Recently, US assistant secretary of state Daniel Russell said that the retaliatory sanctions imposed by the US and the European Union on Russia should deter anyone in China who was interested in emulating Russia's behavior. This statement was likely intended to address the concerns of US allies “ the Philippines and Japan “ who are concerned that China may seek to use force to take contested territory in the East and South China Seas. Â However, I am skeptical that China's President Xi Jinping would approve as risky a move as Vladimir Putin's invasion of Crimea. Were Xi to do so, he would face reductions in trade and investment that would undermine his efforts to pursue reforms to China's economy. Ultimately, I predict that Xi will not sabotage his most ambitious political project for such small returns.
President Xi has invested a great deal of political capital into signaling that economic reform is one of the central goals of his administration. After the 3rd Plenum, Xi announced a series of ambitious reforms – including financial liberalization, bank reform, and reduced control over the RMB – that he hopes will further liberalize and grow China's economy. Each of these reforms are intended to draw further FDI from wealthy countries like the United States and Europe, spur consumption among China's growing middle class, and preserve China's long-term economic growth. Xi has even placed himself at the head of the economic reform leading group, thus solidifying his connection to reform. Consequently, his own political fate is tied to the success or failure of reform.
Furthermore, a reckless attempt by China's military to take the Senkaku/Diaoyu Islands from Japan or the Spratly Islands from the Philippines would entail significant economic losses for China's economy. At a minimum, American and European investors would be spooked by the prospect of conflict in East Asia. At worst, the United States or the European Union could hit China with sanctions. After the moderate sanctions against Russian oligarchs, Russia's stock market lost over 10% of its value and over 3.4 billion dollars in total investment. Given the much greater size of China's economy, Chinese leaders can expect to lose even more. Â Many ChineseÂ leaders would just as soon avoid reducing government involvement in the Chinese economy and their arguments would be bolstered by an economic slowdown, irrespective of the cause of the crisis or the potential benefits for reforms. Â Were China to experience a dramatic economic slowdown, Xi might lose support for his plans and political clout within the Chinese Communist Party.
Given the strength of Xi's commitment to an economically centered agenda, it seems highly unlikely that he would risk any military action in the near future. To do so would not only undermine his own efforts at economic reform but also would risk destroying his political capital within the CCP and with the rest of the world. Instead, it seems more likely that Xi will try to avoid any dramatic disruptions to territory or personnel for as long as he is implementing reforms to the Chinese economy.
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