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What the Realities in China Mean for U.S. Policy

August 11, 2016

Shanghai Selfie, March 2015. CREDIT: Terry Chapman (CC)

DEVIN STEWART: Hi. I'm Devin Stewart here at Carnegie Council. I'm here with Joshua Eisenman. He is a professor at the University of Texas in Austin, LBJ School of Public Affairs.

Josh, thanks for coming back to the Carnegie Council. You've been with us a few times here. Great to see you again.

JOSHUA EISENMAN: Great to be back.

DEVIN STEWART: You've just come back from visiting China. How many times a year do you go to China?

JOSHUA EISENMAN: I tend to go anywhere between three and five times a year and usually stay for anytime from a week to a month. This time I was there for six weeks.

DEVIN STEWART: Six weeks. And you visited seven cities and the Chinese countryside. We really like to get in these podcasts on-the-ground, firsthand observations of what's going on in the world, especially in Asia. What are you seeing in China these days?

JOSHUA EISENMAN: Well, the first thing I would say is that, being in the Chinese countryside for two and a half weeks, which is a pretty rare experience for a foreigner, I can tell you that China's villages are disappearing, that essentially in 20 years China is going to look nothing like the China that has existed for 5,000 years. Everyone in a village is old. Although there are a couple of children there, I saw precious few people from the age of 20 to 50 in a village. So we're looking at a massive change. And of course, this has been well-documented, the urbanization of China. What that means for Chinese culture, the Chinese economy, China politically—all of that yet remains to be written. But this is one of the fantastic changes that I saw when I was there.

DEVIN STEWART: What are the implications? I mean is it something to worry about, or is this just a general sort of natural urbanization that happens in the industrialization process? Is it something darker, or is this something that just happens?

JOSHUA EISENMAN: China has adopted what's call the "new socialist countryside policy." What that means—and I've seen—is the moving of people out of traditional village structures and into high-rise apartment buildings and giving them a small percentage of a large company which then farms their land on a massive scale. So this is a question, right? In the past, farmers had owned their land—or not really owned their land, but owned their houses at least, in perpetuity. Now they've got a 70-year lease.

So the question about landless Chinese peasants, which has haunted China throughout its history, is something which China may have to face going forward—big questions about land reform and what that is going to look like in the next 10-20 years.

And, you know, to the extent that they are actually able to move people into high-rises, if those are near the city, then it seems that that's fine; that becomes an outgrowth of the city. But to the extent that that's happening in pretty secluded countryside, pretty remote countryside areas, the quality of the buildings is uncertain and there's really no connection to jobs. So this is a problem going forward for China.

DEVIN STEWART: Do they own the apartments when they move into the buildings?

JOSHUA EISENMAN: They have 70-year leases.

DEVIN STEWART: In the apartment buildings as well?

JOSHUA EISENMAN: That's right. But they still have to pay large amounts of money to furnish the apartment, to basically finish the apartment.

DEVIN STEWART: I mean it seems like basic development theory that you need to own your own land or house in order to foster long-term economic growth, right? Isn't that sort of a classic understanding? Isn't there some concern that this might hinder capital creation and the use of private capital?

JOSHUA EISENMAN: Well, China has long had a problem with this, right? There's people out there who think that people should have ownership over their own homes. But the Chinese Communist Party has long believed that long-term leases are the best way to foster growth. In doing so, of course, you dis-incentivize further investment, because if you don't really own your home, if you are 60 years into a 70-year lease, who wants to build a new bathtub; who wants to do anything? So you do see a lot of bad, falling-apart capital construction in China.

For China, that's not that big of a problem; they'll just rip it down and put up another one. But what that means for Chinese society when it's really turned into a throw-it-out society—even buildings, tear it down and build another one.

DEVIN STEWART: Sure. But what about mortgaging your home to build a small business?

JOSHUA EISENMAN: You can't do it. Basically you can't do it.

DEVIN STEWART: It seems like that would hinder long-term growth.

JOSHUA EISENMAN: And a lot of economists have argued that.

But there's also political instability, because in the past, several dynasties have been overthrown by peasant rebellions, where the peasants essentially sell their land, become landless peasants, and then end taking up huge amounts of loans out at usurious rates, and then have nothing to lose and join together to oppose the leadership. So for the Chinese, if people don't have ownership of their land, then they can't become landless peasants. Now, other problems, as you rightfully point out, have come out of this.

But, I guess, the important takeaway is that people are moving out of the countryside and for the people who are living in the countryside the kind of traditional Chinese life that had existed for 5,000 years is disappearing. In 20 years, by the time my children are our age, Devin, there will be no more rural China the way there has been for 5,000 years.

Now, what does that mean? I think that is completely unknown, and I haven't seen any books about it written yet.

DEVIN STEWART: Well certainly, when communities are thrust into change like that, the principles and the values that come from a shared culture can be under threat. Is there any sense in your mind about the changing shape of Chinese morality in communities? What do you think people think is important these days?

JOSHUA EISENMAN: Well, as you and I wrote, actually a decade ago now, China remains in many ways a very materialistic, nouveau riche society. Questions of morality, how one acquired that wealth, are really unimportant until some terrible thing happens and the truth comes to light.

But the idea that one would engage in immoral, improper behavior but do so in a way that their parents and friends and family don't know about, acquire large amounts of wealth and come home and be a generous benefactor—that's fine. The issue is, in China being a shame society, people don't really worry about that until the facts come to light, until everyone knows that they gained that money through illicit means—selling false products on Taobao or elsewhere, and then at that point they become embarrassed and shamed, and then you have suicides and divorce and other consequences. But as long as all that remains under the surface, people can live a lifetime—

DEVIN STEWART: Without consequence.

JOSHUA EISENMAN: —without consequence.

DEVIN STEWART: So it's becoming unswervingly rich without consequence, with impunity in a sense, until the facts come out?

JOSHUA EISENMAN: In many ways yes. I mean Xi Jinping's anti-corruption campaign in many ways is trying to push forward what he calls "socialist values," to move China back onto the left side of the political spectrum and to say that you actually have a duty to society.

In many ways the Party has moved significantly to the right. In many ways the Party has become as an entity, as a political organization, an ultra-rightist organization. So what Xi Jinping is trying to do is move it back. Therefore, you have campaigns like the Lei Feng campaign, where you see on the street pictures of Lei Feng, this person who was a selfless cog in the wheel of the socialist revolution.

So, for what it's worth—and who knows if it's working; my sense is it's probably not—children in China today are now told to have a new socialist consciousness.

DEVIN STEWART: What does that mean?

JOSHUA EISENMAN: Essentially, because China is not really—I mean they have 67 million Christians, but for China that's a small drop in the bucket of 1.3 billion people—is not a Christian society. A Judeo-Christian ethic does not truly exist in the way it would in what we would consider the West. That is then being replaced with egregious materialism, as we had discussed. There are consequences of that, a lot of them having to do with the environment, again as we have worked on in the past.

DEVIN STEWART: What do they mean by a "socialist consciousness"?

JOSHUA EISENMAN: Well, a social consciousness that you owe society, that you owe your neighbor, that you owe the party, that—

DEVIN STEWART: So communitarianism?

JOSHUA EISENMAN: I would say that that's one way to put it, yes. I have to admit I'm not the foremost expert in this, but I can say that there is definitely a desire to take those 40 million Chinese people who have benefitted so much—this is the Party members and the members of the system—and have them give back more of the perks that they have received, to check their influence and power more, and to ensure that the next generation is not as, I guess, selfish as the current generation. This is kind of a backlash against that selfish materialism.

DEVIN STEWART: So it's bringing back a sort of Maoist zeal to the Party, returning or re-forming it as a reformation back to its roots? Is that an accurate portrayal of what you're talking about?

JOSHUA EISENMAN: Certainly the tactics would be considered Maoist campaigns. Rectification campaigns, anti-corruption campaigns, the cleansing of the military—these things harken back to the Cultural Revolution. This is a lot of the same techniques that were employed by Mao himself.

But the organization that Xi Jinping is dealing with is much more rightist than the organization that Mao Zedong was dealing with. I mean Mao Zedong himself was concerned that the Party would eventually turn into what the Party has turned into today.

So now Xi Jinping is trying to do what he can to pull this organization back from the right. From his perspective, an organization that continues down the road of rightism, although it may be a wide boulevard, ends in a dead end. That's why in his 95th anniversary speech to the Communist Party he made very clear when he said—he being Xi Jinping—"We are building socialism, not any other -ism." The other –ism I believe he's talking about is fascism. There is another more right-leaning orientation of the Party, and that that right-leaning orientation is trying to rein in from the brink of what he sees as a deep threat to the Party's long-term stability.

Now, there are plenty of other people in the Party who would disagree, and certainly there are not what I would consider liberal voices. They may be somewhere down there, but I do not believe liberalism is part of what we're talking about. Xi Jinping does not want not want to open the media to do this; he wants to use Maoist tactics in order to achieve a rectification of the Party and then to deploy that Party to achieve his desired ends.

DEVIN STEWART: To what end, though? I think the conventional wisdom might be that it's to just sort of consolidate his own political power, make sure that essentially he's the most powerful leader that he can be. Is it anything other than that?

JOSHUA EISENMAN: I think that that's a big part of it. I mean Xi Jinping, like many political leaders, believes that China is a better China with him in charge. So I think that's an important part of it.

I do believe, though, that, based on his background, where he came from, the fact that he was raised during the Cultural Revolution, I do believe that he does feel that the Party needs to be true to its roots, its Marxist-Leninist beginnings. I believe he does believe that. I have heard from people who apparently have met with Xi Jinping that he actually does have real sympathy for the common man, that there is a real desire to right the wrongs of the last 30 years under the reform and opening up.

Now, whether or not he can actually achieve that and what is the priority in his mind, righting the wrongs or his own personal power, I can't speak to. But I do believe both of these things are real and he believes that he is doing this because it will empower the Party and it will make China as a country a stronger and more just place. Whether or not that's true at the end of the day we have yet to see.

DEVIN STEWART: One of the campaigns, I assume, is the anti-corruption campaign.

JOSHUA EISENMAN: That's right.

DEVIN STEWART: How is that going? Is it for real? Is it working?

JOSHUA EISENMAN: Well, the anti-corruption campaign is linked, to the campaign to reform the China Youth League.

I guess it's important for listeners to understand that Hu Jintao, the former president; Ling Jihua who was purged, who was his number one, one of his confidants; and even Li Keqiang, the current premier; all hail from this very powerful organization, the China Youth League. This is an important group and it has his players and its representatives all throughout the government. In many ways, it is the right-leaning group that he is kind of jostling against. And so in using the anti-corruption campaign, he seeks to undermine the strength of his competitors and the Youth League.

The Youth League, in response, is lying low. They're trying to stay out of his way. To some extent that is not really possible because they're his target. But the question will come up next year at the new Communist Party Congress, which will happen in November next year.

DEVIN STEWART: What will be the question?

JOSHUA EISENMAN: The question will be, "Who is going to prevail?" There is a lot of thinking out there that Li Keqiang, the current premier, is going to be asked to step down five years before his term is up. That would be unprecedented. But then, there are also a lot of people in the Party who are big supporters of Li Keqiang and who think that he has got the right ideas and Xi Jinping doesn't.

The result, as has been written about in other places and I myself have said many times, is that there's a lot of foot dragging in the Party. A lot of people who are at mid levels of the Party don't know who is going to win, and so they're not moving.

One great example of this is the comments both made on July 4th and covered in the same exact article between Xi Jinping and Li Keqiang, where Xi Jinping says "We have to make our state-owned enterprises bigger and stronger, we have to increase the power of the Party within them"; and, in the same exact article, Li Keqiang says, "We have to make them smaller, less powerful, and more market-driven."

So the result of this is: How can you do both? If you're the head of a state-owned enterprise, do you make your organization leaner, or do you make it stronger and more Party-dominated, or is it more market-driven? You can't do both. So the result is, not knowing who will win, a lot of people just don't do anything.

Xi Jinping has recently, I think this week, again railed against these foot draggers who refuse to implement reforms. But a lot of that is simply because the power struggle, which many of us had thought was over, is not over and is very real.

DEVIN STEWART: With these tensions within the Party, will this affect the One Belt, One Road (OBOR) initiative? And maybe you might want to also explain to the listeners what that initiative is.

JOSHUA EISENMAN: Explaining the One Belt, One Road initiative is both difficult and easy. We know it was initiated by Xi Jinping in 2013. We know that he has advocated China's enhanced connectability both on land, kind of harkening back to the old Silk Road, and then on water, something he calls the Maritime Silk Road.

DEVIN STEWART: That's the "belt"?

JOSHUA EISENMAN: That's the "belt."

So the idea then is to enhance China's connectability and deploy Chinese firms to these countries in order to make profits essentially and to build the infrastructure necessary for Chinese goods to get in.

DEVIN STEWART: So the Chinese companies are building the infrastructure for the "road" and the "belt"?

JOSHUA EISENMAN: Well, this is the question, because, as was told to me by somebody who was in some of these meetings, when you get the people who work the railways, the airlines, the people who do electricity wires, the people who do pipelines, all of them have their own vision because they all have their own interests of what the One Belt, One Road should be. The people who do railways want to make railways. The people who do electricity want to do electricity. So this becomes a pot where people struggle over that money. Not to mention localities. Localities will frame anything in terms of OBOR so that they can get some money from the central government.

DEVIN STEWART: Sure.

JOSHUA EISENMAN: So you've got companies, you've got localities, and the third group I would say is foreign countries. Pakistan comes up with $46 billion for the Pakistan-China Corridor. The Chinese have never said that. They've never disavowed it either. But I've never heard that publicly. Even Mugabe is talking about $28 billion. Foreign countries are trying to get themselves hooked into this thing because they see it as a way to finance what they want to finance.

So the result is One Belt, One Road, being poorly informed, has become something everybody wants a part of and wants to define it in their own way. The result, unfortunately, for Xi Jinping anyway, is that if this does not succeed—and what "success" means I think is hard to determine—then these groups that I've mentioned will be disappointed.

And so the people who talk against Xi Jinping, the foot draggers, the people who don't want him to succeed, would be more than happy to turn back a few years from now and say "One Belt, One Road was a mistake" and hang it around Xi Jinping's neck as an albatross.

DEVIN STEWART: Are the foot draggers in the Party—can't they sabotage the project itself?

JOSHUA EISENMAN: In many ways that's what they're doing by having millions of dialogues, millions of discussions, but yet achieving nothing.

DEVIN STEWART: Talking it to death?

JOSHUA EISENMAN: By talking it to death, having different views, constant discussions, but yet doing nothing actually, what they're doing is delay tactics, typical delay tactics.

So there's a policy on the top and the pushback on the bottom. The pushback does not happen necessarily by actively saying "No." It just has to be—in a Western context, getting a bill locked in committee, just discussing it but not allowing it to come up to an actual vote as it were. There's not a vote in this case, but actually beginning the projects.

So this is a real concern. Three years on we don't know what the thing is yet.

DEVIN STEWART: What is the potential consequence politically?

JOSHUA EISENMAN: That's a good question. For Xi Jinping, the consequences could be disastrous. If his landmark—what he's trying to put forward is his landmark project proposal, which in many ways is kind of the anti-TPP (Trans-Pacific Partnership)—if the United States is trying to come up with this economic system, China's trying to push forward the state-directed/state capitalist approach, and this is their main avenue to do it, and then it all gets kind of stymied, well then, for him politically there are serious domestic consequences, especially as he is going to be starting his next five years. Whether or not he sticks around and how he sticks around, a lot of it could come down the fact of whether OBOR was a success or not.

DEVIN STEWART: Can the Asian Infrastructure Investment Bank (AIIB) be used to fund the belt and the road?

JOSHUA EISENMAN: This is another question that is not yet resolved. My understanding is that AIIB has not put out its first loan yet.

And also, when you go to Beijing, there isn't one organization in the entire city that the foreigners have any role in in any serious capacity. But at AIIB they can actually vote on that. I mean the European bureaucrats are going to show up in Beijing and have a say in an institution. I think that's a first.

So whether or not China can actually use these two organizations—everybody was kind of down on the United States and saying, "Oh, the U.S. should have just signed up to AIIB and we shouldn't have not supported it" and everything. And yes, that's true in terms of headlines. Politically, propaganda-wise, that was a bad move for the United States.

However, the question of whether or not these organizations, OBOR and AIIB, are going to be successful or not is a long-term gambit from China. In many ways it's easy to sit there on the sidelines and criticize organizations like the World Bank, but at the same time how do you actually—"Okay, well go ahead and do it, but do it better." That's harder. So we'll see if China can pull it off.

DEVIN STEWART: Well, you also mentioned earlier before the podcast something that I found fascinating, the ubiquity of the application WeChat, which is a Chinese application for communication between people. Tell us about that.

JOSHUA EISENMAN: Well, WeChat is far more than that. WeChat is a way to pay your bills, it's a way to hail a cab, it's a way to pass on information, it's a way to make even phone calls free.

DEVIN STEWART: Is there any analogy in the United States?

JOSHUA EISENMAN: To me, I think WeChat brings together a lot of things that we consider separate. It brings together everything from Uber to Twitter to Apple Pay. A lot of things that we consider separate apps, WeChat does it all. So in that sense it is extremely convenient.

But of course it's run by and controlled by the authorities. So this convenience comes at a price, and that price is the fact that everything you are doing is being closely monitored. To some degree that may be the case in China generally, but WeChat makes that monitoring very easy.

So when the Chinese come up and say, "Look, we've got the fastest supercomputer ever," part of that is about crunching all this new information that they have for everybody who lives in China.

DEVIN STEWART: You were telling me about that, that over the years you've seen an explosion of the use of this technology. Give us a sense of what that looks like for people who are not in China. What do you see?

JOSHUA EISENMAN: One thing that I did is every time I went into a store or a cab, I just asked how much of their business is done via WeChat, or "Zhifu bao" as it's called—it's the linking of your bank account through your cellphone—and how much of it is cash. Generally, people respond in major cities like Shanghai and Beijing that about 70–80 percent of their business is done through the WeChat scanning a cellphone, and that cash only makes up about 20–30 percent of their business, and of that 20–30 percent, 60–80 percent of those are people over the age of 60. So the new young generation uses WeChat even to purchase groceries at the grocery store.

I remember one time I went in to get a cold beverage, and as I'm coming out, the line for WeChat signouts was five people deep and the woman taking cash—I just walked up, paid in cash, and walked out the door. It was this very funny moment where this so-called "convenience" application actually causes you to have to wait an extra five minutes compared to just pulling cash out of your pocket.

DEVIN STEWART: Sure.

JOSHUA EISENMAN: But it underscores the point that this application has become essential to life in China. When people ask me, "What's your WeChat?" and I say, "I don't have one," they looked at me as if I had three legs or I was a dinosaur, that "How could you not have this? How could you live in China without WeChat?" I think it might be hard for Americans to fully grasp the ubiquity of WeChat and its importance. And of course, it has post-Orwellian connotations, when basically all this metadata is being collected.

I remember one incident that's worth reiterating here, when I was sitting next to somebody who received an email which was related to a dissident who had decided to no longer log anything on WeChat. He basically sent out an email to all of his followers—or not an email, a WeChat to all of this followers—saying, "Look, I'm going to have to step off because the control is too much." I was sitting next to somebody who then forwarded it to the person sitting on the other side of that person. In the time it took him to hit "send" on his WeChat message and that message being received only a couple of seconds later, the content of the forward changed entirely. It turned from this discussion of a dissident saying "I have to bow out because I don't have the ability to speak freely" to a story about the use of gutter oil by Chinese vendors selling dumplings on the street.

DEVIN STEWART: So something completely not related?

JOSHUA EISENMAN: Something completely different. At that moment, the person sitting to the left of me said, "Now I understand, because sometimes I get these WeChats from people that make no sense to me. Why is this person sending me this? Now I can understand it."

DEVIN STEWART: Is it total gibberish?

JOSHUA EISENMAN: It's not total gibberish. It's just linked to a completely different article.

DEVIN STEWART: Wow!

JOSHUA EISENMAN: Even the title may be the same but the content has been changed. This shows a whole new level of sophistication in the Chinese intranet.

DEVIN STEWART: Why do the majority of the people in China go along with this? Are they in denial, or what is it?

JOSHUA EISENMAN: I would say it's the convenience factor. It has become so ubiquitous and so convenient. I mean even professors at Peking University, where I was teaching, were sending out their reading lists on WeChat. The students regularly teased me about having to actually check their email accounts, whatever that would be, for readings and comments. Some said they hadn't checked their email account in weeks until I—so WeChat has become a dominant feature of China's society and everyday life in China.

DEVIN STEWART: And for the government it has become a way to collect intelligence as well as to manipulate their perception of what's going on as well; is that what you're saying?

JOSHUA EISENMAN: Yes. I mean it has become a massive metadata collection tool. It has become a way to basically solidify the Chinese intranet and coalesce it around a certain application which they then can administer or control, turn off/turn on, change and alter as they see fit. The genius of WeChat is not the creation of it; it's the convenience of it.

DEVIN STEWART: We'll end with a couple thoughts here on using the isolation of China in the Internet sphere maybe as a metaphor for China at large.

There have been a few articles written recently in The New York Times and other places about the futility of global technology companies trying to do business in China because China has sealed itself off, it's its own planet, so business practices, technologies, ways of engaging customers—none of that works with the Chinese business. Uber was probably the biggest case. Uber tried to work within the system as much as possible and still failed.

You've thought a lot about how much Americans or the West even have any influence on China. If you want to just maybe comment on what you've been thinking about the ability for the West to even influence China at all, and to what degree do we have any influence; and, if not, what should we be doing?

JOSHUA EISENMAN: This is perhaps the question of our time, this is the issue, because American policy for decades has been built on the idea that if we engage China and engage the right Chinese people in China, if we identify the moderates and engage them, that we can empower them, and then that will change China to a more liberal country. That, fair listeners, is bullshit and has proven, I think, to be so.

It is very American to believe that we can change another country. But, frankly, we couldn't even do that in Iraq, let alone China. The Communist Party of China knows that we feel this way, knows we want to do this, and therefore constantly leads Americans down the primrose path that "We are changing; just give us some more time."

That becomes much harder to say now in the current climate which is so tight, but still that is the mantra. There are many people in Washington, DC, who still believe that through a robust engagement architecture we can change China. I think that's a fool's errand, and have for a long time.

When I go to China and teach a course at Beijing University and I can go and speak out at conferences and speak my mind and nobody else really can, that's not because I have power. It's because I don't matter. It's because I'm a foreigner; I'm outside the system. For Chinese speakers, "pai zai wai, bu zai nei". I'm outside, I'm not inside China, and I understand that. That gives me to some degree of power to speak my mind, but also it gives power for the other side to know that what I say doesn't really matter very much.

But America's problem is we go and we speak our mind but we seem to believe that what we're saying actually makes a difference. In U.S.–China policy, my suggestion is that we should be far more modest than we've been. We should be far more modest both in our objectives and far more modest in terms of what we can achieve.

We should engage China based on what we want for ourselves. Our conversations with the Chinese should never begin with "You should do this because it's better for you" and they should always center around "We want you to do this because this is better for us," because we know what we want, to the extent that we know what we want. But we definitely should not pretend to understand that we know what the Communist Party wants or what China needs. To me that stinks of American arrogance and has proven to be a failure wherever we've applied it.

So our approach to China should essentially be to understand China better, not to tell China what China should do, and certainly not to apply willy-nilly American IR (international relations) theory about rising powers and status quo powers. China is not Sparta, China is not the Hapsburgs; China is China. To the extent that we merely simply apply IR theory to China, we are going to mislead ourselves, because we're going to fail to understand that between 2012 and 2015–2016 what changed was not that China turned from a status quo power to a rising power—no, in fact that didn't change at all. What changed was that the leadership of China.

So what drives China more than anything else in my opinion is domestic. To simply say that it's just a competition among rising and status quo powers denies this important domestic component.

Now, I'm not saying that rising power didn't have something to do with it—it does. But this is a two-level game, for those political scientists who are listening, it's not one-level, and we have for too long treated China as a one-level game. What we need to do is allow a more robust understanding of Chinese domestic politics to infuse and inform our China policy.

DEVIN STEWART: So learn from what actually is going on, have a little humility and some modesty and honesty—it sounds like a pretty good prescription. Let's see if Americans can do it.

Thanks so much for coming here today and for your great comments today, Josh. Great to see you.

JOSHUA EISENMAN: Thank you, Devin. I really appreciated it. Happy to be back.

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