Thursday, November 7, 2013

Rewalking the Path to Chinese Political Reform through Foreign Investment

A version of this essay first appeared in Asia Policy Point's  Asia Policy Calendar, November 3, 2013. The authors are Research Interns at APP, Mr. Michael Sutherland (Nebraska Wesleyan University) and Ms. Jessie Ding (Lock Haven University of Pennsylvania).

There are many expectations for China’s Third Plenum Meeting of its 18th Party Congress. During the November 9-12 meeting, President Xi Jinping is expected announce new, “liberal” economic reforms to accelerate the country’s internationalization. These financial and structural adjustments are unlikely to be matched on the political side. Nevertheless, as China engages in this “Opening Up 2.0,” its success can be used by the international community to exact more accountability from the Chinese government on human rights and political liberties.

Economists agree that the Chinese growth model needs to be reworked if it is going to remain sustainable. Brookings economist David Dollar notes: “On the demand side there needs to be a shift from investment to consumption…. Opening up to foreign investment and foreign trade is an important part of that agenda.” Xi’s reforms are expected to include a loosening of state controls and regulations to encourage foreign direct investment. As part of this opening to foreign investment, the United States and China have begun discussing the possibility of a Bilateral Investment Treaty (BIT). China may also seek membership in the TPP, further opening itself to negotiations with the United States.

Chinese direct investment in the United States has expanded tremendously over the past five years, from $879 million in 2008 to $12.2 billion in 2013. On October 31st, President Barak Obama issued a statement that his administration is committed to bringing more foreign investment to the United States. Given how much the Chinese already invest in the United States and the amount of capital they have to spare, it seems likely that each of economy will become more intertwined.

In contrast, the Xi government has tried to restrain civil society and liberties. Over this summer, the government  began enforcing what is known as the “Seven Speak-Nots” (七不讲). This policy prohibits the media, intellectuals, and university professors from discussing certain subjects in public. These include freedom of the press, civil society, and past mistakes of the Chinese Communist Party. In October Xia Yeliang, a professor at Peking University, was dismissed for discussing the internet as a tool for political reform. Mr. Xia reportedly has ties with the New Citizens’ Movement, a group of activists and academics in China who organize public meetings to call for political reforms.

Guo Feixiong, a leader of the New Citizens’ Movement, was was detained in Guangzhou on August 8th and formally arrested on October 17th. At an October 29th House Foreign Affairs, Subcommittee on Africa, Global Health, Global Human Rights, and International Organizations hearing “Guo Feixiong and Freedom of Expression in China,” Mr. Guo’s wife and daughter testified alongside prominent Chinese civil rights activists Reverend Bob Fu and Chen Guangcheng. Each urged the Obama administration to appeal publicly to the Chinese government to release Guo Feixiong.

Both Reverend Fu and Mr. Chen suggested further measures that the Obama administration should press while negotiating with the Chinese government. Mr. Chen urged the United States government to commit to making the annual Human Rights Dialogue with the PRC an event that is on par with and connected to the annual Strategic and Economic Dialogue (SED). Top officials from each government attend the SED, including the U.S. Secretaries of State and Treasury. However, the Human Rights Dialogue is conducted behind closed doors and involves mostly lower-level officials, allowing China to dismiss the event as insignificant. Reverend Fu felt that the HR Dialogue should be broadcast live, in order for the public to hold Chinese officials accountable for what they say.

China’s new focus on foreign investment possibly provides a political environment similar to when the country was trying to gain its Most-Favored-Nation trade status. China’s willingness to abide by international norms was a major factor in its success. The international laws and regulations needed to expand investment, therefore, should also come with conditions. The bilateral investment treaties can include stipulations regarding human rights and corporate social responsibilities.

The results of the Third Plenum may provide an indirect opportunity to influence political reform in China. Societal responsibilities and accountability are now at the core of today's global financial transactions. China's leadership wants something from the international community—market access and respect—that should not be given lightly. Human rights can and should again be tied to investment agreements and market access.

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