Why the West Doesn’t Understand China and How It Gets It Wrong
The Huawei debacle shows how prejudice still shapes Westerners’ view of the People’s Republic
Of all the platitudes relating to China in recent times, one of the more facile must surely be that, ‘The prime aim of the Chinese Communist Party (CCP) … is to stay in power’. Maybe those making such pronouncements should try pointing to a Western establishment that does not share this goal.
It is ironic, then, that those lambasting the lack of loyalty on display in the leaking of a decision by the normally secret UK National Security Council to allow Chinese telecoms giant Huawei to supply 5G technology to the UK, appear to yearn for precisely the coherent, centralised and confidential mode of decision-making attributed to the Chinese state.
But generalisations about Chinese politics and society are difficult to sustain. China is so vast that Cambridge economist Joan Robinson’s famous adage, ‘Whatever you can rightly say about India, the opposite is also true’, surely applies to China, too. Robinson also noted how ‘The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all’ – a lesson the ruling Chinese cadre-class implicitly took on board when, during the late 1970s and 1980s, it shifted its base away from peasants and towards the market, a move justified in the name of ‘Socialism with Chinese Characteristics’.
Given this orientation towards the market, it is misguided to start any analysis of Beijing politics, or the Huawei debate, with assertions as to the Chinese Communist Party’s roots in Marxist-Leninist ideology. The world has changed a good deal since 1917 or 1949, or even 1978.
Indeed, with the constant chatter nowadays about the forces and impact of globalisation, one might have imagined that armchair analysts would have caught up and noticed the extent to which their cherished models of China might need to change, too. Yet when the West examines China, there seems to be a failure to note the obvious – that our understanding of China is shaped not just by the nature of China today, but by the nature of the West, too.
A confident and purposeful West, for instance, will see China in a very different way to a West that is insecure, confused or directionless. It might see China as a source of opportunities rather than a constant threat. The truth – as in many things – will lie somewhere in between. Before looking at China, then, it is essential to understand how much has changed in our own Western backyards over recent decades.
Who is in charge?
The apocryphal phrase, attributed to the former, realpolitik US secretary of state, Henry Kissinger – ‘Who do I call if I want to speak to Europe?’ – contained an important truth. Through its institutional arrangements, what was to become the European Union (with five presidents, Council, Commission, Parliament, Central Bank and Eurozone Finance ministers), failed to speak with a singular voice and, accordingly, could not project itself coherently into the international domain.
The tables appeared to turn a decade ago when the European Union appointed its first foreign affairs and security policy chief, the unelected British politician, Catherine Ashton. But when then US president, Barack Obama, wanted to discuss what really mattered in European affairs at the time, such as the Euro debt crisis, he turned not to the EU, but to national leaders, like the German chancellor and French president.
More recently, with the election of Donald Trump as US president, the Washington foreign-policy establishment appears to have become less confident and coherent, too, while the post of secretary of state seems increasingly to come with a revolving door. Finally, EU officials have been able to invert the joke and ask with whom they should talk when wanting to speak to the US.
This form of political incoherence is now almost universal. Who speaks for the UK, for instance? Theresa May, the outgoing British prime minister, not only struggled with her cabinet, but lost control of the Brexit process to parliament. And parliament is, in turn, opposed to implementing the expressed will of the majority of the people it is meant to represent.
Such recent developments aside, international relations and foreign-policy analysis models have long been out of step with postwar developments. These include the emergence of a multitude of supra- and sub-national institutions of growing significance – a process that accelerated through the post-Cold War breakdown of the old, left-v-right political order, and the advent of regulatory (as opposed to redistributive) regimes, expressed through a shift in emphasis from government to multi-stakeholder governance.
China is different?
The evident assumption of much political bombast relating to China is that it has somehow evaded all of these trends. However, there is considerable scholarship examining how the Chinese state has been affected by the same processes of ‘fragmentation, decentralisation and internationalisation’ that have occurred elsewhere. Far from being ‘a unified, authoritarian regime’, clinging to its sovereignty and disrupting a ‘liberal rules-based world order’, what we see in China is a state being transformed, in its own way, by prevailing cultural and market forces.
Indeed, contrary to Western prejudice, while highly centralised in principle, China has long been, in practice, one of the most decentralised states on Earth. According to Arthur Kroeber, a Brookings Institute senior fellow and independent financial journalist, the share of governmental expenditure taking place at the subnational level in China was ‘a staggering 85 per cent’ in 2014 – that’s compared to about 25 per cent in most democracies and less than 20 per cent in non-democracies.
This level of regional and local autonomy predated the period of reform and marketisation heralded by then leader Deng Xiaoping in the late 1970s – a process Beijing was then even less able to command or control, as it shifted from focusing on production targets to increasingly just issuing coordinating guidance. Its development since has reflected a struggle between disparate actors and agencies, although the tendency of careerist sycophants to echo any messages from the top may give an impression of order to this fragmentation.
In practice, while Chinese leaders issue simple directions – to ‘Go Out’ (1999), ‘Go West’ (2000) or to promote a ‘Chinese Dream’ (2013) – these are inherently nebulous in character. Such guidelines have largely replaced the centralised planning of the past. But, at the level of implementation, they are necessarily interpreted (or even ignored) according to the specific interests of particular regions, agencies and enterprises.
Much like a game of Go (or weiqi), Chinese strategy appears more like the framing of a domain to be filled in at a later date. But the ensuing competition between parties readily confuses any initial goals. So, for instance, what began as the One Belt One Road initiative, to redevelop the ancient Silk Road and open up a modern maritime equivalent, was rapidly repackaged as the Belt and Road Initiative, with many belts and many roads, as almost every Chinese region, in pursuit of associated funding, claimed a role in it.
The process of internationalisation cannot be centrally controlled either. It has allowed key players, such as the People’s Bank of China, to impose international regulatory discipline at home (in the same way that European leaders have used European Union rules as a cover for their own domestic objectives). National agencies, such as the coast guard, have acquired significant foreign and security policy roles that they are ill-suited to. And provincial governments have pursued their own agendas across Asia and Africa.
For the West, China’s involvement in Asia and Africa has come under considerable scrutiny, especially the activities of China’s many state-owned enterprises (SOEs) overseas. These are understood to be businesses over which the government retains significant control. But, in fact, many of these 113,000 or so entities, are not under government control. They emerged from the former production ministries of the late 1970s, operate independently, and sell their commodities on the open market.
There are far too many to command and control, so central supervision applies to just 111 of them (or 0.1 per cent). Of course, the CCP does have leverage over these SOEs through a range of financial mechanisms, the issuing of permits and licences, as well as by retaining the power to regulate, discipline and appoint to top-level positions. But there is a world of difference between having such instruments available, and exerting effective control. The actual evidence points, rather, to the inability of the state to rein in the activities of its SOEs – even when it tries to.
Indeed, when supervised at all, the CCP’s focus is on the profitability of SOEs rather than their impact on foreign policy. The drive to promote business and maintain employment levels – particularly when faced with a domestic profit squeeze and production over-capacities that are some of the real drivers of the Belt and Road Initiative – has left the Ministry of Commerce in a far stronger and more significant position than the Ministry of Foreign Affairs. Accordingly, what we actually see are the outcomes of complex inter-agency struggles rather than top-down directives. State policy often follows and seeks to catch up with developments rather than lead them.
Enterprises, regions and agencies, including the People’s Liberation Army (PLA), pursuing their own agendas, have also, on occasion – in Myanmar or the South China Sea, for instance (where actions have been described as ‘consistently inconsistent’) – had adverse impacts, triggering diplomatic incidents that have embarrassed the Beijing establishment by acting in ways contrary to its official policy, and even violating UN embargoes to which it was formally committed.
The recent re-centralisation drive, under President Xi, to streamline and curtail some of this free-wheeling behaviour, may have led to his being perceived of as more authoritarian than some of his predecessors. But it is a move that smacks equally of the dying days of the former Soviet Union, when various leaders amassed more and more titles to compensate for their dwindling power. Talk of re-centralisation may, therefore, be a sign of weakness rather than inherent strength.
Lessons from history
Officially, Huawei is not an SOE, though its activities are undoubtedly of interest to the authorities in Beijing. Now ranked 72 on the Fortune Global 500 list (though not among the top 25 businesses in China), Huawei has become the largest telecommunications equipment manufacturer in the world, employing some 188,000 people and investing over 10 per cent of annual revenue in research and development.
It has established a significant retail presence in the UK and is now angling for the more lucrative returns of government contracts to help build 5G infrastructure. This would facilitate the advent of the so-called ‘internet of things’, whereby countless devices in the real world may, one day, become interconnected.
In this regards, it is worth recalling a significant parallel from just over a hundred years ago. In the period leading up to the First World War, the British government was looking to appoint a provider of essential radio-telegraph equipment, through which it sought to maintain communications and control over its vast empire.
The main manufacturer was the Marconi Company which, while operating from within the UK, was headed by an Italian and had a considerable percentage of shareholders based overseas. Italy was also, at that time, a member of the Triple Alliance, with Germany and Austria-Hungary, of potentially hostile powers – though what seemed to exercise the parliamentary imagination somewhat more was the possibility of monopoly gains and back-handers to those involved in the awarding of an initial contract.
A committee of inquiry took nine months to acquit the ministers concerned and issued three conflicting reports on the matter. The then Liberal government also lost various by-elections as a consequence. And it also took a further 15 years for the UK to acquire a wireless system, owned by the government, but built by… Marconi.
As with the issuing of contracts for a new generation of nuclear-power stations and other critical infrastructure, such as HS2, one of the lessons may be that, unless Britain is prepared to invest for itself, then it is likely to have to engage others through outsourcing. Complaining about who these may be is unlikely to win friends or be an effective industrial strategy.
Yet again, conflicting opinions abound. On one hand, Huawei stands accused of having the potential to conduct future espionage for the Chinese government, through the installation of so-called backdoor access to data gathered through its systems. On the other, it is its supposed technological incompetence that is said to be the problem. A typical review casts endless aspersions before admitting that ‘there is no evidence’ of wrongdoing beyond ‘suspicions’.
Many suspect one of the real drivers of this debate to be the US realising that it is about a year behind in the 5G technology race with China, amplified through its ongoing trade war and security fears. After all, backdoors, and chief security officers reporting to domestic-security agencies rather than their own CEOs are hardly just a Chinese issue.
On 1 December 2018, the chief finance officer of Huawei, Meng Wanzhou – daughter of the founder and CEO, Ren Zhengfei – was arrested in Canada, accused by the US authorities (who are trying to extradite her), of misleading its banks by being in breach of US-imposed sanctions on Iran, as well as engaging in corporate theft. If these allegations are true, it would certainly not be the first time a Chinese (or indeed another nation’s) firm had acted in this way. Again, that may say more about Beijing’s inability to control things than of its having an overarching plan, though its somewhat predictable response has done little to help such impressions. The US, too, has hardly acted coherently in all this.
In the meantime, and in the aftermath of the flagrant leaks from its National Security Council (whatever the source), the UK would do well to reflect on the extent to which such behaviour has been condoned and even encouraged over recent years, as well as on how this reflects deep divisions at the highest level of government and elsewhere.
The need to maintain confidentiality is both desirable and necessary in any society – for our own privacy as much as for private enterprise, from which a healthy public domain can then ensue. But for this we may need to rediscover and celebrate a sense of national and personal sovereignty and purpose that contemporary cultural and political trends have undermined – including, at their most pointed, through contemporary criticism of and concerns about China.