Changing China a challenge

FOREIGN Minister Penny Wong was correct when she warned that the People’s Republic of China of today was not the China of the 1970s or the 2000s.

However, her appraisal was not accurate in the way it was taken by numerous commentators or, very likely, in the way she meant.

It is worth revisiting the background that informs and instructs us about Chinese President Xi Jinping: how he governs and the events that have changed China and inform his reaction to global and regional issues that can affect Australia.

China was in turmoil when Gough Whitlam, and then Henry Kissinger and Richard Nixon, visited in 1971 and early 1972.

Its leader, Mao Zedong, had been in absolute power since 1949, the Cultural Revolution was in full swing with schools and universities closed and ‘rightists’ exiled to far flung areas of the country, and Madam Mao and the Gang of Four were running rampant.

There was almost no private enterprise and international trade was largely inefficient and conducted exclusively by huge state-owned enterprises.

Most people lived in poverty.

The judicial and legal systems were very limited.

It was a country with which we had little in common in terms of governance, freedom, pluralism, economic activity or human rights.

Chiang Kai-shek and his Chinese Nationalist Party (KMT) were running Taiwan as a dictatorship and claiming they were the government of the whole of China.

They had MPs who claimed to represent mainland cities such as Nanjing or Shanghai, having been elected in 1946.

They even had a minister for the ‘Re-taking of the Mainland’ (only finally dropped as a strategy in 1991).

At the same time, and consistently since 1949, China had proclaimed its aim of the reincorporation of Taiwan, and that it reserved its ‘right’ to do so by force if necessary: something it has restated over the decades without trying to do, in the expectation that such reunification would eventually happen peacefully.

Nevertheless, Whitlam, Kissinger and Nixon perceived, correctly, that it was in each of their country’s interests to engage with and recognise the Mao-led government as the only government of China, to make the necessary changes to accommodate this, and to develop relations and trade with China as a valued counterparty, even without agreeing with it on many matters.

The 1976 Tangshan earthquake, which killed hundreds of thousands of people, came a couple of months before (and was regarded by many as a portent of) the death of Mao and of a changed era.

That change came with the advent of Deng Xiao Ping and ‘socialism with Chinese characteristics’, which included many market-oriented reforms in the legal, education and economic arenas.

By the early 2000s, therefore, China was a country akin to the ‘unchained laissez-faire capitalism’ of the 19th century US or UK.

And it faced similar problems, albeit while providing greatly enhanced opportunities and standards of living for hundreds of millions of its citizens.

When Xi Jinping achieved his current office in early 2013, he faced an existential crisis, particularly with respect to rampant corruption.

This led to his campaign to pursue both ‘flies and tigers’, the latter referring to high-powered government and party officials who – for the first time – were not exempt from prosecution.

The legal system was also further strengthened – not necessarily in ways those in the West would approve – with more trained judges, substantial reduction in use of the death penalty, and laws passed and enforced that have enhanced the commercial framework.

An example is the ‘systemic’ financial threat Jack Ma inadvertently highlighted with his famous speech criticising banking regulators.

The speech drew President Xi’s attention to the fact that Mr Ma’s non-bank financial institution (Ant) was operating with a leverage of over 90-10 and onselling its loan portfolio to those stodgy regulated banks, setting up a potential meltdown to make the GFC look like a picnic.

Another is the capping of profit-taking from the education sector.

This had been law since 2004 but was ignored by operators and foreign investors. Although attacked by many investors as a major change, the change was mainly in the observance and enforcement of an existing law.

David Parker was deputy premier of WA between 1983 and 1990, and has lived in Hong Kong since 1997.