2018 cLS Digest
The following are selected essays submitted by 2018 Duke-UNC CLS delegates. This page will be updated with more submissions as we approach the 2018 conference.
HANNAH CORN (GEORGE WASHINGTON UNIVERSITY)
In the past two decades, China has undergone one of the largest economic and social shifts on the modern international scene, growing from one of the poorest countries to the seventh largest in the world by 2000. As China is faced with a large cultural shift ahead, the need for more people-centered policies and approaches is growing. China is a highly dynamic country whose engagement and importance in global affairs is ever-increasing, and observing the interplay between the Party and its population’s desire to increase their social mobility is an emerging area of focus with socioeconomic implications far outside of China. China’s growing internal migration and social stratification, in contrast with its rapid economic engagement on the international stage, serves as a point of high diplomatic interest and concern for how long this balancing act will continue, and what it will take to sustain it.
Beginning in 1958, in order to ensure an adequate supply of low cost labor and limit mass migration to cities, the National People’s Congress implemented the hukou registration system, thus restricting Chinese individuals to their respective provinces as either a rural or urban workers. After 1978 and under the paramount leader Deng Xiaoping, the emergence of dynamic commodity, labor, and capital markets paved the way for an evolving class structure and market economy, as Chinese citizens continued to seek greater opportunity. Today, China’s National Statistics Bureau estimates that nearly 269 million internal migrant workers travel to coastal cities and special economic zones. Despite the incentives of increased social mobility, rural migrant workers often face the negative effects of mass migration, rapid urbanization, and limited resources. For those possessing a rural, non-local hukou, accessing local education, housing, and employment in urban centers can be near impossible. The Chinese government is actively implementing policy reforms aimed at solving rural migrant worker inequality. In 2006, the State Council required local governments to ensure equal opportunities and rights to migrant workers. Additionally, under China’s 2014 New Urbanization Plan, Premier Li Keqiang announced the Party’s goal of registering 100 million rural citizens with local, urban hukous by 2030, implementing “people-centered” reform policies aimed at increasing all Chinese citizen’s social mobility.
As China continues to pursue both state and collective markets and policies, it is important to develop an acute understanding of the motivating factors behind this great migration and its implications for both the Communist Party’s own political trajectory and other governments facing internal migration issues. How are hybrid governments, such as China’s, dealing with displaced populations and large migrations? How can other governments, such as the U.S., learn from China in addressing the similar issue of illegal immigration? China is a country caught between capitalism and communism, traditional hutongs and large skyscrapers, and its internal human capital and global goals for the future. Migrants are an implicitly important population to achieving China’s domestic and international aspirations, and addressing the growing disparity of its population internally will help craft cooperative and comprehensive approaches, thus mutually reinforcing China’s increasing global engagement.
CHRISTIAN MARTINDALE (DUKE UNIVERSITY)
There is no doubt that the post-Deng brand of Chinese socialism is a powerful tool for economic development. China’s almost unprecedented speed of growth is due in large part to the power of the central government to make unilateral and long-term economic policy decisions such as massive infrastructure investments. Western democracies often find it difficult to enact these types of future-focused policies because of the short-term focus engendered in politicians by election cycles, giving Chinese exporters an inherent advantage over those in the U.S. and Western Europe. However, in recent decades the Chinese government has begun to leverage this centralized economic policy power in a more aggressive way, one that many business experts view as harmful to the global economy. This new type of economic doctrine involves Beijing subsidizing Chinese state-owned enterprises or domestic companies, typically through energy and raw material subsidies or through favorable tax policies, in order to drive down the price of the Chinese company’s exports. As a result, the Chinese company is able to export at a price that foreign companies without the benefit of such government assistance are unable to compete with, therefore driving existing companies out of the market and disincentivizing entry into the market.
In the early 2000s, these subsidies have been applied most heavily in industries China has defined as “heavyweight industries”, referring to industries such as machinery and metal manufacturing that China views as essential to keep under government control. However, in recent years China has begun to apply these tactics to various other sectors, most notably in the medical technology industry. While this tactic has certainly proven effective for increasing Chinese market share in industry, it has negative ramifications for the global economy as a whole. This is because disincentivization of new entry into industries perceived as likely to be attacked by Chinese subsidies creates further market inefficiencies. Since foreign enterprises have little hope to compete with a government-subsidized Chinese company, they are incentivized to leave or decline to enter a market, even if entry is currently profitable. Furthermore, preexisting companies in targeted markets live in fear of being the next ones under the crosshairs of the Chinese government, and have little recourse if China decides to step into their industries. Economic doctrine states that manipulating or restricting free entry and exit from a market create overall loss in the market, so these subsidies benefit China at the world’s expense. Although in recent years some foreign governments such as the U.S. have begun to explore higher tariffs on Chinese exports as a way to combat this behavior, these increased tariffs come with their own slew of problems, including more deadweight loss and higher costs for U.S. consumers. Despite growing international anger at this perceived “cheating”, China currently has little incentive to abandon the subsidies due to their proven effectiveness. If foreign governments want to stay on a level playing field with Chinese exports, they will have to either find a novel method of incentivizing China to “play by the rules”, or learn from China’s example and begin subsidizing domestic companies themselves.
LUKE WALKER (BAYLOR UNIVERSITY)
A recent development in Chinese cybersecurity law contains a controversial stipulation: foreign companies are now required to store their data within China, all of which is subject to random checks. This regulation, while reasonable in a more centrally-managed economy, is incompatible with many western economies, controlled by a more laissez-faire system. Operating in China offers companies access to over a fifth of the world’s population, but the new policy allows the Chinese government access to a company’s secrets. Moreover, foreign companies are often forced into a joint venture with a Chinese company, thus lending the CCP full knowledge of that company’s private information. Non-Chinese companies claim these requirements have led to an influx of intellectual property theft. The New York Times reports U.S. companies lost a total of $300 billion last year alone from Chinese companies stealing software and design. In response to these allegations, the Trump administration authorized an investigation under the Trade Act of 1974, granting the U.S. Trade Representative probing power into a nation’s unfair trade practices. If pursued, the investigation will focus on China’s suspected corporate espionage. Beijing has denied all allegations, but U.S. officials have voiced their support. Prior to the investigation, however, major influencing factors must be scrutinized, as the investigation could jeopardize the health of the U.S.-China relationship. Undoubtedly, the two nations’ political economies will affect the perception of any investigation. While the United States economy is driven primarily by a free market, not directly tied to national politics and international relations, China’s economy, marked by a number of state-owned enterprises, is. Thus, the Chinese government is more prone to perceive the investigation as having political ramifications, while the U.S. is likely to ascribe the move to economic accountability.
The U.S.-China relationship is the largest determining factor in the 21st century for the peace and prosperity of the world. It is certainly important for the nations to reconcile differences. However, with respect to intellectual property, a more honest reality ought to be considered: the United States and China disagree. The U.S. economy was created based on free market principles. China’s experience with these ideals is a story of western imposition and colonization. Since 1979, the two superpowers have had ample experience to understand the other’s economic and governmental systems. Decades of experience reveal the two nations simply disagree about the role of government in the economy. This does not make either nation’s economy superior to the other: China’s economic boom over the last 30 years is indicative of this reality. The means to a fruitful relationship, then, must lie in compromise. If the U.S. is fixed on China recognizing the United States’ proposed level of intellectual property, the Trump administration must be willing to concede in a similar respect, such as lowering the current 266% tariff on Chinese steel. While neither nation will be fully satisfied, it is essential for both the U.S. and China to work together to achieve their common economic objective and secure a more prosperous and peaceful world.
BENJAMIN ROBERTS (UNC-CHAPEL HILL)
Arguably, the Sino-African political-economic relationship is a case of dependency theory: a rich country exploiting the periphery for its resource wealth and large markets. However, in “Changing China, Changing Africa”, Davies et al. claims that this relationship is not static. As China’s economy transitions from reliance on manufacturing exports to domestic consumption, Chinese industrial firms will outsource production (Davies et al. 180). Due to existing political-economic ties, long-term Chinese investments in infrastructure and cheap pools of labor, African countries may be the beneficiaries of this outsourcing. This review argues that although Chinese firms may in part relocate to African countries, they will also move to more suitable environments in Southeast Asia and to robotics-based manufacturing within China itself, thus limiting economic gains in Africa. Therefore, the decrease in China’s demand for raw materials may harm rather than benefit the economic development of African countries. Trade between African countries and China is largely characterized by African exports of resource commodities (mostly energy and minerals) and Chinese exports of light manufactured goods. Chinese loans and investments have predominately been backed by state-owned policy banks and therefore have been strategically targeted at resource-rich countries and improving the infrastructure necessary to extract these resources (Davies et al. 183). Furthermore, Chinese firms and workers largely carry out these infrastructure projects (Davies et al. 185). Thus, many argue that China has hindered the development of local manufacturing in African countries while extracting resource wealth with little benefit to regional economies. Davies et al., while acknowledging these trade issues, contends the relationship is adapting with the Chinese economic model.
As China responds to rising wages and slowing productivity gains by increasing its reliance on the private-sector and domestic consumption, low-value Chinese industrial firms will move their production abroad (Davies et al. 187). African countries may be attractive destinations for Chinese outsourcing due to their cheap labor, abundant raw materials and “proximity to global markets” (Davies et al. 190). While resource-based economic activities can coexist with limited infrastructure and poor governance, Chinese industrial investment in the continent would incentivize efforts by Chinese companies and Sino-African governments to promote better governance practices and more diverse infrastructure projects. Firms relocating their production to African countries would require legal protection of investment and sufficient human capital. New infrastructure would be necessary to transfer resources from extraction points to industrial hubs, enable large-scale provision of energy to factories and establish accompanying telecommunications networks (Davies et al. 192). Thus, China’s attempt to transition to a more advanced industrial country may develop Africa, putting it on the same course as countries such as Vietnam.