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The Impacts of China's Rise on the Pacific and the World Upjohn Press Upjohn Research home page 1-1-2018 The Impacts of China's Rise on the Pacific and the orldW Wei-Chiao Huang, Editor Western Michigan University Huizhong Zhou, Editor Western Michigan University Follow this and additional works at: https://research.upjohn.org/up_press Part of the International Economics Commons, and the Labor Economics Commons Citation Huang, Wei-Chiao and Huizhong Zhou, eds. 2018. The Impacts of China's Rise on the Pacific and the World. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research. https://doi.org/10.17848/ 9780880996358 This work is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 4.0 License. This title is brought to you by the Upjohn Institute. For more information, please contact [email protected]. The Impacts of China’s Rise on the Pacific and the World The Impacts of China’s Rise on the Pacific and the World Wei-Chiao Huang Huizhong Zhou Editors 2018 W.E. Upjohn Institute for Employment Research Kalamazoo, Michigan Library of Congress Cataloging-in-Publication Data Names: Huang, Wei-Chiao, editor. | Zhou, Huizhong, 1947- editor. Title: The impacts of China’s rise on the Pacific and the world / Wei-Chiao Huang, Huizong Zhou, editors. Description: Kalamazoo, Mich. : W.E. Upjohn Institute for Employment Research, [2018] | Includes index. Identifiers: LCCN 2017055606 | ISBN 9780880996327 (pbk. : alk. paper) | ISBN 0880996323 (pbk. : alk. paper) | ISBN 9780880996334 (hardcover : alk. paper) | ISBN 0880996331 (hardcover : alk. paper) | ISBN 9780880996358 (ebook) | ISBN 0880996358 (ebook) Subjects: LCSH: China—economic conditions. | China—foreign economic relations. Classification: LCC HC427.95 .I47 2018 | DDC 330.951—dc23 LC record available at https://lccn.loc.gov/2017055606 © 2018 W.E. Upjohn Institute for Employment Research 300 S. Westnedge Avenue Kalamazoo, Michigan 49007-4686 The facts presented in this study and the observations and viewpoints expressed are the sole responsibility of the authors. They do not necessarily represent positions of the W.E. Upjohn Institute for Employment Research. Cover design by Carol A.S. Derks. Index prepared by Diane Worden. Printed in the United States of America. Printed on recycled paper. Contents Acknowledgments vii 1 Introduction 1 Wei-Chiao Huang and Huizhong Zhou 2 The United States and the China Challenge 15 Murray Scot Tanner 3 Is There a Xi Jinping Model of Economic Reform? 27 Barry Naughton 4 Understanding the Major Threats to China’s Economic Growth 43 Wing Thye Woo 5 State Enterprise Reform in China: Grasp or Release? 83 Mary E. Lovely and Yang Liang 6 Why Exit Rights Are the Key to the Reduction of Urban-Rural 107 Income Disparity in China Guanzhong James Wen 7 Trade, Migration, and Growth: Evidence from China 123 Xiaodong Zhu Authors 139 Index 141 About the Institute 155 v Acknowledgments The chapters in this volume are based on lectures from the fifty-second Werner Sichel Lecture Series in 2015–2016. The editors gratefully appreci- ate financial support from the Western Michigan University Department of Economics, the College of Arts and Sciences, and the Timothy Light Center for Chinese Studies; and the W.E. Upjohn Institute for Employment Research. We are also grateful to the editorial production staff at the Upjohn Institute, particularly Allison Hewitt Colosky, for the superb editorial services rendered in the publication of this volume. Finally, we are grateful for the cooperation and insightful analysis provided by the six esteemed speakers of the series and chapter authors. vii 1 Introduction Wei-Chiao Huang Huizhong Zhou Western Michigan University After three decades of rapid economic growth, China has become the second-largest economy in the world. Its rise has driven its search for resources, opportunities, and outside influences, and economic expansion will inevitably be followed by political influences and poten- tially overbearing military strength. In just four years, 2014–2017, China’s outward investment and construction combined exceeded $800 billion. China has also established the Asian Infrastructure Investment Bank, which rivals the World Bank and the Asian Development Bank. Its economic expansion has inevitably brought about conflicts with its neighboring countries, including South Korea, Japan, and Vietnam, and it has recently shifted from being conciliatory to being more assertive toward territorial disputes. The ripples created by China’s first aircraft carrier are bound to travel across the Pacific and reach the shoreline of the United States. One of the contributors to this volume, Murray Scot Tanner, quotes former Deputy Assistant Secretary of State Dr. Tom Christensen: “China’s return to great power status is perhaps the most important challenge in twenty-first century American diplomacy” (Christensen 2015, p. 1). This assessment of the relationship between the two nations has been epitomized by recent events that have occu- pied the center stage of the U.S. trade and foreign policy, including ten- sions in the South China Sea and diplomacy toward North Korea and its nuclear and missile activity. With this background, the 2015–2016 Werner Sichel Lecture Series featured six prominent experts who shared their insights on China and U.S.-China relations. Their lectures help put in perspective China’s rise and its impact on the Pacific region, and the relationship and potential conflicts between the United States and China. This collection presents the edited version of their lectures. 1 2 Huang and Zhou In Chapter 2, Tanner explores five underlying factors in the U.S.- China relationship that pose challenges for the United States: 1) China’s rapidly expanding national interests and its increasing power to assert and protect them, 2) China’s governance problems and their lack of commitment to cooperation, 3) China’s view of security and the com- plexity of building U.S.-Chinese “strategic trust,” 4) mobilizing the United States’ allies and partners, and 5) the challenge at home. China’s leadership remains committed to an established set of long- standing, key security interests—most notably its core interests of pro- tecting Chinese Communist Party rule, maintenance of social stability, sustained economic and technological growth, and protection of Chi- na’s national unity, sovereignty, and territorial integrity. The frontlines of these existing interests, however, are expanding beyond East Asia and to extended arenas of national security. These include maintain- ing energy security, protecting its expanding overseas investments and the millions of expatriate Chinese workers in unstable environments abroad, asserting and protecting its expanding maritime security inter- ests, advancing and protecting its communications security and military security interests in the space and cyber realms, and helping to secure a stable global environment conducive to the country’s sustained devel- opment. China’s expanding interests inevitably define many arenas in which the United States and China share overlapping but not neces- sarily identical interests. While these overlaps make the U.S.-China relationship increasingly complex and challenging, they also widen the range of issues on which the two countries actively cooperate. Another challenge that the United States faces in dealing with China is deficiencies of China’s bureaucracy in implementing agreements. With China’s prominent and extensive presence economically and politically in the world, it needs China’s public support to address key international problems. However, even if leading authorities in Beijing nominally support certain international norms and agreements, China’s capabilities to enforce, implement, or oversee its commitments often may be inadequate. Tanner points out that Chinese local officials and state companies often “control more than enough resources to under- mine some international problem-solving efforts.” China’s international partners, including the United States, must work with Beijing to urge it to develop and strengthen its governance institutions and policy- implementing capacities, and get China to demonstrate sustained Introduction 3 resolve in actively supporting and enforcing a wide array of interna- tional solutions. The third challenge is so-called strategic trust between the United States and China. For many years, the Chinese have often told their U.S. partners that our two great powers need to overcome strategic mis- trust or build strategic trust. However, according to Tanner, this call has typically “been accompanied by lists of actions that the United States should take that demonstrate respect for China’s core national security interests.” These actions relate to reevaluating the U.S.-Asian alliance structure, ending U.S. reconnaissance flights near China’s territory, decreasing U.S. support to allies and partners locked in tensions with, or lifting restrictions on U.S. technology sales to, China. The fourth challenge relates to China’s role in the South China Sea and U.S. relations with allies in that region. The United States will have to strike a balance among three missions: 1) signaling a joint resolve between the United States and its allies to protect our common interests in response to Beijing’s assertive behavior; 2) attempting to reassure Beijing that our continued alliance and partnership with Asian-Pacific nations are not aimed at undermining or encircling China; and 3) con- tinuing to search for new areas where the United States and its allies can enhance nontraditional
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