Interesting Times: Forecasting Change in China

This text is a supplement to Interesting Times: China, America, and the Shifting Balance of Prestige, by Chas W. Freeman, Jr., published by Just World Books in January 2013. Other texts offered in this series can be accessed here.

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Chas Freeman writes:

In December 1978, during the Third Plenum of the Eleventh Central Committee Congress of the Communist Party of China, Deng Xiaoping took the helm in China. He quickly demonstrated his determination to take the country on a new course. At the plenum, he engineered approval of policies of reform and openness to the outside world that promised to set aside Maoist dogma and experiment pragmatically with eclectic borrowing of economic ideas, systems, and practices from the capitalist West. That same month, in a related decision, he agreed to normalize relations with the United States. The years that followed saw Deng use his opening to America to foster an increasingly radical transformation of the Chinese socioeconomic system. But that this was either what he intended or what would happen was far from apparent at the outset.

By 1978–79, when the United States finally accepted Mao’s People’s Republic as the legal government of China, the world had become accustomed to a poor, weak, unstable, isolated, angry, and internationally uncooperative China. It was hard to see past this familiar image of a country doomed to fall short of its potential. Then, too, Deng’s reforms took time to manifest. Few in China or outside it either understood or credited the seriousness of purpose he brought to the task of modernizing his country or the extent to which the policy changes he was enacting could midwife the birth of a post-Maoist China. Deng’s reforms broke the cycle of domestic instability and xenophobia that had characterized China for most of the preceding 140 years and throughout the three decades of the People’s Republic’s history.

For me, the realization that real change might in fact be in progress in China dawned during what seemed like a trivial encounter. I visited Beijing in the early fall of 1979, about nine months after Deng first launched his drive for modernization. I was then Country Director for China, in charge of directing and coordinating U.S. relations with China for the United States Department of State —a much more powerful role in the formulation and implementation of interagency policy than it is now). I was lodged at the Beijing Hotel, then the only hotel in the Chinese capital that came close to internationally acceptable standards. As the first home of the United States Liaison Office at “Peking,” in whose establishment I had participated in 1973, it was familiar territory. On the weekend, I walked the two blocks to the northeastern corner of Tiananmen. There I encountered a noodle vendor with a pushcart.

For anyone familiar with 1970s China, this was startling, something like running into a party of pole-sitters and goldfish swallowers doing the Charleston on the Washington Mall. China’s service sector, especially its culinary element (which had been one of the great adornments of Chinese civilization), had been swamped in a tidal wave of collectivization and left to drown in a sea of state-socialist commercial torpor. In the China mainland I had come to know since my first visit there in 1972, one ate at home, in dreary canteens in work units, in lackluster public cafeterias, in one’s hotel, or in one of a handful of showplace restaurants that had been preserved to impress visiting overseas Chinese and foreigners. There were no xiaochi, small restaurants serving street food, snacks, and light meals.

I like noodles, so I bought a bowl. I was the pushcart’s only customer. As I enjoyed my snack, I asked the vendor what “work unit” or commune he belonged to. He replied, “I am my own work unit.” Puzzled, I asked him what that meant. He said he was a geti hu, an individually registered enterprise. It struck me at once that, if individuals could now start and operate their own businesses in China, something momentous might be in progress. I began to watch for signs that the Third Plenum really had kicked off a revolution in China—and found more and more such indications.

On a dreary winter evening in Washington a few months later, the small part of the U.S. intelligence community dedicated to long-term forecasting convened a who’s who of America’s China watchers. The meeting took place at the Smithsonian Castle on the Mall. As an insatiable “end user” of analysis with a professional interest in China and adjacent areas, I attended. The subject was what China might be like in a decade or two. Most who spoke were clearly working off the unstated presupposition that, over the decades to come, China would continue to be poor, weak, unstable, xenophobic, and politically radical.

I was so taken aback by the contrast between the conventional wisdom in the United States and what I had seen, heard, and tasted in China that I went back to my office at the Department of States and spent the night writing a memorandum setting out my own guesstimates of what China might look like twenty years later. The result was this paper, “Forecasting Change in China: Where China Seemed to Be Going in 1980.” A few days later, I circulated the memorandum for discussion to various components of the analytical community. I hoped to stimulate them to make a serious and comprehensive assessment of the implications of the course Deng Xiaoping had charted at the Third Plenum.

My ideas were not well received; my suggestion of a serious relook at what was happening in China was pretty much ignored. At the CIA, I was welcomed with the politely cynical condescension that the analytical cognoscenti reserve for amateur dabblers in their arts. While the discussion was civil, the assembled analysts made it clear that they thought my estimates of possible Chinese industrial and agricultural growth were wildly inflated, that urbanization would not proceed at the pace I thought it would, and that the Chinese military would remain primitive and unable to project significant power beyond China’s borders. They insisted that I had vastly overestimated both Deng Xiaoping’s ideological innovations and their probable impact. (Among other things, they pooh-poohed my oral suggestion that Hong Kong and Macau might be among the territorial disputes the Chinese would seek to solve by the end of the century. I had omitted mention of this in writing out of concern that I might be mau-mau’d by the residual forces of British colonialism and their American auxiliaries.)

The only predictions I made that the Washington analysts—and the staff of the American Consulate General at Hong Kong, then the U.S. government’s premier China-watching establishment—did not question were several that turned out to be fundamentally wrong, especially my assumption that there would be a Soviet Union for China to be concerned about in the year 2000 and that China and the United States would remain obsessed with strategic challenges from it. (Everyone had by then forgotten the premise and purpose of the containment policy proposed by George Kennan in 1946. He saw it as a means to give the USSR time to collapse of its own infirmities, as it eventually did.) No one, certainly not I, could imagine the Cold War ending except in a nuclear exchange that would leave neither side standing. I also predicted that interest groups would arise alongside the Party. Instead, the Party recognized them for what they were and promptly incorporated them into itself. The competition over policies and resources in China therefore did not weaken Party dominance of the process as I had speculated it might.

Battered as I was by criticism, I was left to wonder whether I had not fundamentally misjudged what was happening in China. I was the only one who thought China might be changing fundamentally. The drab and lackluster realities of China in early 1980 and my speculations about what it might become were just too jarringly opposed for those focused on contemporary realities to absorb. In time, however, I proved to be more right than wrong. Ironically, my estimates of how far China could and would travel over the decades to come turned out to be gross underestimates, not exaggerations, of China’s potential progress. I got the direction and nature of change largely right—but neither the pace nor the details.


Forecasting Change in China: Where China Seemed to Be Going in 1980

February 1980

This was a memorandum from the author to the Assistant Secretary of State for East Asia and the Pacific, Richard Holbrooke, dated March 5, 1980, and titled “China in the Year 2000.” Some of it was incorporated into a June 1980 speech by Mr. Holbrooke that the author drafted for him: “China and the U.S.: Into the 1980s.”

Almost every prediction that has been made about China in the last eighty years has been confounded by events. The recent past has been especially turbulent. Not surprisingly, academic and government China-watchers are now very reluctant to venture predictions about the future. But the United States, which may this year complete the construction of a framework for U.S.–China relations that will last till at least the end of the century, cannot afford not to think about what China will become. This is particularly the case when, as at present, China seems to be at an historic turning point.

I urge a comprehensive study by the intelligence community. I believe there are a number of aspects of China’s future about which we can be relatively certain. Many factors are, of course, more speculative. In the large range of possibilities, I have set forth below what seem to me some reasonable guesses about China twenty years hence. I hope to start others thinking about the same questions.

The Economy in the Year 2000

China’s GNP in 1978 was about $444 billion. During the twenty years from 1957 to 1977, despite the nitwit economic policies and instabilities of the Great Leap Forward, the Cultural Revolution, and the ascendancy of the Gang of Four, China’s GNP grew at an average of over 6 percent. Agricultural growth was over 2 percent, slightly outpacing population growth. Industrial growth averaged 9.2 percent. There is no reason to believe the Chinese will do worse in future, despite popular disaffection, bureaucratic lethargy, and all the other obstacles they confront. (It would be difficult in the extreme to botch things as badly as they did from ʼ57 to ʼ77.) With abundant energy and natural resource reserves, a huge available labor force, and an economy still largely insulated from the vicissitudes of the world, China’s economy should continue to grow at least 7 percent per year, the rate in recent years. Such growth would yield a GNP of $1.97 trillion (1978 dollars) at the end of the century (more than that of the Soviet Union now), and per capita GNP of $1,640 (about the same as Japan’s in the early 1960s).

Chinese growth rates could, in fact, accelerate to the higher levels characteristic of other East Asian economies if current pragmatic policies continue. Were China to grow by 10 percent annually (less that Japan or Taiwan did at comparable stages of development), by 2000 its GNP would be $3.615 trillion and its per capita income would reach $3,010. This seems unlikely in the extreme, despite China’s bold economic liberalization, given the probable difficulties and occasional periods of instability that even a 7 percent growth rate would engender.

Growth will not be even in all regions. The Chinese are directing their own and foreign investment to the areas of the country (e.g., coastal areas and the South) that are already among the most advanced. The difference between the poorest provinces and regions (e.g., Tibet) and more rapidly modernizing areas in China proper will widen, not narrow. This too will cause strain.

Nevertheless, virtually whatever happens by the end of the century, China will clearly have the economic base necessary to project its power and influence to most areas of the globe. In economic terms, it will have become a major power.

Socio-Political Changes

Assuming continuation of current draconian population control policies, China’s population in 2000 should be about 1.2 billion. The labor force will have grown to around 760 million. A considerably greater portion of that labor force will live in the cities and be employed in industry. Over much of the past twenty years, the Chinese have sought to reverse the historic pattern of growth in other societies, preventing urbanization by exporting population from the cities to the countryside. This policy, always extremely unpopular in both the cities and rural areas, has now been all but abandoned. The prospects are now for rapid urbanization, as has occurred elsewhere in East Asia. Growing regional imbalances in living standards will lead to further massive internal migration away from border areas largely inhabited by minority nationalities, whose rate of assimilation will accelerate.

By the year 2000, it is likely that at least 30 percent of Chinese (about 360 million) will be urban, double the 15 percent (150 million) now. Such an increase in the urban population over the next twenty years would keep the rural population about constant at 840 million. Since food production should grow at a rate at least double (possibly triple) the rate of overall population increase in China during this period and light industry will continue to develop in rural areas, the living standard of China’s peasants should rise substantially, but at nowhere near the rate by which urban living standards will advance. The gap in urban and rural incomes, already great, will widen significantly. This will make the cities even more attractive places to which to move. The rate of urbanization should therefore constantly accelerate.

Aside from absorbing enormous amounts of capital, such urbanization brings with it a host of attitudinal changes and social problems. China’s crime rate, currently perhaps the lowest in the world, will soar. Chinese cities already have their first real experience of ethnic tensions, as minority-nationality peasants move in from the border areas. Present informal methods of social control will likely break down, leading to increasingly formal legal and bureaucratic measures. Popular demand for law and order in the cities will probably evoke increasingly autocratic measures. Social unrest—including strikes—may occasionally require army intervention or the temporary imposition of central control over China’s increasingly autonomous cities and provinces. But, for reasons set out below, I do not consider major nationwide disorder likely to occur.

City-dwellers are inherently less conservative, more demanding of change, and more outward-looking than peasants. They are also, by definition, more bourgeois (acquisitively individualistic). Although China’s revolution was based in the countryside, its leadership has been drawn largely from among urbanized Chinese. This will continue to be the pattern. As the gap between city and countryside widens and memories of agrarian nationalism recede in the minds of China’s leaders, they will become increasingly unsympathetic to the situation of China’s peasantry, approximating the traditional disdain of Chinese officialdom for “country bumpkins” and the “idiocy of rural life.” Peasant unrest, a constant feature of pre-revolutionary life, will recur. As in the Chinese past, it will be ruthlessly suppressed by armed force.

The Military of the Future

The People’s Liberation Army seems about to respond to traditional Chinese fascination with rank and status by restoring formal ranks and uniforms. As is usual after revolutions settle down, the military is driving strongly for a more professional, traditionally configured army, navy, and air force. Along with this goes a thirst for modern technology and gadgetry, deepened by new access to foreign colleagues and heightened awareness of the inadequacies of “people’s war” against modern armed forces.

In the year 2000, with a 2-trillion-dollar economy to draw on, China’s defense budget could easily match those of the U.S. or USSR at present.[1] Should the current percentage of GNP devoted to defense be maintained, it could in fact greatly exceed present American and Soviet defense expenditures. While major emphasis will be placed on defense of the national territory to the primary benefit of the army and the air force, the Chinese navy may well have evolved far beyond its current coastal defense role. The Chinese will be tempted at least to match the Soviet naval deployments in the Indian Ocean. Their navy will range the Pacific and could occasionally show its force in the Mediterranean, where the Chinese may seek to deploy ballistic missile submarines. Though qualitatively far behind U.S. and Soviet forces in the year 2000, the Chinese will, in short, field conventional forces outmatching all but those of the superpowers.

Chinese strategic forces, though likely modest in size and capabilities by comparison with our own or those of the Soviets, will have global reach. The Chinese will have an active manned space program closely connected with their military services, possibly including a moon landing.

Rising military prestige based on the status of the armed forces as, in many respects, the most modernized element in China and on their key role in the maintenance of internal order, coupled with the declining prestige and effectiveness of the Party (see below), will give the military a key role in setting foreign and domestic policy for China. But that role will derive more from the increasing autonomy of judgment of a professionalized institution than from deep political bases of support for individual commanders in China’s military regions, between which commanders will now regularly rotate. And the military will be competing with other emerging power groupings.

Chinese Ideology and Politics

Even as they proclaim their fidelity to Marxism–Leninism–Mao Zedong Thought, China’s leaders have radically redefined its content, creating an innovative brand of “Sinocommunism.” The overriding ideological and organizational goal is achievement of the four modernizations. The traditional communist dialectic has been abandoned and replaced with exhortations to employ inductive reasoning (“seek truth from facts”), pragmatism (“practice is the sole criterion of truth”), and experimentalism (“emancipate the mind from dogma”) in pursuit of modernization. Though labeled “Marxism-Leninism,” these ideas are about as compatible with that tradition as John Dewey is with Hegel. Just as European Marxists sought at the beginning of the century to harmonize the revolutionary socialist tradition with Western values such as democracy (and ultimately transformed the party of Marx into the party of Willy Brandt), Chinese communists now seek to harmonize their Marxist-Leninist tradition with Chinese values, such as social harmony and locally autonomous collectivism, under benevolent and remote central autocracy.

If deduction from revealed truth remains repudiated and replaced by inductive reasoning, pragmatism, and experimentalism—and there is every evidence that China’s new leaders are deadly serious about this—the consequences for the Chinese Communist Party and for Chinese politics will be immense. Strain is already very evident among mid-level cadres. After thirty years of relatively mindless and increasingly unenthusiastic execution of wildly shifting central directives, they are being asked to think and to take the initiative on their own. Few are willing to take the risk. Both for this reason and because of the decentralization and decommunalization of the economy, decision-making power has already begun to pass from Party hands in the critical areas of the economy and the military. These areas will, if current trends continue, become largely the province of experts, technocrats, and bureaucratic entrepreneurs. In order to achieve the Party’s goals, the Party must yield power to others.

Moreover, the new ideology strikes at the heart of Party legitimacy. The Party can no longer claim to be the embodiment of scriptural truth, which it alone is competent to interpret. “Facts” can best be analyzed and “truth” best proven by those with specialized expertise. If the test of whether or not policies are correct is whether or not they work, political debate in China will inevitably cease to center on grand questions of ideology. Rather, it will consist, as in other countries, of a series of wrangles over discrete policy questions. If people can experiment with policies not sanctioned or explicitly condemned by the Marxist-Leninist-Maoist scripture, then that scripture will have lost much of its force in daily life. In these circumstances, the Party’s best claim to ruling China will become the facts that it has power and that there is no political institution to take its place, not that it possesses moral superiority and infallible ideological judgment. (This is, in fact, what has happened to the Kuomintang in Taiwan.)

The Party apparatus is in for rough times. Poor performance by mid-level cadres will lead to repeated purges at that level, as competence and ability to deliver results are stressed by upper levels. The Party, created to exercise dictatorship over others, will be increasingly preoccupied with exercising disciplined dictatorship over its own membership. Meanwhile, decision-making power will continue to flow into other, demonstrably more capable hands.

The military, bureaucrats, and technocrats who will now join the Party as at least junior partners in the Chinese political process will, like their counterparts elsewhere, emphasize stability and predictability over almost everything else. The Party, which now has as its goal the achievement of steady economic progress for China, must also favor stability and predictability, because these are essential to attaining “wealth and power.” Since no one now wants or will want massive political disruption again in China, relative stability (in Chinese terms) is likely to be preserved but at the price of increasing bureaucratism.

Current policies stressing devolution of authority, decentralization of economic and social planning, and autonomy in foreign relations at the provincial and municipal levels open up the possibility of spectacular successes as well as serious mistakes by local leaders. Those who succeed will move up to take the place of others at the Center. But mistakes will be made and will lead to frequent local political squalls. Officials will rise or fall at the provincial and municipal levels, where China’s future leaders are being tested. Political instability will likely be confined largely to the localities.

Foreign Connections

The riskiest aspect of China’s economic development plans involves the opening up of the country to foreign and overseas-Chinese investment and tourism. Anti-foreignism, never far below the surface, has several times in this century briefly burst forth to become the dominant feature of Chinese politics. No one knows this better than China’s current leaders.

For a hundred years, all Chinese have agreed that China’s task is to meet the Western challenge by restoring China to its traditional wealth and power (“a modern, powerful socialist state”). Their debate has been about the extent to which Chinese values should be sacrificed to the modernization process. Some (the Boxers, the Gang of Four) have advocated no compromise at all. Others, including the early Mao, have thought that Western techniques could be used without eroding basic Chinese values. Still others (Deng Xiaoping, for one) have believed that China’s “national essence” would take care of itself (as Japan’s has) despite modernization based on eclectic borrowing of ideas from abroad. And a few have argued for the wholesale importation and imposition of a particular foreign model (Japanese, American, Soviet) to displace Chinese values, which they found embarrassing.

Deng Xiaoping and the “eclectic modernizers” are now firmly in command. They are self-confident nationalists who are prepared to risk both the erosion of some traditional Chinese values and the xenophobic reaction that such loss will inevitably entail. If forced to choose between speedy modernization with strain arising from a significant foreign presence and slowing economic progress, they will choose the foreigners and the strain. Chinese popular reaction will be firmly repressed; foreigners will be kept firmly under surveillance and control.

The scope of foreign involvement in China is bound to increase in any event. Chinese foreign trade, now about $30 billion annually (two-way), should grow to from $150 to $250 billion by the end of the century. Our own experience with a comparable level of foreign economic interaction shows that a population mass one-sixth that of China’s can remain remarkably oblivious to the outside world and its level of dependence on it. Once the novelty of their bizarre appearance wears off, China could absorb millions of foreign visitors annually on the standard trade and tourism circuit and scarcely notice.

Implications for the U.S.

By the end of the century, U.S. exports to China should average between $15 and $25 billion annually. Tourism should be substantial. This level of interaction between us will cause intermittent strain in which economic issues (such as protectionism) and consular complaints will predominate. On the other hand, as Chinese science and technology advance, our present donor/recipient relationship should shift toward a healthier reciprocity.

Nevertheless, the central focus of our relationship with the Chinese will remain, as at present, geopolitical, strategic, and multilateral affairs.

Strategic Interaction

In the year 2000, the Soviet challenge will remain the central concern of both the United States and China. Between then and now there may be periods of relative relaxation (expanded trade and cultural exchange; border delineation agreements) in Sino-Soviet relations, but the Chinese—with a long common border with a Soviet Union that feels threatened by even modest degrees of independence in its neighbors—will remain even more obsessed with Soviet expansionism than we are. The danger to the United States is thus not from Sino-Soviet reconciliation, but from the temptation to embrace the Chinese too intimately in the common cause of restraining Soviet ambitions. The risk is that naive American anti-Sovietism can be manipulated by the Chinese to ensure that the United States and its interests are more imperiled by Soviet reaction to Sino-American collaboration than are the Chinese themselves.

Our common concern about the Soviet Union will offer us ample opportunity for cooperation in pursuit of shared objectives. But the Chinese—useful, even essential, as their power and influence can be as a counterweight to destabilizing Soviet ambition—can never be our “allies,” if by that term we mean a nation which regards our best interests as its own. At best, China can and should be a limited strategic partner with which the United States and our allies cooperate regionally, in limited contexts, for limited ends (often over limited periods of time).

The limitations on Sino-American cooperation do not deprive our relationship of its utility. As the end of the century approaches, somewhat discomfitingly, we will find Chinese support more and more essential to preservation of a stable world and achievement of our international goals. Whether our own diplomatic style will prove sufficiently mature to handle this relationship is, of course, a key question. There is a risk that we may come to expect more from the Chinese than they can or will wish to deliver. Our interests will remain sometimes parallel; they will never be identical.

Regional Implications of Chinese Prosperity and Power

The Chinese are now in a position of relative weakness and vulnerability. They have therefore pragmatically refrained from immediate pursuit of their territorial claims—whether Taiwan, the Spratly Islands, or the Senkakus. With the sole exception of their seizure of the Paracels from Vietnam (which presented a unique target of opportunity), their approach has been to defer these questions while preserving their rights in principle for the long term.

The “long term” will come for these claims before the end of the century. Since we have security relationships with all affected countries (except Vietnam) but none of the specific areas in dispute has the least strategic significance for us, we would do well to consider carefully the implications of appearing to take sides in these disputes. By the end of the century, Taiwan may be loosely associated with the rest of China. The Paracel Islands are already in Chinese possession; the Spratly Islands will likely join them by the year 2000. The Senkakus, in which the rival claimants are China and Japan—both major powers—may remain unsettled until the end of the century. If so, they will remain a potential rallying point for anti-Japanese Chinese nationalism, as at present.

The members of ASEAN will, over the next twenty years, each make their separate peace with China. Neither the United States nor the Soviet Union can sustain sufficient influence in Southeast Asia to serve as a counterweight to a China reimbued with wealth and power. Japan might, but won’t—except in economic terms, in which it will dominate the area for the remainder of the century.

Multilateral Affairs

One has only to consider the growing power of China in politico-military and economic terms to realize how very important a role the Chinese will play in multilateral diplomacy in the year 2000. We also have an enormous stake in cooperation with the Chinese to address “global issues.” (Consider the environmental implications of insouciant Chinese industrialization to a $2-trillion-plus-level GNP in terms of environmental impact on the Northern Hemisphere, world energy, and natural resource management alone.) Fortunately, we are already beginning to have some success at drawing the Chinese into discussion of these issues. They will increasingly influence our China policy in future.


In the year 2000, with a GNP as great as our own today, China will have the politico-economic base to project its power and influence throughout the world. Though still not a “superpower,” it will be a great regional military power, with strength rivaling that of the U.S. and USSR in the Eastern Hemisphere at present. Through most of the next twenty years, except with respect to existing minor territorial disputes with its East Asian neighbors, Chinese power and influence will be exercised in support of the geopolitical status quo, with the Soviet challenge remaining China’s idée fixe. Internally, China will be an unappealing autocracy, with power shared by the Chinese Communist Party and increasingly powerful military, economic, and technological elites stressing stability and economic progress over “revolution.”

U.S. relations with the modern, powerful, socialist Chinese state will be characterized by basically arm’s-length cooperation. In the East Asian region, China will be politically and militarily dominant; it will share predominant economic influence with Japan. China will have settled its territorial claims against its Southern and Eastern neighbors on terms favorable to it, but not always by peaceful means. Multilaterally, China should begin to play a constructive role in addressing “global issues,” especially if U.S. diplomacy over the next few years points it in that direction.

[1] In 1980, the U.S. defense budget was about $300 billion.

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