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The Eurasia Center2947 Massachusetts Ave NW
Washington, DC 20016www.eurasiacenter.org
Email: [email protected]
China: Country Report
Eurasia Center Analysis
General Background After nearly 40 years of reform, the Chinese people have seen a new period of openness and a position
as a world power. Since 2008, China has continually become one of the most important players in the
international arena. China, currently, is the second-largest economy in the world, a standing member of
U.N. Security Council, a nuclear power and a possible potential game-changer of the current international
institution. China has become one of the largest contenders to U.S. hegemony and are without a doubt the
dominant regional power in East Asia.
On the other hand, China, still faces numerous challenges in both domestic and international spheres.
Internally, China has not fully completed its process of reform economically and politically. Further, the
society is still recovering from the split brought by the Cultural Revolution and the Tiananmen Square
Massacre. Externally, as its influences reach further, China begins to face several new challenges.
Ultimately, despite the rise of China as a global power, it still faces strong challenges both internally and
externally, which will need to be resolved if it wants to maintain its position of power.
Politics
To the surprise of many western scholars, the Chinese Communist Party (CCP) did not collapse after
the Tiananmen Square Massacre in 1989. The leadership continued its reform and, was successful in
maintaining total rule over China.1 Chinese political system has become more institutionalized in the last
twenty years. The CCP is pushing for political reform to build a more efficient government for its people,2
although it is still undecided whether this could be a success or not.
Nevertheless, there a plethora of problems that the CCP will be forced to deal with. First, its political
reform has entered a critical period,3 which means the people with a vested interest are likely to push back
against the government more than before. Second, problems like environment pollution, corruption,
conflicts between civilians and government officials, and so forth, have greater potentials to cause further
conflicts. Third, with economic development, the relationship between the government and civil societies
has also become an issue for the CCP. The government must approach these issues carefully to prevent
another Tiananmen Square Massacre from happening. At last, the historical problems such as Culture
Revolution and Tiananmen Square Massacre still haunt the Chinese government. The legitimacy of the
CCP is under strong scrutiny from within as a result of unresolved historical burdens.
(The new leader of CCP, Xi Jinping)
In specific, General Secretary Xi Jinping’s anti-corruption campaign became the most critical
agenda in China in the last four years. Thousands of Party members and government officials were
arrested with charges of corruption. The long-term impacts of how this might affect the CCP are unknown
as of now. However, Xi’s leadership appears to have a solid foundation after five years of his governing.
Economy
First and foremost, China has become the second-largest economy in the world, and it is still growing.
Although it maintains a high economic growth rate of 6.6% as of 20164, it is the lowest one in last two
decades. The growth rate of the economy is slowing, and it is also important to note that despite having
the second largest economy in the world the GDP per capita is only $15,400 as of 2016.5 This is the 104th
largest GDP per capita, and far behind most western countries.
(Data from WTO: World Trade Statistical Review 2016)5
As noted above, China is also a key player in international trade system. It surpassed the United
States as the worlds’ largest goods trading economy in 2013. In 2015, China was largest exporter in the
world which takes 13.8% share of entire global trade; it is also the second largest importer in 2015, only
surpassed by the U.S. The value of imports into China in 2016 was 1.756 trillion dollars.6 The general
secretary of China, Xi Jinping, reclaimed that China would be a steady supporter of globalization and
free-trade.7
Since 2013, the Chinese government launched two multilateral development programs, the Road and
Belt Initiative, and the Asian Infrastructure Investment Bank (AIIB). According to the Chinese
government, as of July 2016, China has invested over 50 billion dollars into the Road and Belt Initiative.8
This initiative covers over 60 countries around Eurasian region and over the half of the world’s
population. As a multilateral finance institution, 57 countries signed up as signatory countries of AIIB. As
the leading country, China has put nearly 300 billion dollars, approximately one-third of the total
subscriptions, into the AIIB, wielding almost 30% voting power.9 Together with the G20, RCEP, and
other multilateral economic institutions and treaties, China is becoming continually influential in today’s
international economy.
5 The World Facebook, CIA. Accessed on Feb.3, 2017.
Domestically, Chinese economic reforms focus on supply-side, which means to reduce the excess
capacity, changing the Chinese economy from the investment leading model into a consuming leading
model. In detail, it includes tax reduction, improves market functions and controls the industries with
excess capacity. However, as many of these industries belong to the government, this is not an economic
problem in some ways. Also, this reform will not necessarily cause an employment problem. It is still too
early to conclude whether this new reform will be success or not.
Society Chinese society is divided into two differing areas. On the hand, big cities like Beijing, Shanghai,
Shenzhen, and Guangzhou are very modernized. People there have very high quality of life with good
infrastructure and sound social security systems. On the other hand, most Chinese people, especially in
the west, still constitute the majority of Chinese society where basic needs are often not met like
electricity, clean water and paved roads.
.
(Air pollution has become an urgent social problem)
The current focus of Chinese society is largely about the problems brought by the economic
development. Air pollution has become crucial social issue, especially in the major metropolitan areas.
Other problems like food and water security, the household registration system, and fertility system are
ongoing issues as well. In general, the Chinese society is currently undergoing the process of
“modernization” as it tries to resolve these issues. It is hard to conclude whether or when this process will
complete.
Military The Chinese People’s Liberation Army (PLA) has become one the top military forces around the world
as a result of its consistent budget growth. It contains several subsections: Army, Navy (PLAN; includes
marines and naval aviation), Air Force (PLAAF; includes airborne forces), Rocket Force (strategic
missile force), and Strategic Support Force (space and cyber forces); People's Armed Police (PAP); PLA
Reserve Force.10 In total, the PLA has about 2.3 million active duty troops, which is the largest force in
the world. It is widely believed that the PLA is the third strongest combat force of the world, following
the U.S. and Russia respectively.
PLAN has been the major focus of PLA’s development plan in recent years. According to the
China’s Military Strategy (2015), PLAN “will gradually shift its focus from "offshore waters defense" to
a combination of "offshore waters defense" with "open seas protection," and build a combined, multi-
functional, efficient marine combat force structure.”11 China has become one of few countries to currently
opperate aircraft-carriers. Currently, China only has one, but is attempting to build more.
(The parade in 70th-anniversary ceremony of PRC)
However, shortages within the PLA are also evident. According to a report by Rand, there are two
obvious weakness of the PLA. First, the PLA faces shortcomings stemming from outdated command
structures, quality of personnel, professionalism and corruption. Second, logistical shortcomings,
insufficient strategic airlift capabilities, limited numbers of special-mission aircraft, and deficiencies in
fleet air defense and antisubmarine warfare still hinder the PLA from becoming an effective combat
force.12
Foreign PolicyUntil recently, Chinese foreign policy had not deviated from Deng Xiaoping’s, the previous leader of
CCP, foreign policy platform. Deng gave his judgment that peace and development were the two primary
agendas of the modern world in 1985.13 Based on this, Chinese foreign policy since then has followed a
pattern of “Tao Guang Yang Hui,” which means to keep a low profile.
(G20 Hangzhou Summit)
However, has China begun its transformation from “Tao Guang Yang Hui” to “You Suo Zuo Wei (do something meaningful).” As of 2012, China has started to become increasingly active, or aggressive as some observers believed. The sovereignty disputes in the South China Sea and the East China Sea have led some Western Scholars believe that China is trying to build its own hegemony within Asia. Further, China has used institutions like the OBOD, AIIB, G20, BRICK, RCEP and others to exert influence on global international affairs. This is another important feature of current Chinese foreign policy.
AppendixEconomic Indicators14
GDP PPP: $21.27 trillion (2016 est.) Country comparison to the world: 1 GDP (official exchange rate): $11.39 trillion (2015 est.) note: because China's exchange rate is determined by flat rather than by market forces, the official exchange rate
measure of GDP is not an accurate measure of China's output; GDP at the official exchange rate substantially
understates the actual level of China
GDP - real growth rate:6.6% (2016 est.) (Official figure: 6.7%)country comparison to the world: 13
GDP - per capita (PPP): $15,400 (2016 est.)country comparison to the world: 104
Gross national saving:46% of GDP (2016 est.)country comparison to the world: 3
GDP - composition, by end use:household consumption: 38.7%government consumption: 14.2%investment in fixed capital: 42.3%investment in inventories: 1.5%exports of goods and services: 20.5%imports of goods and services: -17.2% (2016 est.)
GDP - composition, by sector of origin:agriculture: 8.6%industry: 40.7%services: 50.7% (2016 est.)
Agriculture - products:A world leader in gross value of agricultural output; rice, wheat, potatoes, corn, peanuts, tea, millet, barley, apples, cotton, oilseed; pork; fish
Industries:world leader in gross value of industrial output; mining and ore processing, iron, steel, aluminum, and other metals, coal; machine building; armaments; textiles and apparel; petroleum; cement; chemicals; fertilizers; consumer products (including footwear Industrial production growth rate: 6.1% (2016 est.)country comparison to the world: 26
Labor force:805.9 millionnote: China's population at working age (15-64 years) was 1.004 billion (2016 est.)country comparison to the world: 1
Unemployment rate:4.2% (2016 est.)4% (2015 est.)note: data are for registered urban unemployment, which excludes private enterprises and migrantscountry comparison to the world: 39
Population below poverty line:6.1%note: in 2011, China set a new poverty line at RMB 2300 (approximately US $400)
Budget:revenues: $2.465 trillionexpenditures: $2.897 trillion (2016 est.)
Taxes and other revenues:21.6% of GDP (2016 est.)country comparison to the world: 136
Budget surplus (+) or deficit (-): -3.8% of GDP (2016 est.)country comparison to the world: 131
Public debt:20.1% of GDP (2016 est.)15.3% of GDP (2015 est.)note: official data; data cover both central government debt and local government debt; data exclude policy bank bonds, Ministry of Railway debt, China Asset Management Company debt, and non-performing loanscountry comparison to the world: 163
Fiscal year:calendar yearInflation rate (consumer prices): 2.3% (2016 est.) 1.5% (2015 est.)country comparison to the world: 120
Commercial bank prime lending rate:4.4% (31 December 2016 est.)4.35% (31 December 2015 est.)country comparison to the world: 151
The stock of narrow money:$6.802 trillion (31 December 2016 est.)$6.176 trillion (31 December 2015 est.)country comparison to the world: 2
The stock of broad money:$22.89 trillion (31 December 2016 est.)$21.45 trillion (31 December 2015 est.)country comparison to the world: 1
The stock of domestic credit:$23.08 trillion (31 December 2016 est.)$20.53 trillion (31 December 2015 est.)country comparison to the world: 1
The market value of publicly traded shares:$8.188 trillion (31 December 2015 est.)
$6.005 trillion (31 December 2014 est.)$6.499 trillion (31 December 2013 est.)country comparison to the world: 2Current account balance:$270.9 billion (2016 est.)$330.6 billion (2015 est.)country comparison to the world: 3
Exports:$2.011 trillion (2016 est.)$2.143 trillion (2015 est.)country comparison to the world: 2
Exports - commodities:electrical and other machinery, including data processing equipment, apparel, furniture, textiles, integrated circuitsExports - partners: US 18%, Hong Kong 14.6%, Japan 6%, South Korea 4.5% (2015)
Imports:$1.437 trillion (2016 est.)$1.576 trillion (2015 est.)country comparison to the world: 3
Imports - commodities:electrical and other machinery, oil and mineral fuels; nuclear reactor, boiler, and machinery components; optical and medical equipment, metal ores, motor vehicles; soybeansImports - partners: South Korea 10.9%, US 9%, Japan 8.9%, Germany 5.5%, Australia 4.1% (2015)
Reserves of foreign exchange and gold:$3.092 trillion (31 December 2016 est.)$3.406 trillion (31 December 2015 est.)country comparison to the world: 1
Debt - external:$983.5 billion (31 December 2016 est.)$958.3 billion (31 December 2015 est.)country comparison to the world: 16
The stock of direct foreign investment - at home:
$1.458 trillion (31 December 2016 est.)$1.221 trillion (31 December 2015 est.)country comparison to the world: 5
The stock of direct foreign investment - abroad:$1.285 trillion (31 December 2016 est.)$1.01 trillion (31 December 2015 est.)country comparison to the world: 11
Exchange rates:Renminbi yuan (RMB) per US dollar -6.626 (2016 est.)6.2275 (2015 est.)6.2275 (2014 est.)6.1958 (2013 est.)6.3123 (2012 est.)
Acknowledgements: Research is provided by Yu(Tony) Pan, Research Assistant, under the supervision and coordination of Dr. Janco, President, The Eurasia Center/EBC.
1 Bruce J. Dickson, “Generating Support,” in Dickson, The Dictator's Dilemma: the Chinese Communist Party's strategy for survival (New York, NY: Oxford University Press, 2016).2 Third Plenary Session of the 18th CPC Central Committee, “Decision of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform,” Beijing, November 12, 2013. Accessed on Feb.2, 2017. http://news.xinhuanet.com/politics/2013-11/15/c_118164235.htm; the Forth Plenary Session of the 18th CPC Central Committee, “Decision of the CPC Central Committee on Major Issues Pertaining to Comprehensively Promoting the Rule of Law”, Beijing, October 23, 2014. Accessed on Feb.2, 2017. http://news.xinhuanet.com/politics/2014-10/28/c_1113015330.htm; and the Fifth Plenary Session of the 18th CPC Central Committee, “Outline of the 13th Five-Year Plan for the National Economic and Social Development of the People's Republic of China”, Beijing, October 29, 2015. Accessed on Feb.2, 2017. http://news.xinhuanet.com/fortune/2015-11/03/c_1117027676.htm 3 Jintao Hu, “The Report of 18th CPC National Congress,” Nov. 18, 2012. Accessed on Feb.2, 2017. http://cpc.people.com.cn/n/2012/1118/c64094-19612151.html 4 Financial Times, “China GDP hits 2016 target as Trump headwinds loom,” Jan.17, 2017. Accessed on Feb.2, 2017. https://www.ft.com/content/3533b1b0-ddfb-11e6-9d7c-be108f1c1dce 5 WTO, World Trade Statistical Review 2016. Accessed on Feb.2, 2017. https://www.wto.org/english/res_e/statis_e/wts2016_e/wts2016_e.pdf 6 Statista, “China: value of monthly imports from December 2015 to December 2016 (in billion U.S. dollars).” Accessed on Feb. 2, 2017. https://www.statista.com/statistics/271615/monthly-value-of-imports-into-china/ 7 The Wall Street Journal, “Xi Jinping in Davos, Making the Most of a Waning Era,” Jan. 16, 2017. Accessed on Feb.2, 2017. https://www.wsj.com/articles/xi-jinping-in-davos-making-the-most-of-a-waning-era-1484560806 8 Chinese Ministry of Commerce, Aug.18, 2016. Accessed on Feb. 3, 2017. http://www.scio.gov.cn/ztk/wh/slxy/31200/Document/1487819/1487819.htm 9 AIIB. Accessed on Feb. 3, 2017. https://www.aiib.org/en/about-aiib/who-we-are/members-of-bank/index.html 10 The World Facebook, CIA. Accessed on Feb.3, 2017. https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html 11 People’s Republic of China. Information Office of the State Council. China’s Military Strategy. May 2015. Accessed on Feb.3, 2017.http://china.org.cn/china/2015-05/26/content_35661433.htm 12 Chase, Michael S. et al. China’s Incomplete Military Transformation: Assessing the Weaknesses of the People’s Liberation Army (PLA). Santa Monica CA: RAND Corporation, 2015. pp. 1-138. Accessed on Feb.3, 2017.http://www.rand.org/content/dam/rand/pubs/research_reports/RR800/RR893/RAND_RR893.pdf 13 Xiaoping Deng, “He Ping He Fa Zhan Shi Dang Dai Shi Jie de Liang Da Zhu Ti (peace and development are the two major agendas of modern world).” Accessed on Feb.3, 2017. http://cpc.people.com.cn/GB/64184/64185/66612/4488773.html 14 The World Facebook, CIA. Accessed on Feb.3, 2017. https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html
