Pushing the boundaries

FEW OUTSIDE CHINA have heard of Sansha, the country’s biggest city. Its administrative area is 150 times larger than Beijing’s, or roughly the size of Kazakhstan. Yet Sansha’s population is no bigger than that of a village and consists mostly of fishermen. Its government is on an island too small even to fit in an airport; the military airstrip stretches out into the South China Sea, where most of the city’s watery territory lies. It is a city only in name, set up to assert China’s claims in a vast swathe of sea encompassing some of the world’s busiest sea lanes. If Shanghai inspires awe, Sansha causes alarm.

The city was created (in bureaucrats’ minds, though probably not the fishermen’s) seven years ago and upgraded in 2012 to “prefectural level”. Its tiny land area comprises about 200 islets clustered in three groups that are bitterly contested. Two of the groups, the Spratlys (Nansha in Chinese) and the Paracels (Xisha), are claimed by Vietnam. The third, known as Zhongsha in Chinese, includes Scarborough Shoal, which is claimed by the Philippines but has in effect been controlled by China since 2012. Some of the Paracels were controlled by South Vietnam until 1974, when it was expelled after a battle with China. It was on one of these, Woody Island (pictured), that the party installed Sansha’s legislature, which duly elected a man likely to be the country’s least busy mayor.

An empty threat

Sansha is one of China’s most bizarre, and unsettling, attempts at city-building; an undertaking motivated by a desire to stake out territory and scratch the itch of nationalism. Some 2.6m of the South China Sea’s total area of 3.5m square kilometres are said to be under the city’s jurisdiction, giving access to a wealth of resources: an estimated 5m tonnes of harvestable fish and huge reserves of oil and natural gas. Parts of the vast area are also claimed by five other countries. The creation of Sansha was intended to rebuff them.

China’s spectacular urban-led growth in recent years has been changing the way the country behaves abroad in important ways. First, it has been fuelling a voracious demand for imports of commodities, from oil to iron ore. More than half of China’s supplies of both are now bought from abroad. As a result, much more of China’s diplomatic attention is being focused on cultivating relations with commodity-exporting countries, mostly in the Middle East, Africa and Latin America (several of them no friends of the West).

Second, China is now much more worried about the security of its supplies. It feels uneasy about leaving America to patrol vital shipping lanes such as those through the South China Sea. And third, China’s growth has given it much greater confidence, increased by the West’s economic malaise in recent years. The country is asserting itself more visibly, especially in nearby seas that have long been under America’s sway.

Mr Xi himself also happens to be a far more confident leader than his predecessor. He has not been afraid to take steps that raise tensions with American allies, notably Japan and the Philippines. This suggests to some in Asia that China has had enough of America as the region’s dominant power and is beginning to do something about it. Certainly the risk has increased that a small incident might escalate into a bigger conflict. For now, however, Mr Xi does not appear to be spoiling for a fight. China cosies up to America’s rivals, most notably Russia, but it also sees its economic interests, and hence its strategic ones, as closely linked with America’s.

It is developments inside China, in real cities, that should worry the outside world more. Urbanisation, especially over the past decade, has handed Mr Xi a daunting legacy. When his predecessor, Hu Jintao, came to power in 2002, urban China was far less of a challenge. The country was recovering well from the Asian financial crisis of 1997-98. Its north-east had been wracked by large-scale protests by workers laid off during the massive downsizing of the state sector from the 1990s, but Mr Hu kept the region largely quiet by directing dollops of cash to it. The internet was still the preserve of a small urban minority.

A harder place to run

The picture today is very different. Economic growth is slowing. As this special report has explained, rapid urbanisation has spawned two huge new social forces: a middle class and an underclass. Both are much bigger than they were a decade ago; both are suspicious of, and sometimes hostile towards, each other; and both often distrust the Communist Party.

Just in the past five years social media such as Sina Weibo and WeChat have connected hundreds of millions of Chinese in a conversation held in near-real time, much of it less than flattering about the party. More than 60% of urban residents now use the internet. The shoots of civil society are beginning to grow; small, scattered groups are working on everything from helping HIV/AIDS sufferers to cleaning up the environment. The security apparatus keeps close tabs on them but rightly worries that urban China may be changing too fast for it to keep up.

Double-digit growth for much of this century has not only made many ordinary Chinese better off but bestowed breathtaking riches on the families of some members of the political elite (including some of Mr Xi’s extended family). This has proved impossible to cover up. Mr Xi’s anti-corruption efforts risk causing strife among political clans eager to protect their privileges. He may be China’s strongest leader since Deng Xiaoping, but urbanisation has fuelled the growth of other, often countervailing, powers too: large state-owned enterprises that have gorged on property and commodities, local governments bloated by reckless borrowing to build ever bigger cities, and an internal security apparatus that now spends more than the army, most of it on policing cities.

Mr Xi and his team have correctly identified the need for a better approach to urbanisation: one that will help ease social tensions which have built up over the past decade, bring local governments into line and make big SOEs contribute much more to welfare and share more of their markets with the private sector. They have been making encouraging noises about the need to reform the iniquitous hukou system, strengthen farmers’ property rights and make cities more “liveable”.

But Mr Xi needs to go much further. The party still cannot bring itself to talk of a “middle class” (too unsocialist-sounding), much less acknowledge that its aspirations are more than just material ones. In January a famous actor, Huang Bo, introduced a new song about the “Chinese dream” on state television’s most popular show of the year, the Spring Festival gala. It was called “My Needs Are Modest”. The middle-class fantasy it described (without naming it as such) was an advance on the usual calls for selfless devotion to the nation, but it was still politically sterile: “I can earn money, and still have time to go to Paris, New York and the Alps. I stroll through the shopping mall and go skiing in the mountains. Days like these are so carefree.”

Optimists still wonder whether Mr Xi might eventually allow a little more political experimentation. At the party’s 19th congress in 2017, five of the Politburo Standing Committee’s seven members are due to step down, leaving only Mr Xi and Mr Li, the prime minister. Of the replacements expected to join them, at least two are thought to have liberal(-ish) leanings. But few observers are holding their breath.

In 1997 China’s leaders set a goal of making China “moderately well off” by 2020, just in time for the party’s 100th-birthday celebrations the following year. Judgment on whether this has been achieved will be passed while Mr Xi is still in office. As long as China’s GDP keeps on growing at about 7% a year (as is plausible, possibly even making China’s economy bigger than America’s by then), it will not be hard for him to tick off the economic targets. But the party has said that “moderately well off” also means a more democratic China, and one that respects human rights. Ignoring those aspects risks antagonising the constituency that has become most vital to sustaining the party’s power: the urban middle class. Mr Xi would do so at his peril.