Author: Peter Yuan Cai, ANU and Adelaide

It was the Hong Kong based South China Morning Post that first dropped the bomb that tectonic change had just occurred in the upper echelons of the influential Chinese business magazine, Caijing. The general business manager, Daphne Wu, tendered her resignation along with eight of her nine senior colleagues. This was only the first crack in the dyke, with a mass exodus of editors and investigative journalists occurring shortly thereafter. The inevitable Götterdämmerung will be when the charismatic and influential managing editor Hu Shuli leaves the magazine that she founded more than a decade ago.

This story would be unremarkable had it not been for the semi-deified status of Hu Shuli as the most influential financial journalist in China and Caijing’s reputation as one of the very few trusted media sources in a country dominated by party mouthpieces. Read more…

Author: Stanley Lubman, Berkeley

China has come a long way in creating a legal system—and has a long way to go if the avowed aim of ‘ruling the country by law’ is to be realized. At the same time, considering that legal development has really been carried out for only half of the time that has elapsed since the founding of the People’s Republic, the accomplishments are considerable.

What remains in doubt is the depth of the commitment of the current Chinese leadership to further develop key institutions, and whether Chinese society will be stable enough to nourish those institutions.

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Author: William O’Chee, former Senator

For some time commentators have been discussing how the rise of China will change the Asia-Pacific region, but that may be less significant than how China’s involvement in the region, and the greater world, will change China.

China as a rising regional power will transform the politics, and also the economy, of the Asia-Pacific. But this region has actually been in post-colonial flux for some time. In fact, there may be an argument that the seeming stability of American hegemony has been but a passing interlude on the way to something else.

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Guest Author: Mike West, Oxford

While media attention in the northern hemisphere is consumed by the actual wildfires raging in Athens and L.A., the ethnic unrest sparked by the ’7.5′ riots in Xinjiang stubbornly smoulders on. According to Reuters, last Thursday Urumqi again went into lockdown. All roads in the city were closed and armed security forces (武警) were wheeled in to deal with a 3,000-strong demonstration in the People’s Square, during which glass bottles were hurled at the Party HQ. This round of protests is believed to have been ignited by demonstrators comprising Chinese of all ethnicities calling on their government for more adequate protection after the chilling assault on a five-year-old girl, which marked the culmination of a wave of ethnic terror in which over 476 (mainly Han) Chinese were randomly stabbed with hypodermic needles. There are reports that the emboldened demonstrators went on to call for the resignation of Xinjiang’s beleaguered Party Secretary, Wang Lequan, but these accounts are difficult to verify because a systematic information blackout is in place and telephone lines to the outside world have been cut. What does this recent wave of unrest in Xinjiang province mean for China and the rest of the world?

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Author: David Kelly, UTS

Furious criticism in both the Australian and Chinese press has been at an all-time high this past week. ‘Australia must bear the cost of the deteriorating Sino-Australian relations’, proclaimed the Huanqiu shibao. This level of acrimony surprises. Having scanned a wide range of Beijing media, I recall few headlines like this one—even from the Global Times, a broadsheet whose nationalism sometimes borders on jingoism. The Australian press has acted little better than its Chinese counterpart. Greg Sheridan told the Uighurs they have to fight it out in China—which is possibly the least diplomatic piece of advice ever offered by a Foreign Editor of The Australian in the history of the journal. While this past week set a record for arrogant bluster, by Friday the tensions were eased by placatory statements from both sides, most noticeably the Chinese.

It’s not over, not by a long shot. While blown out of all proportion this skirmish highlights some troublesome issues of information asymmetry and cognitive dissonance in the Australian-Chinese relationship. Information asymmetry is mainly an Australian problem, and I have recently discussed it in an editorial elsewhere. The problem of cognitive dissonance needs some explaining, and a parallel with the United States is useful in doing this.

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Author: Peter Drysdale

An important international consequence of the Stern Hu affair has been to shine a more intense spotlight on the political system and the way in which it interacts with the market and the judicial system in China. This week’s lead from Dr Cheng Li, of the Brookings Institution, examines the political contest between two major coalitions (or factions) within the Chinese Communist Party and the prospects for political change in China. He argues that political tensions are on the rise and China’s political system does not seem capable of finding sound, safe and sustainable ways to handle these challenges. These tensions have their origins in a number of important factors, but three stand out. One is the uncertainty of sustaining economic growth in the face of the challenge of adjustment in the global financial crisis. Another is the sensitivity to the sharp rise in external economic dependence, on energy and resources, crystallised in the brouhaha around the political anxieties that the hike in iron ore and other commodity prices have generated. A third, of course, is the elevation of ethnic tensions, most recently in Urumqi. Despite, perhaps because of, these pressures, there is no sign of a multi-party (or a more transparent and representative) political system emerging in the near future. The Chinese Communist Party will continue to have strict control over the army, media, legal and judicial system. Although there are these continuities, several important factors are now influencing change in the conduct of Chinese politics.

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Author: Cheng Li, Brookings Institution

China has been the fastest growing major economy for the last two decades and will most likely be the first to recover from the global financial crisis. China’s political future is less clear. The political system has increasingly proven inadequate to dealing with the complicated and sometimes contradictory needs of the Chinese economy and society.

Political tensions caused by many factors are all on the rise and China’s political system does not seem capable of finding sound, safe and sustainable ways to handle these challenges. Given the pressures, what can we expect from the upcoming new generation of leadership?

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Author: Richard Rigby, Head of the China Institute, ANU

As one whose task it was – together with some excellent colleagues – to report and try to make sense of events as they unfolded in China from 1988 to their tragic denouement on the night of 3-4 June 1989, Zhao’s account comes as very welcome confirmation that, basically, we got it right.

Against a background of growing popular concern over corruption and inflation, the broad outlines were clear enough: Zhao’s intensifying struggle with his more conservative opponents, the way his efforts to defuse an increasingly tense situation following the death of Hu Yaobang on 15 April were systematically sabotaged, the cutting off of Zhao’s direct access to Deng Xiaoping, the subsequent monopolisation of information going to Deng by ‘a small handful’ (to use the phraseology of the time) of Zhao’s enemies, Deng’s final loss of confidence in Zhao, Zhao’s loss of power, martial law, the massacre and its aftermath.

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Author: Ryan Manuel

A recent article by Sun Liping has attracted considerable attention on the blogosphere (thanks to China Digital Times for the link, and initial translation. I have retranslated the text).

CDT highlighted the piece as interesting because of Sun Liping’s links with current rising star Xi Jinping: as an aside, I am somewhat sceptical about this, given that Dr. Sun is a sociology professor and Xi an engineer.

But it is the content of Sun’s article that makes it explosive. In particular, he argues that:

It is difficult to achieve the double goals of maximizing vested interests and keeping the society operating steadily…we will pay a high price in the long-term for safeguarding vested interests.

This part of his argument is a common one, and is interlinked with Sun’s broader point on the lack of social cohesion and ’society’ within China.

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Author:  Peter Drysdale

Last year was a year of dramatic change in the East Asian economy, a defining moment for East Asian leadership. The economy went into sharp reverse everywhere. What wasn’t evident at the time was that the seeds of economic deceleration in China had been sown before the effects of the American and European financial crisis started to wreak their havoc. The speed of economic reversal caught even the most experienced observers by surprise.

Bubbling not far beneath the surface of the economic ferment were powerful currents of political change.

Last year was also the year in which China stepped decisively if awkwardly on to the world stage.

Its economy, at the beginning, was remarked upon as the driver of a historically unprecedented boom which saw world energy, food and raw materials prices jump to astrospheric heights. It hosted the Olympic extravaganza in Beijing, showcasing China’s remarkable achievements since it opened to the world alongside its rich heritage of culture and history. But the troubles in Tibet in the lead-up to the Olympics put a searing spotlight on the disjuncture between China’s achievements and its political development, deflected somewhat by the devastating earthquake in Sichuan which called forth huge reserves of national spirit and international goodwill. By the end of the year, growth had collapsed from 2007-based projections of 13 per cent for the year to 6.8 per cent end year-on-year, with national output virtually stationary in the last quarter.

Japan continued in stasis until it too was skittled by the collapse in America.

Until the world fell down, the rest of the region, including Australia, that most East Asian of the East Asian economies, was pre-occupied with managing all aspects of the China boom – the pressure on energy, resource and food markets, the macroeconomic pressures, the looming foreign economic investment and commercial presence – and beginning to think about its long-term political consequences. India too was more and more caught up in the wave. Read more…

Special Author: Yongsheng Zhang, Development Research Centre, State Council, and Renmin University, Beijing

The Chinese people had high expectations for smooth and fruitful year at the beginning of 2008 – the year of the Beijing Olympics, the 30th anniversary of China’s reform, and a number in Chinese culture signifying good luck and good fortune.

As it turned out, 2008 was a year in which there was as much bad luck as good. In February, southern China was lashed by a severe snow storm; in March, social turmoil in Tibet; in May, the devastating earthquake hit Sichuan; and the Olympic torch was met by protests in some Western countries.

The Olympics in August were a stand-out and government and land reforms were welcomed. But after the Olympics, the world was thrown into economic crisis, and China had to turn to fighting the rapid onset of economic recession.  The poisoned milk scandal also took place.

These were no trivial tests of the achievements of 30 years of reform. The scale of China’s growth and its speed is without precedent in world history. But the question remains: how resilient to natural and social disasters is the new China ? And what further reforms are needed to assure a harmonious role in the world?

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Author: Ryan Manuel

Lord Patten’s recent article argues that China’s ability to have economic growth outside of the United States’ secured, liberal order is a beacon to wannabe authoritarians everywhere. China, then, is a threat to democracy due to its economic success.

There is some reason to what he says. Undoubtedly, the recent economic successes of both China and Russia have altered many of the tenets of democratic growth theory. Democratic growth theory, in a nutshell, argues that as an economy grows, the middle class demands more of a say in its affairs, leading to more democratic institutions and often political transition.

Yet, as Robert Kagan has recently argued, there is a considerable international appeal to autocracy, and if this can be combined with a successful economic model, then suddenly a new model of development appears.

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Author: Yongsheng Zhang

Over the past three decades, institutional changes have been the major driving force for China’s economic development. But, as Ross Garnaut recently stated in Beijing, “many foreign analysts have underestimated the importance of institutions in economic development, and the inevitably gradual nature of successful institutional change”.

If China’s reforms prior to 2000 for establishing a market economic framework could be called the first generation of reforms, then subsequent reforms aimed at improving the market economic system could be called the second generation of reforms (2G), designed to eradicate the hardest institutional barriers incompatible to a market economy.

But the 2G reforms need momentum. For instance, it is not so easy to break the vested interests. However, proper application of the rule of law and civil society measures can provide the momentum and act as a warranty for the success of the 2G reforms and for China’s long term economic prosperity.

The recent strikes of taxi drivers in some places in China is a good example. Read more…

Author: Peter Drysdale

Rowan Callick’s piece in the Australian last week on the collapse of the shonky real east estate company, Fuda, in Jishou, Hunan, provided a hook for him to do some philosophising about the process and history of reform in Chinese markets and elsewhere in the world, with a link thrown in to the state psychology of managing the Olympic Games.

There are too many leaps and bounds in logic in his piece to deal with them all here. But Callick’s comment that the observation by Christopher Findlay and me that ‘Chinese companies in which the state has a stake are ‘publicly listed at home and increasingly in Hong Kong and abroad’, and that ‘state-owned firms in China are increasingly subject to the disciplines of the market at home and abroad’ is self-evidently false because ‘their owners (the Chinese state) still own the market’ needs closer examination. Callick offers no evidence on how the state-owned enterprises relate to the state and its ‘ownership of the market’, let alone how that relationship has changed, or is changing over time.

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Author: Peter Drysdale

Peter Hartcher says that: ‘ The West made a huge strategic bet in deciding to engage China rather than contain it. The punt? That the world would change China faster than China could change the world. Now, as China’s high-growth, high-filth capital is on Olympic display to a curious world, it also happens to be 30 years since Deng Xiaoping launched China’s modernisation.’

The bottomline for Hartcher is that ‘ (China’s) intolerance of some basic human freedoms is notorious. And it is hard to get around the brutal reality that, no matter how enlightened it may be in some of its dealings with the world, China is still an authoritarian dictatorship.’

Hartcher admits that China’s people enjoy incomparably greater freedom today than they did a generation ago. Then ‘the state stipulated where every Chinese had to live and work. Neighbourhood spies kept detailed tabs on every detail. Most Chinese had barely enough to eat. Culture was so threadbare that the arrival of a new movie from North Korea was considered to be a big event.’ Read more…