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China’s Fault Lines: Challenges, Instability, and Response

(Villagers Staging a Protest in Wukan, Guangdong Province, China in June 2016. Source: Getty Images)

By Ian Burns McCaslin  |

Watch a video of the conference here. 

Chinese leaders have projected an image of the People’s Republic of China (PRC) as an inevitable regional and global leader. However, controls on information, assembly, and capital outflows suggest the Chinese government and the Chinese Communist Party (CCP) are paying closer attention to domestic concerns than the projected image would lead one to believe. The Congressional Executive Commission on China’s (CECC) 2016 annual reportdetailed the anger and discontent felt by many Chinese citizens, who are increasingly calling for more government accountability, transparency, and justice. With the CCP’s 19th National Party Congress on the horizon, it is crucial to assess the CCP’s underlying instability and the key threats to the regime’s long-term resilience.

Expert Conference on China’s Fault Lines

On March 30th, 2017, the Project 2049 Institute hosted a conference titled “China’s Fault Lines: Challenges, Instability, and Response.” The conference brought together a distinguished group of experts to address China’s challenges and sources of instability, as well as Beijing’s potential response to both. It was followed by two panel discussions on how China’s current challenges will impact U.S.-China relationship. Based on these factors, participants also examined how the U.S. and its allies could more effectively engage with China in the future. 


(Senator Cory Gardner, Chairman of the Foreign Relations Subcommittee on East Asia, the Pacific, and International Cybersecurity.Source: The Project 2049 Institute) 

Senator Cory Gardner: Beijing Must Put Pressure on North Korea and Follow Its International Legal Commitments Abroad 

Senator Cory Gardner called on China to use its leverage with North Korea to bring the regime back in line with international norms and laws, especially in regard to its nuclear and missile programs. Senator Gardner emphasized that “China must work beyond a mere articulation of concern” and truly push North Korea to denuclearize. China must implement existing U.N. sanction agreements such as Resolution 2270, which covers cargo, aviation fuel, and rare minerals, and Resolution 2321, that sets restrictions on coal, iron, and iron ore. The Senator called on the Trump administration to enforce the North Korea Policy and Sanctions Enhancement Act, which calls for secondary sanctions on any Chinese entities aiding Pyongyang. He also singled out Beijing’s decisions to establish an irregular ADIZ and to create militarized, artificial islands in the East and South China Seas as destabilizing actions that must stop.  

In order to support U.S. national interests, the Senator discussed the “Asia Reassurance Initiative Act” (ARIA). ARIA aims to strengthen U.S. security commitments with allies and build partner capacity, promote economic engagement, and secure U.S. market access. It will also enshrine the promotion of democracy, human rights, and transparency as key U.S. policy objectives in the Asia-Pacific region. If the U.S. becomes divorced from its allies, regional stability and prosperity will suffer, and China will make further inroads at the expense of both the United States, and international laws and norms. 

China’s Domestic Fault Lines 

A Checkup on the CCP 

As Xi Jinping completes his first term in office as General Secretary of the CCP, President of the PRC, and head of the Central Military Commission (CMC), it is pertinent to look back on the policies implemented during his tenure. China’s economy continues to grow, albeit at a slow rate, and more people than ever have joined China’s burgeoning middle class. However, some policies implemented under Xi have been disruptive to people’s daily lives. The anti-corruption campaign has netted large numbers of officials, yet while some commentators continue to laud Xi for going after ‘tigers and flies,’others point to the use of the campaign as a tool for Xi to remove his potential political rivals. 

The anti-corruption campaign has created a tense environment for the bureaucracy. Quite a few officials have pulled back from performing their duties as usual out of fear that the ‘old way’ (corrupt or not) is no longer politically correct. Foreign—especially American—companies are also feeling pressure; not just from the anti-corruption campaign netting business partners and regulators, but from the increasingly nationalist atmosphere that the CCP and PRC government have been propagating. These companies are increasingly pessimistic about their future in China as economic espionage, coerced technology transfers, and legal discrimination has grown. The 2017 American Business in China White Paper revealed just how pessimistic American companies in China have become, with 80% of those surveyed saying they were less welcome in China than before.


(Left to Right: Piper Stover, Sheena Chestnut Greitens, Kaoru (Kay) Shimizu, Sarah Cook, Megan Fluker, and Rachael Burton. Source: The Project 2049 Institute) 

The ‘World’s Economic Growth Engine’ Is Not What It Used to Be 

Even using China’s notoriously unreliable official statistics, the trend toward a “new normal” of lower economic growth is undeniable. All types of firms—domestic and foreign, private and public—are facing slower growth in the Chinese market.  

(Forecast of specific sectors’ industry’s market growth. Source: AmCham China, Bain & Company) 

This change is already having a ripple effect with Chinese firms warning of potential layoffs; this has even extended to workers in state-run firms in strategic sectors, such as steel manufacturing and coal. A lower rate of wage increases is another new reality, frustrating workers who have been accustomed to double-digit raises. Businesses and the working class are facing challenges associated with limited access to unemployment insurance and coverage, and contribution to other social insurance mechanisms remain too low to effectively deal with the likely increase in unemployment. 

Another challenge is a lack of options for workers seeking collective action via unions. In China, the only legal union, the All-China Federation of Trade Unions (ACFTU), is controlled by the CCP, which severely weakens the union’s ability to advocate on behalf of its members. While about 20% of the population are members, the union operates more on behalf of labor management, the Party, and the government, than it does workers. Its failure can be seen by the drastic rise in the number of strikes and worker protests, which the Union discourages, that doubled from 2014 to 2015. Amidst these issues, the “new (economic) normal” will force Chinese authorities to make hard choices, and confront challenges that can no longer be papered over. 

Growing Religious Repression 

The religious revival in China is being attacked by an increasing campaign of repression by the government. At least 100 million people―1/3 of the total estimated believers in China―belong to groups facing high or very high levels of persecution, while about 250 million experience relatively low levels of interference in their day-to-day religious activities. Tibetan Buddhists, Protestant Christians, and Hui and Uyghur Muslims have experienced a particular increase in repression. The ways in which religious repression has manifested itself has also grown.   

(Levels of religious persecution in China by province or special administrative region. Source: The Battle for China’s Spirit: Religious Revival, Repression, and Resistance under Xi Jinping by Sarah Cook) 

In Muslim-majority areas, authorities increasingly respond to incidents with excessive force in comparison to non-Muslim majority areas. Due to a downturn in sales, as more people gave up alcohol and cigarettes for religious reasons, authorities began to promote ads for these goods in Muslim villages. In Xinjiang, state media has provided heavy coverage of a beer festival and drinking competition to “squeeze the space for illegal religious promotion.”There have also been restrictions on the ability of children to participate in religious practices, as seen in Uyghur communities. Acts of repression against Christians now regularly include the arrest of lawyers who represent Christians, and the obstruction of religious celebrations, such as Christmas. Even state sanctioned churches, at times, have been victims of violent suppression. 

Yet, efforts to persecute religious groups out of existence are broadly failing. Believers have responded with courage, using creative ways to keep their faith. For example, the Falun Gong protested their persecution by using letter-writing campaigns to detail their positive experiences with their faith. The level of persecution experienced by religious groups has not been uniform across China, though. Some local authorities appear to have chosen not to persecute Falun Gong residents as they once did. Other local authorities have taken to warning churches about upcoming raids so they can be prepared. 

Although the persecution of religious groups has worsened, those suffering have endured in their faiths, responding to restrictive laws with creativity and determination. Despite this resilience, however, the central government continues its religious crackdown.

Doubts on the Reputation of China’s Infamous Domestic Security Budget 

In order to carry out its various campaigns of repression, the government has had to increase its domestic security budget.[i] Yet, misperception and misconception of China’s domestic security budget has hampered informed discussion of said budget. Regular headlines paint that budget as being massive, and larger than the military’s, but these numbers are misleading. In the final budget total, some items are regularly counted twice or are excluded outright. Some expenses that are considered to be a domestic expense, such as the People’s Armed Police (PAP), are, in fact, commonly put in the defense budget. On the other hand, the domestic security budget often includes the maritime law enforcement vessels that operate outside of China’s internationally recognized borders to enforce control over disputed claims. The decisions behind the allocation of items for inclusion in either budget are due to the Chinese leadership’s conception of their uses. For example, Beijing views the use of the maritime law enforcement vessels as a ‘domestic’ issue in the case of the disputed claims in the South China Sea, because it demarcates those areas as part of the PRC; however, such use is not in conformity with international law. 

While there has been an increase in repression, there is more nuance to the domestic security budget than the idea that an increase in resources directly equates to an increase in human rights abuses. While China’s budget as a whole has been growing exponentially for years, as a percentage of the national budget, the allocation for domestic security decreased from 2007-2012 (the last years for which such information is available). When the domestic security budget is broken down, usually about 60% of it goes to average ‘beat cop’ police work, courts, etc. This means that an increase in this portion of the budget does not necessarily equate to more resources going towards repressive ‘police state’ items.  

(Categories of Internal Security (IS) spending as Proportion of Budget. Source: Sheena Chestnut Greiten, “Assessing China’s Coercive Capacity: De-Mystifying the Domestic Security Budget” Presentation, March 30, 2017) 

Ordinary crime has been rising for years, and China still has one of the lowest police per capita rates in the world. Many local areas, such as the central and western regions of China, lack the fiscal base to fund increased policing. Additionally, tough terrain and poor infrastructure make monitoring expensive and difficult.  In all, there are far more complexities to China’s domestic security situation than is often discussed in the public domain.

False Dichotomy: Human Rights or Security

(Left to right: Ely Ratner, Randy Schriver, and Dan Blumenthal. Source: The Project 2049 Institute) 

The speakers illustrated that the narrative commonly touted of China’s government as a monolithic entity that is a paragon of efficiency, economic growth, and control is false. The less than ‘picture perfect’ reality in China reveals another important fact; human rights are inextricably tied to traditional security. In recent years, the U.S. government has pulled back from giving human rights a prominent place in engagement with China. This conference emphasized that this is a mistake, given that human rights are critical to traditional security, and are an important part of U.S. global leadership. For the U.S. government to ignore human rights would be to ignore one of the most critical tools available to it, which has been missing from its recent China policy. Disregarding human rights only strengthens China’s authoritarian government, the CCP’s protected status, and the repression of huge swaths of people both within China and abroad. 


As this conference by the Project 2049 Institute demonstrated, beneath the surface facade of social harmony in China lie deep fault lines that are challenging the Party, government, and society. Given the increasingly interconnected nature of the world, China’s challenges and how it chooses to respond to them will have impacts that reverberate across the globe. In particular, its response will inevitably influence the foreign policies of the United States in the coming years. Gaining an improved understanding of these challenges presents new opportunities for countries to interact with, and potentially influence, the Chinese leadership as well. 

Ian Burns McCaslin is an Intern for the Project 2049 Institute where he focuses on the PLA and Chinese influence operations. He received his MA from the National University of Singapore.   

[i] Sheena Chestnut Greitens, “Rethinking China’s Coercive Capacity: An Examination of PRC Domestic Security Spending,1992-2012,” The China Quarterly, July 3, 2017, at https://www.cambridge.org/core/journals/china-quarterly/article/rethinking-chinas-coercive-capacity-an-examination-of-prc-domestic-security-spending-19922012/FDC08F840E3479EDD5FE0BA1BEAA44A1.