China, India and the rise of the ‘civilisation state’

This illiberal idea is also appealing to some on the American right

Gideon Rachman



The 19th-century popularised the idea of the “nation state”. The 21st could be the century of the “civilisation state”.

A civilisation state is a country that claims to represent not just a historic territory or a particular language or ethnic-group, but a distinctive civilisation. It is an idea that is gaining ground in states as diverse as China, India, Russia, Turkey and, even, the US.

The notion of the civilisation state has distinctly illiberal implications. It implies that attempts to define universal human rights or common democratic standards are wrong-headed, since each civilisation needs political institutions that reflect its own unique culture. The idea of a civilisation state is also exclusive. Minority groups and migrants may never fit in because they are not part of the core civilisation.

One reason that the idea of the civilisation state is likely to gain wider currency is the rise of China. In speeches to foreign audiences, President Xi Jinping likes to stress the unique history and civilisation of China. This idea has been promoted by pro-government intellectuals, such as Zhang Weiwei of Fudan university. In an influential book, The China Wave: Rise of a Civilisational State, Mr Zhang argues that modern China has succeeded because it has turned its back on western political ideas — and instead pursued a model rooted in its own Confucian culture and exam-based meritocratic traditions.

Mr Zhang was adapting an idea first elaborated by Martin Jacques, a western writer, in a bestselling book, When China Rules The World. “China’s history of being a nation state”, Mr Jacques argues, “dates back only 120-150 years: its civilisational history dates back thousands of years.” He believes that the distinct character of Chinese civilisation leads to social and political norms that are very different from those prevalent in the west, including “the idea that the state should be based on familial relations [and] a very different view of the relationship between the individual and society, with the latter regarded as much more important”.

Like China, India has a population of well over 1bn people. Theorists for the ruling Bharatiya Janata party are attracted to the idea that India is more than a mere nation — and is, instead, a distinct civilisation. For the BJP, the single most distinctive feature of Indian civilisation is the Hindu religion — a notion that implicitly relegates Indian Muslims to a second tier of citizenship.

Jayant Sinha, a minister in Narendra Modi’s government, argues that modern India’s founding fathers, such as Jawaharlal Nehru, mistakenly embraced western ideas such as scientific socialism, believing them to have universal applicability. Instead they should have based India’s post-colonial governance system on its own unique culture. As a former McKinsey consultant with a Harvard MBA, Mr Sinha might look like the archetypal bearer of “globalist” values. But when I met him in Delhi last year, he was preaching cultural particularism, arguing that “in our view, heritage precedes the state . . . People feel their heritage is under siege. We have a faith-based view of the world versus the rational-scientific view.”

Civilisational views of the state are also gaining ground in Russia. Some of the ideologues around Vladimir Putin now embrace the idea that Russia represents a distinct Eurasian civilisation, which should never have sought to integrate with the west. In a recent article Vladislav Surkov, a close adviser to the Russian president, argued that his country’s “repeated fruitless efforts to become a part of western civilisation are finally over”. Instead, Russia should embrace its identity as “a civilisation that has absorbed both east and west” with a “hybrid mentality, intercontinental territory and bipolar history. It is charismatic, talented, beautiful and lonely. Just as a half-breed should be.”

In a global system moulded by the west, it is unsurprising that some intellectuals in countries such as China, India or Russia should want to stress the distinctiveness of their own civilisations. What is more surprising is that rightwing thinkers in the US are also retreating from the idea of “universal values” — in favour of emphasising the unique and allegedly endangered nature of western civilisation.

Steve Bannon, who was briefly chief strategist in the Trump White House, has argued repeatedly that mass migration and the decline of traditional Christian values are undermining western civilisation. In an attempt to arrest this decline, Mr Bannon is helping to establish an “academy for the Judeo-Christian west” in Italy, designed to train a new generation of leaders.

The Bannonite argument that mass migration is undermining traditional American values is central to Donald Trump’s ideology. In a speech in Warsaw in 2017, the US president declared that the “fundamental question of our time is whether the west has the will to survive”, before reassuring his audience that “our civilisation will triumph”.

But, oddly enough, Mr Trump’s embrace of a “civilisational” view of the world may actually be a symptom of the decline of the west. His predecessors confidently proclaimed that American values were “universal” and were destined to triumph across the world. And it was the global power of western ideas that has made the nation-state the international norm for political organisation. The rise of Asian powers such as China and India may create new models: step forward, the “civilisation state”.

China’s Stimulus Muddle Deepens

Beijing is going to find it increasingly difficult to achieve its twin aims of cutting debt while keeping growth on track

By Nathaniel Taplin


A Chinese military conductor is hit by a camera flash as he instructs his music band members during a rehearsal for the opening session of China's National People's Congress at the Great Hall of the People in Beijing, March 5. Photo: Andy Wong/Associated Press



Li Keqiang, China’s premier, has a few ideas for 2019: keep overall debt growth in check, cut taxes, accelerate government bond issuance, and boost lending to small businesses.

If that sounds like a lot to ask—and contradictory—it is.

Some of these goals will fall by the wayside. Getting banks to lend more to small businesses without overall credit growth accelerating will be near impossible. And significantly higher government debt sales will require more banking system liquidity to keep rates from rising and further damaging growth. That means more monetary easing: probably not a 2015-like flood, but definitely a rising tide.

Beijing rightly recognizes that its two previous rounds of stimulus in the past decade, funded largely off the government’s books through state bank loans to state-owned enterprises, created a lot of bad debt for the buck. This time, the jolt is coming more from Beijing’s balance sheet: The government’s annual work report, delivered by Mr. Li on Tuesday, highlighted business tax and fee cuts totaling nearly 2 trillion yuan ($298 billion) for 2019 among other measures designed to keep Chinese growth between 6% and 6.5% this year. It also gave local governments a 2.15 trillion yuan quota to issue municipal “special purpose bonds” that are often used for infrastructure funding—a nearly 60% higher quota than for 2018.

After Hanoi: North Korea, the US and Japan

As the United States alters its strategy, the others will follow suit.

By George Friedman

Releasing the Renminbi

China’s authorities are committed to advancing the shift toward a market-driven economy, with a fully flexible exchange-rate regime. That means that, while it can credibly commit not to keep the value of the renminbi artificially low, it must reject US demands to keep the exchange rate stable against the dollar.

Yu Yongding





BEIJING – The United States is reportedly pushing China to agree to keep the value of the renminbi stable, as part of a deal to end the trade war between the world’s two largest economies. It is a demand that China must think twice about before accepting.

The renminbi was undoubtedly undervalued for many years, including through a peg to the US dollar that was established in 1998. A undervalued renminbi was an important contributing factor to the trade surplus that China has run consistently since 1993, when its per capita income stood at just $400. In other words, even when China was a very poor country, it was exporting capital to the rest of the world, especially the US.

Though running a trade surplus benefits some sectors of the economy for some period of time, it is unclear that it benefits the economy as a whole in the long run. Still, two decades of maintaining a current-account surplus (which includes trade), together with a capital-account surplus (fueled by large inflows of foreign direct investment), enabled China to accumulate huge foreign-exchange reserves and a large stock of FDI. As a result, though China is one of the world’s largest creditors, it has run an investment-income deficit for more than a decade.

But, over the last 15 years or so, China has been working to correct its trade imbalances. Since 2005, when the renminbi’s dollar peg was eliminated, it has appreciated steadily. By the end of 2013, its exchange against the dollar had strengthened by 35%. In the same year, China’s current-account surplus fell to just 2% of GDP, from its 2007 peak of 10.1%.

Moreover, since 2014, when looser capital controls left China’s capital account more responsive to broader changes in the global economy, the country has started to run significant capital-account deficits from time to time. Sometimes, those deficits are large enough to put the entire balance of payments in deficit, despite the trade surplus.

On August 11, 2015, China took a major step to boost exchange-rate flexibility: instead of setting a daily midpoint for the renminbi independently, the People’s Bank of China began basing the midpoint on the previous day’s closing prices. Initially, there was only slight downward pressure on the renminbi in the foreign exchange market. But the poorly timed move ended up fueling expectations of currency devaluation, spurring a surge in capital outflows that drove down the renminbi’s value further.

Some – including former US Federal Reserve Chair Janet Yellen, in a recent interview – have suggested that China devalued its currency that summer, in order to offset the effects of an appreciating dollar on the economy’s international competitiveness. The truth is that China, precisely because it feared that a depreciation would trigger even stronger expectations of further devaluation (ultimately endangering China’s financial stability), abruptly canceled the reform just days after it was initiated and began to intervene heavily in the foreign-exchange market to arrest the currency’s decline.

When those interventions slowed in 2016, the renminbi began to depreciate again, spurring the PBOC to resume intervention. The PBOC spent some $1 trillion of China’s foreign-exchange reserves in less than two years to stem downward pressure on the exchange rate. In 2017, thanks to the tightening of capital controls and a fall in the dollar index, the renminbi exchange rate finally stabilized.

There is no evidence that China has intervened to weaken the renminbi since – not even to offset the impact of higher US tariffs on Chinese exports – even as the exchange rate has fluctuated in response to fears about the trade war. The Chinese government knows that it is not in its best interests to manipulate its exchange rate. And, given China’s financial vulnerabilities, devaluation is particularly unappealing.

So, while the Trump administration’s fear that China is manipulating its exchange rate to gain a trade advantage is not irrational, it is unfounded. Still, China cannot commit to keep the renminbi stable against the US dollar.

China’s economic cycles are not synchronized with those of the US. The Federal Reserve may raise the federal funds rate at a time when the PBOC needs to cut its interest rate, which would spur capital outflows and drive down the renminbi’s value. It is a country’s sovereign right to decide its exchange-rate policy, and the US cannot expect to dictate China’s. So, even as it listens humbly to America’s complaints, China must retain full authority over its approach to the renminbi and be able to loosen monetary policy when economic conditions dictate, regardless of whether that causes the renminbi to depreciate.

The US would disapprove, but what other choice would China have? It cannot forfeit its monetary independence, and it is not in China’s interest to block capital outflows to offset depreciation pressure. Nor can it continue to use its hard-earned – and limited – foreign-exchange reserves to prop up the renminbi’s value. How can China be sure the balance is enough to maintain exchange-rate stability indefinitely?

Complicating matters further, the relationship between the renminbi’s value and the US dollar is not just bilateral. China has already committed to cut its trade surplus with the US – which comprises the majority of China’s overall trade surplus. If the US dollar rises in this context, China’s current account is likely to swing into deficit. Again, is China supposed to cut its imports from the rest of the world by whatever means necessary, or sacrifice its foreign-exchange reserves? This is not a purely bilateral issue – exchange rate misalignments often require international coordination to resolve.

China’s authorities are committed to advancing the shift toward a market-driven economy, with a fully flexible exchange-rate regime. So, in the current trade negotiations with the US, it can credibly commit not to keep the value of the renminbi artificially low. But under no circumstances should it promise to keep the exchange rate stable against the dollar.


Yu Yongding, a former president of the China Society of World Economics and director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, served on the Monetary Policy Committee of the People’s Bank of China from 2004 to 2006. He has also served as a member of the Advisory Committee of National Planning of the Commission of National Development and Reform of the PRC.