OPINION – China’s Strategic Responses to Internal and External Challenges

China’s strategic responses to the ongoing internal and external challenges are characterized by a persistent search for socio-economic solutions and an assertive foreign policy combined with enhanced military preparedness.

On July 30, the Politburo Standing Committee (PSC) of the Communist Party of China (CPC) met and decided that the Fifth Plenum of the 19th Central Committee meeting would be held in October. The Fifth Plenum will have an important task of formulating the 14thfive-year plan for China’s national economic and social development and the targets from now to 2035. Presided over by President Xi, the PSC set the target of achieving the objective of xiaokang (a moderately affluent) society in China’s path of “establishing a socialist modernized nation toward 100 years of governance.” 

The PSC assessed that China is still in the stage of “strategic opportunities” as it encounters tremendous internal and external challenges. Due to the uncertain external circumstances, China persists in its path of “peace and development.” Internally, according to the PSC, China has achieved “a high-quality stage of development” which however is marked by “developmental imbalance and insufficiency.” As such, the Chinese socialism would have to be unleashed, enhancing the “consciousness of opportunities” and “risks awareness.” Amidst crises, China has to “turn them into opportunities and continue to make progress boldly.” The keywords of China’s development embrace “the reliance on the people,” “efficiency,” “fairness,” “sustainability” and “security.” All these key elements will likely be reflected in the forthcoming Fifth Plenum’s 14thfive-year plan.

The PSC stressed that, in face of the challenges of Covid-19, the people’s safety and public health have become the top priority of governance. The Party centre has to demonstrate “staunch leadership” and “economic tenacity.” The PSC admitted that China’s economic circumstances are still “complex, serious, unstable and uncertain.” Therefore, internally China has to create its own “big circulation,” generating sufficient internal demands while interacting with the international “circulation.” China’s socio-economic development will have to adopt long-term coordination mechanism, rely more on new technology and innovation, and implement macro-level designs and regulations to prevent risks and achieve long-term equitable growth. The keyword, namely “big circulation,” denotes that China is stimulating internal consumption at a difficult period of encountering the combined impacts of Covid-19, flooding in different places, and an externally hostile environment.

In the second half of 2010, according to the PSC, China is going to stabilize six main areas: maintaining new ideas of development; coordinating the preventive work on Covid-19; reforming the supply chain; persisting in the process of deepening reforms and openness; extending internal demands and consumptions; and protecting and stimulating the vitality of markets. In terms of macro-economics, China is ensuring “the suitability and flexibility” of its monetary policy, sharpening its direction, maintaining “reasonable growth between money supply and the accumulation of social capital.” Due to the considerable decline in social capital, the government has to ensure that newly accumulated capital must be channelled toward the manufacturing industry, and small and medium enterprises. Deploying macro-economic leverage, Beijing is trying to achieve the combined effects of promoting fiscal policy, stabilizing employment, fostering industrial development, and retaining continuous regional growth.

Finally, the PSC decided that China must forge ahead with urbanization, using new towns as clusters to stimulate the development of its supply chains and increase its overall competitiveness. Agricultural development must be maintained, while state-owned enterprises continue to undergo reforms. The housing markets needs to be regulated and speculative activities must be curbed to ensure “the protection of the people’s livelihood.” The land market is to be developed in a stable manner; youth employment has to be ensured; migrant workers and peasants are encouraged to find their jobs near their hometowns; poor villages and regions have to be protected against Covid-19. Last but not the least, flood control has to be strengthened and better managed. 

Clearly, the overall thrust of the PSC meeting is to maintain a strong Chinese state amid the ongoing socio-economic, public health and environmental challenges internally.

On July 28, President Xi Jinping met a group of democratic parties outside the CPC and he stressed that they had to realize the internal challenges and difficulties in a “comprehensive, dialectical and development” way. Most importantly, he remarked that “no other country and nobody can stop the process of China’s great renaissance.”

Implicitly he pointed to foreign countries that have recently targeted at the CPC and China’s developmental strategies, especially the US and its Secretary of State Mike Pompeo. Xi was accompanied by Premier Li Keqiang and other PSC members such as Wang Yang, Wang Huining and Han Zheng. 

On July 30, President Xi attended a PSC study meeting on the consolidation of defence and military modernization. A military researcher Chen Rongdi was invited to brief the members. In response, President Xi emphasized the importance of “comprehensive military training and preparedness” as “China is facing an increase in uncertainties and instability in its security circumstances.” Moreover, “the world’s new military revolution is proceeding rapidly, providing us with rare opportunities and serious challenges.” As such, the Chinese military has to “enhance its missionary sentiment and urgency, working hard to realize our modernization in a path-breaking style of development.” This means that military reform has to continue; core techniques need new breakthroughs; and defence technology, capability, management, talents and resources must be enhanced. 

He called for the whole Party and whole country “to stand together in the chess game, propelling forward the process of defence and military modernization.” President Xi also added that the relatives of military personnel have to be taken care of in their employment and residence, while retired soldiers’ benefits have to be protected. He finally emphasized that a strong Chinese military “must listen to the Party leadership,” “win battles and wars,” and “manage itself according to law and discipline strictly.”

On July 31, President Xi presided over the opening ceremony of the Beidou Navigation Satellite System in Beijing. The system’s satellites are used for both civilian and military purposes. From 1983 to 2020, China’s 55 satellites under Beidou have made tremendous contributions to the country’s social, economic, scientific and military advancement. As of 2020, there are 30 advanced Chinese satellites in three types of orbit: 24 in medium-Earth orbit, three in inclined geosynchronous satellite orbit and three in geostationary orbit.

Judging from the mainland reports and remarks made by President Xi, China’s strategic responses to internal and external challenges are characterized by two features.

First, internally, macro-economic levers have to be utilized fully to achieve economic growth, regional development, the people’s employment and the recovery and reproduction of various sectors. Internal demands and consumption are increasingly emphasized so that China can rely on its own domestic markets rather than heavily relying on international trade, which has been deeply affected by both Covid-19 and foreign countries’ sanctions and reduced dependence on the mainland in their supply chains. This does not mean that China is returning to self-sufficiency under the Maoist era, but the Chinese leaders know that it will take some time for international trade and supply chain to recover gradually. 

In fact, President Xi on July 28 delivered an address at the fifth annual meeting of the multilateral Asian Infrastructure Investment Bank (AIIB), saying that members should continue to promote community development with “a shared future for mankind.” The AIIB, which was proposed by Xi in late 2013, was launched in January 2016 and it has now 102 members. However, it has been seen as a Chinese challenge to the US dominance in the global economy. During the ongoing Sino-American tensions, China’s insistence on multilateralism hopes to send message to countries in the world that, in the words of the PSC meeting on July 30, it is still attaching great importance to both “peace and development.”

Externally, China has increasingly tense relations with various countries, including the US and European countries over the developments of Hong Kong, India over the border dispute, and US, Australia and the Philippines over the Chinese military installations on the shoals, reefs and islands in the South Seas. Under these circumstances, President Xi maintains the policy of assertive Chinese nationalism amid peaceful development, meaning that he has little choice but, as the chairman of the Central Military Commission, to push for military modernization and preparedness. 

The case of how China deals with the border dispute with India is a good example. Perhaps refraining from stimulating India further by not announcing the exact number of deaths of the Chinese soldiers in Ladakh, where at least 20 Indian soldiers were reportedly killed in mid-June, China has been adopting a two-pronged strategy of being more low-profile in the border dispute and quietly negotiating with the Indian military on a simultaneous withdrawal of troops on both sides from the disputed areas.

In the recent weeks, the Chinese diplomats have appeared to slightly tone down their hawkish rhetoric, diluting their “wolf-warrior” style, while Foreign Minister Wang Yi has been heaping praise on President Xi Jinping’s thoughts as the guiding principle of Chinese foreign policy.

In the midst of internal challenges and external hostility, the Chinese leadership has shown not only its resilience in dealing with internal difficulties through a constant search for socio-economic and public health solutions, but also its determination to enhance military preparedness while maintaining multilateralism and adjusting the tone of its assertively nationalistic diplomacy. The upcoming Fifth Plenum will provide a key indicator of how the Chinese leadership forges ahead its comprehensive plans and resilient approaches to coping with internal difficulties and external challenges.