Dr. Gary Schmitt is the Resident Scholar and Director of Advanced Strategic Studies at the American Enterprise Institute. He just published, as editor, The Rise of China: Essays on the Future Competition—a work that describes China’s ambitions and strategy for competing with the US in the future and possible policy responses by the US and its allies. Previously Dr. Schmitt was a staff director in the Senate for the select committee on intelligence and executive director of a foreign intelligence board during President Ronald Reagan's second term. He is also the author of, Of Men and Materiel: The Crisis in Military Resources, Silent Warfare: Understanding the World of Intelligence, and U.S. Intelligence at the Crossroads: Agendas for Reform.
BC: Dr. Schmitt, congratulations on the release of your new book. First off, let me ask: Is China in the process of becoming democratized?
Dr. Gary Schmitt: I think most experts would say “no.” If anything, the PRC has actually taken some steps backward when it comes to political and civic reforms. The government is far more serious about cracking down on political debate, NGOs that have might be critical of the government, churches that exist outside the sanctioned church establishments, freedom of the internet, and of course any movement by ethnic groups to obtain greater autonomy in their homelands.
And, indeed, if the Chinese government was serious about democratization as a long-term goal, one would have seen far more efforts to loosen political control in Hong Kong: a city-state fully capable of self-governance. But that has not happened because the PRC is determined not to have its one-party rule challenged by that example. Similarly, the experiment in “village elections” has not been expanded; in village after village, the process has instead been turned into a referendum controlled by local party officials with the intent of maintaining their control.
This doesn’t mean, of course, that some unforeseen event might not lead to a crisis in regime legitimacy, spurring a mass movement to replace the current regime with a more representative form of government. But the danger here is that the PRC has gone out of its way to curtail or prevent what Tocqueville called the “schools of liberty” (civic associations, a free press, freedom of local governance) from arising in China. This contrasts with the process of democratization that took place, for example, in Taiwan. While the KMT exercised one-party rule for decades following its move from the mainland to the island, over time the KMT did allow various religious, civic, and environmental movements to grow and assert themselves. In China today, there is obviously more personal freedom than in times past but, as yet, there remains very little civic freedom of the kind that results in a smooth transition from autocratic to liberal democratic rule.
BC: Then does China prove that increased economic freedom does not inevitably lead to increased interpersonal liberty?
Dr. Gary Schmitt: The expectation among many analysts and commentators in the U.S. – both conservatives and liberals– was certainly that economic liberalization would ultimately lead to political liberalization in China. And there are of course systemic reasons to think that would be the case. Nevertheless, this thesis has to be modified by a number of facts: first, the Chinese economy is far from being a totally free-market economy. For example, while the Chinese have a remarkable savings rate as individuals, most of those savings are located in four government-run banks that, in turn, hand out at a massive amount of loans to state-owned companies and do so largely for political reasons—not for reasons tied strictly to market factors. The fact is, until and unless China’s citizens are allowed to move their money freely around and out of the country as they wish, the Chinese economy will continue to be a giant ponzi scheme in which the government uses personal savings to prop up state-owned or state-directed companies that, if left to themselves, would have been bankrupt a long time ago.
In many respects, over the past four years or so, the government has actually gained more control, not less, over the Chinese economy. Private enterprises still make up only a fraction of the companies listed on the various stock exchanges, for example, and their share of the Chinese economy has not grown much if at all in recent years. In addition, the size of China’s middle class, what many believe will be a real force in determining whether economic liberalization will lead to political liberalization, remains no where near critical mass in China. Although poverty levels have decreased substantially over the past twenty years in China, Chinese per capita income remains low and, on the whole, the Chinese are a poor people. And a substantial amount of the new personal wealth that has been created in the country is tied to real estate manipulation or corporate insider dealing tied to state-owned companies. And much of that is tied to friends or relatives of senior party officials. Petty corruption in China is not a particular problem. But large-scale backroom dealing is.
BC: Has our “engage but hedge” policy with China been effective?
Dr. Gary Schmitt: The answer depends on what we think our policy goal is. The engagement element, as far back as the first President Bush, was intended to ease China along its path of reform. We would overlook problems in the short term with the expectation that various forms of engagement— especially economic engagement—would result in long term transformation and liberalization. So far, that has not happened.
According to the logic of engagement policy, by restraining ourselves from challenging China’s rise, we would also be reducing potential for the Chinese to seek competition with the United States in the strategic realm. But this has not been the case. China’s strategic situation is better than it has been in more than a century, yet it has continued to increase its military spending in the double digits for the past two decades. And much of that spending is aimed directly at acquiring defense capabilities which would severely limit America’s capacity to intervene in an Asian conflict. This is a build-up that is fueled by China’s ambitions, not its lack of security.
As for the hedging, I think the Pentagon’s report on Chinese military power makes it clear that, in contrast to a decade ago, our military’s capacity to dominate a potential military situation is far less certain. Not surprisingly, Chinese military and geopolitical strategists are now debating what strategic parity will mean for Chinese policy in the immediate years ahead and what possible preeminence would mean further down the road.
All that said, this does not mean that our policy should not be to “engage but hedge.” What it does suggest, however, is that we should be clear about the limits of what that policy might produce and that we need to make sure that the “hedging” element is kept more in balance with the actual military trends in the region.
BC: Dr. Robert Kagan’s essay quotes Thucydides regarding what motivates nations (interest, honor, and fear). For what reason, however, does China fear America?
Dr. Gary Schmitt: Like nearly every rising power before it, China has both ambitions for what its new power will bring, as well as fears and anxieties that the reigning dominant power(s) will frustrate those same ambitions. The US had such fears about Great Britain and Germany in the 1890s. Now, such fears aren’t valid in every case, but they are certainly reasonable to the extent that dominant powers have an interest in maintaining their ability to dictate the “rules of the road.” Take two examples: first, China believes that Taiwan is part of greater China. They worry that, despite our “One China” policy, we ultimately do not want to see the two states united and that we will thus take steps – such as selling weapons to Taiwan – to frustrate their goal of reunification.
Second, on the issue of energy supplies: China does not trust the US to keep energy supply routes open—or the open energy market, which is run by rules set down by the West, to keep it supplied with energy resources—should a crisis or conflict occur in East Asia. Hence, China is attempting to cut special energy deals with such countries as Iran and Sudan, while at the same time expanding its efforts to create a “blue water” navy to protect its own energy supplies. Are these fears on the part of China reasonable? From our perspective no; but from the perspective of an autocratic regime that doesn’t trust the liberal West to always do what would be best for China, it is reasonable.
BC: Is China’s aggressive foreign policy fueled by a desire to keep face?
Dr. Gary Schmitt: Yes and no. No, in the sense that what drives China today is mostly ambition. (As one China-watcher pointed out, in a review of some 100 recent articles by China’s top strategists, some 4 out of 5 focused on circumventing, reducing or superseding US power and ideas in Asia.) The fact is, only a handful of Chinese have a direct memory of the last days of imperial rule, when outside powers did indeed rule the roost in China. Far more have memories of the disastrous decades of rule under Mao. The current government goes to great lengths, however, to recreate among its citizens those distant memories in an effort to legitimize their own rule, highlighting the PRC’s success in putting China back on the map as a geo-political power.
BC: How hostile is the Chinese press to America?
Dr. Gary Schmitt: This is not exactly the right question. The Chinese press is still controlled largely by the government. So the real question is, how hostile is the Chinese government to America? And here you see the to-and-fros of our complicated and competitive relationship. On the one hand, the Chinese government craves Washington’s attention, which, when granted, reaffirms that China is power to be dealt with on equal terms; on the other hand, it detests that attention when the US begins to question the way in which China is ruled. It can turn downright ugly when it perceives US interference in its so-called “internal affairs,” be it about Tibet, Taiwan, etc.
By the way, this is very similar to how Germany saw Britain in the decades prior to World War I. On the one hand, Germany envied Britain and wanted very much to be seen by London as an equal; on the other hand, Berlin also saw Whitehall as determined to deny Germany its place in the sun—all of this happening despite a rich trade relationship and direct family ties between the respective monarchies.
BC: Do you believe that in the near future they will play their economic trump card and sell off a good portion of their debt as a means to destabilize our country?
Dr. Gary Schmitt: No. We remain by far China’s key export market. Destabilizing the US economy hurts them as well. Because of globalization, we are “two cats in a bag.” Moreover, to whom are they going to sell the debt? Europe, Africa? To the degree they do sell some debt, they will get a lower rate of return and they need a good return to, in turn, subsidize the massive amount of bad loans they have on their own banking account sheets related to loans they continue to make to state-owned companies.
BC: Might our willingness to debilitate our own economy—such as with the Cap and Trade Bill—suggest to the Chinese that we are weak? How do you think the change of presidents will impact their posturing?
Dr. Gary Schmitt: I think the Chinese are still mercantilist at heart and will do whatever it takes to keep their export economy going—including ignoring the environmental damage that might result from some of their manufacturing and energy practices. Undoubtedly, they don’t mind for a minute if the West, including the US, puts an extra tax on its own economic performance in the name of protecting the environment. All that does is bring the Chinese one step closer to their goal of becoming a peer great power.
BC: What does the future hold for Taiwan? How likely is it that the Chinese will take over the island?
Dr. Gary Schmitt: It is difficult to say what the future holds since so much of that future will be dictated not only by what the Chinese do but what policies the Taiwanese and Americans adopt, as well. I would say, however, that the current thaw in Cross-strait relations is not necessarily an indication that there will be “unification” anytime soon, if ever.
Poll numbers in Taiwan remain consistent. Only a small fraction of the island’s population is interested in unification, less than 10%, while the vast majority wants to retain the “status quo” – meaning de facto sovereignty and peace – or the “status quo” and eventual formal independence. This puts a limit on what any Taiwanese politician can do in terms of reaching out to the mainland, even for a KMT-led government.
I also think the problem is bounded by the fact that China’s leaders can only show so much good will toward Taiwan by helping it gain more “international space” without undermining the very argument that Taiwan is just a province of the mainland. In the end, I think, short of actual military coercion, there are real limits to the unification scenario.
BC: Is history still alive in regards to the Sino-Japanese relationship? Do you think that the Chinese will target the Japanese militarily in the decades to come?
Dr. Gary Schmitt: History is very much alive in East Asia. State-on-state rivalries are still part and parcel of statecraft there. It doesn’t take much prodding to get Chinese officials talking fairly negatively about Japan and only a bit more prodding to hear Japanese officials talking about the problems presented by China’s rise. As for targeting Japan, China already targets Japan. China has a large number of missiles pointed at Japan and has sent its submarines into Japanese waters and its surface ships into contested seas. Does this mean war is likely to break out? No. But it does mean, as your question suggests, that neither country has escaped history.
BC: Thank you, Dr. Schmidt.