September 9, 2021

The West’s new Cold War with China has been brewing for over a decade. From Obama’s “Pivot to Asia” policy, through Trump’s trade war and now Biden’s push for “Build Back Better World” — a rival to China’s Belt and Road Initiative (BRI) — the US has steadily been reorienting itself to confront Beijing, and increasingly dragging its Nato allies along with it.

Driving this increasingly confrontational approach is a view of China as a monolithic, authoritarian state embarked on a long-term strategy to overthrow US hegemony. Compared to Western states — riven by factional strife, paralysed by democratic deadlock, flailing about in the Middle East and seemingly unable to plan beyond next Tuesday — China certainly seems a fearsome challenger. Its plans cover everything from domestic Artificial Intelligence development to global infrastructure, while the top-down China Communist Party (CCP) regime ensures strict implementation and compliance. Some analysts have even suggested the existence of a 100-year strategy to displace the United States, implying an incredible capacity for long-term strategic planning.

The trouble is: this isn’t true. The Chinese party-state does not work like this. As I explain in a new book, Fractured China, the party-state is much more fragmented than many Westerners believe. Indeed, central policymaking is often loose and vague, with many competing interests shaping what actually happens on the ground.

Under Mao, the Chinese party-state was highly centralised, with top-down “command and control” systems that allowed central agencies to micromanage China’s economy and society. However, in Deng Xiaoping’s post-1978 “reform and opening up” era, these institutions were dismantled to facilitate the turn to capitalism.

Power and control over resources was extensively decentralised to provincial and local governments, as well as the emergent private sector. Privatisation and corporatisation turned former government ministries into free-wheeling, profit-seeking enterprises whose overseas activities are often beyond the ability of Chinese regulators to control. And as party cadres moved into business, and business tycoons joined the party, competing cadre-capitalist networks emerged across the party-state.

Over the past decade, policymaking has been fragmented across a host of national and subnational agencies, often with competing interests and agendas. Some previously domestic agencies have acquired an international role, with even provincial governments having their own foreign and commercial offices.

Provincial governments have, for example, signed a number of trade and investment deals with governments in Asia and Africa. China’s Ministry of Foreign Affairs, then, is not in control of Chinese foreign policy, and often does not even know what other agencies are up to — until some crisis erupts, such as that in Ghana when the local government of Shangli county in Guangxi province deliberately “exported” tens of thousands of artisanal gold miners to offset local unemployment, sparking a populist anti-Chinese backlash and a government crackdown.

Of course, central leaders do still retain some powerful mechanisms for coordinating the fractured party-state. And these all have some effect on how the system works. But they do not add up to strategic, top-down control of every aspect of Chinese behaviour. Top leaders may convene “leading small groups”, committees bringing together different agencies in a given policy area, to try to cohere them around common purposes. But these purposes are often left vague to accommodate competing interests and agendas.

Equally vague are CCP elites’ speeches and slogans, which set an overall “tone” and direction for policy. Subordinates must orient themselves to these slogans to win policy support, funding and promotion. But they are so general that they usually require extensive interpretation to work out what they mean in practice.

Central agencies’ policies are likewise frequently loose “opinions” that local governments must adapt to local conditions. This all creates enormous scope for subordinates to interpret central “directives” in ways that actually advance their own sectional interests, rather than any geostrategic grand strategy. Indeed, the system actively encourages experimentation within loose guidelines — what former paramount leader Deng Xiaoping called “crossing the river by feeling for the stones”.

The most important cohering mechanisms are the CCP’s powers of appointment, appraisal and discipline, which leaders can use to encourage loyalty and punish wayward cadres. Xi Jinping is making particularly strong use of these powers — having, for example, prosecuted over two million cadres for corruption. That such purges seem necessary reflects the epochal transformations in China’s party-state, which, while spurring rapid economic growth, have also weakened central control, undermined the regime’s authority, and enabled massive local corruption.

Such dynamics have, for instance, played out in the current strife over Xi’s drive for “common prosperity”. Everyone must orient themselves to this agenda, but no one — probably including Xi himself — really knows what it actually means, and everyone tries to wrap it around their own personal preferences. Hard-line leftists in China have interpreted “common prosperity” as unleashing a long overdue attack on the rich, terrorising many business tycoons, who have quickly donated billions to state-linked good causes. But others insist that “common prosperity is not egalitarianism,” and will not involve “robbing the rich to help the poor”, bashing the Left for “triggering ideological confusion and panic”.

Or take Xi’s call for a “toilet revolution” in 2015, in a speech lamenting the often-dreadful state of China’s public lavatories. Local governments seized on this vague utterance to justify splurging a staggering $3bn on toilet upgrades over the next 18 months, doubtless enriching many state-linked construction companies, before the horrified State Council reined them in.

Indeed, Chinese local governments are especially adept at exploiting their autonomy to further their own interests, leading to highly irrational outcomes, which are often misinterpreted as some kind of cunning strategy.

For example, Labour’s Stephen Kinnock, the shadow Asia minister, recently accused China of “deliberately overproducing steel” to dump on Western markets. In reality, overcapacity has been endemic across most basic Chinese industries since the 1990s — reaching 20 to 30% by the early 2010s — as local governments competed against one another to develop local industries and infrastructure through debt-fuelled over-investment. This is why China now has more airports per square kilometre than the US, and is awash with “ghost towns” and loss-making roads and railways, and why many local governments and state-owned enterprises (SOEs) are effectively bankrupt.

But it is China’s BRI that provides the best example of how these dynamics play out internationally. Western commentary tends to depict the BRI as Xi’s cunning grand strategy, designed to undermine US leadership and ensnare developing countries through “debt-trap diplomacy”. Detailed maps give the impression of a strategic blueprint being faithfully rolled out by officials and companies.

The reality is very different. “One belt, one road” emerged as a slogan in 2013 following two speeches by Xi, which largely just described what China was already doing: investing and building infrastructure in developing countries. But quickly, everyone piled in. Over the next two years, provincial governments and state-owned enterprises lobbied ferociously to get their pet projects incorporated into the BRI. Consequently, the project’s guidelines are remarkably vague and capacious, involving no clear objectives, no timeline, no dedicated resource commitments, and no real prioritisation. Practically every party-state activity has been squashed in.

Even today, there is no official Chinese map of the BRI, and unofficial ones were banned in 2017. There is not even a clear definition of what constitutes a BRI country or project: different agencies use different metrics to suit themselves. BRI projects are not devised in Beijing, according to a strategic blueprint. They normally originate with foreign governments, seeking funds to accelerate infrastructure development, which may also be useful for securing electoral support or fuelling patronage networks through dodgy construction contracts. And they are often egged-on by Chinese SOEs — not because they want to advance China’s geostrategic interests, but because they want to win lucrative tied aid contracts. Consequently, projects are as likely to occur outside of the six broad “corridors” sketched in the BRI guidelines as inside them.

Indeed, oversight over the BRI is remarkably weak. Chinese policy banks and regulators have very little capacity to evaluate projects’ feasibility, and consequently approve many “white elephants”, such as the notorious Hambantota Port in Sri Lanka. Half of China’s overseas projects are loss-making. Regulators also have no real capacity to scrutinise projects’ implementation, relying instead on host countries to supervise them. The Ministry of Foreign Affairs is barely involved in decision-making, and is typically only brought in when these problems spark major diplomatic incidents. China is still crossing the river while feeling for the stones, but it is stubbing its toes as it goes along.

And so responding to the behaviour of every Chinese entity as though it were intentionally planned and sanctioned by the top Chinese leadership is clearly misguided. The Chinese party-state is not monolithic — it is fractured, even when it comes to Xi Jinping’s signature foreign policy initiative.

Rather than confronting an imaginary strategic monolith, then, Western analysts and policymakers should develop a much more nuanced understanding of China and the internal struggles animating the party-state. In some policy areas, the interests involved do make cooperation difficult or even impossible. But elsewhere, there are forces and agencies that want to work constructively with foreign partners, creating scope for collaboration and mutual learning.

The UK’s decision to join and shape China’s Asian Infrastructure Investment Bank (AIIB), for example — rather than boycotting it, as Washington demanded — is a good case in point. The AIIB has adopted similar standards to existing multilateral development banks, while also trying to drive up the standards of China’s overseas projects.

A new Cold War will only isolate and immobilise these groups, empowering nationalist and paranoid factions who are convinced the West cannot tolerate China’s rise. Unless we tread carefully, and develop a more realistic understanding of China, we risk provoking a confrontation that we might not be able to win.