011).
105 ASEAN Structure, http://en.wikipedia.org/wiki/ASEAN. (accessed 20 Jun 2011).
106 Shirk China: Fragile Superpower, 111.
107 Robert D Kaplan, The Geography of Chinese Power, Foreign Affairs Vol 89, No. 3, May/Jun (2010): 23-24.
108 ibid.
109 Trefor Moss, ‘USN plans LCS Deployment,’ Jane’s Defence Weekly Vol 48, Issue 24 15 Jun (2011): 6.
23

two strategic examples of China securing support beyond the immediate region. China is
acutely aware of the need to circumvent or protect the vital trade routes to China – a
national interest. This drives Chinese maritime planning, which is designed to return China
to being the pre-eminent power in East Asia.
International Foreign Policy
Chinese foreign policy beyond the region of Asia has many dimensions and the character
of engagement ranges between Realism, Constructivism and Institutionalism. The same
rules apply to those, which serve China well regionally. Analysing the first hypothesis that
domestic policy drives foreign policy, the CCP must ensure economic development to
ensure stability and political legitimacy. Stephen Halper calls it ‘China’s growth entrapment’
– to be legitimate the CCP must grow its economy at a high rate. 110 In contrast, Dr Harsh
Pant of King’s College, argues that gradually a multipolar world is shaping Asia Pacific, with
China and India the major powers and taking a Realist stand, this is inherently less stable
and open to miscalculation. 111 This Realist perspective claims China is a growing super
power with interests in every corner of the globe with similar economic and political
interests too. Along with assertiveness and ambitions, this supposition follows the trend
identified earlier and explained by John Mearsheimer, In Tragedy of Great Power Politics –
competition becomes acute. A practical example is China’s engagement with Pakistan and
Iran, which has political, financial, infrastructure and military dimensions 112 tending towards
a more hegemonic approach.
Taking the alternative perspective of China’s internal transformation shaping foreign
policy, Shirk advocates a more optimistic perspective. She emphasises China as a
responsible power with moderate aims, seeking to avoid global instability, which could
interrupt economic growth and cause internal instability. 113 Taking these two perspectives
in turn, an optimist would argue that the Chinese leadership promotes a ‘peaceful rise’ to
avoid the zero-sum, which has bedevilled the historic rise of most great powers. Chinese
foreign policy should avoid direct tension, by seeking mutual accommodation, with limited
red lines for specific sovereign, security and developmental issues – echoes of a Social
Constructivist approach. The other perspective is the Realist view. This suggests it is
impossible for China to be accommodated either regionally or internationally. There will be
rising tension, with confrontation, particularly over spheres of influence and access to
resources/markets, which are critical to the Chinese economy. The reality is Chinese
foreign policy carves a route, with dexterity, between a ‘peaceful rise’ and Realism. Minxin
Pei supports this judgement. However, he explains the difficult balance in China’s
approach:
On the one hand, the ruling Communist party is eager to show that it has made China a
respected world power. On the other hand, Chinese leaders want to stick to a pragmatic
foreign policy that avoids costly and needless conflicts with the West. 114
China has developed a successful soft power dimension to foreign policy; its pledge of
foreign aid for major infrastructure is on a global scale. This brings tangible results, from
countries such as Venezuela, the Congo or Angola, receiving pledges of aid, but without
conditionality. Halper, gives the underlying form to Chinese soft power: ‘The multi-lateral
110 Stefan Halper, The Beijing Consensus ( New York: Basic Books, 2010), 138
111 Harsh Pant, China’s Rising Global Profile, (Eastbourne: Sussex Academic Press, 2011), 12.
112 ibid., 37.
113 Shirk, China: Fragile Superpower, 257.
114 Minxin Pei, Financial Times, 25 Nov 2010, http://www.ft.com/cms/s/0/. (accessed 20 Jun 2011.
24

world, for developing countries, like the BRICS, globalisation brings a trend of neither
conflict or assimilation with the West; instead, it is to make the Western influence less
relevant.’ 115 In international relations, as China builds on her global network in the future, it
is clear that a transition of power to China will increasingly be the order. This will bring
inevitable foreign policy responsibilities and lead to China intervening to safeguard her
interests. Undoubtedly, there will be tension especially with the US, however in his recent
book Joseph Nye disagrees that the world is set to be dominated by competition between
rival great powers once again. Nye says the world is now too complex and too
interdependent.
116 There are reasons for some optimism. In specific common areas, the
leadership in China, the US and amongst the rapidly developing countries may find ways to
promote global cooperation and a more pragmatic approach. Some commentators point to
the environment as an area, which would benefit from serious co-operation.
Morality and Values in Foreign Policy
Foreign policy by its very nature has some of its roots in morality and values. This
provides another way of analysing the Chinese approach to foreign affairs, particularly the
distinct Chinese approach of ‘non interference’ in the sovereign affairs of another country.
Daniel Bell, in China’s New Confucianism, explains the different moral approach, which
leads to quite different outcomes. Bell compares Michael Walzer’s theory of Just and
Unjust War, with a sceptical Chinese view of this theory. For China, what matters is the
practise and protection from genocide, starvation and actual harm, rather than theories
about individual human rights. 117 In particular, a moral act of humanitarian intervention by
the West, is perceived very differently in China. China does not share the liberal
interventionist concept, 118 perceiving such acts as unlawful and mostly about self-interested
aggression.
China’s foreign policy is wholly different in this area and China opposes, through
diplomacy, acts of intervention in the affairs of other nations. Sudan and Burma are two
examples. China would argue that dialogue and influence are more effective – a different
ideological approach. This presents a real point of tension with other governments.
However, the sign of true strategic leadership would be global leaders seizing the
opportunity to co-operate on these sorts of common issues. Optimistically if the US and
China could co-operate, real progress might be made. The CCP leadership may find the
degree of compromise and the risk of precedence too much in the short term. This is a
cyclical part of diplomacy, tending to Realism, whilst exploiting these sorts of opportunities,
requires bold leadership. The rest of the world has a sense of unease at the dynamic of
the transition of power from the Atlantic to the Pacific. This is driven by a fear over the
direction and outcome of China’s own internal transformation, which remains unclear.
Summary
China’s regional foreign policy is sophisticated and encompasses the full spectrum from
an Institutionalist approach right through to Realism. Similarly internationally, China’s
foreign policy balances the positive concept of a ‘peaceful rise,’ avoiding interference in the
sovereign affairs of other countries, with the Realist protection of China’s growing global
interests. Ultimately, China needs a stable international order to guarantee access to
resources and markets. This is the principle goal of Chinese foreign policy. China can and
115 Halper, The Beijing Consensus, 29.
116 Joseph S Nye The Future of Power (NY: Public Affairs Books, 2011), 154.
117 Daniel Bell China’s New Confucianism (Oxford: Princetown University Press, 2008), 32.
118 Robert Kagan, ‘End of Dreams Return of History,’ Policy Review 144, 5 Oct (2010). www.hoover.org.
(accessed 20 Jun 2011).
25

will develop the capability to protect these growing interests which are critical to China’s
own economic development and, in turn, political stability.
However, ‘events’ 119 always conspire against the best plans and simple foreign policy
statements, based on a ‘peaceful rise’ will not cut through the reality of global politics. The
reality is China’s globally based economy makes the possibilities of friction and competition
with other nations, especially the US, an unavoidable certainty, particularly when its own
national interests are threatened. The key choice for the CCP leadership is how a
‘peaceful rise’ can be reconciled with the concept of comprehensive national power. For
the moment, using comprehensive power, China is ‘getting her way’ with access to all the
tools needed to grow economically. The unknown is China’s response if it does not get
what it wants. At this point, the difference is between the political factions in the CCP. On
one side, are those focused on internal transformation and domestic stability. On the other
side, are those most concerned with securing access to markets and resources, with power
if necessary - they are more concern about China’s survival. 120 The CCP navigates
between these two factions, with the over arching objective of maintaining internal stability.
In preparation for exercising more power, China will seek to reduce US regional influence,
whilst internationally balancing power with the US. This will ensure that sufficient space is
available to exercise power to protect China’s national interests. In sum, China is neither a
hegemon nor a peacefully rising nation, rather Chinese foreign policy oscillates as required
thus protecting her growing global interests, with either with hard or soft power. Equally,
China is agile supporting international institutions or championing the goals of developing
countries. The rest of the world, rightly, remains wary and prefers action rather than words.
A ‘peaceful rise’ is a welcome goal; however, there will be inevitable points where China
will choose its own interests over others.
CONCLUSION
To conclude, China’s vast economic transformation and re-emergence as a great power
certainly has profound implications for global peace, security and stability. The issue of
how China manages her domestic and foreign policy is of vital interest. To that end, this
dissertation has examined the hypothesis that internal domestic policy will drive Chinese
foreign policy. The analysis has focused on the primacy of China’s internal transformation
shaping her foreign policy. The alternative hypothesis, that a transformed and internally
strong nation will act as a hegemonic global power, was found wanting. The reality is
between these two hypotheses, with China protecting her growing global interests whilst
continuing her huge internal transformation. The evidence points to an overarching need
for the CCP to concentrate China’s weight of effort on transformation, with politics and
economics the fundamental tools to achieve this primary objective. A useful analogy is to
consider politics and economics as the heart of the engine, with foreign policy connected
through a gearbox, which has a range of ‘gears,’ from a Realist approach through the
spectrum to a ‘peaceful rise.’ China chooses the foreign policy ‘gear’ to suit each situation,
based on the intrinsic link to the economy and the political requirement. Mostly China uses
the narrative of a ‘peaceful rise,’ to ease any sense of an intrusive Chinese wave sweeping
around the globe. However, having examined China from a political, economic and foreign
policy perspective, there are important deductions, which go beyond this simple narrative.
119 Harold Macmillan. http://en.wikiquote.org/wiki/Harold_Macmillan. (accessed 20 Jun 2011).
120 Mearsheimer, Tragedy of Great Power Politics, 371.
26

Politically, the principal concern is how the CCP evolves, because this will have a
profound effect on domestic and foreign policy. The issue of political reform and evolution
is potentially the most dangerous for the CCP. There is increasing pressure for change.
The combination of globalisation and internal transformation act as very big levers on
Chinese politics and bring an un-quantified intensity to the process of evolution. The
leadership maintains a firm grip by adopting a consensual, middle ground approach to
policy formation, biased neither to the Left nor to the Right. This avoids potentially
catastrophic issues over unity within the CCP. Amongst the wider population, the surest
route to avoiding any drift towards instability is through successful economic development.
The CCP uses the central planning process to curb the worst excesses of transformation,
particularly amongst the poorest and most restive elements in society. However politically
the CCP knows reform is imminent, which is spurred on by the emergence of a growing
middle class too. The new leadership in 2012 will need to develop a narrative for reform.
This process is a very difficult and potentially de-stabilising, particularly if economic
development does not deliver. Reform is not likely to follow the Arab Spring paradigm
because the conditions are so very different - a democratic utopia is not on the horizon.
However, the CCP will make adjustments to give greater legitimacy to the authoritarian
system.
Economically, China has left the Communist ideals far behind and completed a
transformation to a ‘socialist market economy,’ with spectacular success. With this shift
from a closed to an open market, the CCP has ceded control over major elements of
economic development. From the growth of a burgeoning entrepreneurial class at home, to
the rapid expansion of Chinese companies, now operating as global corporations, the scale
and breadth of commercial activity is almost beyond comprehension. Nevertheless, there
are some aspects of the economy, which remain within authoritarian control, for example
fiscal and monetary policy, which are a significant source of the CCP’s political power.
Additionally, there are important areas like access to markets and resources where politics
and foreign policy play a key part. At these interfaces, the CCP must ensure the security of
China’s growing web of global interests. Any interruption to China’s economic
development, particularly over issues of access to markets or resources would reverberate
and quickly lead to instability, which is unacceptable to the CCP.
In this international environment, Chinese foreign policy strikes a careful balance between
authority and acceptance. Policy is controlled through a tightly choreographed narrative.
At times, this has, almost, a Social Constructivist tone, with an emphasis on ‘win-win,’
building co-operation and trust rather than ‘zero-sum.’ However, the practical reality is
much broader and her approach oscillates from a ‘peaceful rise’ through to Realism. To
this end, China is developing her comprehensive national power so that there is the full
spectrum of capability available. However, analysis of China pursuing a much more
hegemonic competition, with the intent for large-scale power projection as the uni-polar
power, was not evident at this stage. The interdependence of globalisation and the
paramount need to transform internally make this less feasible. Even a cursory
examination of the Chinese economy, underpins the fact that China is highly dependant on
the global economy for her own economic stability.
In summary, relative power is moving inextricably towards Asia. In this situation, China
will use a range of responses to safeguard her growing global web of interests, whilst
focused on the considerable challenges of her own internal transformation. In practical
terms, China will increasingly secure her national interests by balancing power
internationally with the US, whilst regionally seeking a transition of power and ‘a modern
27

incarnation of the tributary system.’ 121 This graduated competition, with some cooperation,
will suit China in the medium term and safeguards the principle objective of domestic
stability through internal transformation – thus preserving the legitimacy of CCP rule.
121 Jaques, When China Rules the World, 431.
28

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