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Is China on the verge of a banking crisis?

Written by Damian Tobin.

A variety of indicators suggest that China has come perilously close to a banking crisis. So far, the government has managed to keep things in check. A state-led debt restructuring indicates Chinese officials have learnt some of the lessons of the bad loan crisis faced by state banks in the 1990s. Tight control over banks and their senior personnel has long given China a ready-made platform to control its financial institutions. Continue reading “Is China on the verge of a banking crisis?”

Creative Ideas for Conflict Resolution in the Taiwan Strait Must be Based on Facts

Written by J. Michael Cole.

In an article published in the Diplomat on 4 April, Dr. Liu Yawei, director of the China Program at the Carter Center and founding editor of the U.S.-China Perception Monitor, proposes five areas in which U.S. President Donald Trump and his Chinese counterpart, President Xi Jinping, could cooperate after their groundbreaking meeting in Florida later this week. Continue reading “Creative Ideas for Conflict Resolution in the Taiwan Strait Must be Based on Facts”

Xi Jinping and China’s “Two Sessions”

Written by Lynette Ong.

China’s “Two Sessions”, its annual political gatherings, have just drawn to a close. The “Two Sessions” (lianghui) are the meetings of the National People’s Congress (NPC), and the Chinese People’s Political Consultative Conference (CPPCC) that take place in March every year. The NPC is the country’s largely rubber-stamp parliament that has around 3,000 delegates. Because of its unwieldy size and the fact that it largely approves all legislations that are put before it, it works more like party conventions in the United States. Continue reading “Xi Jinping and China’s “Two Sessions””

The Rise of the Chinese National Security State Under Xi Jinping

Written by Tai Ming Cheung.

China has flourished since it opened its doors to the outside world and embarked on economic development from the late 1970s. But under the tenure of Xi Jinping, domestic and external security concerns have risen to the top of his administration’s thinking and in its policy priorities. This has led to the re-emergence of a national security state in which the leadership is more concerned with the protection of national borders, physical assets, the and core values, especially the rule of the Communist Party, and is also intensely nationalistic. Continue reading “The Rise of the Chinese National Security State Under Xi Jinping”

Comrades and Rivals: Vietnam-China relations and the legacies of the Vietnam War

By Edward Miller.

In recent years, as disputes over power and sovereignty in the South China Sea have escalated, many commentators have invoked history to explain the growing tensions between China and Vietnam. For some, the contemporary crisis is merely the latest episode in an age-old pattern of enmity and distrust between the two countries. According to this view, Vietnam has been fighting off Chinese invasions for centuries. Chinese aggression reinforces Vietnamese xenophobia, perpetuating an endless cycle of rivalry and conflict.

Fortunately, the actual history of Vietnam-China relations is not as bleak as this narrative suggests. While the two sides have sometimes lurched into military clashes with each other, their dealings with each other have also included many periods of mutually beneficial exchange and cooperation. The collaborative potential of the relationship can be glimpsed in the long and complex history of the interactions between the Vietnamese and Chinese Communist Parties. Although the parties were antagonists during the Third Indochina War of 1978-1991, that clash was preceded by a long period of revolutionary cooperation during Vietnam’s earlier wars against France (1945-1954) and the United States (1959-1975).  Leaders on both sides who hope to defuse the current tensions in the relationship would do well to remember this earlier era of comradery, as well as the way in which that era came to an end.

The ties between the Chinese and Vietnamese communist movements date back to the 1920s, when Ho Chi Minh (then known as Nguyen Ai Quoc) was working as a Soviet agent in southern China. During the 1930s and 1940s, many Vietnamese communist leaders held their Chinese counterparts in great esteem. Truong Chinh, who became the second-ranking leader in the Vietnamese party after Ho, displayed his admiration for Mao Zedong by adopting the Vietnamese equivalent of “Long March” as his nom de guerre. Following the outbreak of the First Indochina War in 1945, Vietnamese communist strategists drew heavily on Mao’s theory of “People’s War” to formulate the strategy they used against French colonial forces.

Relations between the two parties became stronger after 1949, following Mao’s victory in the Chinese Civil War and the establishment of the People’s Republic of China (PRC). In early 1950, the PRC became the first government in the world to recognize Ho’s Democratic Republic of Vietnam (DRV). As historian Christopher Goscha has shown, Mao’s backing for Ho helped persuade Stalin to join Beijing in recognizing the Vietnamese revolutionaries. Over the next four years, the PRC furnished the DRV with extensive aid and strategic advice in their ongoing war against France. This aid was crucial to the success of the Vietnamese war effort—especially to the DRV’s spectacular capture of the French garrison at Dien Bien Phu in 1954.

The PRC-DRV relationship was tested in 1954, during the international conference held in Geneva to negotiate an end to the Indochina War. Soviet and Chinese leaders urged the Vietnamese to accept a compromise peace deal under which Vietnam would be temporarily divided into northern and southern zones, followed by nationwide reunification elections in 1956. DRV leaders would later accuse the Chinese of forcing them to endorse a proposal they wanted to reject.However, recent research suggests that the Vietnamese acquiesced because their military forces had been stretched to the limit at Dien Bien Phu, and because they feared possible U.S. intervention if the war continued. It was only later, after the consolidation of Ngo Dinh Diem’s anti-communist regime in South Vietnam and the cancellation of the 1956 elections, that Ho and his comrades came to regret what had happened at Geneva.

By the end of the 1950s, DRV leaders in Hanoi were contemplating a return to armed struggle against Diem in the south. As they moved to put North Vietnam on a war footing, they continued to enjoy strong Chinese backing. In 1962, Beijing agreed to provide 90,000 small arms for use in the DRV-sponsored insurgency in South Vietnam; PRC leaders also promised to send additional aid and even Chinese combat troops in the event of a direct U.S. attack on North Vietnam. Beijing made good on these promises in 1965, when U.S. warplanes began a strategic bombing campaign against the DRV. China eventually deployed hundreds of thousands of People’s Liberation Army soldiers to assist in the defense of North Vietnam, thus freeing North Vietnamese troops to fight in the south.

The first major cracks in the DRV-PRC alliance appeared only in 1968, following the launch of Hanoi’s Tet Offensive in South Vietnam. Although Beijing had endorsed the offensive, Chinese leaders strongly disapproved of DRV leaders’ subsequent decision to enter into peace talks with the United States—a move which the Soviets had previously urged on Hanoi. During a tense meeting in Beijing in October 1968, PRC Foreign Minister Chen Yi scolded the DRV’s Le Duc Tho for “accepting the compromising and capitulationist proposals of the Soviet revisionists.” In response, Tho pointedly reminded Chen of the bad advice that China had offered at Geneva and declared that Vietnam would henceforth keep its own counsel. “The reality will give us the answer,” Tho retorted.  “We have gained experience over the past fifteen years.  Let reality justify.”

Relations between the two parties deteriorated sharply in the years after Tet. Although the war in South Vietnam continued, China’s enthusiasm for the North Vietnamese war effort was much reduced, and it began to cut back on aid deliveries and troop deployments. Hanoi, for its part, was dismayed to learn in 1971 that Mao was seeking a separate rapprochement with U.S. President Richard Nixon. While China briefly reversed some of the aid reductions in a bid to allay the Vietnamese concerns, DRV officials still expected the PRC eventually to abandon them. In 1973, after Washington and Hanoi finally concluded a deal to end direct U.S. involvement in the war, Beijing again slashed its support. By the time North Vietnam launched its triumphant final offensive against South Vietnam in the spring of 1975, the Soviet Union had surpassed China as the DRV’s most important source of aid. China, meanwhile, had thrown its support behind the genocidal Khmer Rouge regime and its virulently anti-Vietnamese leader Pol Pot.

For Vietnamese and Chinese leaders today, the most relevant historical lessons about their relations with each other are drawn not from the ancient past, but from the era of the Indochina Wars. Senior officials on both sides should remember the close relations that their parties forged during the 1950s and 1960s, as well as their costly and bitter estrangement during the 1970s and 1980s. They should also recall how they worked together in 1991 to build peace in the region and to restore diplomatic, economic, and cultural ties between their nations. Current disputes such as the dangerous conflict over the South China Sea may appear intractable, but they do not have to lead inevitably to violence and war. History shows us that much.

Edward Miller is Associate Professor of History at Dartmouth College. and the author of Misalliance: Ngo Dinh Diem, the United States, and the Fate of South Vietnam (Harvard, 2013). Image Credit: CC by manhhai/Flickr

Beijing’s Hong Kong dilemma

Written by Stephen Morgan.

Speculation is rife about how the Chinese Party-State will handle the Hong Kong protests against the 31 August decision to restrict selection of the candidates for the 2017 election of the Hong Kong SAR Chief Executive. Tens of thousands have filled the streets. The Admiralty area has been shutdown since the weekend, spreading to many other parts of Hong Kong too. This is the largest outpouring of political passion in Hong Kong since the demonstrations following Beijing’s crackdown on the democracy movement in 1989. All too easily, comparisons with Tiananmen come to mind. Many observers – including those who witnessed 1989 – have muttered in Tweets and other media that no good will come of the current protests; that Beijing won’t budge. To think otherwise is naïve. And, this will all end very badly, much as the soothsayers hope in their hearts it won’t come to the bloodshed as we saw in 1989 when tanks rolled into Tiananmen square.

Second-guessing the Party-state, let alone predicting the future, is a mug’s game. But exploring some scenarios may add perspective to thinking through the complexities of what we are witnessing. It is shaping up as a once-in-a-generation test for China and for its strongest leader in recent times, President Xi Jinping.

First, 2014 is not 1989, and Hong Kong is not Beijing. China and Hong Kong have moved on. In 1989 Hong Kong’s economy was about 25% the size of China’s and it accounted for about 85% of China’s foreign direct investment; it was 15% or so the size of China in 1997 when Britain handed back its colony to China, but now is barely more than 3%. So Hong Kong’s importance to China these days is overhyped, at least in pure dollar and renminbi terms. In many ways it has become a troublesome periphery. It is certainly a long way from the centre of political power, from China’s capital Beijing that the students, urban youth and young workers of 1989 had occupied.

Second, often not mentioned in the focus on what China will do is the Taiwan factor. This is the unknown element in Beijing’s decision-making calculus. While the students were gathering in 10s of thousands in Hong Kong the Chinese Xinhua News Agency carried a speech by Xi Jinping lauding the virtues of the “one country, two systems” model for a rapprochement that would “return” Taiwan to China. The timing seemed odd. Hong Kong’s model of governance within Beijing’s embrace that is captured in the “one country, two systems” has very limited appeal in Taiwan. A violent crackdown on Hong Kong would undoubtedly sink any hopes Beijing had for unification under such a formula for at least a generation. I very much doubt that Xi Jinping would like to go down in history as the Party leader who “lost Taiwan”. Though that may well have already happened. Thousands of Taiwanese have rallied in increasingly large gatherings the past few days to express their solidarity with the people of Hong Kong. And Taiwan’s President Ma, hardly an ardent democrat said, “we are watching Hong Kong”.

Third, we should not underestimate the Party-state’s capacity for patience in circumstances such as these where they face tens of thousands of people on the streets. Chinese statecraft has often had a cunningness in seemingly not acting, which is expressed in the classic aphorism 无为而治(governance through inaction) that has echoes of the Daoist strategem 无为而无不为 (do nothing and everything is done). Hong Kong Chief Executive C.Y. Leung’s decision on Monday to stand the police down seems to be in this vein. De-escalate the tension, let the crows exhaust themselves and in their persistence in occupying the streets turn other citizens against them is seemingly motivating Leung’s actions. This obviously becomes a waiting game. The question is, who can circle who for longest? But patience is not unlimited, and the authoritarian Party-state can act swiftly when seized with fear. In 1989 Deng Xiaoping’s patience lasted more than a month. Partly that was from the division and uncertainty within senior ranks as to what to do. But that was broken on June 1 when workers from Shou Gang (Capital Steel) and numbers of unemployed announced they were coming out in support of the students in Tiananmen. Suddenly the Party, leader of the proletariat, was facing a revolt of the proletariat. Deng Xiaoping and his Premier Li Peng acted decisively.

Reflecting on the comparison between 1989 and 2014, I cannot help thinking the differences are so great in time, space and political context that Beijing will not respond to the Hong Kong movement in the way it ultimately did at Tiananmen. I could be sadly wrong, but China, for all the hubris and breast-beating of Party leaders, has a lot to lose in resolving the current crisis with force. It will undermine Xi’s dream of a rejuvenated China walking tall and proud in the world much more than some sort of compromise is likely to, however hard the form of that compromise is to imagine as I write at dusk on October 1, China’s National Day.

Stephen L Morgan is Dean of Social Sciences at the University of Nottingham Ningbo China and Professor of Chinese Economic History at the University of Nottingham.

 

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