Fall 2021 Issue 69

What is Behind China's Dual Circulation Strategy 

Alicia García Herrero, Hong Kong University of Science and Technology 

Launched in 2020, the dual circulation strategy is China’s two-pronged plan to 1) become self-reliant in the production of critical goods, particularly technology, to serve domestic demand while 2) simultaneously bolstering external demand for Chinese goods. Both prongs will have sizeable impacts on China’s trade, as its imports of technology will decrease and exports of Chinese-made goods to third markets, particularly those included in the Belt and Road Initiative (BRI), will increase.


  • Dual circulation, 14th FYP, and past economic rebalancing: An entire chapter of the 14th Five-year Plan (FYP), released in March 2021, is dedicated to the dual circulation strategy. The chapter focuses more on internal circulation than external circulation, suggesting the overriding importance of the former. In terms of external context, dual circulation differs from China’s 2008 effort to “rebalance” away from external demand. Following the 2008 Global Financial Crisis and subsequent dwindling external demand for goods, China shifted its consumption focus to its domestic market while continuing its multilateral engagements with the rest of the world. In 2018, the trade war initiated by President Trump brought about American policies that sought to constrain China’s technological rise. As such, previous rebalancing was about reducing China’s dependence on exports, while dual circulation is about reducing Chinese dependence on imports and increasing self-sufficiency, both in production and demand, in an increasingly hostile world.

  • Implementation: Following dual circulation’s appearance in the FYP, government ministries and agencies have released several economic policies. These include: easing supply-side production bottlenecks and increasing information-sharing through 5G; improving national capabilities in science and critical technologies; removing barriers for consumers and incentivizing purchasing; cultivating the growth of small and medium-sized enterprises in technology; shifting reliance from western imports to imports from developing economies, particularly Russia; and expanding China’s digital economy. These policies constitute a collective effort to support domestic demand and upgrade China’s supply chain while boosting external demand.

  • Potential sectoral impact: The dual circulation strategy will have a substantial impact on the global market for natural resources and technology. In recent years, China has taken steps to shore up its scarce supply of oil, metals, and rare earth metals key to technology production. It has gone on a global buying spree of mining companies, created new trade routes and ports under the BRI, committed heavy subsidies to its energy and natural resources sectors, and enhanced protections for domestic use of resources. In the technology sector, perhaps China’s greatest focus is upgrading its semiconductor industry, as integrated circuits (ICs) are currently the top item in China’s import basket. Prior to the announcement of the dual circulation strategy, the government established an IC fund to foster domestic production; however, the efficacy of this investment remains dubious, as Chinese-based IC companies accounted for only 5.9% of market share in the country’s total IC market in 2020. Moreover, Chinese efforts to acquire foreign IC companies have proven challenging, as sellers now regard Chinese acquisitions with increasing levels of scrutiny.

  • Global impact: This new economic strategy has major implications for the rest of the world. As China seeks to vertically integrate its manufacturing production, its foreign partners will likely see a drop in exports to China, particularly in high-end manufacturing equipment. Exporters of technology and intermediate goods will also find a new competitor in China as Chinese production of goods increases to cater to global demand. China is already competing with Germany, Japan, and the United States in key export sectors such as industrial and electrical machinery and road vehicles.


The dual circulation strategy is an effort to boost both domestic and external demand to ensure self-reliance in the context of an increasingly harsh external environment. Comprehensive implementation of the plan has required and will continue to necessitate huge financial resources, with expensive BRI projects proving a crucial avenue for disseminating Chinese goods.

Chinese Views of U.S. Decline
Michael D. Swaine, Quincy Institute 

Publicly available authoritative, semi-authoritative, and non-authoritative Chinese sources reveal varying perceptions of a United States in decline. Analysis of these sources offers insight not only into the public debate on the topic but also the political calculations driving Chinese policy.


  • Types of sources: Authoritative sources that explore this topic include official PRC and CCP statements, Ministry of Foreign Affairs statements and publications, and commentaries and editorials in state-run news sources like People’s Daily and Liberation Army Daily. Semi-authoritative sources include homophonous bylined articles in state-run news sources (for example, the byline “Ren Zhong” is homophonous with “voice of the Central) that are likely written by editorial staff. Non-authoritative sources cover a range of commentaries and articles in PRC and Hong Kong new outlets like Xinhua and CCP and PLA newspapers.

  • Authoritative sources: In the immediate aftermath of the 2008 Global Financial Crisis (GFC), few CCP or PRC statements pointed to the GFC as a harbinger of American decline. Instead, U.S.-China relations at the time were portrayed as an evolving relationship predicated on cooperation and mutual respect. Today, few authoritative Chinese sources explicitly state that the U.S. is in decline, instead relying on veiled allusions. Many sources use a phrase coined by Xi Jinping in 2017: the international environment is undergoing “great changes unseen in a century.” Authoritative journal and news articles have also included the phrase “a rising East and a declining West” to reflect a changing international order. Others suggest that the United States is responsible for its own decline as it tries to maintain its hegemonic power in an increasingly multipolar world; these sources have also implicitly linked American decline on the international stage to its domestic mishandling of COVID, gun violence, and racial and economic inequality. However, many authoritative sources, particularly statements from leading diplomats, assert that the U.S. is still the most powerful country in the world and will remain so “for a long time to come.”

  • Semi-authoritative sources: Quasi-authoritative sources are more willing than authoritative publications and statements to identify America as a declining power. Many of these sources unambiguously place the U.S. at the center of the global power shift, in contrast to the more veiled implications of U.S. decline in authoritative sources. However, these semi-authoritative articles present logic similar to that of their authoritative counterparts: America is fighting a losing battle against a natural progression toward multipolarity. Moreover, U.S. resistance and inability to confront its own internal problems only aggravates America’s external relations and its negative perception abroad.

  • Non-authoritative sources: Non-authoritative Chinese sources are the most openly critical. Even in 2008, many of these unofficial sources pointed to the GFC as a marker of American decline. In recent years, these sources have echoed their authoritative and semi-authoritative equivalents’ reference to “hegemonic anxiety,” with some even referring to America’s decline as “inevitable.” Many non-authoritative sources point to domestic turmoil as a reason for U.S. decline, identifying the January 6 attack on the U.S. Capitol building or the loss of power in Texas as evidence of greater societal problems. However, the degree to which the U.S. has declined remains up for debate among non-authoritative authors, with many asserting that the strength of the U.S. in particular and the West in general will remain unchallenged for the foreseeable future. Several Chinese academics have even posited that the theory of Western decline is oversimplistic and risks an underestimation of American power. One researcher urges that, “as a responsible major power, China needs to actively participate in global governance, for which we need support and cooperation form our Western partners.” In this way, some believe that American decline is unlikely to benefit, and may even harm, China.


This analysis of sources offers a variety of official and unofficial Chinese views regarding U.S. decline and its possible causes and repercussions for China. Xi’s phrase of “great changes unseen in a century,” a line that has been publicly endorsed by sources across the authoritative, semi-authoritative, and non-authoritative spectrum, suggests that China’s highest political echelon perceives the U.S. to be in some sort of decline. However, the exact nature of the decline, its timeline, its causes, and its impact on China remain up for debate.

The Emergence of the Central Office of Foreign Affairs: From Leadership Politics to “Greater Diplomacy”

Guoguang Wu, University of Victoria 

The Central Office of Foreign Affairs (COFA) is a CCP Central Committee organ that oversees the Foreign Ministry (FM), a state body. Although the COFA has existed for forty years, it only gained substantial power within the past decade. This essay explores the COFA’s institutional role within the Chinese party-state and its responsibilities in crafting China’s recently proposed program of “greater diplomacy.”

  • The COFA’s beginnings: The COFA’s predecessor, the Foreign Affairs Office of the State Council (FAO), was established in 1981 and headed by soon-to-be PRC president Li Xiannian. It provided advice on foreign affairs to China’s top leaders while the Foreign Ministry managed the state’s formal diplomatic activities. Following the 1989 Tiananmen crackdown, China sought to engage in secret diplomacy with the U.S.. Given its informal role within the party-state, the FAO headed years of secret diplomacy with the Bush and Clinton administrations while the Foreign Ministry maintained its place as the state’s formal foreign affairs body. The FAO was disbanded in 1998 by the State Council under Jiang Zemin and reconstituted as the COFA under the CCP Central Committee, thus starting the process of foreign-affairs power consolidation within the CCP system. During the Hu Jintao era, the head of the COFA assumed the role of China’s top diplomat, outranking the Foreign Minister.

  • The COFA under Xi Jinping: In 2013, Xi tapped former Foreign Minister Yang Jiechi to lead COFA; Yang, promoted to a Politburo member in 2018, outranks Foreign Minister Wang Yi, a state councilor. Xi also upgraded the COFA’s bureaucratic ranking, elevating it to Office of the Commission under the CCP Central Committee in 2018. Xi further consolidated the party’s control – and his own control – of foreign affairs by assigning the International Department of the CCP Central Committee greater responsibility in managing China’s external affairs and installing one of his protégées as party secretary of the Foreign Ministry.

  • The COFA and China’s foreign policy designs: “Greater diplomacy” is a program suggested by Xi that seeks to expand China’s foreign affairs work beyond that of professional diplomats. Through this program, Chinese leaders aim to propel China to a leading role on the international stage. The COFA’s responsibility under this framework is to coordinate the state, party, and non-party-state organizations engaged in China’s external affairs. The COFA coordinates the foreign affairs of administrative bodies – such as Ministry of Commerce and Ministry of State Security, among others – the military, party-affiliated organizations like the Chinese People’s Institute of Foreign Affairs, local party-states, and non-state actors such as universities, enterprises, and NGOs. In this way, China’s external conduct is decidedly transfinite, with the COFA inhabiting an umbrella role that goes beyond Western conceptions of foreign affairs management.


The evolution of the COFA from its beginnings as the FAO of the State Council to the CCP-directed organization of today reveals a continuing trend of CCP concentration of foreign policy power. Moreover, current COFA director Yang Jiechi’s position as a member of the CCP politburo, the highest body in the country, reflects the rise of COFA within the party-state apparatus. COFA is an institutional sign of Xi’s transfinite program of “greater diplomacy.”

The CCP’s Domestic Security Taskmaster: The Central Political and Legal Affairs Commission

Minxin Pei, CLM Editor

The Central Political and Legal Affairs Commission (CPLAC) of the Communist Party is one of China’s most powerful party-state organizations. The CPLAC is responsible for translating the party’s orders on domestic security into implementable policies which it oversees. It counts among its members the heads of all domestic and national security agencies, the People’s Armed Police, and the presidents of the supreme court and procuratorate. Despite the CPLAC’s expansive role in domestic security affairs, public information surrounding the nature of its work is limited.

  • The political-legal sector and CPLAC evolution: China’s political-legal sector is composed of nearly 2.7 million officials and law enforcement agents. It includes the courts, procuratorates, the People’s Armed Police, police agencies, the Ministry of Public Security, the Ministry of State Security, the Ministry of Justice, and their respective local agencies. Since China’s founding, the CCP has had varying degrees of control over this sector. In 1958, the CCP created the Central Legal and Political Affairs Small Group, the scope of which was limited to major criminal cases and legal disputes. It was later reestablished as the CPLAC and, by the 1980s, its mandate was expanded to cover the entire political-legal system. Local political-legal committees (PLCs) were also formed. The CPLAC was briefly abolished in 1988, but it was reestablished in 1990 following the Tiananmen crackdown. According to the official statement announcing the CPLAC’s reinstitution in 1990, the body’s primary function was to provide “macro-level guidance and coordination” in the political-legal sector.

  • The CPLAC under Xi: Soon after ascending to power, Xi purged the CPLAC’s former head and made himself the leader of a newly established Central National Security Commission in 2013. He further purged the political-legal apparatus in 2018 with the start of a national campaign that is set to end in October 2021. Within its first four months, the campaign allegedly facilitated the discipline of over 72,000 political-legal officials. It is perhaps the largest purge of the party’s coercive apparatus since the end of the Cultural Revolution.

  • Organization and functions of the CPLAC: Since open-source information on the CPLAC is scarce, one can only make educated guesses about the organizational structure of the body based on its mandates. Given its stated responsibilities, the CPLAC likely includes: a bureau focused on repressing “evil cults,” a bureau for political security, and a bureau for coordinating law-and-order management. Other sources suggest that the CPLAC also houses a bureau of propaganda and education, a bureau of rule of law, and a bureau for coordinating anti-separatism (likely responsible for monitoring and addressing ethnic unrest). However, no official sources can confirm the existence of these bureaus. Since local bodies often mirror their national counterparts, analysis of PLCs may also shed some light on the makeup of the CPLAC. The Guizhou PLC has fifteen sections and offices that include a general office, a research office, a propaganda team, two stability maintenance divisions, a supervision and investigation division, and a division for reforming members of “evil cults.” In this way, the organization and responsibilities of the CPLAC may be divided into five general areas: management and vetting of political-legal officials, conventional law enforcement and public safety, regime security, coordination of political-legal work, and suppression of evil cults.

  • PLC activities: PLCs are the local counterparts of the CPLAC. The head of a PLC must be either a member of the local standing committee or a deputy secretary of the local party organization, which allows for close coordination between PLC and local party objectives. PLC heads are included in the annual central political-legal affairs conference, which usually takes place at the beginning or end of a calendar year. Public records from the PLC of Futian in Shenzhen offer evidence of various PLC activities, including: stability-maintenance (coordinating among government departments, monitoring commercial disputes), comprehensive social-management (inspecting anti-terrorism security measures, preparing propaganda), combating illegal activities, and anti-cult work.


This analysis of the CPLAC and PLCs offers insight into how the CCP maintains control over the coercive apparatus of the Chinese state to bolster regime security and provide for public safety. The only uncertainty about the future of the CPLAC is the role of Xi’s newly established Central National Security Commission. The two bodies’ overlapping missions may imply that the CPLAC may lose some of its power at one point in the future, though this remains speculation. 

Xi Jinping–Style Control and Civil Society Responses

Diana Fu & Emile Dirks, University of Toronto 

Xi Jinping has systematically suppressed China’s civil society sector through a three-pronged approach of tightening regulations for both domestic and international NGOs, cracking down on grassroots organizations, and deepening party control across civil society.


  • Tightening regulations: The 2016 Charity Law and the 2017 Overseas NGO Law implemented under Xi Jinping have impacted both domestic and international civil society organizations (CSOs). For some organizations, the new legislation has made it easier to operate in China. For example, under the Charity Law, NGOs no longer need to be sponsored and supervised by a state-affiliated organization and are required only to register with the Ministry of Civil Affairs. CSOs can also publicly fundraise, a right previously reserved for state-managed foundations. However, for international organizations, the Overseas NGO Law has greatly impacted their ability to work in China. International NGOs (INGOs) must register with the Ministry of Public Security and find a supervisory government organization; this means that groups working on sensitive issues are unable to find sponsors or register with the government. Although the new regulations have legitimized organizations through formal government registration, the laws have been accompanied by an expansive crackdown on the civil society sector.

  • Grassroots crackdown: During the Hu and Wen administrations, about three million CSOs operated informally in China. These organizations, which were largely funded by foreign donors, were not required to register with the Ministry of Civil Affairs. Despite the lax rules of this era, NGOs were cautious to toe the political line to decrease possible consequences. However, with his rise to power in 2013, Xi began a prolonged assault on the NGO and grassroots civil society sector. In 2014, the party demolished over 1,800 crosses and Protestant churches in Wenzhou and imprisoned pastors. In 2016, authorities detained hundreds of lawyers, activists, and their family members across the country, and officials shuttered labor organizations and women’s rights groups. Two years later, the government detained and disappeared a handful of student activists from elite universities who had allied with factory workers for greater labor representation. And in July 2021, over a dozen WeChat accounts of LGBTQ university student groups were removed from the platform. The lengths to which the Xi administration has gone to repress grassroots civil society reflect the party-state’s perception of the sector, its ideologies, and its collective action potential as threats.

  • Embedding the CCP within civil society: Xi Jinping has also deepened party control of the sector through increased CCP supervision. In 2018, the Central Committee instituted a rule requiring all CSOs with three party members or more to establish a party branch within the organization. His administration has also intensified the “Sinicization” of religion and called for greater party-state supervision of religious groups. The new regulations for civil society also come amid moves to strengthen party oversight of universities and private enterprises.

  • Civil society responses: In the face of increasing party-state suppression, NGOs and CSOs are left with two options: to adapt or disappear. Many Protestant leaders, for example, responded to the 2014 crackdown by excluding all discussion of politics when preaching and “Sinicizing” church architecture and religious garb. Churches that have not taken such steps have been sanctioned or shuttered. However, not all organizations have adapted. For example, in 2015, 25 labor activists in Guangdong were arrested after encouraging factory workers to go on strike, and their organizations were shut down. The impact has also been felt by foreign NGOs; between January 2017 and July 2020, 28 INGOs had their registrations revoked, and many looking to operate in China are faced with mounting challenges to register with the government.


China’s clampdown on civil society poses a unique opportunity for the United States and its multilateral approach to China. It will be crucial for the U.S. and its allies to encourage greater people-to-people exchanges with China as it moves away from the isolationist policies of the Trump administration.  

Quarterly digests written by Genevieve Collins

Summer 2021 Issue 68

China's Climate Strategy

Elizabeth Economy, Hoover Institution & Council on Foreign Relations

China has put forth ambitious climate goals: it seeks to peak its carbon emissions by 2030 and achieve carbon neutrality by 2060. Beijing has developed a number of strategies to achieve these goals, though design flaws and weaknesses persist.


  • Can’t kick the coal habit: Coal is the backbone of the Chinese economy, providing over half of China’s energy capacity and releasing over three-fourths of the country’s CO2 emissions. Its use is also on the rise. In the years following China’s ratification of the Paris Climate Agreement, China’s CO2 emissions continued to climb, as did its coal plant capacity. In the first quarter of 2021, China’s CO2 emissions increased by 9% in comparison to its pre-pandemic levels. The 14th Five-Year Plan provides little guidance on how China will achieve its carbon peak by 2030, and it does not call for a reduction in the amount of coal used. The calculations of a UK climate group indicate that China will have to reduce its coal capacity by one-third by 2030 if it is to achieve its goal of carbon neutrality by 2060.

  • The renewable flip side: Despite China’s rising coal use, it is simultaneously expanding its renewable energy sector. In 2020, over half of China’s energy infrastructure investments were directed towards sustainable energy projects, and it is the world’s leader in total installed wind and solar capacity. Xi set forth a goal of increasing the share of non-fossil fuel consumption to 25% by 2030, and the country’s largest grid corporation aims to achieve 50% renewable electricity generation by 2025. The decarbonization of transportation is another big goal for Chinese leadership; the State Council recently released a plan for all new vehicles to be eco-friendly by 2035. However, foreign energy experts have noted that China’s stated renewable capacity, particularly in wind energy, has been greatly exaggerated. Moreover, China’s 80% share of global solar panel production may be at risk as the industry’s ties to the Xinjiang-Uyghur Autonomous Region and evidence of forced labor come to light.

  • Market strategies: State planners have given China’s financial markets a critical role in the country’s efforts to meet its ambitious climate goals. Chief among its market-led strategies is its national-level carbon trading market, or ETS. The market sets a price on CO2 emissions, and firms in the power sector can take steps to reduce their emissions, purchase permits from other firms, or invest in carbon offsetting projects. Pilot launches of the ETS, which have taken place over the past ten years in cities across the country, have revealed certain flaws with the program: noncompliance among firms is widespread, and there are no enforcement or punishment mechanisms; the ETS’s focus on carbon intensity (CO2 emissions per unit of GDP) as opposed to carbon emissions means that a plant might become more efficient but actually produce more emissions; and the state-determined efficiency benchmark is so low that many large plants have already met the target, providing no incentive to reduce carbon intensity or emissions. In addition to the ETS, the Chinese government has developed a green bond market, enabling banks, cities, and state-owned utility and infrastructure enterprises to issue green bonds and use the borrowings to fund green projects. However, many of the projects that are advertised as environmentally conscious are actually highly polluting, and a lack of bond regulations means that many firms are directing the borrowings towards their working capital and not towards green projects.

  • Efforts abroad: The projects that China funds abroad through its Belt and Road Initiative (BRI) are highly polluting and carbon-emitting. China is financing 25% of the world’s coal plants through the BRI; even if the 126 host countries meet their climate commitments, a group of Chinese and international experts estimate that the global temperature could rise by 2.7°C due to the emissions from BRI projects. Although pressure from inside and outside of China has led it to finance more renewable energy projects abroad, coal-based projects still made up 27% of its overseas energy investments in 2020.


As the producer of 28% of the world’s CO2 emissions, the trajectory and success of China’s climate strategy is of global importance. Although it appears to be moving in the right direction, China’s reliance on coal at home, its promotion of fossil-fuel projects abroad, and the flaws in its market-based strategies are challenges to its grand climate goals.

It’s Not Just China: Population, Power Generation, Political Polarization, and Parochialism Are Also Long-term Threats to
Taiwan’s Success and Survival

Syaru Shirley Lin, China University of Hong Kong & Brookings

In addition to the existential threat posed by China, Taiwan faces a number of internal challenges that jeopardize its longevity and success.


  • Demographic concerns: Out of 227 countries, Taiwan has the lowest birthrate at 1.07 children per woman. The resulting lack of demand for education has shuttered schools and will strain universities in the years to come. By 2065, the country’s workforce will be cut in half to 8.6 million people, crippling economic growth. Fewer workers mean less funding for the pensions and universal healthcare that will be needed to support the super-aged population. This, in turn, will put greater stress on the younger generations to care for the elderly, further dampening economic activity and causing urban population decline, as in Japan. To prevent this, Taiwan has two options: designing policy solutions to increase birthrate or allowing greater immigration. The former is exceptionally hard to enact successfully, while Taiwanese society currently seems averse to the later, as discussed later.

  • Power generation: Over 80% of Taiwan’s power capacity comes from non-renewable sources, and its per-capita carbon emissions are among the highest in the world for its population size. The Taiwanese economy still revolves around what has made it so successful: the production of petrochemicals and electronics, both of which are high emitters and use vast amounts of water. The government’s unambitious carbon goals mean private companies are not motivated to transition to renewables, and policymakers continue to view environmental impact as an unfortunate but necessary side effect of economic growth. Additionally, polarization surrounding environmental policy between the private sector, anti-nuclear activists, and traditional conservationists has led to even more stagnation in reforms.

  • Divided parties: Taiwan is experiencing increasing polarization, both between and within its two major political parties, the ruling Democratic Progressive Party (DPP) and the Kuomintang’s (KMT). Four referenda scheduled for August will put Taiwan’s divided political environment to the test. One referendum regards the construction of a liquid natural gas (LNG) terminal, and it has caused a number of schisms within the DPP between environmentalists who reject the use of LNG, others who view it as a lesser evil than coal and oil, and a third faction that views LNG as a safer option than nuclear power. Another divisive referendum challenges the government’s decision to import American pork injected with the additive ractopamine and its greater implications for U.S.-Taiwan trade relations. Having flipflopped their positions since 2012, this vote pits the KMT (against) and DPP (for) against each other.

  • Paradoxical parochialism: Despite Taiwan’s sophisticated and progressive economic, social, and political values, it remains an inward-facing society. This is reflected in its immigration policies, which do not allow for extended or permanent immigration that could help to mitigate the impending population decline. Additionally, Taiwan’s goal to educate students in English has been met with local backlash, and the country’s few connections to the English-speaking world fail to show Taiwanese why learning English, or another foreign language, may be beneficial for them and their country. Taiwan must become more connected with the outside world if it wishes to maintain its local culture and resist pressures from the mainland.

  • The role of the U.S. – Targeted U.S. policy can help Taiwan combat these challenges while maintaining its independence from China. First, the U.S. can help Taiwan fight the pandemic by providing vaccines and supporting Taiwan’s accession to observer status in the World Health Assembly. Second, the two countries can engage in greater academic and professional exchange, bringing Taiwan into the international fold. Third, Taiwan can work with the U.S. and its allies in the long term to diversify its economy away from carbon-intensive tech and pharma manufacturing industries to high value-added service industries. And fourth, the U.S. and other democratic nations should work together with Taiwan to devise solutions to common challenges facing their democratic institutions.


Regardless of the role that Taiwan is to play in the U.S.’s China strategy, it is crucial that Taiwan and the United States engage on issues beyond arms sales and defense. Cooperation with the U.S. on matters of environmental sustainability, political and economic vitality, and international integration will help Taiwan maintain its cross-Strait relationship and contribute to its future success. 

The Myth of Authoritarian Superiority: China’s Response to Covid-19 Revisited

Yanzhong Huang, Seton Hall University & Council on Foreign Relations 

Through analysis of China’s pandemic response, one may evaluate the successes and failings of crisis management in an authoritarian setting.


  • The lead-up to the outbreak: Following the SARS epidemic in 2002, China revamped its public health infrastructure, assembling the most expansive disease surveillance network and online reporting system in the world. Central government officials, particularly the director of the Chinese Center for Disease Control and Prevention (CDC), had full confidence in the system’s ability to detect and prevent a future epidemic. At the local reporting level, however, a lack of funds, staffing shortages, and rigid bureaucracy left major holes in this system.

  • Initial outbreak – December 2019 to January 2020: Early on in the outbreak of what come to be known as SARS-CoV-2, local officials in Wuhan and experts sent to investigate the situation actively withheld information from the central government. Government officials in Wuhan deleted reports of multiple cases of an atypical pneumonia that health workers had uploaded to the reporting system; as a result, the director of the CDC did not learn about the first cases of Covid-19 until December 30, weeks after they had been reported. Investigative teams sent to Wuhan by the National Health Commission (NHC) also suppressed information regarding the infection of healthcare workers, thus leading the central government and World Health Organization to downgrade the likelihood of human-to-human transmission. This disjointed upwards flow of information can be attributed to China’s authoritarian and bureaucratic system: local officials did not want to ruffle the feathers of their superiors to whom they are accountable, and authoritarian impulses to maintain secrecy and social and political stability led local officials to withhold information from both the Chinese people and their superiors.

  • Crisis – January 2020 – April 2020: As the severity of the situation came to light, Xi Jinping ordered the lockdown of Wuhan on January 22. In just a matter of days, sixteen makeshift hospitals were constructed, and comprehensive digital and human surveillance networks were implemented. Such quick mobilization of resources is a testament to China’s infrastructural might and logistical capabilities. On April 8, after the U.S. had surpassed 400,000 reported cases, Chinese authorities lifted the lockdown in Wuhan. However, it soon became evident that authorities in Wuhan had dramatically undercounted the number of people infected and dead from the virus, a result of China’s top-down political structure, which often discourages the flow of accurate information to superiors and to the people. Additionally, some deemed the all-out lockdown an abuse of human rights and civil liberties, and emerging news of the government’s early mishandling in December and January led to outrage on social media and a legitimacy crisis for the CCP. 

  • Post-crisis – April 2020 to the present: The government has taken drastic measures to maintain low infection rates, implementing a policy of zero-infections: when a single case is identified, by-all-means measures are taken to prevent the spread. Under this policy, the government has achieved heroic feats, testing millions of people in a matter of days and identifying and quarantining close contacts through precise tracing. Under the upwards accountability model, these local officials are incentivized to produce instant results, with little concern for efficiency or accuracy. The top-down flow of political orders leaves no room for these local officials, who have knowledge of their communities and have observed prevention tactics firsthand, to make suggestions to improve government responses and policy. And when they fail to achieve such ambitious orders, they face removal or are deemed neglectful by their superiors.


When looking purely at results, China’s authoritarian state model has proven successful. Its ability to mobilize vast resources and enact comprehensive restrictions on citizens’ mobility has helped the country prevent major outbreaks of the virus. China’s infection and mortality numbers are miniscule when compared to those of the United States or India. However, distortions in information flows, upwards accountability, and by-all-means containment measures have impeded China’s ability to respond efficiently to subsequent outbreaks. And it was these very authoritarian tendencies that led the central government to so gravely mishandle the initial outbreak in Wuhan. China now faces a Catch-22 dilemma, forced to sustain or tighten its strict policy on zero infections until it can achieve herd immunity. In these respects, an authoritarian model is not superior to a liberal democracy in managing a crisis.

Threading the Needle: Balancing Security and Development in the 14th Five-Year Plan

Minxin Pei, CLM Editor

In its 14th Five-Year Plan, China seeks to increase its technological self-sufficiency, protect its supply chains, boost economic growth, and protect crucial sectors of its economy.


  • Technological self-sufficiency: The first chapter of the FYP outlines Beijing’s strategies to increase domestic capabilities in science and technology (S&T). The chapter calls for increased resources and funding to be directed towards basic research, national labs, state research institutions, universities, and enterprises. State-owned enterprises (SOEs) are to play a crucial role in fostering domestic research and development (R&D) capabilities and innovation, and they are expected to collaborate with national organizations and universities. Domestic talents and professionals are to be developed and recruited, while immigration policies will be adjusted to attract highly skilled foreigners. On the international stage, state planners seek to position China as a trailblazer in S&T by hosting foreign academics, leading international research projects, and establishing research programs.

  • Manufacturing & supply chains: Recognizing the country’s dependence on foreign-produced components, particularly inputs made in the United States, Beijing seeks to make Chinese supply chains and manufacturing self-sufficient and secure. SOEs will aid in designing and producing critical software, hardware, and other technologies to replace Western products. Additionally, policies will encourage manufacturers to place their most vital supply chain links in-country. Industries considered strategic priorities – information technology, biotechnology, new energy, and electric and automated vehicles, among others – will receive targeted state support, and R&D facilities and factories will be concentrated in specific regions to increase efficiency.

  • Reorienting source of growth: Leaders aim to boost growth through a two-pronged “dual circulation” strategy: foster strong domestic demand for Chinese products and boost Chinese economic ties with other countries by increasing foreign dependence on Chinese goods and supply chains. To achieve the former, the FYP identifies increased household consumption as the main facilitator. It will be promoted through expanded supply of mid- to high-end services (healthcare, education, tourism, etc.), implementation of paid-vacations, increased access to e-commerce in rural locales, and strengthened consumer protections. In relation to the latter goal, the FYP offers few concrete directives. It states that China will attract foreign investment through its telecom, internet, education, culture, and healthcare sectors, and Chinese products, brands, and technology will be exported to more markets, particularly developing countries.

  • Security in food, energy, and finance: The FYP’s chapter on economic security offers broad initiatives to be undertaken in securing the food, energy, and finance sectors. Given China’s current reliance on imported grains, state planners seek to preserve farmland, develop agricultural technologies like high-yield seeds, and cultivate agribusinesses. To secure the energy sector, the FYP list several mega-projects, including the development of oil and gas fields and investment in shale gas projects; however, these projects, in addition to directives for enlarged coal, oil, and gas reserves, are at odds with China’s ambitious climate objectives. Finally, in the financial sector, the FYP simply proposes stronger enforcement of regulations, providing little detail.


As evidenced by its objectives on energy security, the FYP contains contradictions. If China is to secure its supply chains, it will have to limit its reliance on more efficient foreign producers; this, in turn, will lead to a loss of efficiency among Chinese producers, thus curtailing China’s innovative abilities and making Chinese products less appealing to and more expensive for foreign consumers. Additionally, the country will face a number of challenges in implementing its FYP. It lacks specifics on the stakeholders involved in each component strategy and how resources will be allocated, not to mention the role that local governments will play. The prominence given to SOEs is another cause for concern, as they have proven slow to innovate in comparison with private-sector firms. Additionally, it is unlikely that household consumption will dramatically increase without higher wages, an issue the FYP does not address. Finally, it remains unknown how the central government will afford the massive investments required for this plan, particularly its goal to achieve technological self-sufficiency. 

Quarterly digests written by Genevieve Collins


Spring 2021 Issue 67

How China is Responding to Escalating Strategic Competition with the U.S.

Ryan Hass, Brookings

In the face of changing relations with the United States, Beijing is pursuing a strategy that seeks to install China as the central actor in Asia and a leading power in the international system.


  • US-China relations: During the Trump administration, Beijing responded to increasing hostility from the United States with careful and calibrated actions that protected Chinese interests and opportunities. However, the tenor of the relationship changed during the early weeks of the COVID-19 pandemic with the emergence of a tit-for-tat pattern, with both sides wielding sanctions, export controls, consulate closures, and pointed insults. Meanwhile, Beijing’s actions in Xinjiang, Hong Kong, and at the Indian border reflected a similar shift away from China’s once-cautious approach to foreign policy.


  • Chinese views on the US: It is widely accepted among officials and experts in China that the United States’ power on the international stage is declining relative to that of China. Additionally, Chinese officials – including Foreign Minister Wang Yi – blame the United States for perceived attempts to stem China’s growth and the subsequent downturn in relations between the two countries. Beijing expects little change in the US’s orientation towards China under the Biden administration, predicting instead a drawn-out struggle. As a result, China’s policy designs no longer rest on an expectation of stable relations with the US.


  • Goals and Strategy: China seeks to become the leading power in Asia and a central actor on the world stage, enabling it to shape institutions and norms to its advantage; its behavior in Hong Kong and Xinjiang suggest that such goals may not necessarily be pursued in a benign manner. Despite the lack of any publicly available government strategy document, three strategic lines may be gleaned from opensource investigation, as discussed below.


  • (1) Maintain a non-hostile external environment: Beijing recognizes that a hospitable external environment is critical to achieving its regional and international goals. At the fore of this approach is lowering the temperature of relations between China and the United States. Additionally, Beijing wants to position itself as the leader of the Asia-Pacific region, having entered into the Regional Comprehensive Economic Partnership, as well as a series of China-ASEAN plans for post-COVID recovery. At the same time, China is pursuing closer ties with Russia while encouraging the EU to resist Washington’s calls for a trans-Atlantic front.


  • (2) Shift dependencies: Through an uptick in domestic production and consumption – referred to as a “dual circulation strategy” – coupled with increased trade and investment with the EU and ASEAN, Beijing is lessening its dependence on America while increasing the world’s dependence on China. The Chinese government has granted large subsidies to domestic technology companies, pursued aggressive intellectual property acquisitions, and made strategic investments in foreign firms in its quest to decouple from the American technology supply chains. Moreover, China is making progress in insinuating itself into the global economic system through a series of trade deals and infrastructure projects. In 2020, China supplanted the US from its status as the largest recipient of foreign direct investment, and Moody’s Analytics forecasted that in the same year, China’s economy accounted for nearly 17% of global gross domestic product.


  • (3) Expand Chinese influence abroad: Beijing has engaged in a number of tactics to increase Chinese authority overseas. Perhaps most visible is the Belt and Road Initiative, China’s global infrastructure strategy, which has extended the PRC’s influence far beyond its own shores. Beijing has forged institutional partnerships and treaties with foreign governments, exported surveillance technology abroad, and expanded the overseas reach of its domestic security apparatus. However, Beijing has also actively punished countries and foreigners that have challenged China’s preferences or telling of events, sanctioning Australia, former Trump officials, and, most recently, members of the European Parliament.


The success of China’s three-pronged strategy in achieving its regional and international goals remains unknown. However, discontent among Western democracies regarding China’s illiberal tendencies, warning signs about the Chinese economy’s long-term health, and questions about the practicality of becoming technologically self-sufficient all pose significant challenges to China’s objectives.

China’s Counter-Strategy to American Export Controls in Integrated Circuits

Douglas B. Fuller, City University of Hong Kong

In response to American sanctions against Huawei, the Chinese government and technology sector have taken a series of steps to try to decouple from American semiconductor supply chains. 


  • The integrated circuit (IC) supply chain: ICs, which are chips made of a semiconductor material like silicon, are crucial components in nearly all electronic devices and equipment. The IC supply chain may be divided into three phases: design, fabrication, and assembly and testing (A&T). Each phase of the supply chain has key technological inputs, including electronic design automation (EDA) software that is crucial to the design phase, as well as capital equipment used during the fabrication and A&T stages. China has limited capabilities in these areas. As discussed below, the American sanctions on Huawei targeted these tools, thus forcing China to reconcile with its dependence on American technology while also complicating its endeavors to create a substitute chip.


  • The Huawei Case: Concerned by the rise of Huawei, its emergence as the leader of 5G telecommunications equipment, and the fear of compromised networks, the Trump administration placed Huawei on the Entity List in May 2019. Foreign individuals, governments, and businesses on the Entity List, which is published by the Bureau of Industry and Security, are subject to US license requirements for the export of certain items. Huawei’s placement on the list prevented it from acquiring software with a certain level of American content (including EDA), as well as American-manufactured hardware with a certain level of American content (including capital equipment). However, loopholes still allowed for Huawei to legally purchase American-designed ICs that were fabricated overseas. Realizing this, the Trump administration closed the legal loopholes in August 2020, further restricting Huawei’s access to American capital equipment and EDA tools used in chip design and fabrication while also preventing foundries from using American capital equipment to fabricate chips for Huawei.


  • China’s response: Both the Chinese government and corporate sector took action in response to Huawei’s placement on the Entity List. In July 2019, the government provided increased financial resources for developing capital equipment and EDA tools to a select number of Chinese firms. The following summer, after the closure of the legal loopholes, the government also granted new tax breaks for IC capital equipment producers, and the 14th Five-Year Plan (2021-2025) dedicates $1.4 trillion towards the technology sector, including the semiconductor supply chain, in the hopes of decoupling from America.


  • Huawei’s response: Although Huawei front-loaded orders of chips before the Entity List sanctions came into full effect, that stockpile will likely run out by the spring of 2022, if not earlier. With the support of the Chinese government, Huawei has embarked on its own mission to design and fabricate ICs using Chinese equipment vendors. However, it will take years to produce the high-quality chips integral to 5G telecommunications equipment and competitive on the global market without access to America EDA software and capital equipment. Although China has had success in domestically sourcing the required capital equipment for fabrication, its inability to access EDA tools complicates Huawei’s goal. The firm’s best – and most efficient – option is to not develop Chinese alternative to EDA, but to find ways of accessing American EDA tools, either through hacking or shell companies.


A second Trump administration would have likely expanded the range of sanctions to cover a greater scope of the Chinese tech industry, forcing domestic and multinational firms to devise ways around the controls. Under the Biden administration, expanded sanctions are extremely unlikely; some officials, including Secretary of Commerce Gina Raimondo, have even criticized Huawei’s placement on the Entity List, and there are hints of a possible easing of restrictions currently imposed on the firm. Over the course of Huawei’s decline, other Chinese telecommunication firms have filled the vacuum, unfettered by American export controls.

Xi’s Anti-Corruption Campaign: An All-Purpose Governing Tool

Christopher Carothers, University of Pennsylvania

Since its inception in 2012, Xi Jinping’s anti-corruption campaign has attracted global attention for its series of arrests of high-profile party leaders, government officials, military officers, and heads of state-owned enterprises (SOE). This campaign has allowed Xi to consolidate his personal power and remove opposition, and it also serves as an all-purpose governing tool, bolstering national policies and directives and allowing for greater supervision of party, state, and SOE affairs.


  • Institutionalization: The anti-corruption campaign has been institutionalized most visibly through the creation of the National Supervision Commission (NSC) in March 2018. The NSC’s stated mission is to supervise enforcement gaps within the bureaucratic system. The NSC integrates the anti-corruption units of multiple government bodies, and it works in tandem with the party’s Central Commission for Discipline Inspection (CCDI), thus granting the NSC a mega-jurisdiction over the 91.9 million party members and the tens of millions of state employees. Moreover, a series of revisions made to law and party codes have further codified anti-corruption objectives.


  • Support for policy initiatives: The campaign against corruption has become a supporting feature of many other policy initiatives and programs. Xi personally tasked the NSC and CCDI with monitoring the progress of an all-out push to eliminate absolute poverty in China. After a series of national inspections in 2019, over 99,000 people were disciplined for corruption related to poverty alleviation programs. Additionally, after launching a nationwide anti-crime campaign targeting connections between criminal organizations and political-legal officials (police, judges, prosecutors), the Central Committee and State Council tasked the NSC and CCDI with investigating disloyalty among officials. The two anti-corruption bodies also have oversight of companies involved in the Belt and Road Initiative, and they played a role in supervising local efforts to stop the spread of COVID-19 in early 2020.


  • Inspections and state goals: Frequent inspections of local governments, bureaus, and SOEs have become a hallmark of Xi’s ruling style; he made CCP history by conducting full inspections of all provinces, state agencies, central SOEs, and other key bodies over the course of a single term. Analysis of investigations reveal that Central Inspection Teams (CITs) are usually deployed to address four types of problems: 1) corruption, 2) internal mismanagement, 3) weak implementation of party directives and policies, and 4) insufficient loyalty to Xi and the CCP. After an organization is inspected, it must produce a post-inspection report detailing how the institution has or will be reformed to address the problems unearthed by the investigation. In this way, organizations that have been inspected are required to implement practices and policies that address the identified problem areas in ways that are in line with state goals.


  • Xi’s vision and governance through anti-corruption: The anti-corruption campaign, which has been realized through the aforementioned policy initiatives and inspection drives, has heightened party oversight of state institutions, SOEs, the judiciary, and sub-national governments. Moreover, anti-graft bodies and policies have contributed to Xi’s centralization of power, furthering the top-down system of control employed by the CCP.


Whether or not Xi’s campaign has proven successful in curbing corruption is yet to be seen. Although his tactics have made engaging in corruption far riskier than ever before, critics argue that the campaign inevitably fails to address the root cause of corruption: the CCP’s unchallenged control of the state.

Grid Management: China’s Latest Institutional Tool of Social Control

Minxin Pei, CLM Editor

The Chinese government first implemented a social surveillance system known as grid management in 2004 as an experimental project in the Dongcheng district on Beijing. Since then, grid management has, at least in theory, been employed across the country. However, its rollout has been uneven and its full adoption would be extremely costly to local governments.


  • Emergence of grid management: In grid management’s initial rollout in Dongcheng, the district was divided into three levels of grids: neighborhood (large grid), community (medium grid), and residential area (basic grid). Each basic grid was managed by a combination of grid attendants, assistant grid attendants, grid police officers, grid supervisors, grid party branch chiefs, grid judicial officers, and grid fire wardens. After designating 45 more cities as pilots, Chinese leadership fully endorsed the implementation of grid management at the 3rd plenum of the 18th Central Committee in 2013.


  • Organization: Although the specifics of grid management differ between jurisdictions, all local governments have adopted a variation of the Dongcheng model. Rural and urban areas are divided into three or four levels of grids, with the basic grid size determined by area (often around 10,000 square meters) or population (usually between 1000 and 1400 residents). As in Dongcheng, each basic grid employs a number of grid personnel, and it often hosts a party branch or cell, too. In some jurisdictions, the formal grid personnel are joined by a cadre of volunteers, and many rural grids rely on village party chiefs and community leaders to serve as grid directors and attendants. In fact, in many poor districts, existing party officials and salaried state employees often double up as grid personnel.


  • Functions: The purpose of the grid management system as touted by the Chinese leadership is twofold: to expand the Chinese surveillance state and to improve the delivery of social services. Each jurisdiction balances these two functions as it sees fit. For example, in Shanghai, the work of grid attendants largely focuses on inspecting facilities and maintaining city infrastructure, while in Jiangsu, grid attendants’ primary task is to collect information on residents and maintain law and order among the grid populace. In a number of municipalities, grid personnel must conduct routine-home visits and upload information on the residents, public sentiments, disputes between neighbors, and crime to a database. In one township in Ningxia, grid attendants are required to visit at least ten households each week, in addition to one visit per week to high-priority surveillance targets, such as drug users, convicts, or petitioners.


  • Information systems and surveillance technology: Information technology platforms have become a vital component of the grid system. Grid attendants are required to report the information they collect regarding inhabitants and incidents to the basic grid platform, which is then transmitted to the city or county platform. In theory, this layered system provides local authorities with real-time information on possible threats to public safety and social stability. Additionally, a number of wealthy districts in Shanghai, Suzhou, and Beijing have integrated surveillance equipment – electronic tagging of public facilities, cameras, facial recognition technology, and fire and smoke sensors – into their grid management plans. However, the implementation of such tools and information systems appears to be the exception and not the norm, as the deployment of surveillance technology is sorely lacking or nonexistent in poorer areas.


  • Challenges: The greatest hurdle in achieving national grid management is the cost. Since the central government has not allocated funds to its local counterparts to finance the grid system, county governments are left to bear the cost. Although wealthier districts may be able to afford the grid personnel salaries, equipment, maintenance, and tech support, poor jurisdictions are likely unable to cover the cost. Additionally, grid managements’ two design flaws – grid attendants’ vague legal authority and the busywork and quotas they are required to fulfill – impede grid efficiency.


Although official news outlets and local governments claim that the goal of reaching nationwide grid management by 2020 has been met, available evidence indicates that equipping the 1.4 million basic grids with attendants and surveillance technologies remains a work in progress.

Quarterly digests written by Genevieve Collins


Winter 2020 Issue 66

The PLA’s Evolving Role in China’s South China Sea Strategy

Oriana Skylar Mastro, Freeman Spogli Institute at Stanford University

Over the course of the global COVID-19 pandemic, the Chinese People’s Liberation Army (PLA) has been actively promoting Chinese claims in the South China Sea through military exercises and operations, materiel deployments, and official statements. As discussed below, such activities are not necessarily acts of aggression but signals to enhance Chinese deterrence against the United States.


  • US military activities: Over the past eight months, the US government has countered Chinese expansion in the South China Sea with heightened pressure. In addition to some targeted economic sanctions, most of this pressure has been applied through military means. The US military’s main tool is freedom of navigation operations (FONOPs) in which the US Navy sails a vessel through areas that China has illegally claimed. In the first half of 2020, the US conducted seven FONOPs, as well as several non-FONOP operations, including the flight of two B-1B strategic bombers over the South China Sea. According to a Beijing think tank, the US flew over 40 reconnaissance aircraft over the South China Sea in September 2019. Such activities ensued against the backdrop of heightened US-China political and economic tensions.


  • Chinese military activities: In 2020, PLA operational and exercise activities in the South China Sea increased in frequency, a somewhat expected trend as the Chinese military’s capabilities and technologies evolve. In early July, the PLA Navy (PLAN) conducted five days of military exercises in the Paracel Islands, following the docking of a PLAN warship at Woody Island. Later that same month, the PLA moved at least eight fighter aircraft to Woody Island, which were followed by the PLAN’s newly revealed bomber in mid-August. The PLAN also successfully tested a torpedo, launched several ballistic missiles, and held multiple naval exercises in the South China Sea. The China Coast Guard (CCG) also frequents the disputed waters, ramming Vietnamese fishing ships near the Paracel Islands in April and July.

  • Increasing Chinese aggression or signaling: Both the deployments of weapons systems to and PLA exercises in the South China Sea suggest that China is trying to enhance its deterrence capabilities without provoking the United States. First, the PLA has not adopted an outright offensive posture. Although the PLA has successfully tested missiles, it has not deployed any such capabilities to the artificial islands, and it has never landed fighter aircraft on any of the Spratly Islands. Additionally, many of the military exercises that the PLA conducted in the past eight months occurred shortly after a US military action or official statement. For example, the deployment of fighter aircraft to Woody Island occurred several days after a US FONOP and Secretary of State Michael Pompeo’s condemnation of Chinese claims to the South China Sea; the PLA launched anti-ship ballistic missiles, which threaten aircraft carriers, days following US aircraft carrier operations in the disputed waters. Notably, with various deployments and exercises, the Chinese state-controlled media often highlights the PLA’s deterrence capabilities as warnings to the US. In this way, increased PLA activity in the South China Sea may be interpreted as a means of enhancing Chinese signaling value.


  • Further media signaling: The PLA has publicized its operations via China’s state-controlled media platforms, emphasizing Chinese capabilities in the South China Sea in light of what it describes as instances of American meddling and provocation. Although the Chinese government has never directly indicated that its activities in the South China Sea are warnings to the United States, Chinese media has cited such events as warnings. Moreover, the media affirms the PLA’s commitment to defending the South China Sea should America attempt to militarily challenge its claim. Finally, the media maintains that the US has stoked tensions in the South China Sea as a means of distracting the world from its failings in dealing with COVID-19 at home; one op-ed in China Daily asserts that American provocation in the South China Sea is Washington’s attempt to deflect perceived weakness.


The PLA remains cautious in its dealings with the US military, as the United States still holds a strong military advantage in the South China Sea. However, the PLA’s willingness to demonstrate its offensive capabilities, a deviation from traditional Chinese military tactics, suggests growing insecurity in Beijing.

Continuous Purges: Xi’s Control of the Public Security Apparatus and the Changing Dynamics of CCP Elite Politics


Guoguang Wu, University of Victoria

Over the course of Xi Jinping’s tenure, purges among the leading cadres of the Chinese political-legal system have become commonplace. The public security sector in particular has become the site of frequent changeover. Such purges in the Chinese public security apparatus, which may be categorized into three distinct waves, indicate that CCP elite politics is increasingly controlled through internal repression and coercion.


  • The first wave: Xi Jinping’s ascent to power was coupled with a sizeable political shakeup. Zhou Yongkang, once the leader of the political-legal (zhengfa) system with jurisdiction over the police and public security apparatus at large, was removed from his position, along with many of his high-ranking confidants; this was the first time since 1989 that a member of the Politburo Standing Committee fell from power. Upon his inauguration, Xi was a relatively weak political player. However, his ability to mobilize support from within the public security sector proved vital. In general, it was four groups of public security officials who supported Xi’s initial purge: 1) former protegees of Zhou who switched their loyalty to Xi, referred to in Chinese politics as “traitors”; 2) those with close ties to Shanghai politicians such as former Party chief Jiang Zemin and Party official Meng Jianzhu, who replaced Zhou; 3) those with close ties to Xi’s political allies; and 4) Xi’s long-time associates and allies. The subsequent purges of the public security and zhengfa systems represent an ongoing redistribution of power among the members of these four groups.


  • The second wave: The following round of purges began in 2018, following the Nineteenth Party Congress. Many of the Zhou “traitors” fell from power or were sidelined into less powerful positions. Meng Hongwei, a prominent vice minister of public security who served in the position for 14 years, was removed from all of his government positions. Another prominent figure is Fu Zhenghua. During Zhou’s tenure, Fu served as director of the Beijing Municipal Public Security Bureau before being promoted by Xi to the second-highest position in the Public Security Ministry. Both he and Huang Ming, another Zhou protegee-turned-Xi-loyalist, were transferred from the public security apparatus to less prominent ministries. Fu Zhenghua’s role in the Public Security Ministry was filled by Wang Xiaohong, a long-time Xi associate. The second wave of purges saw the downfall of Zhou’s former protegees, many of whom Xi had promoted following their betrayal of Zhou.


  • The third wave: In April 2020, Chinese authorities announced that Sun Lijun, a vice minister of public security appointed in March 2018, was under investigation. Despite Sun’s close connections to officials such as Meng Jianzhu who aided Xi in the first wave of purges, he was removed from office, along with several provincial heads of public security bodies with close ties to Meng Jianzhu. Although Meng retired in 2017, there are rumors that he may be the next target of investigations, given the large network of protegees he fostered during his time in office. Currently, the nine leaders of the Ministry of Public Security – the minister, five vice ministers, a Party discipline official, and two senior officers – all have some sort of personal connection to Xi, or to longtime Xi associate Wang Xiaohong. Wang, currently number two in the Ministry of Public Security, is expected to become the minister in 2023. The cadre of officials likely to succeed Wang are already waiting in the wings; all have some personal or professional connection to Wang or Xi, if not both.


  • Changing dynamics: Given the series of purges described above, it is possible that removing former allies may become a hallmark of Xi’s consolidation of power. This strategy may be attributed to several factors, including rising discontent among China’s ruling political elite, coupled with their criticism of Xi. Additionally, Xi’s likely goal of attaining life-tenure as Party chief and PRC president requires political support, necessitating loyal allies in powerful positions. The third factor is the issue of succession; in stacking elite positions with his loyalists, Xi is assuring that his successor will be an ally.


Xi’s special attention to the public security sector is important to note; unlike the military, which serves as a tool of last resort in power struggles, the public security apparatus is involved in daily political operations, thus making it an important lever of control for Xi.

Will China Eliminate Poverty in 2020?

Terry Sicular, University of Western Ontario

In 2015, China announced a worthy policy goal: to eliminate poverty by the end of 2020. After the investment of substantial financial, human, and political resources, official statements suggest that this target has been met, or is at least very close to being met. However, elimination of poverty – or the illusion of poverty elimination – in the present does not eliminate future poverty. 


  • Past poverty policies: From the early 1980s to 2012, the number of rural poor declined by about 600 million following a series of policies promoting farm productivity. However, poverty rates declined unevenly across the countryside; in the 1990s, the government concentrated poverty reduction and development efforts in the poorest counties, largely through targeted industrial and agricultural projects. In the early 2000s, the government instituted the dibao program, providing cash transfers to poor households nationwide. Nevertheless, a substantial portion of Chinese society remains in poverty, in both urban and rural locales.


  • The 2020 target: Initially proposed in 2014, the goal of eliminating rural poverty was included in the 13th Five-Year Plan (2016-2020), which states that by the end of 2020, “All rural residents falling below China’s current poverty line will be able to lift themselves out of poverty, all poor counties will be able to rid themselves of poverty, and poverty alleviation will be achieved in all regions.” The goal of lifting 55.75 million people (the 2015 official rural poverty headcount) above the poverty line is ambitious, given that many poor households are scattered across the countryside or located in remote areas. However, it is also a fairly pragmatic and narrow goal, as it excluded urban poor from the target goal and defined poverty using a low poverty line of 2300 yuan per person per year, or $2.30 dollars per person per day. Additionally, in 2015 the number of rural people living below 2300 yuan per year was fairly small, accounting for 4% of the total population.


  • Efforts to meet the target: China’s poverty policy strategy is referred to as “Precision Poverty Alleviation” (PPA), as it aims to target households and individuals, not villages and countries. Similar to Mao-era, high-priority policy programs, PPA has been carried out through a “campaign” approach, in which personnel across all levels of government are mobilized to address the goal in question. PPA identifies five types of interventions based on the household in question: (1) economic development through employment opportunities for households with work capabilities; (2) relocation of poor households in mountainous regions to more developed areas; (3) ecological compensation for poor households in ecologically sensitive areas; (4) investment in education for households with children; and (5), social security support for those unable to work.


  • Will China Meet the Goal: Although official poverty statistics suggest that China is on track, or close to being on track, to achieving its goal, the veracity of such numbers is debatable. There have been reports of falsified poverty statistics, as well as corruption among local officials that have led to the misallocation of funds and faked entries to the poverty registry. Data published by the National Bureau of Statistics (NBS) appears more reliable than official statistics and numbers published by other government bodies, as they are based on large, annual sample surveys of household incomes and expenditures, not direct reporting by local officials. Regardless of the accuracy of the statistics, achieving the 2020 target does not mean the eradication of poverty in China. The number of people at risk of poverty – including many aided by PPA programs – is far from zero, and the economic livelihoods of the nearly 10 million people relocated from remote regions remain vulnerable.


The policy’s definition of poverty does not necessarily reflect what it actually means to be poor in China, or what poverty will look like in the future. Understanding the situation through a relative poverty approach, in which the poverty threshold changes over time with rising incomes, provides a more multidimensional picture of poverty in China. Relative poverty in rural areas is much higher than the rural poverty levels reported by the NBS. Additionally, the rate of relative rural poverty from 2013 to 2018 remained stable at 17%, while the NBS poverty rate declined from 8.5% to 1.7%.

From “China Inc.” to “CCP Inc.”: A New Paradigm for Chinese State Capitalism


Jude Blanchette, Center for Strategic and International Studies

Following China’s ascension to the World Trade Organization in 2001, the term “China Inc.” came to describe the far-reaching power of the country’s state capitalist system. As the CCP has become more entrenched in operations up and down the value chain, the once-clear boundaries between state-owned and private firms have become blurred; locating where CCP influence ends and firm autonomy begins is nearly impossible. The result is a new, complex political-economic order – CCP Inc. – in which Party objectives are embedded in the commercial processes of state-owned enterprises (SOEs).


  • The origins and rise of China Inc.: In the 1990s, the CCP restructured both state-owned and private firms into corporations, introducing concepts of limited liability and transferable shares, thus corporatizing state-assets. The result was the creation of hundreds of business groups, many of which were granted government subsidies and protections. In 1999, state-owned enterprise restructuring continued, as large SOEs were merged into even bigger conglomerates, over which the central government or local governments had control. Although limited shares were sold publicly, the CCP remained the ultimate owner and controller of these mega firms. By focusing on a select number of SOEs operating in strategic industries (steel, telecommunications, banking, and energy), the CCP ensured that the resulting conglomerates would remain a prominent characteristic of the Chinese political economy. After gaining membership to the WTO, Beijing was set on securing Chinese investments overseas. In the early 2000s, SOEs dominated overseas investment, accounting for more than 80% of China’s outbound foreign investment. However, the goals of the Party-state often clashed with the commercial objectives of the SOEs, rendering China Inc. a much less coordinated network than originally perceived.


  • Redefining the CCP’s relationship with firms: The inefficiencies of the China Inc. system were not lost on Beijing’s economic planners and CCP leadership. Following the 2008 financial crisis, the Party-state came to redefine its role; instead of being owner and regulator of state assets and enterprises, Beijing transformed itself into an investor, or an “investor state.” As a result, the Party-state became an increasingly interventionist body, directing SOEs through tools of finance, most notably through state investment entities. These CCP-run entities, which by definition serve the interests of the state, took equity stakes in private, public, and hybrid-ownership firms, allowing the Party-state to pursue directly its strategic objectives through investment. By 2014, there were ten central and over 100 local state-owned capital investment companies.


  • Furthering CCP influence over SOEs: At the time of Xi’s ascension to office, the CCP was in a precarious situation. Although membership had ballooned, organizational discipline and loyalty to party ideology had decayed. In an effort to shore up the CCP’s ruling status and capabilities, Xi declared that Party organizations in SOEs should take on a leading role within firms. In October 2017, the Party Constitution was revised, adding that Party committees of SOEs should “set the right direction, keep in mind the big picture, ensure the implementation of Party policies and principles, and discuss and decide on major issues of their enterprise in accordance with regulations.” In other words, SOEs’ Party representatives were to take on a steering position in firm affairs.


  • Bigger and better SOEs: In 2003, there were 189 central SOEs. Through mergers, that number now rests at 96, and it will likely continue decreasing this decade. Guided by Party objectives and not beholden solely to shareholders or quarterly results, these SOEs guarantee Beijing’s unrivaled access to technology, infrastructure, and natural resources around the world. Consider COSCO Shipping Group: it has 300 subsidiary companies, a fleet over 1200 ships strong, total assets of $100 billion, equity stakes in a range of other SOEs, and it owns and operates dozens of foreign ports, such as the port of Piraeus in Greece. In 2018, Huawei was awarded a contract to replace the port’s network infrastructure, and in 2019 a COSCO subsidiary acquired Piraeus Europe Asia Rail Logistics, allowing it to run rail into Europe. Two state-run Chinese banks received licenses to set up local operations. This is just one example of the fruits of the CCP Inc. network.


The CCP Inc. system rejects the notion that the “state” and “market” operate in opposition to each other. Rather, they work in tandem, each reliant on the other. As global markets stumble out of the COVID-19 pandemic and China tightens its capital purse strings, the resiliency of this system will be put to the test.

China’s Fateful Inward Turn: Beijing’s New Economic Strategy as Spelled Out by the Resolution of the CCP Central Committee’s 5th Plenum

Minxin Pei, CLM Editor

At the 5th plenum of the 19th Central Committee of the Chinese Communist Party (CCP) in October 2020, Chinese leaders announced a new 15-year economic strategy. The strategy’s long-term development objectives emphasize domestic growth and technological self-reliance over foreign interdependence. Although specifics of the strategy remain unknown, analysis of open-source materials, such as Xi’s relevant speeches and the resolution of the 5th plenum, offers an initial understanding of the CCP’s rationale behind the shift, as well as the main components of the strategy.


  • CCP reasoning behind the shift: In several of his recent speeches, Xi Jinping has pointed to an increasingly volatile external environment as the main animus for a shift to domestically focused growth. Citing instability and uncertainty in the international system, as well the unilateralism and protectionism of an unnamed foe, Xi positions China’s foreign economic reliance as an issue of national security that must be addressed. In addition to this geopolitical reasoning, Liu He, a vice-premier and Xi’s most trusted economic advisor, offers economic reasoning that necessitates the shift to domestic growth. According to Liu, China has long relied on external markets to achieve growth, as its low per capita income did not allow for a strong domestic market. However, now that China’s per capital income has risen, domestic demand can now sustain growth. Additionally, Liu points to the dangers of Chinese reliance on critical production components from the West, as well as the many challenges currently facing global production and supply chains.


  • Generating domestic demand: Although the new strategy will orient development toward domestic growth, the resolution offers few concrete means of achieving such an end. Such plans are forthcoming. Pro-consumption policies and an increase in household incomes feature as important goals in the resolution, though policy specifics remain unknown. Investment will be another source of domestic demand, with high priority projects such as the Sichuan-Tibet Railway, the National Water Network, and others listed in the resolution by name. Additionally, Xi’s speeches and the resolution point to the need for better “domestic big circulation.” In other words, China must undergo a number of market reforms to ease production, distribution, and consumption processes, break up monopolies, and reduce transaction costs, thus improving the economy’s efficiency to nurture domestic demand and subsequent growth.


  • Shoring up the supply side: In one speech, Xi points to the vulnerabilities in Chinese production and supply chains revealed by the pandemic as both industrial and national security risks. Such weaknesses are to be addressed through increased reliance on domestic innovation, technology, and critical components, allowing China to maintain self-sufficiency when needed. Each sector must take a “strategic” approach in designing its supply chains. Additionally, increasing China’s competitiveness in sectors in which it already leads, such as telecom and highspeed railway equipment, will increase global dependence on China and offer stronger choke points for national security objectives.


  • Technological innovation and self-reliance: Although domestic technological innovation is a key component of supply chain securitization, the resolution dedicates a separate section to this objective. The resolution lists several notable measures to achieve technological self-sufficiency, including tax-based incentives to encourage firms to invest in innovative scientific and technological projects, as well as the reform of state-run research institutions to grant greater research autonomy and strengthen intellectual property protections. Additionally, China seeks to become a leader in life sciences, artificial intelligence, quantum information, and other cutting-edge scientific and technological fields. In this respect, China desires to lessen its reliance on foreign scientific innovation, which will aid in its quest to secure supply chains.


  • Lingering questions: Although detailed policies to achieve the aforementioned goals are forthcoming, several general questions remain unanswered. Both the resolution and Xi’s speeches make clear that, although efforts will focus staunchly on domestic growth, the international market will still play a role in China’s economic development. However, the exact nature of this relationship is uncertain. Additionally, Xi’s praise of state-owned enterprises and the prominence of the state-owned economy in the resolution indicate that the state sector will be the leading force in implementing the new economic strategy.

Quarterly digests written by Genevieve Collins


Fall 2020 Issue 65

Investigation of a Death Long Feared: How China Decided to Impose its National Security Law in Hong Kong


By Minxin Pei, CLM Editor

China’s recent imposition of a national security law (NSL) in Hong Kong has gutted the “one country, two systems” (OCTS) model. Open-source materials shed light on the obscure decision-making process that led to the law’s implementation.  Below are the main findings.


  • The Umbrella Movement in 2014 likely served as the main turning point for CCP leadership in determining future plans for the status of Hong Kong. However, it was not until Xi Jinping’s speech delivered in Hong Kong on July 1, 2017, the 20th anniversary of the region’s return to China, that these plans were partially articulated to the public, albeit vaguely. Xi also coined a phrase in his 2017 speech that later became a marker for Beijing in evaluating the severity of the crisis in Hong Kong: his “bottom line.” In his speech, Xi declared that “any activities that endanger national sovereignty and security, challenge the authority of the central government and the authority of the Basic Law of the Special Administrative Region, and use Hong Kong to engage in infiltration and sabotage in the mainland touch [our] bottom line and will absolutely not be permitted.”

  •  Between Xi’s 2017 speech and the unrest in Hong Kong in 2019, Chinese authorities were preparing various options, including its own national security law, to assert control in Hong Kong. The New York Times revealed that Chen Duanhong, a Peking University academic specializing in constitutional theory, had submitted a report entitled “The Dilemma of Enacting a National Security Law in Hong Kong” to the General Office of the Central Committee in 2018.


  • By the end of July 2019, the protests in Hong Kong had apparently breached Xi’s “bottom line.” On July 22, the day after protestors defaced the national emblem on the building of the central government’s Central Liaison Office in Hong Kong, official spokespeople for both the Chinese Foreign Ministry and the Hong Kong and Macau Office of the State Council employed Xi’s “touching the bottom line” in describing the protests. Carrie Lam used the same phrase, also on July 22, as she condemned the protestors during a press briefing. Given the coordinated use of identical language, it is likely that Beijing’s top leaders had issued instructions to disseminate throughout the Party on how to characterize the protests directly following the events of July 21. In the following days and weeks, the CCP’s news and propaganda network also picked up language identical or extremely similar to the language of Xi’s 2017 speech.


  • In late August, the Politburo set the date and agenda for the Fourth Plenum of the 19th Central Committee for late October. The full text of the Fourth Plenum’s resolution, released on November 6, contains Beijing’s plan to take control of Hong Kong. It included an unspecified “legal system and enforcement mechanism to safeguard national security” in Hong Kong. At the time, this was interpreted as yet another attempt by Beijing to pressure Hong Kong into passing an NSL. However, in January and February, the CCP appointed loyal Party hardliners to key positions, including the director of the Central Liaison Office and the head of the Hong Kong and Macau Office. Soon thereafter, China announced its decision to impose the new national security law in May 2020.


  • Given that the CCP employs plenums to endorse decisions already made by the top leadership, it is likely that top Chinese leaders had already decided upon an NSL, likely during the meeting of the Politburo on August 30, when the convention of the Plenum was also decided upon. From this we may determine that Chinese leaders had approved an NSL by August 2019, at the very latest. To be sure, to maintain maximum flexibility, the Chinese government did not take the final official step until the opening of the annual session of the National People’s Congress in late May 2020. 


Tracing the decision process in the case of China’s NSL for Hong Kong shows that by laying down a set of hardline positions or markers in his speech on July 1, 2017, Xi significantly reduced his room for maneuver after mass protests directly challenging Beijing’s authority erupted in Hong Kong in 2019.  He faced the dilemma of retreating and losing credibility and cracking down and destroying the “one country, two systems.”  At the end, he opted for the latter, most probably because it provided short-term political benefits while its costs – the loss of Chinese international credibility and escalation of tensions with the West – are long-term. 

The Chinese National Security State Emerges from the Shadows to Center Stage

By Tai Ming Cheung, University of California, San Diego

From the recent imposition of the National Security Law in Hong Kong and the construction of fortified islands in the South China Sea, to the reform of civilian national security strategies and a sweeping anti-corruption campaign, Xi Jinping has been unrelenting in his quest to build China’s national security capacity in the face of acute international and domestic challenges. This transformation has profound implications on China’s ability to respond to present and future security threats.


  • China is in the process of pivoting from a largely defensive national security state, mainly focused on domestic security, toward a hybrid security state engaged in both defensive and offensive posturing. In addition to border and domestic defense, this plan couples extraterritorial pre-emptive use of force with internal repression and economic mobilization to support the state’s external policies. No single event or shock triggered China’s move toward pursuing enhanced national security. However, Xi’s ascension to office in late 2012 marked a fundamental shift from the traditional realpolitik perspectives of his predecessor Hu Jintao.


  • Organizationally, Xi unveiled both the Central National Security Commission (CNSC) and the Overall National Security Outlook (ONSC) in April 2014. The former reports directly to the Politburo Standing Committee and has been described as the “nerve center” of national security decisions. A high level of secrecy obscures the CNSC’s activities from public view. The ONSC is the overarching national security framework. It couples ideological purification with a repressive national security state, reforms justified by a central premise: China is now faced with internal and external factors unrivaled in their complexity. In this way, Xi reconceptualized national security as a means of combating non-traditional, political, and emerging threats, thus necessitating a new national security approach.


  • The motivating factors include both threats and opportunities. The three threats are: 1) Invasion, subversion, and splittism, which include disputes in the South and East China Seas and unrest in Tibet and Xinjiang; 2) disturbances to reform, development, and stability processes, such as issues of unemployment, social inequality, and corruption; and 3) disturbance to China’s socialist system, including domestic authority. This is the ultimate concern of CCP leaders, who perceive domestic and international forces (particularly western constitutional democracy) pushing for regime change. The three opportunities include 1) China’s uniquely rapid rise to global power and its disruption of the global economic status quo; 2) the renewal of the Chinese nation due to the central role of the CCP; and 3) China’s unprecedented capabilities and confidence in soon achieving great power status. However, the leadership recognizes that these opportunities are ephemeral, necessitating the quick adoption of an assertive national security posture to respond to the aforementioned threats.


  • Short-term results: a comprehensive anti-corruption campaign within public offices; a political discipline campaign to investigate senior Party members; an overhaul of the civilian national security apparatus; full reform of the military high command; and the 2015 passing of a National Security Law (NSL), which encompasses all conceivable elements of state security, from energy, food, and nuclear security to political, military, ethnic, religious, and even outer space security. The NSL has secured the Party’s grip on power, providing a sweeping legal framework and justification on which to build the new national security state (NSS).


  • The Chinese NSS has five main coercive arms: the public security system, which deals with issues ranging from traffic management to cybersecurity; the state security/intelligence and counter-espionage system, composed of the Ministry of State; the People’s Liberation Army, the most politically influential and powerful component of the Chinese NSS; the People’s Armed Police, which Xi recently brought under the domain of the Central Military Commission; and the political-legal system, composed of public and state security and judicial bodies. The NSS’s far-reaching scope has enabled it to proactively prevent security threats in a way previously impossible, realizing Xi’s call to respond to emerging and nontraditional threats.


  • Challenges facing the NSS: Despite China’s initial slow response during the first weeks of the virus’s spread, CNSC leadership has applauded the national security state’s capacity at dealing with the pandemic, crediting its highly centralized and coordinated leadership system. These assets are, and will continue to be, crucial in dealing with the prolonged US-China struggle. Given the crisis’s increasingly all-encompassing nature, Xi’s integrated, holistic, and centralized approach to national security will work in Beijing’s favor.


In the years ahead, the national security state will increasingly be centralized as Xi continues to place himself at the core of critical NSS bodies and mechanisms. However, given that Xi has, for the most part, appointed political allies rather than seasoned national security experts to senior NSS positions, the longevity of China’s NSS in a post-Xi world remains questionable.

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The Saohei Campaign, Protection Umbrellas, and China’s Changing Political-Legal Apparatus

Sheena Chestnut Greitens, University of Texas at Austin

 Xi Jinping launched a campaign called the “Crack Down on Underworld Forces” (saohei) in 2018. The three-year crackdown has significantly impacted China’s internal security apparatus (known as the political-legal system).


  • Targets of the campaign: criminals and “protection umbrellas,” or members of the law-enforcement apparatus who harbor individual criminals or organized crime networks. Saohei aims to investigate and punish all criminal and governmental actors involved in protection schemes, thus cleansing the party at the grassroots level. The CCP rolled out the saohei campaign rapidly. In under two weeks after the CCP’s initial announcement in late January 2018, four administrative and judicial departments released regulations for the campaign. By the close of 2018, over twenty other departments had announced their own specific guidelines for saohei, including those that wield authority over core industries, reflecting the comprehensive and far-reaching nature of the campaign.


  • Who’s leading the crackdown: The campaign’s main coordinating body, the National Saohei Office, is headed by Chen Yixin, the secretary-general of the Central Political and Legal Commission (CPLC) and close Xi associate, while the National Leading Small Group for the Saohei Campaign is headed by Guo Shenkun, head of the CPLC. The campaign was divided into three, year-long stages, with each year targeting a set geographical location.


  • Scope of the crackdown: the campaign’s first round covered Hebei, Shanxi, Liaoning, Fujian, Shandong, Henan, Hubei, Guangdong, Chongqing, and Sichuan. This year-long period reportedly eradicated nearly 100 criminal groups and investigated almost 1800 corruption and protection umbrella cases.  A report released by the Supreme People’s Procuratorate (SPP) in March 2019 reported that it authorized the arrests of 11,183 people suspected of gang-related crimes. The second round, which began in April 2019, covered Tianjin, Jilin, Zhejiang, Anhui, Jiangxi, Hunan, Guangxi, Hainan, Guizhou, Yunnan, Xinjiang, Beijing, Shanxi, Heilongjiang, Inner Mongolia, Shanghai, Jiangsu, Qinghai, Gansu, Tibet, and Ningxia. Official media reported an increase in prosecutions for involvement in protection umbrellas; another SPP report released in May 2020 lists 30,547 prosecutions for gang-related activities, 67,689 prosecutions for criminal activity, and 1385 prosecutions for actors involved in protection umbrellas. Data for 2020, the campaign’s third and final full year, are not yet available. However, preliminary data on the first six months of 2020 reflects further expansion of the campaign’s breadth.  Among those investigated and punished were 13 provincial- and ministerial-level cadres, over 13,000 department/bureau-level cadres, 9,000 country/department cadres, 33,000 township/department cadres, and 39,000 general cadres. This data reflects the campaign’s focus on low-level government workers and bodies.


  • A new campaign is looming: Although the Saohei campaign is set to conclude in early 2021, its leaders have already announced a new “education and rectification” campaign to follow in its wake. The new campaign has four major goals: root out disloyal and dishonest party members, implement greater supervision over enforcement and judicial bodies, promote model examples of law enforcement officials, and expand the ability and capacity of law enforcement agencies and individuals.


A rectification campaign so all-encompassing of the political-legal system has not yet been implemented during the post-Mao era, suggesting Xi’s intention to consolidate personal power and purge rivals from party ranks. Although this forthcoming education and rectification campaign will target the lower ranks of the political-legal apparatus, it will complement Xi’s recent successes in replacing top political-legal leaders, such as the minister of Justice and deputy minister of Public Security, with his own personal associates.

China’s Economy Bounces Back, But to Which Growth Path?

By David Dollar, The Brookings Institution

Managing the COVID-19 Pandemic Part II: The International Dimension

Michael Swaine, The Carnegie Endowment for International Peace

Quarterly digests written by Genevieve Collins

Although China is leading the pack in its economic recovery, its road to recovery is not a simple reversion to the old ways and tactics.


  • Immediate impact of COVID-19: The Chinese economy came to an abrupt halt after the country imposed strict lockdown measures in February. An independently calculated index from Yicai Global tells us that GDP growth was normal in January but substantially declined in February to a rate nearly –20% compared to the growth rate of February 2019. GDP growth recovered slightly in March but was still negative. The Yicai Index determined a –6.7 growth rate for the first quarter, followed by –4.4% in April, 0.6% in May, and 1.4% in June, reflecting a slow but steady return to positive growth. However, growth was, and continues to be, uneven across and within sectors. The manufacturing sector experienced a good month of exports in April, likely because of pent-up demand, especially for medical equipment and supplies. However, manufacturing and exports experienced a downturn in May and June, while non-manufacturing sectors started to recover. The auto industry is experiencing a small surge in demand, while air and rail travel have both sharply contracted. Hospitality and entertainment services also hit a downturn and have yet to recover, while delivery services have experienced substantial growth. Moreover, the boom in construction is a reflection of the housing market’s successful recovery, as well as the government’s effective stimulation of infrastructure projects.


  • Projections: China will likely experience a low but positive growth rate for 2020, with various forecasts ranging from 1.0% to 2.5%. Compare this to the projected –8% growth rate for the US. Moreover, China will likely experience healthy positive growth in 2021, as the IMF forecasts 8.2%. The US, by comparison, is projected to rebound by 4.5% in 2021.


  • More US-China decoupling:  The first and most immediately felt long-term change is China’s decreasing dependency on exports. Prolonged economic weakness among importing countries means that China cannot rely on exports to spur immediate recovery. This issue is closely related to the US-China trade war. Although China and the US negotiated a deal in January 2020 requiring China to purchase an additional $200 billion of US goods and services, this is an impossible goal to meet. Most economists do not see the deal surviving for two years. This will likely necessitate greater economic de-coupling between the two countries. China is pursuing enhanced ties with European, Asian, and African states. China has already started this process by signing on to the Regional Comprehensive Economic Program (RCEP), a free-trade agreement among the ASEAN states, China, South Korea, Japan, Australia, and New Zealand. This deal will largely, though not entirely, offset the drop in world incomes caused by the US-China trade war.


  • Financial reform needed: The current state-owned, bank-dominated system worked well during China’s export-growth phase in the 1990s and 2000s. But now, with growth dependent on productivity and innovation, the present system is proving inefficient and stagnant. Moreover, the presence of high leverage in the economy prior to the onset of the pandemic put China in a weak position to stimulate the economy. Compared the US’s fiscal stimulus of about 10% of its GDP, China’s response amounts to only 5%.  China needs to open up its market to international banks and institutions, make interest rates more flexible, and de-bureaucratize the process of stock and bond financing for firms.

  • Social safety net needs strengthening: COVID-19 has exposed the weakness in China’s social safety net, especially for the nearly 300 million migrant workers. The vast majority work in urban areas but are registered through the hukou system in rural locales, meaning social benefits do not move with them. As such, about 200 million of these workers do not have access to public health and education services or pensions. Another issue is China’s aging population. By 2049, the population over the age of 65 will double to 400 million. The lacking health systems in rural parts of the country where most of this aging population resides will become all the more strained. Because of these reasons and the drop in private consumption due to the pandemic, now is the ideal time to abandon the hukou system, allowing migrant works to access pensions, health insurance, and education where they work.


Although China is leading the world in its economic revival, a quick “V-shaped” recovery is neither attainable nor advantageous. The pandemic has made even clearer the threats faced by the Chinese financial system. Implementing reforms to both the financial and social systems would advance China’s efforts in the long run.

China’s international COVID-19 strategy consisted of three elements: 1) China’s willingness to work with the international community through diplomacy, bilateral and multilateral efforts, and propaganda; 2) defending against foreign criticism of China’s lacking domestic response in early 2020; and 3) in rebutting such criticism, Beijing has attempted to prove the superiority of China’s political system over western democracies, such as the US.


  • Charm offensive: Beijing launched a comprehensive campaign to fight the global spread of the virus through open contact with foreign leaders, heads of international organizations, scientists, and doctors. By late May, China had sent nearly 30 medical teams around the world and provided assistance to 150 countries and four international organizations. This was in addition to establishing various inter-country best-practices sharing mechanisms and implementing the Debt Service Suspension Initiative for nearly 80 countries. Beijing has also used the opportunity to call for greater international cooperation on global health matters, even proposing a “Health Silk Road.”


  • Propaganda blitz: China has unleashed the full power of its news and propaganda apparatus to counter foreign criticisms of its initial poor handling of the pandemic. Various state-run media outlets have detailed the foreign aid and assistance provided by China and the positive responses from recipient countries. Additionally, it has been used to deflect blame for China’s initial mishandling of the virus in the hope of boosting Chinese standing, not only in international eyes but in the mind of the Chinese public. In response to international calls for independent inquiry into the origins of the virus, Chinese officials, including Xi Jinping, have called on the international community to set aside criticism and instead focus on international cooperation. Other officials have rebutted criticism by emphasizing the amount of foreign aid China provided in the wake of the virus’s spread.


  • “Wolf Warrior” diplomats: Some Chinese officials have used particularly harsh language or unfounded claims in refuting critics, a relatively new phenomenon termed “Wolf Warrior diplomacy” by Chinese observers. This “Wolf Warrior diplomacy” is a likely reaction to multiple factors: Xi Jinping’s call on Chinese officials to express a “fighting spirit” in response to foreign criticism, China’s growing international clout, a younger and more outspoken generation of Chinese officials, and resentment due to continued attacks on China in the wake of the virus.


  • Pot calling kettle black: In rebutting foreign criticism, China has compared its own approach to the failure of many democracies, particularly the US, in coping with the pandemic. In a June speech, Xi Jinping declared that China’s control of the virus “demonstrated the remarkable political advantages of the leadership of the Communist Party and the socialist system of our country.” Various news and propaganda pieces have praised the superior Chinese response in comparison to the failings of multiple western political systems.


  • Holding the line on WHO: In response to Trump’s initial decision to suspend WHO funding in light of perceived WHO favoritism toward China, Xi addressed the World Health Assembly on May 18, stressing China’s early cooperation with the WHO and applauding the international organization’s important work. Later in the month, Foreign Minister Wang Yi reiterated that the WHO does not serve individual country’s interests, even those that provide more funding than others (a subtle jab at America). However, Washington’s own criticism and defunding of the WHO and baseless attacks of China have undoubtedly damaged America’s international standing, too.


In sum, China’s international actions in response to COVID-19 are wide-ranging in their respective successes and errors. Many Chinese-led efforts have contributed to combating the virus abroad, boosting Beijing’s global image in the process. Moreover, state-controlled media has been successful in furthering positive Chinese narratives. However, perhaps the most negative consequences have resulted from increasingly sour relations with the United States.