Deciphering China’s Growth Trajectory: Q&A With Peh Shing Huei

The rise of China has been perhaps the single biggest event of the twenty-first century. Not only is it the world’s second largest economy, but it can now count a number of firsts in many areas, including having the world’s largest automobile market, being the biggest consumer of energy and more recently, overtaking the U.S. as the world’s largest goods trader.

But at the same time China’s breakneck growth has led to numerous growth pains, from huge levels of public debt to escalating pollution and increasing levels of dissatisfaction over corruption and wealth disparity. It is becoming clearer that China needs to find a new path to growth.

Yet for the ruling Communist Party, this presents a dilemma – to reform, it needs to loosen its grip – yet if it resists, its 64-year hold on power may be threatened. Peh Shing Huei had a ringside view of these tensions when he was China Bureau Chief for the Straits Times of Singapore from 2008 to 2012. It was during this seminal period he wrote ‘When the Party Ends – China’s leaps and stumbles after the Beijing Olympics.’

We sat down with Peh Shing Huei to discuss the key political and economic challenges facing China as its new government embarks on a generational blueprint of reform.

 

Q. In your book you emphasize the importance Beijing places on technological advancement. Why exactly is it such a high priority?

It is important to understand the historical context to China’s technological aspirations. They date back to the May 4th movement in 1919 and were borne out of frustration that China was unable to push its territorial demands after the First World War. This then started a century old desire to modernize a backward China, calling for both science and democracy.

Of course, the emphasis has been on science and technological progress. Among China’s various achievements in building cars and jumbo jets, its high-speed rail stood out. This was a field where China can claim to be a market leader and innovator, not a follower.

Unfortunately the Wenzhou high-speed train disaster in 2011 was a severe blow and this has dented the allure of China’s technology. For instance, it appears that the discussion to build a high-speed rail link between Singapore and Kuala Lumpur only seems to be considering Japanese rail technology. We have seen China can mass produce technology and make it much more accessible, but it has still to prove it can innovate on its own.

 

Q. Can you explain why China’s space program is so important? Is there real technological benefit here, rather than just delivering a feel good boost to the country?

I believe its main objective is about boosting national pride. Although China is moving very fast, having landed an unmanned spacecraft on the moon last December, what it is doing for its space program is still 40 years behind that of the West. But it has generated a huge amount of global media coverage, especially given the lack of activity on the part of the United States.

 

Q. You mention how China has proved uncooperative dealing with pollution problems in the past during bilateral talks. Does it recognize the scale of its pollution problem and do you expect much action in terms of policy response?

There is a real recognition that pollution is a growing problem and Chinese people are increasingly intolerant of it. From my own experience living in Beijing, pollution has clearly got much worse in the last three to four years. There is always a trade-off in the development cost – as in what does it mean to scale back growth. It still appears in the short term, that growth will take precedence over tackling pollution.

But at some point China will have to do something. It is an issue that has real potential to galvanize people across China. It affects people of different levels of income – rich and poor – their air is dirty. And China can solve it. As we saw during the Beijing Olympics and the Shanghai Expo, things can be cleaned up.

 

Q. China’s growth has had a huge impact on various commodities, including oil despite the pollution effects. Do you see a political will to curb some of this growth?

In the past few weeks we have seen some isolated policy initiatives where the northern municipality of Tianjin imposed a quota on new car licences in order to fight smog.  But overall it is going to be difficult to do much about China’s national dependence on oil, where it is already the world’s largest oil importer. Instead of curbing usage, China appears to be focused on ensuring its supply is protected. This has led to a number of international incidents in the South China seas in the past two years or so.

There are two elements to this. Firstly, China wants to ensure the freedom of navigation for supply from the Middle East where it gets most of its oil. Secondly, it is also concerned about securing access to oil and gas deposits below the sea. If China wants access to this resource, it wants to have a stake. Economic growth is still China’s priority and all competing demands are set aside for now.

 

Q.  You mention in your book, a comment by China’s Foreign Minister Yang Jiechi, that, “China is a large country and other countries are small countries and that is just a fact.”  Given this new assertiveness by China in the South China Sea, do you think it will be able to grow peacefully?

China recognizes it will have to grow peacefully to get richer. Will this be possible? It really depends on domestic forces. We have seen some unilateral aggressive moves such as the establishment of an air defense identification zone. No one is talking about war but there is talk of a limited action where China would like to teach one of the smaller countries a lesson. The problem is that it could escalate and spiral out of control. Overall, most money is still on China to grow peacefully.

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