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Zhang, Yongjin --- "China transformed: FTA, socialisation and globalisation" [2009] NZYbkNZJur 3; (2008-9) 11-12 Yearbook of New Zealand Jurisprudence 15

Last Updated: 25 April 2015

China Transformed:

FTA, Socialisation and Globalisation

Yongjin Zhang*

I. IntroductIon

The Free Trade Agreement (FTA) occupies a significant place in the recent

development of New Zealand-China bilateral relations. The signing in April

2008 of the New Zealand-China FTA, ‘a high quality, comprehensive and balanced Free Trade Agreement’, was hailed in both Wellington and Beijing as ‘a milestone’ in the bilateral relations for appreciably different reasons. In concluding this agreement, New Zealand became the first developed economy to have successfully negotiated an FTA with China. In so doing, it was claimed that New Zealand completed the ‘fourth first’ in its economic and trade relations with China.¹

In a broader context, an FTA involving China has much wider ramifications for regional and global economy. It constitutes an indispensable part of the increasingly intensified regionalisation of East Asia (broadly conceived); and it can be regarded as one of the culminations of China’s participation in and engagement with globalisation, which is indicative of China’s integration into the global economy. If the implications for the global political economy of such engagement and integration leading to the rise of China remain contentious, China’s ‘great economic transformation’, though very much ‘unexpected’, is nevertheless undeniable.² Roderick MacFarguhar claimed, in 2006, that the Chinese Communist Party (CCP) ‘is presiding over the most astonishing example of economic growth in human history. ... Never before has so much wealth been created by so many people in so short a time.’³ Such creation of wealth has led to another economic transformation in China. As a recent

* Professor of International Politics, Department of Politics, University of Bristol.

1 The other three firsts are respectively, 1. New Zealand was the first Western country to conclude a bilateral agreement with China on its accession to the World Trade Organization, in August 1997; 2. New Zealand was the first developed economy to recognize China’s status as a market economy in April 2004; and 3. New Zealand was the first developed country to enter into FTA negotiations with China, announced in November 2004. Available at <www.chinafta.govt.nz/3-Progressing-the-FTA/1-Why-China/Four-firsts.php>. Accessed on 18 August 2009.

2 Lauren Brandt and Thomas Rowski (eds), China’s Great Economic Transformation, p 1.

3 Roderick MacFarquhar (2006) Remarks by Roderick MacFarquhar: Debate 1 ‘Is Communist Party Rule Sustainable in China?’ Reframing China Policy: The Carnegie Debates. Available at <www.carnegieendowment.org/files/cds_macfarquhar.pdf>.

World Bank report states, the record of poverty reduction in China over 25 years between 1981 and 2007 is ‘enviable’ and the poverty headcount rate fell ‘from 65 per cent of the population in 1981 to four per cent in 2007.’ As a result, ‘more than half a billion people [were] lifted out of poverty over this period.’⁴

Other more frequently cited statistics testify further to China’s great economic transformation. China has been the fastest growing economy in the world in the last thirty years. China’s GDP grew at an average annual rate of between nine and ten per cent between 1979 and 2009. That growth has led to the claim that China has been the second largest economy in the world according to the Purchase Power Parity (PPP) measurement for years. It is projected to become the second largest economy as measured by the official exchange rate in 2010, if not in 2009, replacing Japan.⁵ China has already become the largest trader in the world, replacing Germany. There has been a surge in recent years of China’s outward investment in Africa, Latin America, Middle East, Southeast Asia, and Australasia, as well as in North America and Europe in resources and technology sectors, at a speed and on a scale unimaginable even a decade ago. All things considered, China is now regarded as ‘an economic superpower’.⁶

In every conceivable way, the Chinese economy today is in stark contrast with what it was thirty years ago. Autarky has been replaced by China’s unprecedented participation in the global production networks (thus the image of China being the world’s factory) and by its embrace of global market. China not only claims to be the largest emerging market, but it has also become one of the most significant players in global finance as the recent global financial crisis testifies. Such a transformation cannot be simplistically attributed to the claim that China is a winner in economic globalization. Nor can we simply look at such transformation at its own merit, i.e. as the natural logic underlying China’s rising power.

4 World Bank (2009) From Poor Areas to Poor People: China’s Evolving Poverty Reduction

Agenda: An Assessment of Poverty and Inequality in China.

5 According to CIA’s World Factbook, for example, in 2008, China’s GDP, calculated by PPP, is $7.973 trillion in comparison to Japan’s $4.329 trillion. Calculated on the basis of official exchange rate, however, the GDP for China in 2008 is $4.402 trillion, while that for Japan is $4.924 trillion. Available at <www.cia.gov/library/publications/the-world-factbook/geos/ ch.html> and <www.cia.gov/library/publications/the-world-factbook/geos/ja.html>.

6 This claim was made by Fred Bergsten and others at the Peterson Institute of International Economics. For details, see Bergsten et al, China’s Rise: Challenges and Opportunities, pp 10-15.

In this paper, I offer a different interpretation of the great economic transformation in China today. I argue that there is a deeper and more significant economic transformation in China than spectacular economic growth. It is China’s socialization into and its acceptance and adoption of global norms—be they economic, political, social and humanitarian—that underlies the real logic of China’s transformation. The central argument that I seek to advance is that the great economic transformation in China and globalization are mutually constitutive. In other words, whereas economic globalization has transformed the Chinese economy as well as, the Chinese state, the great economic transformation in China in the last thirty years constitutes also an integral part of economic globalization. Such an interpretation not only helps us to understand the tortuous process of this mutual engagement and mutual constitution between China and globalization, but also gives us a glimpse of future challenges and prospects presented by the rise of China.

My argument in the remainder of this paper will proceed in three parts as follows. I will first look at the WTO and the FTA as integral parts of external transformative dynamics in engaging China in the regional and global economy. This is followed by a discussion in which I take a step back and examine the processes of China’s recent socialization into international society, in particular with a set of global norms and institutional arrangements, as a transformative process. Starting with a discussion of China’s participation in the keystone global economic institutions such as the World Bank and the International Monetary Fund (IMF) in the early 1980s, I will also investigate China’s socialization with other global norms and common values such as arms control and human rights. In the third part, I offer some discussions of implications of Chinese economic transformation for global political economy. This will be couched in terms of the transformative dynamics provided by China for the future of global economic transformation.

II. chInA, the Wto And FtAS

Since the beginning of the 21^st century, China has been vigorously pursuing a FTA strategy that seeks to fulfil its regional and global agenda. It is not mere coincidence that this strategy started around the time of China’s accession to the World Trade Organisation (WTO) in 2001. There is good reason for Mike Moore, WTO’s Director-General at the time, to claim that:

It is difficult to overstate the importance of these developments [the admission of China and Taiwan into the WTO]. Taken together they constitute a defining moment for the WTO and for the international economic, political and security arrangements that will influence our world in this century and beyond.⁷

With eight years hindsight now, few would dispute Mike Moore’s claim today.

It is worth remembering, though, that when China initially applied in 1986 to join the General Agreement on Tariffs and Trade (GATT), the predecessor of the WTO, China’s own practice of economic policies and economic principles could not be more different from those embodied in GATT. They were no doubt completely incompatible, if not in total conflict, with those embodied in the principles and practices of FTAs advocated by China today. Looking back at China’s fifteen years’ long march to gain WTO membership, two historical trajectories come to the forefront that shed light on the gradual convergence of Chinese economic practice and good economic behaviour defined in the global economy by the existing powers and by global market. One is that the economic reform agenda since 1986 was significantly and progressively shaped by China’s persistent pursuit of GATT/WTO membership. This pursuit included, at the systemic level, its determined transition from the socialist planned economy to the socialist market economy. This was only partially successful, it must be admitted, when China had to accept the conditions to join the WTO as a non-market economy in 2001. More specifically, one could look at China’s attempts to internalize, grudgingly more often than not, the well-established norms, principles and practices in the market economy such as abolition of price control, economic transparency, business deregulation and free access to market. One could also refer to the banking reforms in China in the mid-1990s, which realized the commercialisation of state-owned banks and established the People’s Bank of China as a functioning central bank concerned solely with macro-economic and monetary policies. There is also the example of a total overhaul throughout the 1990s of China’s accounting system to bring it into line with international standards. Last, and certainly not least, one could add to this list the example of legal reform.

Not surprisingly, in the 1990s, ‘to bring Chinese economic practice in line with norms and standards of the world economy’ (yu shijie jingji jegui) became the rally call in spearheading further economic reform in China. This brings me to the second historical trajectory I have in mind. In this process of policy and behaviour convergence between the Chinese economy and the global economy, one could discern a clear sequence of instrumental and strategic adoption leading in the direction of normative learning, acceptance and commitment.

7 South China Morning Post, 15 November 2001.

Take the so-called ‘WTO effect’ as an example. The Chinese government started, in the early 1990s, a comprehensive reform of China’s international trade regimes. This includes progressively reducing both import and export tariffs, abolishing import regulatory tax and export subsidies, making and implementing a series of trade laws, and the liberalisation of foreign exchange swap market.⁸ There is a clear strategic and instrumental reasoning behind China’s adopting such reform of trade regimes, i.e., to fulfil the requirements of GATT/WTO membership by making China’s foreign trade regimes compatible with GATT/WTO standards, norms, rules and principles.

Negotiations for China’s WTO entry in the 1990s, however, continued to compel as well as induce China to make a normative commitment to WTO laws, institutions and rules. For the WTO members, China’s conformity with WTO rules and norms based on strategic adaptive behaviour was no longer sufficient to gain its entry. The conformity had to come from China’s firm normative commitment. For China, the 1990s was a period when adaptive behaviour induced by strategic and instrumental reasons gradually, and sometimes grudgingly, led to the internalising of WTO laws, rules and norms in China’s trading practices. By the time the WTO was ready to embrace China in

2001, a normative base had been created to sustain China’s adaptive behaviour through inducing China’s cognitive understanding that WTO laws, rules, norms, and institutions were not only binding but also beneficial for China. After 2001, to make China fully ‘WTO compliant’ and to enforce completely the compliance deal struck between China and other WTO members may be regarded as a process of norm diffusion to assist China in embracing the principles, laws, institutions and norms of the WTO as the new normative basis for China’s trade and economic practices and policies.

The FTA is a key institution that embodies some most important principles of the WTO. It is in the broad context of China’s quest for its WTO membership and the liberalisation of its trade regimes and practices that China started to pursue an FTA strategy in the Asia-Pacific.⁹ The two triggers for it were, however, outside the WTO context. One was the Asian financial crisis in 1997-

1998; and the other was China’s strategic consideration to build a peaceful and stable international and strategic environment conducive to its domestic economic development, with particular emphasis on fostering good relations with its neighbouring countries.

8 For further details of these reforms, see Zhang (1998), China in International Society since

1949, pp 229-238.

9 My discussion here excludes China’s approach to the Asia-Pacific Economic Cooperation

(APEC), which I do not regard as a discernible FTA strategy by China.

The Asian financial crisis highlighted, among other things, the importance of collective action by all regional economies in confronting the challenges and risks posed by accelerated globalisation as well as harvesting opportunities it provides. The proliferation of bilateral and mini-multilateral FTAs since then has been a hallmark of an emerging East Asian regionalism and regionalisation in East Asia.¹⁰ China’s pursuit of a regional FTA strategy in the wake of the Asian financial crisis, on the other hand, had a strong strategic rationale. As I argued on another occasion, the surprise proposal made in 2000 by Zhu Rongji, the Chinese Premier then, to establish China-ASEAN Free Trade Agreement (CAFTA) was ‘primarily prompted by political expediency and diplomatic considerations, rather than economic calculation.’¹¹ It was aimed partly to allay fears among ASEAN countries that competition from China would crowd out jobs and growth in ASEAN and would suck away investment and trade; and partly to counter the ‘China threat’ claim prevalent at the turn of the 21^st century.

Regardless of the strategic rationale behind the initiation of CAFTA, it is worth noting that China has pursued this FTA proposal with vigour and imagination. In October 2001, China and ASEAN agreed on the goal of establishing CAFTA by 2011. It was followed, in November 2002, by the signing between China and ASEAN of a Framework Agreement on Comprehensive Economic Cooperation, with a specific and ambitious schedule for China to establish a free trade area with the original six ASEAN members, namely, Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, by 2010; and with ASEAN’s newer members, i.e. Cambodia, Laos, Myanmar, and Vietnam by 2015. To facilitate CAFTA negotiations, China offered, unilaterally,

‘an early harvest’ program implemented since 2004, which offers ASEAN countries party to such agreement preferential access to China’s domestic market, particularly the agricultural products, prior to the establishment of CAFTA.¹²

Today, China’s strategic pursuit of FTAs, both in its intra-regional and inter- regional manifestations, is firmly entrenched in China’s economic development strategy. In East Asia, such pursuit has been accompanied by, and has assisted in, the formation of such regional cooperation mechanisms such as ASEAN Plus One, ASEAN Plus Three as well as the East Asia Summit (EAS). If the plethora of FTAs in the region involving China has facilitated the process of regionalisation, regional integration of China no doubt constitutes an integral part of such regionalisation. To the extent that the WTO and FTAs have a

10 I use ‘East Asia’ broadly here to refer to both Northeast Asia and Southeast East Asia.

11 Yongjin Zhang, (2006), Globalization and Regionalization in East Asia: The China Factor, p 11.

12 For more details, see ibid pp 9-13.

transformative effect on the Chinese economy, it is not so much seen in the spectacular trade expansion at both regional and global levels since China joined the WTO. Rather, it should be seen in the manner in which China’s engagement with the WTO both before and after its entry, and its embrace of the FTA as a commonly accepted institution, have facilitated China’s accepting laws, institutions, norms, rules, and principles embodied in the WTO in its trade policies and practice, and how they have helped to change China’s global and regional outlook of the world economy in seeking its economic development and political engagement. If this interpretation is accepted, then, New Zealand’s engagement with China through its famous ‘four firsts’ has played a pivotal role in this transformation of China, as discussed above.

III. SocIAlISAtIon And chAnge

China’s entry into the WTO is, however, only part of a larger story. When in August 2008 Beijing successfully hosted the 39^th Olympic Games with spectacular opening and closing ceremonies, very few people were conscious that it was only in 1984 that the People’s Republic of China (PRC) first participated in the Olympic Games.¹³ Reflecting in 2008 on the motto of the Beijing Olympics, ‘One World, One Dream’, how many of us remember that, in a divided world thirty years before, the United States did not recognize Beijing as China’s only legitimate government until December 1978? Looking at the prospect of Shanghai hosting the World Expo in 2010, one can hardly believe that just over three decades ago, China as a revolutionary power was seen as a pariah state, largely isolated from, if not altogether outside of, the international system. Its economy was best characterized as autarkic. There was virtually no foreign investment in China. China’s foreign debt was minimal. Foreign trade, state restricted and controlled, remained the only tenuous link between the Chinese economy and the world economy. It is worth noting, though, that this was not entirely China’s own choice.¹⁴

13 It was only in October 1979, at a meeting held in Nagoya, Japan that the International Olympic Committee Executive Board passed a resolution on the problem of China’s representation, confirming the Chinese Olympic Committee as the representative of the Olympic Movement in the whole of China using the national flag and national anthem of the People’s Republic of China, while the Olympic committee in Taiwan area, as one of China’s local organisations, could only use the name of ‘Chinese Taipei Olympic Committee’ with its flag, anthem and emblem different from the original ones pending the IOC’s approval. The resolution was passed by the IOC members with a vote of 62 for, 17 against and two abstentions. However, China did not participate in the 1980s summer Olympics in Moscow, because of the Soviet invasion of Afghanistan in 1979. Many other countries also boycotted the Moscow Olympics.

14 For a revealing account of economic containment policy mounted by the United States on

China, see Zhang, Shu Guang (2001), Economic Cold War.

This was indeed China in the international system and international economic order thirty years ago. Who would have imagined then such deep integration of China into the global economy as we see today? Who would dare to predict that China would have become the world’s second largest economy and the world’s largest trader thirty years on? Who could have foreseen the global footprint of Chinese investment in Africa, Central Asia, Latin America, the Middle East, Southeast Asia, as well as in Australasia, Europe and North America?

The larger story I have in mind is China’s socialisation into the global international society, and more specifically, with global norms, in the last thirty years. The story is an ongoing one. It has led, in the first instance, to the call that China be ‘a responsible stakeholder’ in the existing international system.¹⁵ It has also led to the rise of China as a significant player in the global economy. The most recent explicit recognition of this development came from a public speech made by Tim Geithner, the US Treasury Secretary, at Peking University in June 2009. Speaking about the global financial crisis, Geithner claimed that ‘How successful we are in Washington and Beijing will be critically important to the economic fortunes of the world’; and further

‘Global problems will not be solved without US-China cooperation. That goes for the entire range of issues that face our world from economic recovery and financial repair to climate change and energy policy.’¹⁶

This is a far cry from China in 1980 when it first joined the IMF and the World Bank, signifying the start of the PRC’s learning about and socialisation into the global economic institutions. It is worth recalling that the PRC was excluded from the United Nations until 1971. Throughout the 1970s, even after it returned to take China’s seat in the United Nations, the PRC had purposely shunned away from any engagement with any international economic organisations, even those under the UN umbrella. It was only in 1978, for example, that the PRC formally applied, for the first time, for technical assistance from the United Nations Development Program (UNDP). Before 1978, the non-recognition of the PRC by the United States was an insurmountable political obstacle for China’s membership of such global economic institutions such as the IMF and the World Bank. Only after these political barriers were removed with the full normalisation of diplomatic relations between the PRC and the United States at the end of 1978 was it possible for China to consider applying for the membership of the IMF and

15 Robert Zoellick, ‘Whither China: from Membership to Responsibility?’ National Committee on United States-China Relations.

16 Timothy F Geithner, ‘The United States and China, Cooperating for Recovery and Growth’, June 2009.

the World Bank.¹⁷ Unlike China’s WTO membership that was obtained as a result of protracted negotiations, China’s membership of both the IMF and the World Bank entailed very few preconditions. Once the political barriers were out of the way, China simply walked through the doors of these two global economic institutions, obtaining their full membership in 1980.

With hindsight, this is a modest but decisive step in the mutual engagement between China and global economy. Its importance, nevertheless, can hardly be over-exaggerated. It was the first time that China participated in the post- war global multilateral economic institutions. It took place at the critical juncture when China started its economic opening and reform. Both IMF and the World Bank provided valuable financial and technical assistance at the early stages of economic reform in China.¹⁸ For example, China exercised its right in 1981, soon after it obtained the IMF membership, to take 759 million Special Drawing Rights (SDRs) to balance its current account deficit incurred by its trade deficit. The first World Bank project in China, the University Development Project, was launched in April 1981, with a total funding commitment of $200 million from the World Bank and the International Development Agency (IDA). From 1981 to 1988, the World Bank Group made commitments totalling $7.4 billion to its China project. By 1995, the World Bank ‘became China’s largest single source of foreign capital and China became the Bank’s largest borrower.’¹⁹

More importantly, perhaps, China’s membership in both IMF and the World Bank began to open up the Chinese economy, for the first time, to the scrutiny of Western economists, though in a very limited fashion at the beginning. To fulfil the requirements of member states, China began to release more and more statistics throughout the 1980s. It learned to compile its economic data according to international standards and to adopt universal standard of measurements to evaluate its economy and to describe itself to the outside world.

17 Who could have ever anticipated then that less than thirty years after China’s membership at the World Bank, a Chinese economist should have been appointed the Chief Economist of the World Bank as a dynamic driver for major policies of this global economic institution? Professor Justin Yifu Lin from Peking University was appointed the Chief Economist and Senior Vice-President of the World Bank in February 2008.

18 Deng Xiaoping is allegedly said to have told Robert McNamara, the World Bank President, in April 1980 that ‘We are very poor. We have lost touch with the world. We need the World Bank to catch up.’ P Bottelier, ‘China’s Economic Reform since 1978 and the Role of the World Bank’, p 10.

19 Ibid.

Whether the IMF and the World Bank had any direct influence on China’s reform direction or the devaluation of the Chinese currency renminbi (RMB) in the 1980s remains unclear and is a subject of controversy. It is hardly deniable, however, that both the IMF and the World Bank participated in China’s opening and developmental process in meaningful ways. China’s engagement with these two global economic institutions, on the other hand, provided valuable institutional learning environment in China’s early engagement with the global economy. The fact that the membership in them entailed few preconditions in terms of institutional changes while offering substantial benefits may have encouraged China’s early attempts at internalising norms, rules and standards commonly accepted by members of the IMF and the World Bank. It may have also facilitated China’s application for GATT membership in 1986, sending China on its 15-year pursuit of first the GATT membership and then the WTO entry. This course of action resulted in a long and drawn-out process of China’s convergence to, acceptance of, and compliance with institutions, rules, norms and principles of the market economy, which has dictated fundamental and structural changes of the Chinese economy.

China’s trajectory of adopting increasingly convergent policies and practices and accepting commonly accepted norms in the international economic system in the 1980s is both indicative of and consequential to one particular facet of China’s socialisation with global norms after 1979. Indeed, throughout the

1980s and the 1990s, China’s socialisation with global norms in other areas also led to notable, if not radical, changes of its normative commitment to commonly accepted international institutional arrangements and regimes. Two such changes merit our attention here.

The first is China’s approach to multilateral arms control treaties and regimes. Prior to 1980, China, a declared nuclear power after 1964, stood largely outside major multilateral arms control treaties and regimes. Ideological differences and China’s own security concerns led to its public denunciation of both the Partial Test Ban Treaty (PTBT) in 1963 and the Comprehensive Test Ban Treaty (CTBT) in 1968 concluded by the United States and the former Soviet Union. Excluded from the United Nations until 1971, China opted to pursue its own initiatives of disarmament outside the generally accepted multilateral framework at the time. It was China’s membership in the United Nations, and in particular, as one of the P5 in the UN Security Council, that ‘entangled’ China in a series of arms control and disarmament talks, deliberations and debates at various multilateral forums under the UN auspices. By 1979 China had joined the United Nations Disarmament Commission and by 1980, the Committee on Disarmament (later called the Conference on Disarmament). China also became a member of the International Atomic Energy Agency (IAEA) in 1984. Crucially, these memberships and participation opened up

channels of intellectual communication between China and other nuclear powers on arms control and disarmament issues. Such entanglement and new intellectual communication significantly facilitated China’s learning about and socialisation with existing global arms control and disarmament norms and regimes.

It took a decade after China regained its membership in the United Nations and at the UN Security Council before it initiated its first accession to a major multilateral arms control agreement.²⁰ In 1981, China signed the so- called Inhumane Weapons Convention.²¹ This is followed by its signing of the Antarctic Treaty²² and the Outer Space Treaty,²³ both in 1983. By 1993, China also signed or acceded to the Biological and Toxin Weapons Convention (1984),²⁴ the Treaty of Rarotonga (1989),²⁵ the Seabed Arms Control Treaty (1991),²⁶ the Non-Proliferation Treaty (1992),²⁷ and the Chemical Weapons Convention (1993).²⁸ When it finally signed the Comprehensive Test Ban Treaty (CTBT) in September 1996,²⁹ China became party to almost all major multilateral arms control treaties and regimes.

The second is a more controversial and contentious case of China’s socialisation with global human rights norms. Memories of the crackdown of student protests at the Tiananmen Square in 1989, recent ethnic riots in both Tibet and Xinjiang and continued suppression of political dissent are testimony to China’s appalling human rights record in practice. It is

20 The very first multilateral arms control treaty that China signed, in 1973, was the Treaty of Tlatelolco (Treaty for the Prohibition of Nuclear Weapons in Latin America and the Caribbean) 634 UNTS 281. China ratified the treaty on 2 June 1974.

21 Convention on Prohibitions or Restrictions on the Use of Certain Conventional Weapons

Which May be Deemed to be Excessively Injurious or to Have Indiscriminate Effects, 19

ILM 1980.

22 12 UST 794; 402 UNTS 71.

23 Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer

Space, including the Moon and Other Celestial Bodies, UST 2410, TIAS 6347, 610 UNTS

205.

24 Convention on the Prohibition of the Development, Production and Stockpiling of

Bacteriological (Biological) and Toxin Weapons and on their Destruction (1972), 26 UST

583, 1015 UNTS 163, reprinted in 111 LM 309.

25 South Pacific Nuclear Free Zone Treaty 1985, 24 ILM 1442.

26 Treaty on the Prohibition of the Emplacement of Nuclear Weapons and Other Weapons of

Mass Destruction on the Seabed and the Ocean Floor and in the Subsoil Thereof, 10 ILM

1971, 145.

27 The Treaty on the Non-Proliferation of Nuclear Weapons, 21 UNTS 483, TIAS 6839, 729

UNTS 161.

28 Convention on the Prohibition of the Development, Production, Stockpiling and use of Chemical Weapons and their Destruction, Technical Secretariat of the Organization for Prohibition of Chemical Weapons, 32 ILM 800.

29 35 ILM 1439.

instructive however, to look at how much China has moved in the last thirty years, towards accepting the universality of human rights in principle and in rhetoric and in instituting its normative commitment to international human rights treaties and regimes.

It is useful here to look at China in 1979 again. Some excerpts from Notes on Human Rights, an official commentary published in Beijing Review, the English weekly, in November 1979 are remarkably telling. In claiming that human rights, though advocated by the bourgeoisie as universal, cannot be for everyone, it goes on to assert that they are rights only for the bourgeoisie because:

in the capitalist society, as the bourgeoisie owns the means of production, it has the right to exploit and enslave the proletariat. The principle of human rights (such as liberty and equality) put forth by the bourgeoisie is, to the proletariat, essentially hypocritical.

Human rights, on the other hand:

is also a slogan with which imperialism and bourgeoisie attach our proletarian dictatorship and socialist system ... they attach socialist countries as granting no human rights to its people. They slander measures under the dictatorship of the proletariat (such as the suppression of counter-revolutionaries) as violations of human rights.

Noting that it was the foreign aggression and imperialism that denied basic human rights of all Chinese people, it asked ‘How can the imperialists have the effrontery to prate about the so-called human rights question in China?’³⁰

In sharp contrast, in Human Rights in China, a White Paper issued in 1991 in defending China’s human rights record in the wake of the international condemnation of the military crackdown in Beijing in June 1989, we find an entirely different rhetoric. Not only did the White Paper concede that China accept in principle international norms and rules on human rights. It also explicitly stated that ‘China appreciates and supports the efforts of the UN in promoting universal respect for human rights and fundamental freedom.’ More importantly, it publicly acknowledged that China accepts the universality of human rights in principle when it asserted that the Chinese government considers the Universal Declaration of Human Rights adopted and proclaimed by the United Nations in 1948 ‘the first human rights documents that have laid the foundation for the practice of human rights in the world arena.’³¹

30 Guangming Daily Commentator, ‘Notes on Human Rights’, Beijing Review, (45) 1979, pp

17-20.

31 Information Office of the State Council, ‘Human Rights in China’, Beijing Review, (44)

1991, pp 8-45.

Such changing rhetoric, significant in itself, indicates a radical shift on the part of China on the question of the universal respect of human rights as a fundamental principle in both domestic politics and international relations. It may be accounted for, at least partially, by China’s involvement and participation in international human rights regimes throughout the 1980s. Prior to 1979, China was no party to any international human rights conventions sponsored by the UN, nor did it participate in the work of any UN human rights organs. It was not until February 1979 that the Chinese delegation attended, for the first time, sessions of the UN Commission on Human Rights (UNHRC). Given China’s position as reflected in the 1979 official commentary mentioned above, this is by no means surprising.

Prior to the 1980s, China moved steadily towards selected commitments to international human rights regimes. Altogether, China ratified or acceded to seven international human rights conventions in the decade.³² China also ratified the UN Convention on the Rights of Children in 1996.³³ It was the signing by the Chinese government, respectively in October 1997 and October

1998, of the two cornerstone conventions of the UN human rights regimes, namely the International Covenant on Economic, Social and Cultural Rights³⁴ and the International Covenant on Civil and Political Rights,³⁵ that can be regarded as a milestone in China’s socialization with global human rights norms.³⁶ In March 2004, the State’s responsibility for respecting human

32 These are 1. The International Convention on the Prevention and Punishment of the Crime of Genocide; 2. The International Convention on the Suppression and Punishment of the Crimes of Apartheid; 3. The Convention on the Elimination of All Forms of Discrimination against Women; 4. The International Convention on the Elimination of All Forms of Racial Discrimination; 5. The Convention Related to the Status of Refugees; 6. The Protocol Related to Refugees; and 7. The Convention against Torture and Other Cruel, Inhumane or Degrading Treatment or Punishment.

33 United Nations Convention on the Rights of the Child, UN Doc. A/44/736, (1989), UNGA Doc. A/Res/44/25 of 5 December, (1989) 28 ILM, 1448, (1989).

34 International Covenant on Economic, Social and Cultural Rights, GA Res. (XXI), UN GAOR 21^st SESS, (Supp. No 16), at 49 UN Doc A/6316 (1966).

35 International Covenant on Civil and Political Rights, UN GA Res. 2200 (XXI), 21 UN GAOR, Supp. (No. 16) 52, UN Doc. A16316 (1966).

36 China ratified the International Covenant of Social and Economic Rights in 2001. At the time of writing, China has not ratified the International Covenant of Political and Civil Rights.

rights was written into the Constitution of the People’s Republic of China. An amendment was made to the Constitution, stipulating, in particular, that

‘The State respects and preserves human rights’.³⁷

This brief discussion does not obscure, of course, the substantial gap between China’s normative commitment to global human rights norms in principle and in rhetoric and its state policies and practices that often deviate from these norms. These three stories of China’s socialisation with the existing global institutional arrangements, regimes and norms, taken together, do illustrate an important point. That is, prior to China’s economic rise as we see today, there was radical transformation of China, i.e. China’s transformation from a revolutionary power to a reformist state. The changing normative commitment on the part of China induced and compelled throughout China’s socialisation in the global international society is constitutive of such important transformation. Normative convergence also significantly enhanced the legitimacy of China’s status as an emerging great power in the early reform years.

China’s socialisation as discussed and the transformation thus induced, one could argue, prepared and positioned China well in taking full advantage of opportunities and challenges presented by economic globalisation. Without such socialisation, China’s all-out engagement with globalisation in the last decade or so would not have been successful or even possible. Just look at the following important changes. Clearly, China has put strong emphasis on its willingness to pursue China’s developmental goals and national ambitions under the conditions of globalization and within the existing global economic order and political system, though it is not entirely happy about either of them. Accordingly, China is no longer seen as a wilful disruptive force seeking to forge a different international economic order. Rather, it is seen as an increasingly open market opportunity integral to global development and prosperity. William Overholt from Rand described in 2005 such transformation in the following words:

China has transformed itself from the world’s greatest opponent of globalization, and greatest disrupter of the global institutions we created, into a committed member of those institutions and advocate of globalization. It is

37 This is the new paragraph that was added to Article 33 in Chapter II, The Fundamental Rights and Duties of Citizens of the Constitution of the People’s Republic of China. It is part of the fourth amendment to the PRC’s Constitution (1982) approved at the second session of the 10^th National People’s Congress on 14 March 2004. Another significant constitutional change embodied in the same amendment is the guarantee of private property rights. Part of the revised Article 13 reads ‘Citizen’s lawful private property is inviolable’. See

‘Amendment to the Constitution of the People’s Republic of China’, available at <www. npc.gov.cn/englishnpc/Constitution/node_2826.htm> accessed on 7 January 2010.

now a far more open economy than Japan and it is globalizing its institutions to a degree not seen in a big country since Meiji Japan. Adoption of the rule of law, of commitment to competition, of widespread use of English, of foreign education, and of many foreign laws and institutions are not just updating Chinese institutions but transforming Chinese civilization.³⁸

One does not have to share Overholt’s excitement in order to agree with his overall assessment about China’s changing position on globalisation. Clearly now a mutual endorsement between China and the global market has happened, which continues to reinforce the market-oriented reforms in China and to impose a convergent policy agenda on matters related to Chinese and global economic governance.

IV. globAlISIng chInA: IMPlIcAtIonS For globAl PolItIcAl econoMy

China’s embrace of global market and globalization has also necessitated a series of institutional changes, institutional capacity building attempts and even institutional innovations of the state to accommodate its transition to a full market economy. The Chinese state, one could argue, has been rebuilt, or reinvented, in China’s engagement with globalization. The important point to note here is not the limits of such state transformation.³⁹ Nor is it to debate the role that the state, re-invented or rebuilt as it may be, has played in China’s successful economic transformation. Rather it is to acknowledge that globalization has not only regulated the internal as well as the external political and economic behavior of the Chinese state. It also has constitutional effect on the Chinese state. When the Chinese Communist Party (CCP) officially embraced the market economy as the legitimate aspiration for Chinese reforms in 1997, the political legitimacy of the regime became increasingly contingent on its successful engagement with global market. If the CCP continues to rely on mobilizing popular nationalism to address its ‘legitimacy deficit’, it is the political logic of growth-based legitimacy that dictates the Chinese state’s external policies in regard to economic globalization. In this fashion, globalization effectively relocates the main source of state legitimacy of China to external actors and institutions.

This is one particular dynamic that we must keep in mind when looking at China’s outstandingly successful embrace of and integration with the global market and the arrival of China as the largest emerging market. The great economic transformation of China, as argued earlier, has made China a

38 William Overholt, ‘Statement of William H Overholt before the US-China Economic and

Security Review Commission’, p 1.

39 For one such argument, see Yongnian Zheng, (2004), Globalization and State Transformation in China.

significant global economic power with unquestionably global outlook in its economic development strategy. The image of China as ‘the world’s factory’ is graphically indicative of China’s organic participation in the global production networks. By the same token, it is likely to have a crucial role to play in any future global economic restructuring. As the largest global trader, the dramatic expansion of China’s exports has had significant impact on the growth of global export share of the world output.⁴⁰ China has been for years the largest recipient of foreign direct investment of all developing economies, and has now become, most probably, the largest global investor from the developing world as well. China certainly holds the largest foreign currency reserve by a single country in the world today.

The China story so far seems to be too good to be true. Did China ride globalization to perfection? How much is the Chinese experience reproducing globalization in its own fashion? Whither the Chinese state in such reproduction? In which way does the Chinese experience challenge our conventional wisdom about the global development? And ultimately, what are the implications of an increasingly globalizing China for the global political economy?

These questions are likely to be debated for years to come. While providing full answers to all the above questions is beyond this paper, suffice it here to suggest that the search for answers to them is best started with a full appreciation of three special characteristics of China as ‘a historically unique economic superpower’ which is second only to the United States in terms of its importance in future global economic governance, according to Fred Bergsten and others at the Peterson Institute for International Economics in Washington D.C. These three special characteristics are first, China ‘is still a poor country with per capita income of around $3,000, less than ten per cent that of the European Union and the United States’; second, ‘it is still a non-market economy—one in which the government makes major decisions on prices and allocating goods and resource—to an important extent despite the dramatic marketisation of the past three decades’; and third, it is ‘not yet a democracy’. For all these reasons, the ‘systemic challenge’ that China—an economic superpower—poses to the existing global economic order, Bergsten and others argue, is ‘vastly complicated’.⁴¹

40 For example, according to one estimate, from 2001-2007 the export share of China’s output rose from 20% to 36%, a surge that coincided with a rise in the global export share of world output from 24% to 31%. See David Pilling, ‘The Next Asia’, Financial Times, 11 October

2009.

41 Bergsten et al (2008), China’s Rise: Challenges and Opportunities, p 10-11.

Such challenges presented by a globalizing China have indeed already begun to encourage us to rethink the new dynamics in the global political economy and ask big questions about the future global economic governance. This is particularly seen, I suggest, in the following three areas. First, quietly, China has been taking a leading role in stimulating global economic growth, thus global prosperity. Already in 2004, for example, the Chinese economy contributed more than the US economy to the global GDP growth.⁴² As Bergsten and others also note, during the record expansion of the global economy between 2004 and 2007, China ‘shared global growth leadership with the much larger United States’ and ‘has become the undisputed chief driver of world growth’ after the US economic downturn in 2008.⁴³ With slow and precarious global economic recovery in the wake of the global financial crisis, expectations from the Chinese economy are very high. Although no one believes that China alone could get the world out of its economic and financial doldrums now, China’s leading role in global economic growth is expected to continue.

Second, the ongoing global financial crisis has added new imperatives in considering China’s role in the global economic governance. It has long been recognized that as China has rapidly grown into an economic powerhouse for the global economy, it has become too important not to be included in the global economic decision-making and rule-making.⁴⁴ Yet, precisely because of the three special characteristics of China as an economic superpower mentioned above, it has been excluded, by design, from such important bodies as G8. The inclusion of China into the G8 fringes, such as its Finance Ministers meetings, and most recently, informal summit with G8 leaders still ‘illustrates both the glaring gap in global governance and the increasing economic and policy interdependence between industrial countries and major emerging markets.’⁴⁵

Nevertheless, challenges and difficulties of incorporating China into the existing global economic governance structure and institutional arrangements are obvious and should not be underestimated. This is not only because the

42 Yasheng Huang, (2008), Capitalism with Chinese Characteristics, p 1.

43 Bergsten et al, pp 9-10. It is further noted that China alone counts (based on PPP) about one quarter of global economic growth in 2008. Bergsten et al, p 31.

44 In a different context, Harry Harding also argues for the inclusion of China in important global norms formulating. In his words, ‘as new norms are written, or as outmoded ones are revised, if Beijing is to be regarded as a ‘responsible stakeholder’ in the international system, it should be invited to participate in the norm drafting process ... [and] should be treated as a rule-maker and not simply as a rule-taker.’ Harry Harding, ‘Testimony of Harry Harding’, p 6.

45 Colin Bradford Jr and Johannes Linn, Global Economic Governance at a Crossroads, p

1.

willingness and the capacity of China to play a responsible role in global economic governance is questionable. China’s unusual identity—as a developing economic superpower, a non-democratic state, a non-market economy and the largest emerging market all combined—makes the inclusion of China a compelling and complex challenge to the existing institutions, structures and mechanisms of global economic governance.

Such challenges and complexities are clearly present behind the proposed G2 (Group of Two, i.e. the United States and China). The idea was first publicly floated in an article published in Foreign Affairs in July 2008. In A Partnership of Equals, Fred Bergsten argued that because China is a ‘poor, significantly nonmarketized, and authoritarian’ yet rapidly expanding economic (super) power, it poses serious systemic challenges to the existing global economic order. Yet, ‘Beijing is shirking its responsibilities to the global economy’. He further argued that ‘Inducing China to become a responsible pillar of the global economic system [in addition to the United States and the EU] will be one of the great challenges of coming decades.’ Washington should, he believed, offer to share global economic leadership with China in order to

‘co-opt China by integrating it into the regime that they [the US and the EU]

have built and defended over the last several decades.’⁴⁶

This idea is revolutionary as much as it is controversial. It has since stimulated

a lot of debates, particularly with the deepening of the global financial crisis in

2008-2009. This is an idea, however, that the Chinese leadership has publicly rejected. While attending the Eleventh China-EU Summit in Prague in May

2009, Chinese Premier Wen Jiabao dismissed the idea embodied in the G2 is ‘baseless and wrong’, insisting that ‘multipolarisation and multilateralism represent the larger trend and the will of the people.’⁴⁷ During Obama’s visit to Beijing in November 2009, Wen again went out of his way to make it clear that China disagreed with the idea of G2.⁴⁸

Nevertheless, the challenges of incorporating China into the existing institutional arrangements and structures for global economic governance remain imperative and uncompromising. As Geithner elegantly put in Beijing:

46 Fred Bergsten, ‘A Partnership of Equals: How Washington Should Respond to China’s Economic Challenge’, Foreign Affairs, July/August 2008. The idea is further elaborated in Fred Bergsten, et al, China’s Rise.

47 Cong Mu, Wen Rules out G2 Proposal, Global Times, 22 May 2009. Available at <http://

china.globaltimes.cn/politics/2009-05/431991.html> Accessed on 10 September 2009.

48 See ‘China Disagrees with the G2 Suggestion’, available at <www.bjreview.com.cn/

special/2009-11/19/content_230467.htm>. Accessed on 8 January 2010.

I believe that a greater role for China is necessary for China, for the effectiveness of the international financial institutions themselves, and for the world economy.

China is already too important to the global economy not to have a full seat at the international table, helping to define the policies that are critical to the effective functioning of the international financial system.⁴⁹

Third and finally, to a considerable extent, the Chinese economy now holds the key to the stability of the global market. On the primary metal market, for example, China is often regarded as ‘the 800lb gorilla’ at least in terms of demand. As the world’s largest producer and consumer of steel, China’s demand seems to be largely responsible for the volatility of the prices of iron ore, iron and steel products on the global market. The same is true of aluminum. As one of the two largest consumers of energy in the world today, China is often blamed for the oil prices hike in recent years. China’s stabilizing role, however, goes well beyond the commodities and energy markets, as the most recent global financial crisis testifies.

This is best illustrated by what role both the European Union and the United States expect China to play as a key stakeholder in the global political economy. A most recently released policy report sponsored by the European Council on Foreign Relations is highly critical that the EU ‘continues to treat China as the emerging power it used to be, rather than the global force it has become.’ It claims emphatically that ‘China is now a global power. Decisions made in Beijing are central to virtually all the EU’s pressing global concerns, whether climate change, nuclear proliferation or rebuilding economic stability’. Even trenchant criticisms of China’s behaviour at the G20 summit in London in April 2009 articulated in the same report convey a strong sense of the EU’s expectations. It contends that:

Efforts to get Beijing to live up to its responsibility as a key stakeholder in the global economy by agreeing to more international coordination have been largely unsuccessful. The G20 summit in London in early April 2009 demonstrated Beijing’s ability to avoid shouldering any real responsibility; its relatively modest contribution of $40 billion to the IMF was effectively payment of a ‘tax’ to avoid being perceived as a global deal-breaker.⁵⁰

In the same speech at Peking University, cited above, Tim Geithner was more positive. In ‘the most challenging economic and financial stress in generations’, he stated, ‘China and the United States are working together to help shape

49 Timothy F Geithner, ‘The United States and China, Cooperating for Recovery and Growth’, June 2009.

50 John Fox and Francois Godement (2009), A Power Audit of EU-China Relations: A Policy

Report, pp 1-2.

a strong global strategy to contain the crisis and to lay the foundation for recovery.’ ‘A successful transition to a more balanced and stable global economy’, he believed, requires significant changes of economic and financial policies, most importantly from both the United States and China. Further, in his words, ‘The effectiveness of US policies will depends in part on China’s, and the effectiveness of yours on ours.’⁵¹ Echoing Geithner’s sentiment and highlighting the importance of the US-China cooperation in energy security and climate change, President Obama emphasized at the US-China Strategic and Economic Dialogue in July 2009 that neither the United States and China—the two largest energy consumers and greenhouse emitters of the world—‘profits from a growing dependence on foreign oil, nor can we spare our people from the ravages of climate change unless we cooperate. Common sense calls upon us to act in concert.’⁵²

It has become patently clear that China’s own successes of great economic transformation have brought with them rising expectations that China should take up more responsibility in managing the global economic system, as it now claims an increasingly bigger stake in the global political economy. The recent global financial crisis and the urgency to deal with such global concerns as climate change and global warming have added new imperatives for China to play new roles in a turbulent world ahead.

V. concluSIon

In his book The Next Asia: Opportunities and Challenges for a New Globalization, Stephen Roach makes two important assertions. Not only is Asia the greatest beneficiary of globalization in the past, but Asia is also critical in producing a new globalization in the future. As one leading player among all Asian beneficiaries, China has ridden globalization to perfection, merrily capitalising on the consumers’ demand of the American market and successfully pursuing an export-dependent growth strategy. Roach is firm, however, that such a merry time for Asia and for China is now over in the world after the financial crisis. He calls on China in particular to rebalance its economy towards greater domestic consumption as the driver for its economic growth and development in the post-crisis era. The enormous promise of

51 Ibid.

52 ‘Obama at U.S.-China Strategic and Economic Dialogue’, 27 July 2009. Available at

<www.america.gov/st/texttrans-english/2009/July/20090727111325bpuh0.2506067. html&distid=ucs> accessed 7 January 2010.

the Asian century, Roach argues, can only be fulfilled with a new economic growth dynamic in Asia based on the expanded domestic consumption of 3.5 billion Asian consumers.⁵³

If the prognosis offered by Stephen Roach on the next Asia is largely correct, what are the opportunities and challenges for New Zealand in such a scenario in regard to the future transformation of China? New Zealand has played an important, perhaps also modest, role, through its pioneering efforts as a developed economy, in facilitating the mutual engagement between China and the WTO and in promoting China’s regional and global economic integration through liberalisation in the last fifteen years, with the crowning achievement of the signing of the New Zealand-China FTA in April 2008. In this sense, New Zealand has become part of the story of China’s riding of globalization. The signing, however, coincides with the next stage of China’s great economic transformation. China’s rebalancing of its economic growth model and its boosting of domestic consumption provide huge opportunities for New Zealand producers and corporate sectors to explore in realising the full potential of trade expansion on the China market, taking advantage provided by the FTA.

A particular challenge, nevertheless, looms large on the horizon, the possibility of trade wars between China and the United States.⁵⁴ In the regional context, the China-US trade war would not only derail the economic recovery in East Asia, wherein New Zealand economic future lies. It would also pose a serious threat to the transformation that is to usher in the Next Asia. New Zealand has an important stake in stopping this from happening, and must play its part to prevent such a total mockery of the collective commitment to free trade norms and principles as embodied in the WTO. Finally, given the great transformation of China as discussed above and the mounting expectations of the role that rising China is to play in the global political economy, the engagement with China should have a new strategic purpose in the next decade or two. That is to encourage China to take up greater responsibility for global economic prosperity and global economic governance and to endorse China’s responsible role in this direction. New Zealand is well-placed to play an innovative part in such a transformation of a globalised China in the future.

53 See Stephen Roach, Stephen Roach on The Next Asia: Opportunities and Challenges for a

New Globalization, (2009).

54 See for example, Heather Stuart, ‘China and US Head for Trade War’, Guardian, 23

June 2009, available at <www.guardian.co.uk/world/2009/jun/23/china-us-trade-row>. Accessed on 7 January 2010; and Michael Shuman, ‘Why the China-US Trade Dispute is Heating Up’, Time, 14 September 2009, available at <www.time.com/time/business/ article/0,8599,1922155,00.html> Accessed on 7 January 2010.