Internal Economic Development

Internal economic development is still constituting the main priority of the Chinese government and an essential driver of its foreign policy. However, it has known profound change as China’s economic power has progressed. In this view, we can define two main periods in the evolution of China’s policy. We will concentrate on the last period of China’s economic development, where it began to take into account its new economic power. This has had an impact on its foreign strategy, which has become more confrontational and ambitious. [1]

1.1. External direct investment and industrial politics (95–2005)

The period from 1995–2005 is marked by a change in politics. Beijing has decided to adopt a logic of general promotion of EDI. Those investments that were previously limited to certain key defined areas, get greater access. Nevertheless, classification still occur and projects of high capitalistic value or of high technology were encouraged. Investments were classified in three categories: 1° encouraged, 2° limited 3° forbidden. [2]

Therefore, the promotion of EDI became an integral part of the national policy of economic development. In 1992, Jiang Zemin officially stated the need to push Chinese’s enterprises to invest abroad and to expand their transnational activities. [3] All of this can be defined under the new Chinese policy of ‘going out’. Under this strategy, Chinese’s enterprises that are willing to invest abroad in activities of transformation are supported. Support especially strong as long as those enterprises are using Chinese raw material or intermediary products. [4]

The main goal of this strategy is to promote enterprise to intervene on the international market for capitals and to invest abroad in order to rise toward an international ranking. Officially the investments are encouraged in three specific cases [5]:

When they allow access to raw resources needed by the Chinese economy
When they allow an increase in export performance.
When they allow access to technologies.

Those three priorities clearly illustrate the willingness of Beijing to use the Chinese investment to foster its national economic growth to ascend in scale in terms of technology. [6]

Through a greater involvement in the international circuits and the internationalisation of its enterprises, China will in the future be obliged to reinforce its diplomatic presence in order to protect its interest abroad. An evolution that would require the questioning of its traditional strategy of non-interference. The first sign of this relates to the international organisation and Beijing more active role (integration to the WTO). [7]

1.2. China assume its new economic power (end of Hu era and from Xi-2000)

The defining factor of this period was the perceived impact of the financial crisis of 2008–2009. The dominant powers of the time (the USA in the lead) seems to have been weakened by this crisis. At the same time, we have a confirmed rise in power, and confidence of China. In 2010, it has become the second-largest economy, just after the USA. In this context, China has become powerful in terms of economical and financial means and will be able to display greater ambitions and to abandon its posture slowly, of ‘keeping a low profile’. As a result of this ‘new power’, the initiatives abound from Beijing. Those initiatives are taking into account both economical preoccupation and geopolitics objectives. [8]

The new silk road: Often described as a ‘new phase of China’s opening’, this strategy is clearly guided by internal economic preoccupation. The first objective was to sustain the dynamic of growth of the Chinese economy. The second one was to improve its international status. This is in line with the ‘going-out’ strategy. Thirdly, it acted in the line of the strategy of reform of the state enterprise (master objective of the Central Committee of the CCP). [9]
Institutional activism of China: Reinforced by its economic (and mostly financial) power, China is making progress in the field of global governance (economic, security, the internet, space). Moreover, it is looking to increase its influence inside the international financial organisation like the IMF. Beijing has also launched multiple institutional initiatives (NBD, BAII,…) [10]

Conclusion

In its recent history, China initially has initially emphasised its economic development; Putting the diplomatic ambition in the background. However, it’s no longer the case and the economic power of China is now put to the use of its great enterprise of diplomatic affirmation. Its newly acquired power has provided with influencing power toward a number of its partners (notably the weakest). This is even more felt in its region, where its tight economic connection has deepened the vulnerability of a number of countries and has put them in a situation of dependency. A dependency that China is no longer reluctant to use.

2. Energy, raw material and foreign policy adjustment

Access to raw energetic and mineral resources constitutes a structural question for China international posture. Beijing faces a dire need in some natural resources to face the growing demand. Its energetic need is the equivalent of a quarter of the world and the emerging of its economy has confronted Beijing to an increasing dependency. That is something that Beijing is not really easy with and it has had a profound impact on the orientation of its foreign policy. [11]

China is undergoing a profound transition of its economic and industrial strategy. The focus is now put on the energetic transition and to the new energetic technologies provide new dimension to Beijing’s international strategy and the formulation of its foreign policy.

Since the middle of 2000, China has begun to see the limits of its policy of growth at all cost. Harmful effects on the environment (air/water/soil pollution and therefore human health) can no longer be ignored and Beijing is facing growing social contests. New technologies of energy and the energetic transition have taken a central stage in the Chinese industrial strategy. This evolution has had a profound impact on the energetic policy and formulation of new axes of China’s foreign policy. [12]

First representation of this evolution, China is now positioning itself as a leader in numerous fields related to the energetic transition. It is the leader in solar panels and windmill production and is also the first investor in the renewable energy field (103 billion $ in 2015). Until 2020, China is willing to invest still 360 billion $ in this field, hoping to generate 10 million Chinese jobs. Moreover, Beijing wants to generate 20% of its energetic mix from non-carbonated sources in 2030 (from only 9% in 2015). [13]

Some analysts (notably John Mathews and Hao Tan) advance that the new Chinese ambitions in terms of transformation of its energetic mix could put China it in the capacity to foster a shift of paradigm at the global scale. A shift that would be in favour of the new technologies of energy and particularly for renewable energy. This would allow Beijing to emerge as a true industrial power. Following their hypotheses, it will be through the mastering of those industrial field based on electric power and mastering of renewable energies sources that China will be able to assert itself as a truly global power in the 21st century.

Aside from this affirmation, this shift toward more renewable energy would also allow Beijing to resolve in a structural way to the problems of both energetic security and dependency to foreign resources. The articulation of this shift is already beginning to have an effect on the formulation of China international stance in general and in the field of energy and natural resources in particular. We can identify several tendencies that assert the fact that China is no longer only looking for natural resources abroad but is also looking to promote initiatives which could facilitate its energetic transition at home. [15]

This translates itself by an aspiration for international leadership in the field of climate change and energetic transition. Beijing is looking for foreign playing field for its industries in the field of new energy technologies in order to sustain the development of its industrial base in those fields. A clear example is the solar industry, where 90% of its activity is conducted toward the exportation (a subject of concern for the EU and the USA).

The late promotion by China of energetic transition toward renewable energies has in the great line allows China to reinvent itself as a leader in energetic transition on the international stage and notably to advocate for more ambitious international actions in the fight against climate change. [16]

III. Diplomatic activism from Xi Jinping

Since its arrival, Xi Jinping has concentrated into his hand vast amount of power, greatly more than its predecessor, with the exception of Mao Zedong. This explains the limited number of Chinese officials that are taking part in the elaboration and the establishment of the foreign and security policy and their proximity to the President. At the same time, Xi Jinping has developed a diplomatic activism, greater than its predecessor Hu Jintao, which explains in large part the reorganisation and expansion that he has dictated to the institution responsible for the international policy. A greater centralisation of power, the creation of new organs and a better coordination of competences have revealed necessary due to the steady rise in power of China and the multiplication of its international responsibilities. [17]

Under the leadership of Xi Jinping, there are two diplomatic systems. There is the official administrative system of foreign policy. This system is under the direction of Yang Jiechi (minister of foreign affairs) and include Song Tao (director of the department of international liaison of the CP). Son Tao has a complementary role, notably regarding complicated actors like North Korea. The second system is composed of a number of actors that play a key role close to the President Xi Jinping. In this circle, we have two members of the Political Bureau of the CCP (which accompany Xi Jinping in his foreign trip) [18]:

Li Zhanshu – director of the powerful department of general affairs of the central committee
Wang Huning – director of the political research department of the central committee

1. Central role of Xi Jinping

When we study the foreign policy of China, what stand out, is the difficulty to identify the influence of the actors that are under the central actors, which is Xi Jinping. Since he assumed power as the President of China, Xi Jinping has concentrated even more power as his predecessor – Hu Jintao/Jiang Zemin – . He is the president of most of the Leading Group related to international questions, with the exception of the ones that concern Hong Kong/Macao and the Leading group related to finance and economy. [19]

Most of the diplomatic initiatives taken since 2013 and that we will explain in this blog are attributed to his action. The relinquishment of the ‘low profile’ of Deng Xiaoping is attributed to him. Xi Jinping is also a fervent advocate of the affirmation of China Power, and is often in advance of the wishes of nationalist movements of the CP.

Xi Jinping is clearly depicting his interior/international ambitions; such as looking to push the US outside of oriental Asia and accelerate the reunification with Taiwan – 2021/2049 – . At his count, we have also the establishment of the ‘new relation between great power’ and the ‘new silk road’. Xi Jinping has also reinforced the position of China inside the BRICS and clearly display Chinese ambitions on the African continent. [20]

Xi Jinping has clearly favoured diplomatic initiatives and even though the system is still secretive it has become far quicker and efficient. This allows China to have a greater adaptability to the shift of foreign policy and circumstance. Therefore, we can say that Xi Jinping has a preeminent role, in matter of foreign policy and outside security, drawing the full potential of its civilian/military function. [21]

2. Role of other executives

2.1. Limited role of Li Keqiang (Prime Minister)

In terms of foreign policy, he has a minor role and not really autonomous since Xi Jinping seems recalcitrant to any kind of delegation in the international field. He is the Chinese executive that is travelling the most, after Xi Jinping; even though he generally went into less important meeting, or to visit that have a greater commercial connotation. Nevertheless, he has a heavy diplomatic agenda and he contributes to the elaboration of the international policy of the country. However, it has to be taken into account that he is not politically close to Xi but rather to Hu Jintao. [22]

2.2. Zhang Dejiang

As the number three of the CPBP, he regularly flew to foreign countries in order to develop relations with foreign parliament whether elected or not. However, similar to Li Keqiang, he has strictly limited autonomy, being under strict supervision of XI Jinping. [23]

3. Xi Jinping advisors

Two officials play a special role in terms of international policy:

Li Zhanshu: He is most likely, the closest officials to Xi Jinping. He is one the trusted man of Xi Jinping. He is the director of the bureau of general affairs of the central committee of the CCP. He is responsible for the distribution of documents inside the party organs and the most power broker of Xi Jinping. His is limiting the role of Yang Jiechi on the international field. [24]
Wang Huning: he has the particularity to have worked under the leadership of three President – Jiang Zemin/Hu Jintao/Xi Jinping – , but it is under Xi Jinping that he has begun to play an increasing role in terms of foreign policy. He is the advocate for the Singaporean political model, far from being pro-occidental. Since 2013, he follows Xi Jinping in most of his foreign trip. He has become the most discreet, influent and omnipresent diplomatic advisor. [25]

4. Foreign Affairs System

The opacity of the Chinese Foreign affairs system has to be taken into account, especially to what extent these are instances of either collective decision, or coordination / concertation. Those coordination and decision structures have long stay secret and are still much more opaque and most of them are chaired by Chinese n°1. While we don’t know very well the modus operandi of those instances. What is certain is that Xi Jinping has progressively reinforced his power in every domain, including the international field. Through its function of secretary general of the Central Committee Xi Jinping, is fixing the agenda of the meeting and has discretionary authority to put or not in front of these committees questions of international policy which are requiring decision. [26]

This system is dominated by Yang Jiechi, principal public actors and officials of the Chinese diplomacy. He occupies the position normally devoted to a minister of foreign affairs. However, he has a limited influence on foreign policy. He was only a member of the political bureau from 2012–2017 and is not included in the CNS. Finally, he is also in competition with the two advisors of the President Xi, just mentioned earlier. He also has a secondary place inside the minister of foreign affairs – directed by Wang Yi – . Among the supreme concentration/coordination/decision structure, we have the leading groups of the Central Committee of the CCP, in charge of foreign policy, maritime security and Taiwan or the National Security Commission, all presided by Xi Jinping. The establishment in mid-2012 of a central leading group in charge of the protection of the maritime rights and interests, and after the NSC and of the GDCI at the end of 2013 has reinforced the power of the number one of the Party, in terms of security in general. [27]

In this system, we have the Permanent Committee of the Political Bureau of the CCP. Consisted of seven members and meeting every Thursday morning under the direction of Xi Jinping, it is responsible for defining the great international political orientation and endorse the main decision in this field. However, its members don’t have the same weight in the elaboration and the conduct of the foreign and security policy. Their weight was dependant on their relative position in the leading group of the CCP. The political bureau of the CCP – 25 members including the 7 previous – is supposed to have a right of views on international questions. However, while being kept informed on the subject, its monthly rate of meetings provide it with a rather marginal role, except in case of international crisis. [28]

[1] La Chine dans le monde, Alice Ekman (dir.), CNRS Editions, p.40.

[2] At the start, there was four categories, with two among them having different levels of restrictions. The passage to three date back from 2002.
[3] Cheng Shaoming and Roger R. STOUGH, “The Pattern and Magnitude of Chinese Outward FDI in Asia”, in Ramkishen S. Rajan, Rajiv Kumar, Nicola Virgill (dir.), New Dimensions of Economic Globalization: Surge of Outward Foreign Direct Investment from Asia, Singapour, World Scientific Publishing Company, 2008, p.115-140
[4] Ibid.p.47.
[5] Ibidem.
[6] Overseas Investment Industrial Guidance Catalogue published by the National development and reform Commission and the minister of trade.
[7] On this point, see Ana-Cristina Bâlgar, “The Role of Foreign Direct Investment in Sustaining China’s Economic Growth”, mimeo, Institute for World Economy, Romanian Academy, 2015.
[8] For further details on China-WTO relation, see Henry S. Gao, “From the Periphery to the Center – China’s Participation in WTO Negotiations”, Chinese Perspectives, n°1, 2012, p.59-65.
[9] See Jia Qingguo, “One Belt, One Road: Urgent Clarifications and Discussions of a Few major Questions”, Renmin Luntan, 19 March 2015; cited in David COHEN, “China’s “Second Opening”: Grand Ambitions but a Long Road Ahead”, in François Godement (dir.), “One Belt One Road”: China’s Great Leap Outward, Londres, European Council on Foreign Relations, June 2015, p.3-5 (www.ecfr.eu/page/-/China_analysis_belt_road.pdf).
[10] La Chine dans le monde, Alice Ekman (dir.), CNRS Editions, p.57.
[11] Ibid., p.65.
[12] Ibid., p.66.
[13] Ibid., p.82.
[14] “China Focus: China Eyes Greener Energy Mix by 2020”, Xinhua News Agency, 05 January 2017. Ibid., p.82.
[15] La Chine dans le monde, Alice Ekman (dir.), CNRS Editions, p.85.
[16] Ibid., p.86.
[17] Ibid., p.95.
[18] Ibid., p.109.
[19] Ibid., p.100.
[20] Ibid., p.102.
[21] Ibid., p.106.
[22] Ibid., p.106.
[23] Ibid., p.107.
[24] CHENG Li, “Xi Jinping’s Inner Circle (Part 1: The Shaanxi Gang)”, China Leadership Monitor, n°43, March 2014 (http://www.brookings.edu/-/media/research/files/papers/2014/01/30-xi-jinping-inner-circle-li/xi-jinping-inner-circle.pdf).
[25] La Chine dans le monde, Alice Ekman (dir.), CNRS Editions, p.114.
[26] Ibid., p.99.
[27] Ibid., p.110-111.
[28] Ibid., p.96.

Domestics factors of China foreign policy