On Monday, South China Morning Post’s Jane Cai reported various deficiencies in the advice Chinese leaders have been receiving on the ongoing trade war with the United States.
Chinese policymakers have been left searching for answers to the trade war with the US because the domestic think tanks Beijing has called on for guidance have provided “filtered information” to avoid offending supervisors, sources close to the Chinese government and diplomatic observers said.
Beijing’s researchers also have been hamstrung by government restrictions on foreign travel that have limited the ability to devise a suitable response to the aggressive trade moves made by the administration of US President Donald Trump, the sources said.
In the six months since the US slapped punitive 25 per cent tariffs on US$50 billion of goods imported from mainland China, Beijing officials have been frustrated as the think tank experts being consulted for advice on a response only serve their backers’ interests, people involved in the consultations told the South China Morning Post.
In some cases, the experts had done insufficient research on the matter, the people said.
[…] “Some think tanks took the chance to press for reforms, while some maintained China should adopt a tough stance,” a source said. “Opinions vary and divergence is big, which is OK. The biggest disappointment came from some think tanks who did not tell the truth.” [Source]
Beijing does appear to have at least one very unfiltered source of information: on Wednesday, The New York Times reported U.S. intelligence officials’ fears that Chinese intelligence agencies routinely listen in on Donald Trump’s private conversations with friends, which he insists on conducting over unsecured phone lines.
The SCMP report describes “sharp” variance between think tanks’ positions. This diversity might somewhat allay fears that the range of acceptable viewpoints within the system had narrowed dangerously, following developments such as the late 2015 ban on “improper discussion” of central policy. Several observers expressed such concerns the following year, with CSIS’ Bonnie Glaser telling The Washington Post that “leading experts who used to provide policy advice are now scared to offer suggestions […] ‘Part of the Taiwan policy community appears to be completely shut out. The system is broken, and even more broken on Taiwan than other issues.'” SOAS’ Steve Tsang, then at the University of Nottingham, warned that this phenomenon might “significantly increase the party’s risk of making a major policy error [as] mistakes are more likely when dissenting views are silenced.” Formerly outspoken law professor He Weifang told the Post that “Xi is conceited and refuses to listen to second opinions. He has chosen to live in an isolated space, surrounded by flatterers. He has no idea what is going on in the real world.”
This summer brought some suggestions of a domestic backlash against this tendency. Nevertheless, fears remain. Last week, Foreign Policy editor in chief Jonathan Tepperman argued that Xi risked eroding the post-Mao systems that had been able to avoid many of the pathologies suffered by other authoritarian regimes,” under which “nobody tells the truth, especially when it could make them or their leaders look bad,” and “cloistered tyrants—their egos bloated by constant, obsequious praise—find themselves increasingly cut off from reality.” Such tendencies are widely blamed for the catastrophe of China’s own Great Famine. Tepperman’s essay touches on two of the same key issues raised in Cai’s article: the undue influence of loyalty to immediate superiors, and the impact of travel restrictions.
[… An] important feature of the old system was that bureaucrats at every level could expect to be rewarded for good performance. This wasn’t quite a meritocracy, and the system included a fair degree of corruption and patronage. But both of those features actually served the common good in one key way: If an official performed well, he or she could expect a cut of the proceeds and steady promotion. Xi, by contrast, has “replaced this incentive-based system with one based on fear,” as [Minxin] Pei puts it. And there are two big problems with this shift. First, it has warped officials’ priorities, from showing results to showing loyalty. The second problem, according to Alexander Gabuev, a China specialist at the Carnegie Moscow Center, is that “when fear is all you have, bureaucrats become too frightened to do anything without explicit orders from the top. So the whole bureaucracy becomes passive. Nothing gets done.”
[…] In 2014, authorities began confiscating bureaucrats’ passports. Like so many of the government’s other recent restrictions, this move has been justified in the name of combatting corruption—the idea, ostensibly, is to prevent dirty officials from fleeing the country. But the fact that the policy has recently been extended all the way down to elementary school teachers and reinforced by other, related strictures—officials now must apply for permission to attend foreign meetings and conferences and account for their time abroad on an hour-by-hour basis—reveals that the real priority is limiting contact with outsiders and their ideas.
[…] With each new budget-busting move, and in the absence of reform, the odds that China will experience a seriously destabilizing economic crisis—which China bears such as Ruchir Sharma, the head of emerging markets at Morgan Stanley, have been predicting for years—keep rising. “The big question is whether one of the ticking time bombs—bad debt, overheated property markets, oversized SOEs—will explode,” Gabuev says. “Because of Xi’s concentration of power, no one will give him advance warning if one of these bombs is about to go off. And because he doesn’t actually understand macroeconomics very well, and everyone is afraid to contradict the emperor, there’s a huge risk that he’ll mismanage it when it does.” Indeed, the government’s response to any instability is likely to be ugly. As Schell explains, “Xi has really put China at enormous risk. And because his only tool is repression, if things go wrong we’re likely to see even more crackdowns.” [Source]
Beijing has long sought to ensure that China’s think tanks serve the Party, a priority which critics have argued limits their global influence and competitiveness. SCMP’s Wang Xiangwei, for example, has described them as mere “mouthpieces of government policies; they rarely criticise any government decision or offer effective alternative solutions and recommendations.”
One notable exception is Unirule Institute founded by liberal economist Mao Yushi, which has paid a steadily mounting price for its independence. It was evicted from its former offices in July, with the doors welded shut and some staff temporarily sealed inside. This week Unirule announced plans by the Haidian Industrial and Commercial Bureau to revoke its business license for allegedly failure to register a change in the scope of its operations. In a statement, Unirule denied any wrongdoing, saying that its operations had not expanded, that no reregistration was therefore necessary, and that it had not received an official order to reregister as required by the law. It concluded:
In the light of the pressure from the external trade war threat and the domestic economy in recession, if the Haidian District Industrial and Commercial Bureau revokes the license of this company illegally, it would not only impose serious harm to this company, but also serious harm to the administrative system. It will signal that the administrative system does not understand or abide by the spirit of the Constitution which upholds the “socialist market economy”, or the spirit of the CCP’s resolution of “rule of the Constitution”. It will also signal that the administrative system does not practice the Regulations on Administration of Registration of Companies based on basic legal logics and due process of law, and it will jeopardize the general justice of the laws and regulations, and harm the credibility of the administrative system. This also constitutes a serious blow to the market environment, because if the practice of this case applies, hundreds of thousands of enterprises will be threatened by the alleged “business scope” issue. This will be a serious defeat of the market economy in China, which will further worsen the national economy. [Source]