Chinese leaders are engaging in a dual strategy of “strike the mountain to shock the tiger” and “kill the chicken to scare the monkey.” The first strategy is an internal approach designed to take down a few powerful leaders to scare the lesser ones. The second strategy is an external approach in which leaders go after lesser powers to diminish the role or prevent the involvement of a greater power.
The internal strategy aims to remove formidable leaders who previously headed powerful institutions in key segments of the Chinese system, namely the state security apparatus, the military establishment, and the oil sector. These leaders pursued their own agendas and jockeyed for power at the highest levels before, during, and after the current leadership’s transition period that occurred nearly two years prior. The external strategy concerns the United States, the greater power, as well as Japan, the Philippines, and to a lesser extent, Vietnam, collectively referred to as the lesser powers. These observations lead to some salient questions. What are the major internal and external drivers of these ongoing strategies? Why are Chinese leaders pursuing these two strategies? And what is their overall intent?
What Are the Main Drivers of the Strategies?
The prime drivers of the leadership’s strategies consist of two internal factors and one external factor. The internal factors are best explained by the “crisis theory.” This means the leadership is attempting to manage domestic crises that pose challenges to the current leadership’s new authority and threaten the stability of the state. Presently, crises are unfolding in the economic arena, and, to a lesser extent now, the political arena. The external driver comprises ongoing structural changes occurring in the regional architecture and the security domain in particular; this regional transformation is driven in large part by the U.S. leadership. Both the internal and external factors have push-pull effects; meaning, China’s internal situation shapes its external policies and actions and, at the same time, the external situations feedback into China’s domestic system and affect the internal situation.
In the economic arena, the leaders are dealing with slowing economic growth. According to Charlene Chu, Senior Director of Fitch Ratings China, and a recent report produced by Fitch Ratings on Chinese Banks, “a key macro financial concern since the global financial crisis of 2008 has been the inability of China’s economic growth to get any lasting traction without considerable credit extension.” What’s more, “credit/GDP will have risen an estimated 87 percentage points in the five years ending in 2013, nearly twice that observed in other countries prior to financial sector stress.” The concerns “relate less to the level of credit/GDP – figures in the region of 200 percent are not unheard of in Asia or developed markets – and more to the very rapid rise in such a short time.”
The leadership however might be competent in managing a vast economy on the verge of a gradual economic slowdown by introducing policies to continue extending substantial credit and to liberalize capital controls in order to boost domestic consumption, for example. But these policies hold obvious risks. Extending more credit accelerates the rapid rise of credit/GDP levels in a short time, while lifting capital controls might make China vulnerable to capital flight. More crucially, the leaders are facing a potential crisis unfolding in the banking and finance sector and, as Chu has pointed out elsewhere, in the shadow banking system in particular. In this case, the leadership might be less capable of managing a sudden collapse of a major banking institution or of shadow banking institutions and the residual effects from such unexpected failures, such as social instability.
For the Chinese leadership, an economic slowdown or a banking and finance crisis, or some combination thereof, is dangerous on many levels. Conventional wisdom suggests the leaders predicate the Party’s legitimacy on economic development and growth, so a major economic setback or sudden crisis might undermine the new Party leadership’s authority. More importantly, however, is the unconventional wisdom. Every leadership since the 14th Party Congress perceives that economic weakness might make the state vulnerable to foreign influence and manipulation. Chinese history is replete with negative examples of how a debilitated Chinese economy made China more susceptible to foreign forces and resulted in considerable adverse consequences for the state and society. And when the CPC established the PRC in 1949 it staked its reputation on strengthening China against foreign influences and control as well as maintaining national sovereignty. For these reasons China’s economic reforms – in the banking and finance sector in particular – have entered a complex phase for the party, the state, and society.
Current economic reforms are made more complex because of the ongoing but seemingly diminishing complications in the political arena resulting from what appears to be the final stages of China’s leadership transition. Contrary to popular opinion that the current leadership has consolidated power rapidly, the leaders are still untangling and addressing an intricate internal faction. This faction consisted of influential individuals who occupied, and in some cases still occupy, powerful positions in major institutions, namely the state security apparatus, the state oil sector, and the military establishment. The matter is convoluted because the institutions are tightly connected: the security apparatus is connected to the military establishment; and the military establishment and the state oil industries have been closely linked in large part due to the Sino-Soviet split in the 1960s that resulted in oil shortages and imperiled China’s military. Because of this reality, unraveling the faction in its entirety and removing each and every player are unachievable objectives.
Complicating China’s internal situation are external developments. From the Chinese viewpoint, the principal external issue is the U.S. leadership and its strategy to transform the Asia-Pacific regional security architecture. The Chinese leaders are unclear about Washington’s intentions: Why would the U.S. aim to expand its military presence in the region and relocate approximately 60 percent of its air and sea assets to the region when the U.S. already has a preponderant regional military presence? What’s more, part of the strategy consists of supporting Japan and its rise to balance the rise of China. This development is a cause for concern among Chinese leaders because the logic of causality in the Japan-China equation is wrong, given that Japan in the 1950s started re-arming and in the early 1990s started transforming its Self-Defense Forces (SDF) into a national military. This combined with other factors compels the Chinese leaders to respond to demands from segments of the military establishment and, as I have pointed out before, the domestic audience, to take a hard line toward Japan particularly regarding national sovereignty and territorial issues.
The U.S. security strategy also includes providing diplomatic and military assistance to Vietnam and the Philippines, as well as supporting them in their disputes with China. At the same time the U.S. leadership has created, through existing and new alliances and partnerships, a de facto Asia Pacific Treaty Organization (APTO) consisting of Japan, South Korea, Taiwan, the Philippines, Vietnam, and Australia. This loose association excludes China and, from the Chinese side, the U.S. Asia-Pacific security policy looks more like an “every country but China” policy. As open source materials in China show, the aggregated implications of the security policy are clear: The U.S. leaders want to embolden regional leaders to directly challenge China as well as construct and strengthen multilateral and bilateral security arrangements to contain and encircle China. This security policy has consequences for the Chinese system because, as the system theory suggests, external pressures feed in to the domestic system and test the internal system’s capacity to process and adapt to these stresses. In the context of China’s current political and economic situation, this external condition might produce additional and unwanted internal stresses that warrant further changes to the country’s foreign and security policies.
What Is the Chinese Leaders’ Intent?
By pursuing the dual strategies of “strike the mountain to shock the tiger” and “kill the chicken to scare the monkey” the Chinese leadership most likely wants to attenuate the affects of internal and external stresses and at the same time stabilize the internal and external environments.
To this end, the Chinese leaders might continue containing the internal political struggle and consolidating their rule. The leaders will probably achieve these goals through the ongoing anti-corruption campaigns. These campaigns recently resulted in the removal of formidable leaders from power, such as Bo Xilai, Zhou Yongkang, and Jiang Jiemin, to name a few. And for obvious reasons the leaders might use internal directives to quietly remove from power or punish influential military leaders. For instance, the CPC Central Military Commission (CMC) in 2009 issued a directive establishing an accountability system in the military that holds senior military officers responsible for their conduct; the leaders, for example, might have used this directive to remove from power Lieutenant General Gu Junshan, the former deputy head of the PLA’s General Logistics Department.
Additionally, the leadership could continue to implement institutional restructuring and adjustment policies in key segments, such as the security apparatus, the military establishment, and the oil sector. In doing so, it would bring these institutions closer to the center. Late last year, for instance, the leaders restructured the security apparatus and established the State Security Committee (SSC). This reform brought the security apparatus closer to the center and at the same time expanded the center’s control over internal security.
This year the leaders might introduce reforms reducing the number of military regions and creating an integrated management; this potential reform could by driven by a desire to assert greater control over the military establishment as well as reflect the leadership’s view that the changing regional security environment now contains different security challenges threatening to China’s national security and interests. And the leaders may initiate structural adjustment and investment reforms in the state-owned petroleum sector as well as expand the supervisory power of the State Assets Supervision and Administration Commission (SASAC), which manages the State-owned assets, to exert more central control over this important state sector. The logic driving the strategy of “strike the mountain to shock the tiger” most likely is to continue to remove from power high-ranking officials who challenge the current leadership’s authority and agenda as well as to restructure institutions in order to dilute existing but diminishing elements of factionalism, consolidate power, stabilize the internal system, and pursue economic reforms.
Externally, the rather tenuous domestic situation compels the leadership to engage in strong diplomatic rhetoric and, as I see it, in “proactive defensive” measures toward the lesser powers in order to look tough on the outside. The leaders, because of domestic conditions and demands, must take tough stances on territorial disputes with Japan, an historical adversary, and the Philippines, a traditional tributary state. Through economic and diplomatic overtures and pressures as well as military maneuvers the leadership tries to persuade the Japanese and Philippine leaderships to shelve the dispute or reach some bilateral settlement on joint development (as it has achieved with Vietnam). But more importantly, the Chinese leaders want to keep the U.S. out of these bilateral discussions simply because the leaders perceive the matters to be bilateral affairs.
Meanwhile, China’s leaders want to stop Washington from inciting the lesser powers to take direct action against China. At the same time, they aim to increase the cost for lesser powers’ participation in a U.S.-led strategic encirclement of China in vital geographic areas like the East and South China Seas. Although China’s leaders strive to foil U.S. involvement in regional security issues and those involving the lesser powers in particular, they also want to mitigate the possibility of a direct confrontation or an escalation of a confrontation with the U.S. because the Chinese leadership recognizes that the U.S. remains technologically, economically and militarily superior. And perhaps most importantly the leaders are uninterested in jeopardizing U.S.-China economic ties, particularly at this critical junction in China’s domestic economic reform and new foreign policy push to promote economic diplomacy. By going after the lesser powers, the leaders probably hope to check not only an increased U.S. involvement in regional security issues, specifically targeting China and the lesser powers, but also a U.S.-led further transformation of the regional security architecture, such as unleashing an unchecked Japan. In taking this approach, the leaders most likely aim to reduce the feedback pressure emerging from the changing external regional security conditions on China’s internal system. And this most likely is the logic driving China’s external strategy of “kill the chicken to scare the monkey.”
J.M. Norton teaches international relations, foreign policy, and nonproliferation at China’s Foreign Affairs University in Beijing and has lived in China for 7 years. Dr. Norton has worked as an advisor to enterprises and governments on issues relating to China, Northeast Asia, and international strategic trade. The views expressed are those of the author and not those of CFAU.