October 01, 1999	atimes.com

China Toward the 21st Century By Robert A Scalapino Introduction As the People's Republic of China (PRC) approaches its fiftieth anniversary, evaluations of its status, including achievements and present and future challenges, will be many and varied (1). To draw up an accurate balance sheet is not easy. On the positive side, China is now a nation, with the Communist Party and its military arm having ended the decades of civil war and the multiple political entities that existed in this vast land during the early twentieth century. A highly centralized state structure has now functioned for five decades, with the Communist Party as the supreme authority. During the Cultural Revolution, to be sure, all institutions were threatened, but recovery was rapid as veterans sobered by their experiences returned to the helm. Recently, organs such as the National People's Congress and the Chinese People's Political Consultative Conference have shown greater vigor and placed a strong emphasis on the rule of law. Certain certified non-Communist parties exist and are permitted carefully supervised roles. Yet no one doubts where power lies. Equally important, the military in the form of the People's Liberation Army (PLA) has been controlled by the Party. This does not mean that the military is without voice on the political front. Indeed, key PLA leaders have occupied positions in the supreme party organs and clearly command attention on certain issues. Moreover, in troubled border areas, their authority over regional affairs is significant. Yet, warlordism, the scourge of Nationalist China, has not returned. Further, through a combination of achievement and intense indoctrination, the New China acquired legitimacy and support from a strong majority of its citizens at an early point. Wedding socialist ideology to nationalism, leaders sought to politicize the masses in a more intensive manner than China had ever known. The results have been mixed, but the Party has had reason to be relatively satisfied -- at least until recently. Perhaps most important, by means of ''socialism with Chinese characteristics'', the Chinese leaders have united stability and development in a manner previously unknown in this continent-sized, highly diversified society. Political challenges The political challenges that lie ahead, however, are by no means insignificant, and many of them are connected with development itself. Indeed, China is currently in the midst of a great transition with its outcome unclear. First, the nature of political leadership is undergoing major changes. At the outset of the PRC, the intensely personalized politics so characteristic of the past continued under the Communists in marked degree, notwithstanding the advances in institutionalization noted earlier. As a result, Lord Acton's maxim that ''Power tends to corrupt and absolute power corrupts absolutely'' held true in Maoist China. Power corrupted Mao with increasing intensity. As his tenure lengthened, paranoia and associated traits made themselves ever more manifest. The disastrous consequences of the Cultural Revolution and the rise of the Gang of Four were the culmination. The Great Leader is gone, and more importantly, the age of a single, all-encompassing authority appears to be over. Moreover, the primary characteristics of leaders have changed (2). The first and second generation of Communist leaders were generalists and staunch ideologues. They came from a guerrilla background, whether as civilians or military men (and those roles were frequently fused). The third and fourth generations now occupying the supreme political positions are for the most part technocrats -- trained as engineers or forced to assume the role of economists. Despite periodic public signs to the contrary, moreover, ideology is secondary to development in their priorities. Thus, China is en route to collective leadership, with a specialization of functions among the key personnel. Naturally, this poses new challenges. Can such a system serve to underwrite stability, while an appropriate division of responsibility - and power - are maintained? What imagery is conveyed to the citizenry, historically used to placing leader above institution? President Jiang Zemin is defined as the ''core'' of the system, but few hold him in the same regard as Mao or even Deng Xiaoping. Another sign of China's political transition lies in the resurgence of an issue that has deep roots in this society's past, namely, the allocation of authority among center, region, and locality. The Nationalists were never able to resolve this critical question, with fierce debates ensuing over whether extensive centralization was essential if unity and strength were to be achieved, or whether China's great diversity did not require recognition through some form of federalism. The Communists initially opted for intensive centralization in the name of absolute solidarity. Yet with decades of rapid economic development, diversity has grown rather than diminished. Moreover, China's ''advanced regions'' have achieved considerable control over economic policies, a trend eminently rational from an economic standpoint - if not carried too far. But perhaps matters did go too far in recent times. Thus, one of Prime Minister Zhu Rongji's principal tasks has been to recapture control of macroeconomic policies for the center. The issue of federalism will remain of critical importance in the years ahead. In the midst of an ongoing economic revolution, what is the appropriate allocation of powers within the state and its sub-units? Clearly no final answers can be given to this question, and the need to provide a system that permits flexibility as conditions warrant continues to challenge China's leaders. Like one-man leadership, the exclusive centralism of the early Communist years cannot be resurrected. These crucial political challenges betoken the fact that China is in the process of moving from Marxism-Leninism-Maoism (MLM) to an authoritarian-pluralist system. Politics is still controlled in an authoritarian fashion, albeit, with multiple uncertainties and a growing degree of flexibility. Freedom of speech has expanded in remarkable fashion in recent years; freedom to write and publish is more limited, but here too, significant advances have taken place. To engage in efforts to organize politically beyond the authority of the Communist Party is far more hazardous, as recent events have shown. Leaders of the would-be Democratic Party languish in prison, convicted of ''seeking to subvert the state''. But in truth, this is a period when most individuals are uncertain as to what they can and cannot do, and thus the frontiers of permissibility are constantly being tested. A civil society is also emerging apart from the state, with a growing number of separate interest groups capable of articulating their positions to some extent. In addition, non-government organizations have made their presence felt more meaningfully in recent times. Moreover, pluralism in the political realm is exceeded in the economic field, with a mixed economy that features the growth of the private sector. Thus, China is currently pursuing a course relatively common to late developing societies, having shifted from hard to soft authoritarianism - with the central goal still that of preserving stability while engaged in the quest for rapid development. Meanwhile, in recognition of the need to bring the rural grassroots into a more active political involvement and alleviate some of the concerns of the farmers, the government has initiated village elections. While carefully controlled for the most part, these elections allow a degree of referendum on current conditions, and may serve as a curb on autocratic or corrupt local officials - a massive problem. Will democracy follow? Predictions regarding this question are very hazardous. Due to its vast geographic scale, China's outer regions, with significant ethnic minorities, represent security hazards now and for the foreseeable future. The nation's ethnic minorities are too small in numbers and too divided to constitute a serious threat to PRC survival; they can and will be controlled by force if necessary. Yet regions like Xinjiang and Tibet will remain troubled, given the vast cultural differences between Han and such minorities as the Uighurs, Kazakhs, and Tibetans. Moreover, as shall soon be noted, fundamental economic challenges remain to be resolved or eased. Under these conditions, authoritarianism will retain an appeal as the most effective means of preserving stability. It is thus not wise to attempt a firm prediction regarding China's political future at this point. Suffice it to assert that Maoism in its political dimensions is history. In this context, the earlier role of ideology is in jeopardy. To be sure, the appeal is issued to be faithful to the words of Mao and the doctrines of Deng, coupled with the insistence that socialism with Chinese characteristics promises a bright future. Virtually every major address by Jiang and other leaders features a call for theoretical study, both on the part of Party cadres and the citizenry at large. Yet the dominant note in these same addresses is usually pragmatism. This is a note initiated by Deng himself; it was he who turned the tide with such statements as, ''It doesn't matter whether the cat is black or white, as long as it catches mice.'' At present, the Chinese people - and especially the younger generations - have limited interest in ideology in its MLM form. Their interest overwhelmingly is to get ahead in life, advancing their living standards so that they benefit personally from the economic revolution underway. Thus, in so far as individuals are concerned, politics revolves around concrete economic and social issues. Recent social unrest has been in response to social and economic problems rather than politics per se. Not without reason, the Beijing government has been increasingly concerned about peasant unrest in certain areas due to excessive taxes, corrupt officials, and the low grain prices. The arrests of certain leaders on charges of ''subverting the state'' will not end these protests. In urban centers, moreover, the rise in unemployed workers due to the downsizing and closure of various state-owned enterprises, along with migrations into the cities of under- and unemployed rural personnel have also constituted rising worries. Moreover, the capacity of a traditionalist Buddhist sect, the Falung Gong, to quickly mobilize some 10,000 followers for a silent protest in central Beijing in April 1999 startled the PRC leaders - and many Chinese intellectuals as well. ''Feudalism is not dead,'' was one comment. An intensive propaganda campaign and the arrest of certain leaders has followed, with the effort to stop a movement that reached into party circles and even the military. Yet its results are not yet clear. To meet these and similar manifestations of unrest, China's leaders have increasingly resorted to an appeal not to socialism, but to nationalism - utilizing the most powerful source of mobilization in Chinese society. In this connection, the response to the bombing of the Chinese Embassy in Belgrade was enormously revealing. Taking advantage of the situation to divert attention from economic problems and such past events as the Tiananmen Incident, student demonstrations were both encouraged and controlled by the government with ''patriotism'' as the all-powerful theme. The lesson emphasized was that China must have rock-like solidarity and work unstintingly if it is to be rich and powerful so that it can meet the threats from outside aggressors. While the nationalist surge was powerfully abetted by the bombing incident, it has been underway for some years, and indeed it has always been an important part of Chinese politics in the Nationalist as well as the Communist era. However, China's new unity, combined with its growing economic power and its important, if still modest, military establishment, give nationalism new significance - a fact not lost on China's neighbors. Thus, a key question is whether nationalism can serve the purpose of maintaining Chinese unity and advancing its economic course without underwriting a chauvinistic, domineering attitude toward others, possibly with expansionist predilections. Is the Middle Kingdom complex being revitalized? As is well known, PRC leaders insist that China intends to live by the Five Principles of Peaceful Coexistence, including the peaceful settlement of all disputes and the acceptance of the equality of all nations, as well as respect for their sovereignty. In recent times, as we shall note, Beijing has made numerous efforts to improve bilateral relations with the nations on its borders through various visits and pledges. Indeed, with most East and South Asian nations - and with the Russian Federation - relations are perhaps better at present, at least on the surface, than at any time in recent years. Nevertheless, nationalism remains a volatile force, and, regarding such issues as Taiwan, it might serve to underwrite a major crisis. An illustration of the delicacy of this matter as it affects leadership and policy can be given through a purely personal occurrence in the immediate aftermath of the Embassy bombing. A ''man in the street'', an individual of limited education, said to an American, ''I do not support Jiang. He is too weak. He has not made China strong enough to stand up to the big powers.'' This episode is revealing both with respect to the degree to which freedom of speech has advanced - and as to the potential that an appeal to nationalism holds - sometimes going beyond the desires of current leaders. Economic challenges Since China's economic future will play a major role in determining its politics, it is imperative at this point to attempt to draw up a balance-sheet on this facet of the Chinese scene (3). As is well known, the positive side of the ledger is impressive. According to official statistics, between 1979 and 1997 China's yearly growth rate averaged 9.8 percent, and China's GDP quadrupled between 1980 and 1995. Rapid increases in both agricultural and industrial production took place during these years, with industrial gains playing the major factor in China's economic growth. Per capita GDP showed an equally spectacular growth in the span of 20 years, with official figures indicating an annual growth rate of 8.4 percent. Many rural as well as urban residents have enjoyed income gains. Correspondingly, both consumption and savings advanced rapidly; Chinese households have been saving on average some 40 percent of their income. The rapid development of township industries provided some 130 million jobs. Moreover, with its low labor costs and certain enticements given to foreign investors, China became an attractive investment opportunity. Such investment reached more than $40 billion yearly, and foreign exchange reserves totaled some $140 billion by 1998. Revenue collection improved significantly as a result of an intensive anti-smuggling campaign, more efficient collection methods, the rising price of petroleum, and an increase in tobacco taxes. Most importantly, inflation was kept under control despite the economic boom and extensive government spending on infrastructural improvements. Thousands of kilometers of new roads and rail lines were constructed as well as a number of airports. Through these achievements, the livelihood of hundreds of millions of Chinese has improved, significantly reducing the ranks of the desperately poor. Given the emphasis on science and technology, moreover, a sizable number of experts now exists - some of them products of training abroad. They will be a cardinal asset in moving China into the ranks of the more advanced societies in the decades ahead. These advances are a tribute to the significant changes in macroeconomic policies that were set in motion at the beginning of the Deng era. Pragmatic, market-oriented policies liberated the entrepreneurial instinct that was always present in Chinese culture and clearly manifest in the Overseas Chinese both in Asia and in the West. The private sector of the economy has provided the dynamism. By 1999, private enterprises numbered 1.23 million with some $491.3 billion in registered capital, and the private sector accounted for more than 90 percent of new employment and 80 percent of current economic growth. Yet no-one, including Beijing's current leaders, would deny that at present China faces a number of serious economic challenges, some of which cannot be quickly or easily resolved (4). The financial-banking structure is in serious trouble, with extensive non-redeemable loans. Such loans are the products of the old state-dominated structure that spawned the type of government-industrial collusion familiar in other Asian settings. Budget constraints on both enterprises and banks were lacking since the task was not to maximize returns but to fulfill plant quotas and to maintain employment irrespective of income. Overwhelmingly, the loans went to state-owned enterprises (SOEs) even though some 40 percent of the SOEs were operating at a loss, with massive overproduction of unwanted goods. Some estimates place non-performing loans at present as high as one-third or more of GDP. Thus, no issue is of greater immediate importance. While the government has initiated certain important financial reforms, fundamental structural changes are yet to be seen, and many observers doubt that the present plan of transferring non-performing assets from banks to capital management corporations will resolve the basic problem. Structural reforms involving the further opening and standardization of China's financial markets are required, possibly through the implementation of a shareholding system in the state-owned banks. In an effort to halt growth decline, the government has engaged in a major pump-priming operation, spending billions on infrastructural projects. Moreover, China's central bank cut interest rates for the seventh time in three years in June 1999. But the results have been limited. Indeed, some outside observers dispute official figures, and assert that growth is currently minimal. While many of the loans continue to go to SOEs, reform has been ongoing, with sizable reductions of the work force. Yet to allow bankruptcies has been very painful, given the problem of unemployment; hence, bailouts continue. Unquestionably, unemployment - rural and urban - has been a growing problem in recent years. The underemployed and unemployed rural workers may number over 150 million, and each year some 20 million pour into China's urban areas, seeking jobs and creating social difficulties. Township enterprises, while very important in reducing rural unemployment in the past, have betrayed certain serious problems: production of dubious quality; management weakness; inadequate sources of funding; and extensive pollution. Hence, many are in trouble at present. Further, SOE reform has produced some 17 million jobless from this sector, and significant reductions of government employees at all levels have also exacerbated the unemployment problem. Reportedly, some 4 million government workers were laid off in 1998. The need for such reforms is obvious, but the social consequences naturally cause anxiety. Military reform involving both the removal of the PLA from the business sector and a downsizing of the standing army are additional important aspects of the reform program. Most accounts indicate that these programs have been carried out with considerable success, but given the domestic and international situations at present, the status of the military is both a delicate matter and potentially subject to change. In sum, while the reforms initiated by Zhu Rongji and his associates have been more far-reaching than many observers had anticipated, much remains to be done if the Chinese economy is to be successfully restructured so as to remedy its serious weaknesses. The fundamental challenge is to move further from a strategy based upon state dominance of all facets of the economy - a strategy that has proven to be economically unsound - without inducing massive social unrest. This task has not been made easier by the recent economic stress racking many of China's Asian neighbors. To add to the difficulties, there remain major differences between and among China's various regions. In general, it is East China, and especially coastal China, that has enjoyed the greatest economic development, benefiting from a concentration of talent, greater government assistance, a more advanced infrastructure, and closer interaction with foreign investment and technology. The vast interior remains relatively backward, and poverty is commonplace. Beijing pledges greater assistance in a variety of ways, but a multitude of claims on national funds attenuates the center's capacity to narrow the gap. To modernize 1.2 billion people constitutes a monumental challenge, and China's accomplishments, especially since 1978, should not be slighted. Yet now, with the task of living with globalization unresolved by any nation, and, with China entering a more complex transition in political terms, the economic uncertainties understandably trouble current leaders deeply. They cannot forget that differences over economic policies contributed mightily to the political crisis of the late 1980s, and that peasant unhappiness and the plight of the unemployed urban worker constitute far greater threats to stability today than the attitudes of university students. What is the future of the ''socialist market economy''? Can the socialist portion of this hybrid be further reduced, as is economically necessary but politically hazardous? It is thus with a combination of strengths and weaknesses that China faces the twenty-first century. In the decades immediately ahead, China is likely to become a major power - but a major power with major problems. And certainly, domestic trends - both political and economic - will have a critical influence on Chinese foreign policies (5). Foreign Policy Challenges Currently, PRC foreign policy can be summarized by outlining four priorities. First, given the continuous emphasis upon rapid economic development - ''the route to power and wealth'' - China seeks to create and preserve relationships that advance its domestic economy. The commitment to ''opening up'' is irrevocable, although its pace and extent remain debatable issues. It is likely that at some future point the dependence upon domestic stimuli for developmental purposes will become much greater, but, for the present, China's interest in foreign investment and export-oriented policies remains strong. Naturally, this has a significant influence on foreign policy, including China's interest in participating in international bodies committed to economic matters. Second, China sees a threat in ''unipolarism'', which it defines as US ''hegemonism''. Thus, it now urges ''multipolarism'', and seeks to counter what many Chinese leaders regard as a US attempt to contain China despite Washington's denials. Hence, China seeks to build up ''partnerships'' with as many neighbors as possible. While these partnerships are proclaimed non-alliances, from a Chinese perspective a number have strategic as well as economic and political implications. To be sure, such a partnership was created on paper with the United States. But the basic thrust of current PRC policy aims at the creation of a vast buffer-zone around the nation, making American strategic penetration more difficult. At the same time, Beijing does not want to see PRC-US relations deteriorate to a point where peace is threatened or economic relations are seriously affected. Nor does it want access to America via multiple non-government channels to be blocked. Thus, verbal militance and policy restraint are interwoven. Third, China intends to defend its territorial claims resolutely, centering upon Taiwan but including the South China Sea islands and certain other places. While indicating that it is prepared to negotiate on these issues, China has thus far shown little interest in compromise with Taiwan on key political matters and has not hesitated to advance its claims unilaterally in the South China Sea on occasion. Territorial issues relating to PRC-India relations, and even a few remnant border issues along the Chinese-Russian frontier as well as the Diaoyutai (Senkaku island) dispute with Japan also remain unsettled. While presumably accepting the loss of Mongolia and the Russian Far East, Beijing is not prepared to sacrifice those other parts of its historic empire. Fourth, China is in the process of creating a more even balance between bilateralism, which it strongly favored in earlier years and multilateralism which increasingly serves its strategic as well as economic purposes as the twenty-first century opens. Bilateralism is still accorded great importance, with visits, signed accords, and pledges reached with other states on a global basis. Yet in recent times, China has entered a number of multilateral organizations and undertakings. Further, it has become a stout champion of the United Nations, juxtaposing it against what it has termed the ''illegal and aggressive actions'' of American-led NATO. In the UN, the priority given the sovereignty of the nation-state - or at least, the major nation-states - is prominently displayed. China, it must be emphasized, has come to independent nationhood in relatively recent times, and thus, despite the advent of internationalism on every front - a trend requiring some modification of classic state-centered doctrine - China continues to fiercely defend state sovereignty in its most absolute form. Japan As Jiang Zemin's visit to Tokyo in 1998 illustrated, the Sino-Japanese relationship remains delicate principally because of a lengthy history of conflict and animosity. Many Chinese regard Japan as instinctively prone to ''militarism'' and disdain for others. Hence, every act by Japan to raise its status or to assume more strategic responsibilities evokes warnings. The revised US-Japan security guidelines, the Theater Missile Defense (TMD) issue, and the Japanese decision to launch an independent intelligence satellite all produced frowns and warnings from Beijing (6). On the other hand, many Japanese regard China at present as arrogant, and insistent upon being accepted as Asia's true major power. Thus, Jiang's efforts in November l998 to elicit a ''sincere apology'' for Japan's wartime behavior created a strongly negative impression, with the Japanese attitude being that ''we've apologized enough''. Naturally, Japan watches trends in Chinese nationalism and PLA modernization with concern. At the same time, however, both nations are ever more closely bound in economic terms and cognizant of that fact. In the economic realm, common interests exist, and, as the trip of Prime Minister Keizo Obuchi to Beijing in mid-1999 illustrated, this common interest can produce such understandings as an agreement on conditions for the PRC entry into the World Trade Organization. Further, as Natural Economic Territories (NETs) such as the Sea of Japan (East Sea) emerge, these two nations will be ever more closely intertwined in economic terms, although elements of competition as well as cooperation will still be present. At the same time, the psychological foundations of the Sino-Japanese economic relationship will remain fragile for the foreseeable future, affecting relations in the political-strategic realm. Russia China's official relations with Russia have reached a level of amity not seen since the early 1950s. The reason is very clear. Both nations are responding to the perceived threat of Eurasian encirclement - the expansion of NATO in the West and the tightened network of US alliances in the East. The conflict over Kosovo and US policies with respect to TMD - among other tensions - have given additional salience to the ''strategic partnership'' between Beijing and Moscow, a relation first signaled in l996 (7). The issues upon which this ''partnership'' is based have included opposition to American global dominance, support for multipolarism (with all major powers given equal roles), and agreement on such specific matters as Taiwan and Central Asia. Border demilitarization has been accomplished, and efforts to provide a favorable climate for increased economic interaction have been taken. The underlying raison d'etre for the new relationship, however, is clearly that of creating a strategic balance against a perceived US-dominated world. Yet the strongly positive words that garnish the new Sino-Russian relationship notwithstanding, genuine intimacy is lacking. Leaders proclaim a newly-found comradeship, but below this level indifference or suspicion on the part of the citizenry are omnipresent. The cultures of these two societies are radically different, and once again the history of this relationship is rife with tension. At present, moreover, the ideological glue of communism is gone. Further, Russia's current political and economic disarray makes the future uncertain. Hence, in contradistinction to Japan, China's economic incentive for strengthening its relationship with Russia is negligible, although the economic recovery of the Russian Far East could change that picture dramatically. In sum, the China-Russian relationship hinges upon the perception of external threat. At the same time, both nations - especially given the needs in the economic field - must sustain workable relations with the West, and especially the United States, as recent events have clearly illustrated. Mongolia As noted earlier, China appears reconciled to the independence of Mongolia, while making it clear that any nationalist appeal to the Mongolians in China would produce a strongly negative response. China has concentrated upon increasing its economic relations with Mongolia, a fact that Mongolians watch carefully. In essence, Mongolia, located between two major nations, China and Russia, sees safety in numbers. Hence, it cultivates the greater involvement of the United States and Japan while carefully avoiding antagonizing either Beijing or Moscow. Korean peninsula Meanwhile, China's interest and involvement in the Korean peninsula is presently much greater (8). China is the one external nation that comes closest to having a two-Koreas policy. Since the early 1990s it has recognized the Republic of Korea, and its economic and cultural relations with the South have greatly expanded. Indeed, they now dwarf those with the North. Yet as the June 1999 visit of a Democratic People's Republic of Korea (DPRK - North Korea) delegation to Beijing headed by Kim Yong-nam illustrated, both Beijing and Pyongyang are keenly aware of the importance of their bilateral ties (9). China has been a major benefactor of the North during its recent economic troubles and also proclaims the PRC's ''traditional friendship'' with the DPRK as ''blood-cemented''. Various reports suggest that DPRK leader Kim Jong-il may make his first trip abroad since assuming command by going to Beijing in the fall of 1999. In reality, however, the facts are far more complicated than public pronouncements would indicate. The June trip was the first high-level visit of North Koreans to Beijing since 1991, and China has insisted, with considerable reason, that its knowledge of developments in Pyongyang - and its influence on the North - have been very limited in recent times. Privately, moreover, the Chinese have been strongly critical of the DPRK, regarding its economic policies as short-sighted and calling its politics ''bizarre''. Spokesmen for the DPRK have also indicated privately in the past that ''we do not trust China'', signaling their displeasure over certain Chinese actions and pressures. For Beijing, South Korea has been both more understandable and approachable in recent times. Moreover, Beijing leaders have praised Kim Dae-jung's ''Sunshine Policy'' toward the North, seeing it as the route to peaceful rapprochement between the two Koreas. And while China has reiterated its commitment to the peaceful reunification of the two Koreas ''without outside interference'', it agreed to participate in the Four Party Talks that have been underway sporadically for the past several years. In addition, the PRC has been helpful in putting modest pressure on the DPRK with respect to such matters as missile testing and has also allowed Beijing to be the site for various bilateral meetings involving Northern representatives. The indications are strong that the PRC would prefer a continuance of the status-quo on the Korean peninsula despite its public support for peaceful reunification. A collapsed North would create multiple problems for Beijing. It should not be forgotten that China's Yanbian Autonomous Region, bordering on the Yalu River, has a population that is overwhelmingly Korean. A unified Korea under ROK control might rekindle nationalist sentiments among Chinese Koreans. Further, it might move American power closer to China's borders. But neither does China want another Korean war nor a nuclear DPRK with its dangerous consequences throughout the region. Similarly, further missile expansion is worrisome for Beijing, given the inevitable repercussions in the United States, Japan, and the ROK. Hence, China is prepared to cooperate with others, at least up to a point, to preserve the peace and work toward an evolutionary path for the North, whereby it joins its neighbors and the world in a fashion similar to China's own recent course. Taiwan Turning elsewhere in the region, one cannot avoid the issue of Taiwan. To be sure, for PRC leaders, Taiwan is a domestic, not a foreign policy issue. Yet even Beijing cannot avoid the fact that many states are involved - directly or indirectly - in Taiwan, and developments in China-Taiwan relations will have a major impact on stability throughout the region. At present, economic and cultural relations between China and Taiwan are advancing more or less satisfactorily, with extensive Taiwan trade and investment on the mainland continuing and visitations expanding to include a wider spectrum of political figures as well as business and academic leaders. Millions of Taiwan residents have visited the PRC as tourists or to contact relatives. Yet a political impasse continues, and despite arrangements for Wang Daohan, head of the Association for Relations Across the Taiwan Strait (ARATS) and the PRC's head negotiator, to go to Taiwan in the fall of 1999 for talks, no breakthrough is in sight. Indeed, recent developments have darkened the clouds over PRC-Taiwan political relations, and raised new questions about whether the Wang visit will take place. With the year 2000 presidential election looming ahead, every politician in Taiwan is well aware of the fact that a great majority of the Taiwanese people have never been prepared to accept the formula of ''One China-Two Systems'' proffered by Beijing. In recent years, the Kuomintang (KMT) and the Democratic Progressive Party (DPP) have come closer together with respect to the central issue of Taiwan's current and future status. Taiwan, both parties have proclaimed, is presently an independent, separate entity and entitled to equality in all relationships with the PRC. Until recently, the KMT retained the One-China principle, maintaining that eventual reunification would depend upon whether the PRC became truly democratic, whereas the DPP has held that since de facto independence existed, it was not necessary to proclaim independence in de jure terms; and, if necessary, a plebiscite could be held to determine the people's will. In early July 1999, however, President Lee Tung-hui seemed to shift the KMT into the same position as the DPP when in an interview with a German radio station he stated that from now on Taiwan would treat contacts with China as special ''state to state'' relations, and, under such relations, there was ''no longer any need to declare Taiwanese independence''. Seemingly, Lee publicly abandoned the one-China formula. Predictably, Beijing authorities were furious and issued a statement that included the words, ''do not underestimate the courage and force of the Chinese people to oppose separatism and Taiwan independence''. Compromise on this critical issue has never seemed less promising. If Beijing were to offer a proposal for commonwealth or confederation, with the issue of sovereignty set aside for the present, it might produce a willingness in Taiwan to consider the idea. But, given recent developments, the political costs of such a move are probably too great for Beijing's leaders to consider at this time. Thus, the critical issue is whether both parties can live with the status quo. Once again, much will depend upon political developments in both societies. Southeast Asia Southeast Asia represents a foremost testing ground for China's pledge to abide by the Five Principles of Coexistence. On the positive side, the PRC has engaged in both bilateral and multilateral negotiations with members of the Association of Southeast Asian Nations (Asean) and has accepted membership in the Asean Regional Forum (ARF). Further, it has entertained various leaders from the region in Beijing, and engaged in high-level visitations to a number of Asean capitals. Even with Vietnam, where past animosity has been substantial, cordial proclamations have been jointly issued. Yet on occasion, China demonstrates its intent to be vigorous in protecting its proclaimed rights. The construction of buildings on an atoll claimed by the Philippines (and others) that do not appear to be mere facilities for fishermen, as the PRC claims, is an example. It is not surprising that most Asean members desire to establish good relations with China, but they are also alert to developments and, in most cases, anxious for a balancing American presence in the region. South Asia South Asia represents a region of at least equal interest to the Chinese, largely because of India. Sino-Indian relations have long been troubled, with the 1962 war a continuing shadow and the border dispute still unsettled. China's support of Pakistan provided a certain balance to Russia's support of India in earlier times, and, while conditions have changed, Beijing is still anxious to see some balance maintained. The Indian and Pakistani nuclear tests were deeply disturbing to China, as is the heightened tension over Kashmir. Given its concerns over Tibet, Beijing does not want to confront the collapse of the existing order in this region or to witness Indian dominance. Yet China is not prepared to be extensively involved. United States Let us turn finally to the enormously complex and important relationship between China and the United States (10). The volatility of that relationship was amply revealed in the opening months of 1999. After the reciprocal Jiang and Clinton visits of 1997 and 1998, the atmosphere seemed relatively positive (11) but, to be sure, there was no absence of contentious issues. China proclaimed the Taiwan issue central to the relationship. In June 1998 Clinton fulfilled one strong PRC demand when he publicly proclaimed support for ''The Three Nos'': No Taiwan independence; No Two Chinas or One China-One Taiwan; and No admission of Taiwan to international organizations open only to sovereign states. Yet subsequently, Congress overwhelmingly reaffirmed the Taiwan Relations Act, the Clinton Administration agreed to sales of missiles and anti-submarine torpedoes to Taiwan, and Energy Secretary Bill Richardson visited Taiwan - all actions viewed by Beijing as injurious to its interests. In all likelihood, US policy with respect to Taiwan will remain complex, especially given the most recent happenings. On the one hand, it will continue to warn Taipei against any declaration of independence, but such an act seems unlikely since both the KMT and the DPP now say that it is unnecessary. The United States itself will continue to abide by a one-China policy. Moreover, it is not likely to incorporate Taiwan directly into a Theater Missile Defense program. On the other hand, it will continue to sell military equipment to Taiwan and will warn Beijing against the use of force while refraining from indicating its policies should force be used. To make a positive pronouncement on that matter in advance might be construed as either support for the Taiwan independence movement or the hardliners in Beijing; equally important, it would certainly cause deep divisions among the American people. On occasion, ambiguity is a preferable policy to the available alternatives. Nevertheless, Taiwan could become the critical issue for all parties concerned (12). It is over this issue more than any other that the United States and China could conceivably go to war. In addition to the Taiwan issue, other long-standing troubles in the Sino-American relationship have revolved around human rights issues, including Tibet; PRC missile sales to Iran and Iraq; and a range of economic matters. Yet as 1998 closed, progress on some of these issues seemed en route. China signed the International Covenant on Political and Human Rights and, as noted, provided numerous signs of greater political flexibility despite periodic rigidity. Beijing also insisted it was abiding by the agreed restrictions on missile sales, and concessions were offered on the economic front. Abruptly, the skies darkened in the first months of 1999, with Sino-American relations suddenly looking more negative than at any time since the Korean War. As noted earlier, the attacks on Serbia by Nato were denounced by Beijing as unvarnished aggression, overriding the United Nations and international law (13). In Beijing, Kosovo evoked the images of Taiwan, Tibet, and Xinjiang. PRC TV and other media, presenting only the Milosovic position, depicted the United States as a bloody violator of Serbia's sovereignty and a butcher of thousands of innocent people. Then came the bombing of the Chinese Embassy, which pushed Chinese anger to unprecedented heights (14). Student demonstrations, encouraged but supervised by the government, focused on American iniquities and frequently made Clinton personally the target. Posters calling him a ''rapist'' and ''bloody aggressor'' appeared on campuses like Peking University, along with such signs as ''We love Lewinsky''. In one sense, as noted, the government has benefited from the series of events following the embassy bombing. With public anger focused on a foreign threat rather than on peasant, worker, or cult issues, the tenth anniversary of June 4, 1989, Tiananmen Square events passed without incident. Moreover, by issuing appeals for patriotism and nation-strengthening action, a militant nationalism was directed toward the support of government policy. However, as noted earlier, it is unclear whether this nationalist surge can be controlled. Moderates privately worry that the bombing and its aftermath have seriously weakened the positions of Jiang and Zhu vis-a-vis the hardliners within the government and that China would be pushed closer to Russia, given their common concern over a perceived US domination of the world. A central issue relating to PRC-US relations today is whether the strong negative sentiments regarding the United States that now prevail among the Chinese citizenry will inhibit a restoration of normalcy and progress with respect to key issues for the foreseeable future (15). The overwhelming majority of Chinese citizens have indicated in polls that they do not accept the American insistence that the embassy bombing was accidental. Whether perpetrated by the top leadership or by others, Chinese widely view the bombing as a ''punishment'' for China's views on Kosovo and an effort to counter China's growing power. Moreover, the visit to Beijing by Under-Secretary Thomas Pickering in mid-June to present the evidence supportive of the accident thesis changed neither the minds of the Chinese citizens nor the public position of the PRC government (16). Meanwhile, the ongoing TMD issue further provoked the PRC. Disturbing developments also affected American Congressional and public opinion. The Cox Report stated unequivocally that spies had passed on to China important nuclear secrets, affecting US defense. Some reports indicated that China had increased the number of missile implantations directed at Taiwan. In addition, new human rights issues emerged, such as the arrest of peasant leaders deemed responsible for earlier protests and the incarceration of those seeking to launch a genuine opposition party. Under these conditions, negotiations on China's joining the WTO came to a halt, and observers feared that Zhu Rongji had been weakened due to the concessions he made in Washington - concessions that in April, before the embassy bombing, Clinton did not accept as sufficient due to fear of an adverse Congressional response. Military to military interaction has also been suspended. Even in this dark period, however, the PRC government made it clear that it did not desire the deterioration to affect bilateral economic relations (17). And despite the steady barrage of vitriolic criticism of US and Nato actions, there were almost no incidents of attacks on foreigners in China. Moreover, China abstained from, but did not veto, the UN resolution that aided in ending the Kosovo conflict. While public sentiments - both Chinese and American - may serve to restrict improvements in relations for a protracted period of time, political leaders on both sides are likely to seek some repair of the current damage. Throughout the recent past, these leaders have recognized the importance of a Sino-American relationship that can exert a positive effect on virtually every significant issue in the Asia-Pacific. Further, the two nations have certain important interests in common: the expansion of mutually beneficial economic relations; a peaceful relationship between the two Koreas until unification can be achieved; progress on strategic arms reductions; and advances in the all-important realm of environmental and resource issues. Agreement on China's admission to the WTO provides one crucial test that lies immediately ahead. China will continue to protest American hegemonism and view with concern what it perceives as US efforts to contain China. ''Protect national sovereignty'' will be emblazoned on every banner. Yet China will recognize the indispensable importance of the United States with respect to such issues as Korea and the future of the Japanese role in Asia. For its part, the United States is likely to follow a policy that accepts the role of China as a rising major power, although one that will fall far short of equaling US power - military as well as economic - for many decades. The United States will gamble on the prospect that China - deeply committed to resolving domestic issues while advancing its economy and growing increasingly interdependent with others in the region - will match words with deeds and pursue policies in line with the Five Principles. Thus, the United States will opt for engagement, not containment. At the same time, taking into account the possibility that this evaluation is wrong, Washington will maintain its military alliances in East Asia and reject the strategic withdrawal advocated by a minority at home and within the PRC government. In this fashion, the United States will seek to build a set of incentives and deterrents that encourage China to play a positive, constructive role in the region and the world. In the broader global context, the foreign policy of the United States is likely to be a combination of concert of powers and balance of power. On a number of issues such as Korea, it seeks to establish coalitions of nations having a common interest in the specific problem at hand and possessing a willingness to work together toward its resolution. These coalitions will be composed of different members, depending upon the issue, and may reside within or outside of existing multilateral institutions. China will frequently be invited to join. At the same time, given the rising nationalism that dominates the Asia-Pacific region, the commitment to military modernization, and the numerous unresolved issues--some of them potentially incendiary - the United States will also play the major role in maintaining a balance of power, although the PRC will continue to call this an effort to monopolize power. In any case, China will unquestionably seek to counter the United States in this respect by developing its own strategic relationships, as its current ties to Russia indicate. Conclusion In conclusion, two vital questions deserve attention. First, what is the political future of the People's Republic of China? Some analysts see China moving from authoritarian-pluralism, its present status, to democracy in the fashion of a number of other Asian societies in recent years. Yet China is different from most of these societies, both in scale and in history. To be sure, it can be pointed out that India, the world's largest democracy, is comparable in scale. It must be remembered, however, that at the time of independence, the Indian elite had been subjected to a lengthy period of British political tutelage. Despite the leadership of individuals like Sun Yat-sen, China's modern history displays very limited support for democracy - a political system frequently associated with instability. Further, the combination of domestic challenges, both economic and social, and the drive for international recognition provide a rationale for continued authoritarianism. Thus, the likelihood is that the authoritarian-pluralist system will remain, amidst recurrent challenges, for the foreseeable future. A return to the hard authoritarianism of the past, however, seems unlikely, given the current developmental trends. Yet one cannot rule out the possibility of augmented military power should serious instability threaten. However, as one weighs the probabilities, it is wise to avoid dogmatism in considering China's political future and to re-examine the scene at frequent intervals, given the many variables involved. The second, and related, question pertains to China's regional and global role. Will the PRC abide by its promises to accept all states as equals, negotiate differences rather than fight over them, and use its augmented power to help stabilize the Asia-Pacific region? Or will such issues as Taiwan, together with a militant nationalism covering other matters, provoke the return of a Middle Kingdom complex, and produce a China that threatens the peace? Once again, a dogmatic answer is unwise. Much will depend upon China's domestic environment. If Beijing's priorities remain those of economic development and the resolution of domestic problems, to induce tension on the regional front will be very counterproductive. But the international environment and the policies of others are also important considerations. Can regional and international mechanisms for the resolution of issues - and the enforcement of agreements - be strengthened? And can the major powers - most importantly, the United States - pursue policies that encourage China's positive interaction? In all probability, the future will be a mixture of cooperation on some fronts and unresolved issues conducive to tension on other fronts. Hence, the policies of other nations with respect to China will be to encourage a combination of concert of powers and balance of power. Given the likelihood that at some point in the twenty-first century China will emerge as a major power - but one still facing major problems - this is the only logical policy, and one that has a reasonable prospect of maintaining peace among Asia-Pacific nations notwithstanding the likelihood of continuing internal struggles in certain states. On balance, there is reason for cautious optimism. War between nations - especially large nations - has become so costly that such a war cannot be won, given the advances of military technology. Interdependence, moreover, is steadily advancing, making large-scale conflict an economic disaster. Hence, rationality dictates that every nation will search for alternatives. The task, therefore, is to make such alternatives available and attractive. *Robert A. Scalapino is Robson Research Professor of Government Emeritus at the University of California, Berkeley. Notes: 1 A recent evaluation by a Chinese scholar is that of Minxin Pei, ''Is China Unstable?'' Foreign Policy Research Institute, vol. 7, no. 8 (July l999). 2 For an earlier study of changes in the PRC elite, see Cheng Li and David Bachman, ''Localism, Elitism, and Immobilism: Elite Formation and Social Change in Post-Mao China,'' World Politics, vol. XLII, no. l (October l989), pp. 64-94. 3 A stimulating recent appraisal of China's economic picture is that of William H. Overholt, China in the Balance, published by Asia Economic Research Unit, Nomura Research Institute, Tokyo, May l2, l999. For a PRC appraisal, see the brief ''China Report: Results of Two-Decade Economic Development,'' Foreign Affairs Journal, no. 5l, May l999, pp. 49-52. In addition, see Nicholas R. Lardy, China's Unfinished Economic Revolution, Brookings Institution Press, l998, and his recent essay, ''China and the Asian Financial Crisis,'' in Karl D. Jackson, ed., Asian Contagion--The Causes and Consequences of a Financial Crisis, Boulder, Colorado: Westview Press, l999, pp. 83-l04. 4 A discerning analysis is that of Ken Masui, ''Recent Trends and Future Prospects of the China Financial Sector,'' China Newsletter, JETRO, no. l39, vol. 2 (l999), pp. l2-l9. 5 A recent overview of the global scene from a Chinese perspective is ''The World Amid Test and Readjustment,'' Contemporary International Relations, China Institute of Contemporary International Relations, Beijing, vol. 9, no. 3 (March l999), pp. l-ll. For a survey of Chinese foreign policy, with special emphasis on PRC-U.S. relations, see Chu Shulong, China and the U.S.-Japan and U.S.-Korea Alliances in a Changing Northeast Asia, Institute for International Studies, Stanford University, June, l999. 6 For example, see ''Japan: Dangerous Tendency,'' Xinhua, reproduced in Foreign Affairs Journal, no. 5l (March l999), pp. 57-58. 7 As an indication of the arena of agreement, see ''Sino-Russian Joint Statement on a Multilateral World and the Establishment of the New International Order,'' Renmin Ribao, April 24, l997, p. l. For a strongly positive evaluation, see Zhao Longgeng, ''Sino-Russian Strategic Cooperative Partnership: Heading for Road of Solidity,'' Contemporary International Relations, vol. 9, no. 5 (May l999), pp. l0-l8. 8 For a South Korean scholar's appraisal of China's Korea policies, see Chang Kong-ja, ''In the National Interest: Chinese Policy Toward the Two Koreas,'' East Asian Review, vol. II, no. 2, (Summer l999), pp. 3-24. 9 For a Chinese report on the DPRK visit, see Sun Shangwu, ''Li cherishes DPRK ties,'' China Daily, June 4, l999, p. l. Pyongyang's official views can be found in ''Pyongyang and Beijing Vow to Further Strengthen Traditional Friendship,'' The People's Korea, June l2, l999, pp. l, 8. 10 Recently issued reports on U.S.-China relations include: Donald S. Zagoria, ''National Committee on American Foreign Policy's Project on U.S.-China Policy and Cross-Strait Relations,'' American Foreign Policy Interests, issued by the National Committee on American Foreign Policy, vol. 2l, no. 3 (June l999); and U.S.-China Relations, sponsored by The Aspen Institute, March 30-April 4, l999. 11 For trends in l998, see Robert Scalapino, ''The United States and Asia in l998,'' Asian Survey, vol. 39, no. l, January/February l999, pp. l-ll. 12 An appraisal of U.S. policy regarding Taiwan is in David M. Lampton, ''Recent U.S. Perspectives on Cross-Strait Relations,'' American Foreign Policy Interests, vol. 2l, no. 2 (April l999). In the same issue, see Ralph N. Clough, ''Cross-Strait Economic Relations,'' and Samantha F. Ravich, ''U.S. Policy Toward the Taiwan Strait: A Historical Perspective.'' See also Dennis Van Vranken Hickey, The United States and Cross-Strait Rivalry: Strategic Partnership and Strategic Ambiguity, The Atlantic Council of the United States Occasional Paper, May l999. 13 Typical is the article by Wang Jie, ''Trampling on International Laws Deserves Punishment,'' Beijing Review, vol. 42, no. 22 (May 3l, l999), pp. ll-l2. 14 See the article ''Behind the Bombing of the Chinese Embassy,'' Beijing Review, vol. 42, no. 21 (May 24, l999), p. 5, and other articles in this issue. 15 For an optimistic appraisal of future relations, albeit, one written before the Embassy bombing, see Sheng Lijun, ''China and the United States: Asymmetrical Strategic Partners,'' The Washington Quarterly, Summer l999, pp. l47-l63. 16 See ''China doesn't accept US explanation,'' China Daily, June l8, l999, pp. l-2. 17 See for example, the item ''Huge Potential for Sino-U.S. Economic Cooperation,'' in the Newsletter of the PRC Embassy, Washington, D.C., no. 99-7 (April 5, l999), pp. 3-4. This item is followed by an attack on the U.S. decision to table a resolution in the UN criticizing China for human rights abuses (''China Opposes U.S. Interference in China's Internal Affairs,'' pp. 4-5). An article by Hua Hua also notes the critical importance of U.S. investment (''Do more to attract investment,'' China Daily, June 26, l999, p. 4). (Reposted with permission. (c) 1999 by The National Bureau of Asian Research [ http://www.nbr.org/ ]. See also AccessAsia, NBR's database of specialists on contemporary Asia [ http://www.accessasia.org ].

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