China’s leaders set out their intention to push forward with policy reform following the Third Plenum. The full decision released on 15 November makes clear the aim to loosen constraints on the market, and suggests a dilution of state-owned enterprise influence. A new national security committee could also lead to greater policy integration between domestic security and international affairs.

The Third Plenum of the Chinese Communist Party’s 18th Central Committee took place in Beijing from 9−12 November. Initial reactions based on the communiqué released on the last day of the meeting were mixed. However, on 15 November the authorities published the detailed decision approved by the plenum, and an explanation given to the plenum by Party General Secretary Xi Jinping – in which he acknowledged major problems facing China.

These documents make the implications of the plenum much clearer. In sum, it offers a clear political signal that as China’s fifth-generation Party leadership enters its second year, it is intent on taking forward a ‘comprehensive deepening of reform’ across a wide range of issues. As an indication of the importance of this, a new high-level ‘leading small group’ will be established to coordinate and oversee this process. The decision spells out various new measures, and reiterates many which are already part of the government’s agenda.

More market in the economy

The most important material is on the economy, where the decision makes clear that the leadership envisages a ‘decisive’ role for market forces, and the establishment of ‘fair and equal’ competition in the economy. This will provide a guiding principle for policy-making over the coming years.

One of the ways of achieving this is to reorganize the functions of government. Here the decision reiterates the themes which the government has been working on since Premier Li Keqiang took over in March this year, namely reducing or removing the need for government approvals to businesses, freeing up the investment environment, and allowing businesses and the market to take the lead unless there is a strong reason for government intervention. Better governance is a wider theme of the decision, covering the judicial system and reforms to the party’s disciplinary organs which would clarify leadership and accountability in anti-corruption investigations.

SOE reform

A possible impediment to market reforms is the power of China’s state-owned enterprises (SOEs), and the original communiqué gave the impression that nothing much would be done about SOEs. However, the ability of these so-called ‘vested interests’ to stymie market reforms has been weakened by the targeting of a number of senior SOE-related cadres in the party’s latest anti-corruption campaign, which began at the end of 2012.

Further, the detailed decision suggests further reforms are in the offing. Although the relevant section of the document begins by restating the leading role for state ownership, a series of subsequent policy aims could serve to dilute it, such as ensuring equality in property rights protection and competition; developing mixed (state and non-state) ownership through cross-shareholding and bringing private capital into state-led projects; shifting from managing SOEs to managing state investments in enterprises; better supervision of SOEs which operate in natural monopolies; and removing administrative monopolies.

International affairs

The decision talks about further opening of China’s economy, but the vast majority of the issues covered in the decision are domestic in nature, and announcements such as a further relaxation of birth control policies have attracted most attention. Even the points on military and defense issues relate more to internal management than external capacity.

There was, however, one announcement which could have important implications for China’s foreign policy, which will be watched carefully outside China, the establishment of a ‘national security committee’. Xi said that this was being set up in response to external pressures to protect national sovereignty, security and development. He also cited internal pressures to maintain political security and social stability. It is too early to judge what the exact remit of this body will be, but it could lead to greater policy coordination and integration between domestic security issues and international affairs, at a time when China is playing a more important role across the international spectrum.

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On 3 March, 14 members of the UN Security Council denounced the 15th member, Russia, in unprecedentedly strong terms for the violation of Ukraine’s territorial integrity and use of military intimidation. Even China followed suit.

The Russian ambassador, Vitaly Churkin, who is used to getting his way in the Security Council, was dumbfounded. With surprising confidence, Churkin had asked for the emergency discussion over Ukraine. Each of his arguments was swiftly dismissed as inacceptable with regard to international law, or in bad faith. He got his way with a shameful nyet to Security Council resolutions on Syria, but not here.

The Russian state has been facing growing criticism from many governments and multilateral organizations since it launched an armed incursion into Crimea. NATO, the OSCE, the EU and the Council of Europe have condemned Russia’s resort to military force in Crimea. Sanctions are being discussed very seriously. And the economic and financial backlash is hurting the Russian currency, treasury and major corporations. The Kremlin has stumbled on international legal norms, which it wrongly believed it could interpret in its own free manner, with the support of China.

On 4 March, President Putin chose to express himself on Ukraine, at last. He looked nervous even though he was addressing a small and carefully selected group of young journalists for a ‘discussion-like press conference’. He told an odd story of the war he had threatened everyone with, but had never intended to wage. He repeated arguments that Churkin had already lost in New York the day before. And, with his never-abating desire to rewrite recent history, he condemned both Ukraine’s independence and the Orange Revolution of 2004.

He kept changing his mind about deposed Ukrainian President Viktor Yanukovich’s position. He first said that Yanukovich was ‘politically dead’, but later justified Russian military ‘protection’ of Crimea’s population with Yanukovich’s supposed written request to Moscow on 1 March. Such a pretext is less convincing to the US and Europe by the day, just like Yanukovych’s use of a hastily passed anti-terrorism law to attempt to justify his order to shoot at civilian protesters on the Maidan. Today, Yanukovich is a former despot on the run. The Kremlin’s propaganda has backfired.

Negotiation is now beginning to reassert itself over confrontation. The Russian and Ukrainian governments have just renewed a fragile communication line. Kyiv and Simferopol are setting up a commission to discuss a common strategy out of the military standoff, and the status of the autonomous republic of Crimea in the Ukrainian state. The war scare is not quite over, but it now looks clear that Moscow bears the responsibility for raising the stakes all the way to the brink of armed struggle, with civilians as potential victims. Most powers, together with international organizations, agree that Russia’s behaviour has been dangerous and that the new interim Ukrainian government is legitimate.

The priority, now that armed violence is abating, is quick and robust support to the Ukrainian economy and society. And, as a necessary corollary, Western governments will have to devote time to helping the Russian president save face and stay quiet behind the Kremlin walls.

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Professor John Ikenberry will examine the challenges to global order that are posed by the rise of China and current shifts in global power. He will argue that a liberal-oriented international order, as championed by the United States and Europe over the last century, remains the best hope for stability and growth in the 21st century.

Professor Ikenberry will contend that, while non-Western rising states seek greater voice and authority in the global system, they – perhaps surprisingly – still embrace the basic principles and institutions of liberal world order. Thus, the United States and Europe have powerful incentives to work together to reform the world’s governance institutions to accommodate new stakeholders and tackle problems of rising economic and security interdependence.

ASK A QUESTION: Send questions for the speaker by email to questions@chathamhouse.org or using #askCH on Twitter. A selection will be put to him during the event.

This event will be followed by a reception.

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The umbrella revolution in Hong Kong, precipitated by the announcement of the decision on how to hold the 2017 elections for chief executive in September, has now sprung several leaks. The passion of the initial protests which convulsed the centre of the city, and which even heavy downpours of rain could not dampen, has evaporated. Street protests only get you so far. The activists have to engage now in the delicate art of politics and compromise. This is where either the real achievements are gained or everything is lost. Street protests belong to the world of theatre. They only make a difference if they give impetus and energy to what happens afterwards, in the establishment of long term arrangements and real outcomes.

The political vision of the leadership in Beijing about the Hong Kong issue is pretty clear. The idea that China talked about 'One country, two systems' on the basis of each part of this balanced clause having equal weight is now over. It was an illusion. In fact, for the Beijing leadership, there was only ever one important part of that four word phrase – the first two words. 'One country' trumps everything. And the preservation of their idea of that one country and its best future is key. A Hong Kong which would be able to march off with a political system increasingly at odds with that presiding just over the border was never on the cards.

Now both the Hong Kongese democrats, and the outside world, are relieved of their illusions, how best to deliver a future for Hong Kong in an age when the airy empty promises of its old colonial masters, the British, are no longer relevant. First of all, there has to be a shift in thinking. Like it or not, Hong Kong figures as a province in the thinking of Beijing leaders around Xi Jinping – a special province, one that has a unique status, and significant value for them, but a province all the same. In that context, it lines up with all the other issues and problems they have to deal with, from restive western provinces to fractious and demanding central ones, to placating the demands for more freedom and space of boom towns like Shanghai or Guangzhou. Hong Kongese have to think about how they relate to all these domestic issues, and pragmatically accept that they are irrevocably tied to a system that has to handle these – its success or failure in the management of this is also their success or failure. Hong Kongese have a vested interest in the Beijing government. They have to start thinking of far smarter ways of being allies in this, rather than camping outside of it and resting on loud declarations of their privileges. A sense of entitlement inherited from the British will get them no traction in China anymore, where there are far larger priorities and battles going on.

Current Chief Executive C Y Leung has been a failure in almost every respect. He has proven poor at promoting Hong Kong’s interests in Beijing, the one place where he needs to deliver – and even poorer at delivering palatable messages back in Hong Kong. That Hong Kongese at least have some form of representation in 2017 is not much, but at least it is something. A good politician could have made something of this, messaged it differently, and used it as a basis on which to build. But Leung simply wasn’t up to this. It is hard to see him having a political life after 2017.  In many ways, he is already finished.

For the protestors, they now need to think deeply about their future strategy. They have made their point, and at least proved that the myth of Hong Kong’s apolitical population can be safely consigned to a trash can. Having politicized the city, they now need to argue, mobilize and build constituencies to support developments beyond 2017. Business is important here – the one constituency the Beijing leadership probably listen to and take seriously – so having an engagement strategy with them is crucial. Framing a demand for better quality leadership in the future is all-important here, because business, political and social constituencies all want to see this. If the Xi leadership in Beijing insists on a system where only two or three people can go through and then be voted on by the electorate, then the protesters at least have the negotiation space to demand far better quality candidates than the ones that have led the city since 1997 and its reversion to Chinese sovereignty. All three of the chief executives so far have been disappointments. Hong Kong now has the right to ask for a better deal, and insist that the people put forward are at least up to the job asked of them – something that the current incumbent evidently is not.

Does all this prove that Xi Jinping is a strong, forceful leader? Perhaps. Perhaps not. One could argue that a really strong leader would have had the courage and vision to let Hong Kong adopt a more open system in elections after 2017, and the confidence not to fear kickback from this into the mainland. What it does show is that, underneath all the heat and noise, Xi is as risk averse as his predecessor Hu Jintao, and has taken, at least domestically, a very safe option. If he had gone to Hong Kong and dared to explain directly to the people there what the Beijing government’s thinking was on this issue, that would have been even more impressive. At most, we can conclude that the Xi leadership is not radically different from their predecessors, but just aware of a vast menu of challenges they need to face domestically, of which Hong Kong is one of the least important. Beyond that, recent events over Hong Kong have shed little light into the real soul of the current Chinese leaders. At most it has proved what has long been known: that if you really want to see what they believe and what they want, then you cannot do that from Hong Kong but have to look at what they do over the border. In that sense, and only that sense, Hong Kong continues to occupy a unique position as the last place in China where its leaders can truly be themselves.

This article was originally published by IB Tauris.

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How is China’s growing international status likely to affect the future trajectory of global governance? Will it operate within the confines of liberal order, or attempt to substantively revise the existing global framework? The speaker will argue that China is now playing an active role in shaping the rules, norms, and institutions of global governance. She will offer some fresh insights into this new trend in Chinese foreign policy by placing a lens upon key global policy-making realms, including the maritime commons, where conflicts over international norms and national interests are most stark.

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Parag Khanna will draw on the themes of his new book, Connectography, to explain how the future of geopolitics lies less in determining national borders and territory but more in controlling infrastructure, supply chains and market access.

Khanna argues that new energy discoveries and innovations have eliminated the need for resource wars, global financial assets are being deployed to build productive infrastructure that can reduce inequality, and regions such as Africa and the Middle East are unscrambling their fraught colonial borders through ambitious new transportation corridors and power grids. He will contend that beneath the chaos of a world that often appears to be falling apart is a new foundation of connectivity pulling it together.

This event will be followed by a reception open to all attendees.
 

It is tempting to read China's refusal in this case to acknowledge the jurisdiction of the arbitral tribunal in The Hague as the defiance of an arrogant superpower that views itself as above international law. No doubt many in Manila, Washington and elsewhere are purveying this view. But there is more here than meets the eye.

For decades, Beijing has complained that the global order was forged in an era when China was weak and the rules of the game are rigged against it.

But this lament is more difficult to sustain in relation to the UN Convention on the Law of the Sea, which China helped negotiate in the 1970s and early 1980s. Beijing signed the treaty as soon as it was opened for signature in 1982 and ratified it in 1996.

The Philippines initiated this arbitration against China in 2013 as part of a long-running dispute over rights in the South China Sea, including over the Spratly Islands (known as the 'Nansha Islands' in China) and surrounding maritime areas. 

Under the treaty, China is not obliged to defend the case but this is no bar to proceedings and it remains legally bound by the award. From a legal perspective, its refusal to participate is thus a risky move, all the more so since the ruling is likely to have legal ramifications for China's highly charged maritime disputes with other neighbours such as Vietnam and Malaysia.

It is well known that the legal proceedings launched by the Philippines sparked a contest of ideas in Beijing. Behind closed doors, some Chinese international lawyers argued that China should prove its commitment to the international rule of law by vigorously fighting its corner in the arbitration. The defeat of these liberal voices is usually interpreted as an inevitable effect of the nationalists' grip on power under President Xi Jinping.

In a significant concession to those on the losing side of the argument, however, China published a position paper setting out its objections to the jurisdiction of the tribunal and formally conveyed this to the tribunal which treated it as ‘effectively constituting a plea on jurisdiction’.

This novel form of ‘non-participating participation’ must be seen against the backcloth of a strategic ambition by China to develop a greater mastery of international law. At an important meeting just two months earlier, the Communist Party called for China to strengthen its ‘discourse power and influence in international legal affairs’ and use legal methods to safeguard its ‘sovereignty, security and development interests’.

Our research team at Chatham House has been tracking impressive steps by China to realize this goal, including new government decision-making machinery designed to promote compliance with international law, a hiring spree of international lawyers and new advisory committee for the Ministry of Foreign Affairs, promotion of scholarship and efforts to show norm leadership especially in ‘new domains’ of international law such as cyber law, and a training programme to share growing Chinese international law expertise with the global South.

We know from Chinese colleagues that maritime disputes are a major impetus for this drive. For years, the Chinese government has fretted about its low capabilities in the international legal field, compared with other permanent members of the UN Security Council and regional rivals such as Japan. Now, impelled by the need to protect its strategic interests in the South China Sea and elsewhere, it is doing something about it.

It may seem paradoxical in light of its bullish attacks on the Philippines and even the tribunal itself, but China's boycott of the arbitration should also be seen as a manifestation of its low confidence in its own capacities in the realm of international law. Speculation is rife that the leadership lacks faith in its ability to convince the tribunal of the legal validity of its controversial ‘nine dash line’ demarcation of China's rights in the South China Sea.  

In the arbitration and otherwise, China has avoided clarifying the precise legal basis and implications of its ‘nine dash line’ claims while sponsoring a vast industry of academic studies to support its position.

In the meantime, China is playing to its strengths, including its deep pockets, in pursuing an extrajudicial approach. An audacious programme of land reclamation and militarization of atolls and escalating patrols and exercises in disputed territories is a clear effort to alter ‘the facts on the water’. And in recent months it has choreographed statements of political support for its South China Sea claims from a motley crew of states with economic ties to China.

While China's rejection of the South China Sea arbitration is true to form for a powerful state that, like its great rival the United States, is generally ill-disposed towards binding international dispute resolution processes, it is not inconceivable that this approach will give way when China becomes more confident in its ability to play and win at ‘law fare’, as we are already seeing in the context of World Trade Organization disputes. Until then, in time-honoured fashion, Beijing is biding its time, plugging its skills gap and hoping it can shake off mounting reputational damage from its petulant spurning of these proceedings.

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The arbitration between the Philippines and China on the dispute in the South China Sea is coming to an end. The Permanent Court of Arbitration is to issue its decision on 12 July. This meeting will discuss the notable points of the tribunal’s award and the next steps. 

Attendance at this event is by invitation only.

The ruling by an arbitral tribunal of five members based in The Hague was simple and devastating. It declares that ‘China’s claims to historic rights… with respect to the maritime areas of the South China Sea encompassed by the relevant part of the “nine-dash line” are contrary to the [The UN] Convention [on the Law of the Sea, UNCLOS]’. This is a result that Southeast Asia’s maritime countries have long sought. The way is now clear to resolve all the disputes in the region, if the participants choose to do so.

For decades, countries around the South China Sea lived under the shadow of a quasi-territorial claim that no one really understood. What did the U-shaped, nine-dashed line marked on Chinese maps actually mean? In 2009, the Chinese government attached a copy of the map to an official submission to the UN Commission on the Limits of the Continental Shelf and the region became alarmed. For the first time, it seemed that China was serious about asserting a claim to all the land and water inside the line.

On Tuesday that claim was dismissed as entirely incompatible with international law. Moreover, the Arbitral Tribunal ruled that not one of the Spratly Islands qualifies as an ‘island’. This ruling is at least as significant: it means none of the features in the archipelago are entitled to an exclusive economic zone. Theoretically it should now be simple to resolve all the maritime disputes in the southern part of the South China Sea. The Philippines, Malaysia, Brunei, Indonesia and the Philippines can, in principle, draw lines up to 200 nautical miles out from their coasts and agree compromises where they overlap. China is now irrelevant to this process because its nearest coastline is simply too far away.

All the 50 or so features in the Spratly Islands that are naturally above water at high tide would be granted a 12-nautical-mile territorial sea. The resulting settlement would resemble a Swiss cheese: large areas of exclusive economic zone measured from national coastlines punctuated by a few dozen ‘bubbles’ of disputed territory. This would not resolve the disputes about which country is the rightful owner of those ‘bubbles’ but it would settle the maritime disputes in the sea around them.

Of course, there are still wrinkles. Not least is the Philippines claim to the Malaysian province of Sabah in northern Borneo. This means that, for the time being, those two countries can’t settle the maritime boundary between them. They could, nonetheless, agree how far it projects offshore.

The bigger problem will be China’s attitude. Its response to the tribunal’s ruling has been angry but curiously misdirected. State media have focused their ire on questions of territorial sovereignty – even though the tribunal was barred from even considering this subject. China’s territorial claims to the rocks of the Spratly Islands are entirely unaffected by Tuesday’s ruling. There must be separate processes to resolve those questions.

China has many interests in the South China Sea – including defence, trade routes, fisheries and hydrocarbons – so it’s not surprising that it pursues whatever approach it thinks practical in order to protect them. However, the whole purpose of the UN Convention on the Law of the Sea was to create an international order that defended the rights of countries to exploit the resources off their own coasts without threat from other states further away. China was a full participant in the negotiations between 1973 and 1982 that created UNCLOS and, at that time, was a strong defender of the rights of coastal countries.

While it may feel that it has lost out from this week’s ruling, China has much to gain from a strong community of regional order in the South China Sea. Most Southeast Asian countries remain alarmed by China’s intentions − which is why, in the past few years, they have been strengthening their ties with the United States and increasing military spending. China’s wider interests would benefit from a de-escalation of this tension. Reassuring its neighbours would give them less reason to rely on the US.

Putting a new maritime order in place, based upon UNCLOS and commitments between China and the Association of Southeast Asian Nations, would be a major step towards this. It would also bring many associated benefits – not least cooperation to protect the region’s fish stocks, which are facing disastrous collapse. The first step is accepting the implications of Tuesday’s ruling.

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