Vijaya Subrahmanyam’s piece explains how China’s new digital currency differs from commonly used virtual payment systems. She argues that the e-CNY, issued by the People’s Bank of China, has the potential to be a global leader in digital currencies and push financial inclusiveness across China, but also creates new ways for the government to control society.

Xiangyuan Li and Haizheng Li analyze the pandemic’s impact, particularly the government’s strict Zero Covid policy, on China’s economy. The results are not good. They point out long-term economic challenges, which were known before, but argue that the pandemic will lead to even slower growth than expected, along with some unexpected negative outcomes.

In his piece on foreign policy and U.S. public opinion about China, Tom Petersen shows that public attitudes toward China have shifted dramatically negatively. China now outranks North Korea, by far, as the biggest worry in people’s minds. He argues that this shift gives policymakers the room to act decisively to counter China’s potentially destabilizing actions regionally and globally.

Reflecting on rural life, Jin Liu reviews the now-banned movie Return to Dust. Although a slow-moving, artsy film, it was well-received by Chinese audiences for several months. Then the film disappeared from theaters. Jin explores the film’s themes, relating them to the rural transformation occurring in China today. Rural life is disappearing as farmers are pushed off the land and into town apartment towers. Her characterization of the protagonist as “China’s last peasant” helps us grasp the powerful message of this film.

Similarly, Marin Ekstrom explains the assault on linguistic and cultural identity in the autonomous region of Inner Mongolia. Despite being considered a “model minority” by Beijing, in 2020, the central government began requiring schools to use Mandarin Chinese exclusively instead of the traditional Mongolian language. This policy has been extended to TV shows regarding language, as well as replacing Mongolian themes with Chinese cultural and historical programming. Ekstrom cites evidence of resistance to Beijing’s encroachment on minority rights but sees it as another tool of central authority across China.

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China’s Central Bank, the People’s Bank of China (PBOC), has developed its own digital currency. The electronic China Yuan, or e-CNY, results from a six-year effort and follows a crackdown on private cryptocurrency trading and mining in 2021. Authorities view private cryptocurrency as a threat to financial stability. While digital payments are popular in China, the rollout of a national digital currency puts the government in a space that had been designed to thwart central control. e-CNY also is a key part of China’s efforts to digitize its domestic economy to, in part, expand state control while also strategically positioning China to influence the global financial system.

Piloting the currency in four cities in April 2020, usage of e-CNY is rapidly expanding within China. The Beijing Winter Olympics was an opportune time to showcase the currency’s scalability by piloting it in 10 regions across China in February 2022. The People’s Bank of China has not disclosed the number of adopters of the e-CNY since October 2021, but its unofficial estimates are around 261 million wallets¹ with total transaction values of more than RMB 87 billion (approximately $13.75 billion).² These include both individual and corporate wallets, but it is uncertain if all the wallets are in use. According to the Digital Currency Institute, as of August 2022, more than 5.6 million merchants are accepting payment with the digital currency. Authorities allowed residents to use digital currency to pay utility bills and collect tax refunds and health insurance reimbursements.

China hopes to gain an advantage in the digital currency space even as central bankers globally have been skeptical about moving forward with their digital currencies. Their main concerns center around financial stability and privacy because governments would have access to the daily transactions of users. Inadvertently, the recent bankruptcy of FTX, formerly the world’s second-largest crypto exchange, may have created a watershed moment for regulation and the state’s role. The failings of FTX have led to increased skepticism about cryptocurrencies and financial stability, altering their trajectory in many parts of the world. As a result, the need to regulate digital assets, cryptocurrencies and the digital ecosystem has increased in urgency, shedding favorable light on China’s approach to using centralized control for financial stability. This article presents a summary of central bank digital currencies (CBDCs), China’s e-CNY and China’s motivations in taking the lead in this space. The article argues that e-CNY may be a double-edged sword. While the conveniences of a digital currency can move the country quickly toward financial inclusiveness, there is a danger of the state using the currency as a tool to control society.

Central Bank Digital Currencies vs. Mobile Money

Digital money is not a new concept. Virtual payments are increasingly becoming the norm, as credit cards and payment apps allow cashless transactions in China and elsewhere. Digital money is stored on a cloud server or a personal electronic device and can be used for exchanging goods and services by using payment apps. Mobile money utilizes existing commercial banking-based transactions to manage consumer wallet balances based on exchange with cash or credit lines or loans. Therefore, mobile money is the liability of commercial banks and other authorized financial institutions.

In contrast, national digital currency is issued by a central bank, which may serve as a medium of exchange and hold the same storage value.³ Therefore, a national digital currency is a direct liability to the central bank as it is the issuer of the currency. In this sense, CBDC is a new payment instrument that will either replace or coexist with paper money to represent local currency values, whereas mobile money is not a new instrument but rather a new type of payment transaction.

Mobile payments in China have experienced explosive growth with Alibaba’s AliPay and Tencent’s WeChat Pay, which have dominated the space. Innovations such as QR codes and digital wallets have transformed the nation’s shift away from cash and traditional credit cards. This rapid growth was outwardly encouraged but also resulted in ambivalence about the supervision over the payment systems from the People’s Bank of China. China’s Communist Party inserted Party members as part of both Tencent and Alibaba and Ant Financial’s governance structures so as to control the magnitude and speed of growth of these firms. In 2010, the People’s Bank of China enacted regulations that required foreign-funded third-party providers of online payments to obtain State Council approval to operate in the Chinese market. In addition, they would be subject to different rules from those governing domestic operators.⁴ As part of a deleveraging campaign in 2017, the People’s Bank of China extended its regulatory wand to end third-party providers and ordering funds transferred from commercial banks into Central Bank accounts. In 2019, the People’s Bank of China took over all deposits of platforms such as Alipay and WeChat Pay to address risks associated with shadow banking, while simultaneously moving user transactions data under the central bank umbrella.

More recently, the State Council launched an antitrust investigation into Alipay and WeChat Pay claiming to help smaller companies enter the market in the payments space. However, due to their ubiquity and innovation ability, Alipay and WeChat Pay have managed to maintain their dominant position. In addition, the central bank is aware that it must depend on more than commercial banks to expand the use of e-CNY. As of 2020, with over 94% of market share, they are the leading third-party providers for online payments in China with Alipay at almost 56% and Tencent, which includes WeChat Pay and QQ Wallet, at close to 39%.⁵ While Chinese authorities are stepping up efforts to encourage the use of e-CNY, the question remains whether consumers will download this new digital yuan app and switch from WeChat to Alipay. Hence integrating with WeChat and Alipay is key to growing the user base for e-CNY.

How Will e-CNY Work?

China’s digital currency is legal tender, issued and backed by the Central Bank. It will be a traceable replacement for notes and coins and have all the functionality of paper currency – a medium of exchange, a unit of account, and a store of value. e-CNY has two tiers with the first exclusively made up of a few commercial banks that can facilitate the exchange of digital currency with cash or bank deposits. The second tier is the People’s Bank of China, which controls the supply of e-CNY and manages the digital currency payments between the first-tier banks. Policy makers describe the Chinese digital currency network as “one coin, two databases, three centers.” “One coin” is the encrypted digital unit of currency guaranteed by the PBOC. The “two databases” refers to the People’s Bank of China’s ledger that keeps track of all outstanding e-CNY, and all the e-CNY ledgers by the lower-tier banks (Lee et al, 2021). The “three centers” reside within the People’s Bank of China. They comprise a certification center that maps the identities of all digital wallet users, a registration center that tracks ownership of digital wallets and the transactions of their users (Louie and Wang, 2021), and a big data analysis center that monitors payment flows. The central bank will limit how it tracks individuals, noted Mu Changchun, who is leading the project at the People’s Bank of China calling it “controllable anonymity.” Central Bank officers emphasize that the monitoring is primarily to combat illegal activities, including money laundering, terrorist financing, and tax evasion. In addition, the institutions that issue the currency to users are required to meet compliance regulations with payment rules such as capital controls and sanctions.

Currently, e-CNY can only be purchased through China’s six large state-owned banks and Tencent and Ant Group bank affiliates that control China’s two leading digital retail payment platforms. e-CNY users may be individuals or corporations, and each of these “wallet-holders” has different transaction limits. Wallets can be software-based via the e-CNY app, which can be downloaded from the e-CNY app stores, or they can use AliPay and TenPay apps as the interface allowing users to manage their transactions.⁶ Wallets can also be hardware-based, allowing for contactless transactions. Additionally, other options are being piloted that may include reusable prepaid cards, not linked to any specific bank, that may hold small amounts of the digital currency but may offer some privacy.

What Is China’s Motivation to Take the Lead?

On the domestic front, the e-CNY can help China promote inclusion by giving individuals in all of China easy access to financial transactions. The People’s Bank of China has announced a goal of having more than a billion users before any other country can take substantial steps toward developing a central bank digital currency of its own (Hoffman et al., 2020). The People’s Bank of China can also implement monetary policy while identifying problem areas to help devise policies to ensure price and financial stability (Aysan et al., 2014, 2015). Furthermore, unlike paper currency, digital currency helps track and monitor the use of currency after issuance. This tracking can help prevent fraud and illegal transactions, guaranteeing increased safety for the public.

On the international front, the use of digital currency helps China gain a stronger foothold in the global financial system. First, it would help reduce China’s dependence on the U.S. dollar-denominated financial system. Second, it would allow China to leverage its position as the leader in CBDCs. Given the increasing movement toward cashless societies worldwide, many nations are considering digital currencies, and they may turn to the Chinese model to emulate. This would give China a first-mover advantage in exporting its technology.

Further, the People’s Bank of China is also introducing technology that allows and promotes the digital yuan to be used in cross-border payments. This would permit China’s security agencies to surveil the financial activity of Chinese citizens and any foreign individuals or entities doing business with China. This surveilance ability may have major international security implications.

Transparency, Privacy, and Digital Currencies

The fundamental differences between decentralized digital currencies (aka most cryptocurrencies) and centralized digital currencies (CBDCs) lie in information control, privacy, and transparency. Most cryptocurrencies were created to move power away from one single organization to a network to avoid giving control to any single authority, such as a central bank. Transparency in decentralized digital currencies is critical. Everyone in the network can see all transactions made and received by any user since all the revenue streams are placed on a public chain, called the blockchain, which serves as a public ledger.

In the case of CBDCs, all transactional information is stored within the central bank and not shared. Unlike cryptocurrencies, CBDC transactions are not anonymous but subject to government monitoring. CBDCs are virtual like cryptocurrencies but issued by the government instead of the private sector (Prasad, 2021). The use of CBDCs is a trade-off between security and privacy. Because the central bank backs them, they are considered a secure investment.

Further, the People’s Bank of China determines the supply depending on the prevailing economic conditions, unlike cryptocurrencies, whose supply is limited. Central bank digital currencies require complete verification of the investor’s or purchaser’s identity, unlike cryptocurrency, which is attractive because of its anonymity. With CBDCs, the People’s Bank of China can monitor and hence regulate the use of the currency by any individual or business.

While free market advocates promote the idea of decentralized digital currencies, policymakers express concern that these currencies are vulnerable to abuse in funding terrorism and criminal activities. Many nations, therefore, see central bank digital currencies as the better alternative: digital money that can be conveniently used for transactions while providing the security that comes with its central bank issuance. Countries monitor transactions even with cash for financial and national security threats such as money laundering, terrorist financing and tax evasion. Additionally, governments set thresholds for customs declarations and cash transactions that trigger compliance regulations when they reach a certain volume (Pocher, N and A.Veneris, 2022). As the world moves increasingly toward cashless societies, financial and national security threats remain and may be exacerbated. Most nations, therefore, fall somewhere along the spectrum of privacy-transparency versus security trade-offs.

Privacy, Security, and Promotion of e-CNY

Despite hesitation among other large economies, China is forging ahead with its e-CNY project. It has ramped up the spread of digital currency and plans to position itself as the leader in CBDCs. The People’s Bank of China wants users to make offline payments with their digital wallets to spend e-CNY in remote areas of rural China or in-flight. Unlike conventional bank accounts, e-CNY wallets will likely reside within the internet of things devices, including home and vehicle sensors. While China’s payment system is largely dominated by WeChat and Alipay digital wallets, the government has found a balance to work with these private entities without completely clipping their wings.

The People’s Bank of China says a defining principle of the digital yuan is “controlled anonymity.”  PBOC Governor Yi Gang stated that the two-tier operation is designed to protect personal privacy and maintain financial security. He said the Central Bank, as the first tier, only processes inter-institutional transactions and thus does not deal with individual transactional information. Second-tier financial institutions provide digital currency exchange services to individuals and businesses, collecting personal information only as needed.

China argues that the two-tier structure will preserve the private sector’s well-established technological innovation and operational prowess, particularly given the size and complexity of China’s geography and economy. Instead of taking commercial banks out of the picture, the idea is to include them as the lower tier for the distribution of e-CNY through software applications. The private banks may gather information on their users and use that data only for target marketing purposes and to manage the users’ wallets to facilitate withdrawals and deposits.

While intended to be “cash-like,” the digital yuan is designed to allow the People’s Bank of China a degree of visibility and control that real cash does not permit. Each digital currency token would include a cryptographic algorithmic expression identifying the token’s owner and the purchase transaction. Not all data will be available to those transacting in e-CNY, but the data will be available to the Central Bank for security purposes. Thus, true anonymity does not exist, as currency registration and traceability are built into e-CNY transactions. That process, augmented by data mining and big-data analysis, provides the People’s Bank of China with the ability to have complete oversight over the use of the currency. While the argument forwarded is that this oversight will control tax evasion, money laundering, and terrorism financing, this may not be true as most illicit activity is not conducted over formal monetary channels.⁷

While the Central Bank desires scalability and increased adoption of e-CNY, people need more incentive to switch from popular digital wallets such as WeChat and Alipay. Therefore, the People’s Bank of China is using a mix of persuasion and arm-twisting to roll out the digital currency. It seeks to get citizens to participate in the e-CNY project by playing the safety and security card.⁸ It also uses promotional discounts to encourage increased use of e-CNY. The state-funded e-CNY network also offers businesses lower fees than the more established Alipay and TenPay network platforms.

In addition, there is talk of converting government and state-owned enterprise payrolls to e-CNY, forcing its increased use within China. More recently, the State Administration for Market Regulation (China’s antitrust regulator) has also launched regulatory actions against monopolies and e-commerce platforms to hasten the adoption of e-CNY. As a result, Ant Group was urged to give consumers more choices in payment methods. Following this, Tencent and Ant Group’s bank affiliates began fast-tracking the use of e-CNY by enabling the purchase of the digital yuan. As large Chinese tech companies start partnering with state-owned banks in pilot projects facilitating the consumer use of the e-CNY, this could impact the data gathered by Alipay and WeChat Pay and reduce their market share in payment platforms.

Conclusions

The digital yuan offers China more than just fine-tuned monetary policy and improved anti-money laundering software. Using e-CYN gives the CCP unparalleled insight into the Chinese people’s finances and significant levers to carry out punitive state action. In addition to basic information about users and transactions, various metadata associated with users’ movements and devices could also be infused with big data. Increased use of the e-CNY has huge implications for the financial world as it enables the creation of the largest database of centrally governed transactions (Hoffman et al., 2020). The People’s Bank of China will possess a trove of information on its users, providing tools for censuring and surveilling individuals. The Central Bank’s e-CNY vision is summarized by President Xi Jinping’s claim that it is necessary to strengthen omnidirectional supervision, standardize all types of financing behavior, and seize the opportunity to launch special programs for financial risk regulation.⁹

Given a world driven by data, e-CNY is a double-edged sword. The use of e-CNY promises to be more inclusive, providing more people and firms easy access to financial services. Concurrently, it raises fears about the central bank having access in granular detail to the movement of money among individuals and businesses, creating concerns about its implicit use as a surveillance tool by the government. To alleviate such fears, China passed an omnibus privacy law, the Personal Information Protection Law (PIPL), in November 2021, designed to regulate online data and protect personal information. The PIPL followed closely on the heels of China’s Data Security law enacted in September 2021. The latter applies to a wide range of data processing activities, including processing personal information. The scope and penalties of any violations are expected to be complex and detailed for the PIPL when doing business in China.

In addition to privacy and transparency concerns, in expanding the use of the e-CNY in cross-border payments, China hopes to establish itself as a leader in the global digital currency race. In doing so, one of the motivations may be to undermine the dominance of the U.S. dollar in international payments. Moreover, internationalizing the e-CNY may help China circumvent any sanctions imposed by the United States and its partners. China’s innovations surrounding the e-CNY are changing the financial landscape at home and forcing its competitors abroad to acknowledge China as a new powerful, innovative force in the digital currency space.

References

Aysan, A.F, Fendoglu, S., Kiline, M., 2015 Macroprudential polices as a buffer against volatile cross- border capital flows, Singapore Economics Rev, 60(01), 1550001.

Aysan, A.F, Fendoglu, S., Kiline, M., 2014, Managing short-term capital flows in new central banking: unconventional monetary policy framework in Turkey. Eurasian Economics Rev, 4(1), 45-69.

Aysan, A.F., F.M. Kayani, 2022, China’s transition to a digital currency does it threaten dollarization? Asia and the Global Economy, 2, 100023.

Hoffman, S. J. Garnaut, K. Izenman, M. Johnson, A. Pascoe, F. Ryan and E. Thomas (2020). The flipside of China’s Central Bank digital currency. The Australian Strategic Policy Institute Limited, Policy Brief Report no. 40/2020.

Lee, D.K.C., L. Yan and Y. Wang, 2021, A global perspective on central bank digital currency, China Economic Journal, 14 (1), 52-66.

Movroydis, Johnathan, (2022), What the rise of China’s Digital currency could mean for the US, https://www.gsb.stanford.edu/insights/what-rise-chinas-digital-currency-could-mean-us/ https://www.hoover.org/news/qa-rise-chinas-central-bank-digital-currency-concern-us-government-argues-darrell-duffie

Pocher, Nadia and Andreas Veneris, (2022) Privacy and Transparency in CBDCs: A Regulation-by-Design AML/CFT Scheme, IEEE Transactions on Network and Service Management, 19(2), June, pp 1776–1788 https://doi.org/10.1109/TNSM.2021.3136984

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In recent years, China has faced complex and severe challenges: a trade war in 2018, the start of a pandemic in 2020, the real estate turndown in 2021, and the end of “Zero-COVID” in 2022. These challenges, especially the COVID-19 pandemic and its stringent public health measures, have negatively impacted the Chinese economy.

Slowing economic growth since the outbreak of COVID-19, and the uneven recoveries that followed, reflect long-term problems that policymakers must face. More specifically, this paper will cover four aspects of China’s economy: (i) China’s Covid policies and situation, (ii) an overview of China’s GDP growth and international trade, (iii) employment and wages, and (iv) human capital.

Based on these data, we argue that the slowing of the economy does not reflect a normal business cycle, nor can an upturn in the business cycle solve China’s current economic challenges. The data suggest that low and falling domestic and external demand is behind China’s slowing growth. In addition, serious setbacks to entrepreneurship and human capital acquisition due to the pandemic have created long-term structural challenges to economic growth.

2. China’s COVID-19 pandemic and public health policies

In December 2019, the first COVID-19 case was discovered in Wuhan, Hubei province. After hundreds of cases were detected in less than a month, Wuhan was locked down on January 23, 2020. From January 23 to 29, all provinces across the country launched a Level 1 Provincial Response to Public Health Emergency, the highest level.¹ The centralized treatment of all confirmed patients, suspected patients, and close contacts of confirmed cases kept many people in quarantine. The local COVID-19 pandemic was controlled by mid-March and Wuhan reopened on April 8, 2020.² However, the strict restrictions for COVID-19 prevention dramatically reduced all economic activities in China.

After the reopening, cases continued to break out in different places around the country. As a result, China implemented a set of strict pandemic control policies. For example, any community or building with an infected individual would be classified as a high-risk area where inhabitants were forbidden to go out. This “Zero-COVID” policy was implemented in 2021 and continued through the first three quarters of 2022.

In the meantime, the pressure for the government to ease Covid-restrictions mounted. Then, in November 2022, China suddenly eased the restrictive measures, abolishing “Zero-COVID.” This change was wide-sweeping and included canceling the classification of risk areas, canceling the suspension of businesses, and letting patients be treated at home instead of in isolation areas. As a result, China experienced an infection peak in the fourth quarter of 2022 causing another sharp drop in economic activities. After that, China gradually returned to pre-pandemic life in the first quarter of 2023.

Stringent public health measures were in place for almost three years in China. The economic activities of enterprises, especially small and micro enterprises, were severely impacted. The costs of continuing this stringent policy were enormous. Over the past three years, the tight public health measures and lockdown have had a large, negative impact on growth in China.

3. Economic growth and international trade

Since the economic reform and opening of the Chinese economy in the late 1970s, economic growth in China has been in the range of 9%-10% annually on average, regarded by many as the “China Miracle.” However, such dramatic growth started to slow starting from 2012. GDP growth steadily declined to 7%-8% from 2012-2015, slowing to 6%-7% from 2016 to 2019, as shown in Figure 1.

Figure 1: China’s GDP

3.1 Economic growth

After the outbreak of COVID-19 in December 2019, the normal economic growth of 6% suddenly dropped to 2.2% in 2020. The unprecedented pandemic hindered consumer demand, production, investment, and international trade. In 2021 growth bounced back to 8.4% from a relatively very low base in 2020. In 2022, with the recurrence of the COVID-19 pandemic and the strict “Zero-COVID” policy, growth dropped into the 3% range. To remove large fluctuations in GDP growth during the Covid period, we calculated a three-year moving average of economic growth. As shown in Figure 1, the three-year moving average shows a continuous downward trend in the pre-pandemic period followed by a sharp decrease during the pandemic (2019-2022).

As an important part of economic growth, from 2010 to 2019, consumption’s contribution to growth on average was approximately 60% annually. However, the contribution of consumption became negative and dropped sharply to -6.8% in 2020 as shown in Figure 2.

Figure 2: Contribution to GDP growth

Although it rebounded to 58.3% in 2021, it declined sharply again to 32.8% in 2022. The COVID-19 pandemic has made this much worse. In 2020, investment contributed to 81.5% of growth, much higher than the 42% average from 2010 to 2019 of 29%. In 2022, the contribution of investment was a bit more balanced at 50%.

Most analysts believe that domestic consumption in China is too low, leaving the economy dependent on investment and especially government investment. If China wants to raise economic growth, stimulating consumption is key. Over-investment hurts productivity while consumption-driven growth is more likely to meet the needs of society. However, given the lower income and declining confidence for the future, it remains a major challenge for the government to drive up domestic consumption.

3.2 International trade

China for years has relied on exports, especially labor-intensive products, as an engine of economic growth. However, since the outbreak of the pandemic and the trade war between China and the U.S., uncertainties in the global economy have dramatically increased. In the meantime, international trade protectionism has become increasingly geared toward China, partly due to the changing political environments inside and outside China. These tensions pose risks to international trade and foreign direct investment (Gita Gopinath, 2022).

Figure 3: China’s export and import

The data in Figure 3 show that, during the Covid period, China’s total imports and exports declined slightly from 2019 to 2020 but recovered and increased in 2021. The trade surplus continued upward. However, the figures for international trade based on revenue may not give a real picture. Due to the pandemic and Russia’s invasion of Ukraine, prices for some goods in international markets increased dramatically. The trade volume is compared using real values adjusted by the price index (to take inflation into account). However, because of abnormal price fluctuations in the international market, the price indexes sometimes seriously underestimated the price hike for some goods. As a result, some of China’s major export goods did not increase much in quantity although increased in revenue (International Monetary Fund, 2022). For example, pharmaceuticals are a major category of exports from China. Even after adjusting by the price index, as shown in Figure 4, the value of pharmaceuticals exported shows substantial growth from 2020 to 2021. However, the quantities exported increased much slower. The same phenomenon can also be found in steel, another major export from China.

Figure 4: Growth in value and quantity of exported pharmaceuticals and steel

4. Employment and income

4.1 Unemployment

Overall, the impact of the pandemic and the “Zero-COVID” policy on foreign-invested companies across China was vast. The COVID-19 pandemic with its tight restriction measures and other changes occurred in China accelerated the closing of foreign-invested firms, such as Toshiba, Nikon, and Samsung. For example, at the beginning of 2022, Canon closed its factory in Zhuhai, ending its 32-year history in China and laying off 1,300 employees. At the end of 2022, social media was abuzz about whether Foxconn would withdraw from China. If they did, unemployment would increase in Henan by tens of thousands of people.

The data from the China Foreign Investment Statistics Bulletin and National Bureau of Statistics show the scale of withdrawal of foreign-invested firms. The number of newly established foreign-invested enterprises was approximately 39,000 in 2020 and 48,000 in 2021.³ However, during the same period, a total of 102,000 foreign-invested enterprises exited China in 2020 and 109,000 exited in 2021.⁴ The number of foreign companies that withdrew was more than double those newly established.

Moreover, during the COVID period, a large number of private companies closed. For example, data from Tianyancha, a platform for collecting and sharing business information, show that in the first quarter of 2022 alone, more than 460,000 small and medium-sized private enterprises ceased operation. In China, private enterprises absorb about 80% of the employment in the economy.⁵ Their closure will have a lasting impact on the country’s employment.

This withdrawal of foreign companies and the closure of domestic enterprises inevitably aggravated the unemployment problem. It emerged — especially for youth workforce —in China during the pandemic. According to the national data, since 2018, the surveyed urban unemployment rate has increased, from below 5% to as high as 6.2%. By the end of 2022, China’s surveyed urban unemployment rate remained around 5.5%.

Figure 5: Surveyed urban unemployment rates

However, the youth unemployment rate for those aged 16-24 has been three or four times higher than those aged 25-59. As shown in Figure 5, the unemployment rate of young workers rose five percentage points since January 2020. It also shows a clear upward trend, from 10%-12% to as high as 20%. College students, a large part of the youth workforce, are facing fierce competition for jobs. The number of graduates searching for jobs reached 9.09 million in 2022, with was an historical high. The large inflow of labor market entrants added to an already serious unemployment situation during the pandemic.⁶

4.2 Disposable income and expenditure

As the GDP growth rate dropped from 6% to 2.2% in the 2020, the growth rate of real wages of those employed in urban areas also dropped from 6.8% to 5.2%, the lowest point in the last decade.⁷ Moreover, as shown in Figure 6, the growth of disposable income of urban and rural residents has shown a decrease since 2014. It dropped sharply at the beginning of COVID-19 in 2020 and remained negative until early 2021. Growth rebounded in early 2021 and then continued to decline to below 4.3% in rural incomes and 2.3% in urban incomes by the end of 2022.

Figure 6: Per capita disposable income and per capita expenditure growth

Source: National Bureau of Statistics, website: https://data.stats.gov.cn/easyquery.htm?cn=B01

5. Human capital of the youth

Chinese youth have been under pressure to find employment in recent years. Although it is common for young people newly entering the labor market to face challenges in finding good jobs, youth opportunities were further diminished by the COVID-19 pandemic.

5.1 Risk-taking and entrepreneurship

The younger generations seem to be more risk-averse than previous generations, as they appear to prefer safe jobs with less challenge and more stability. Such a phenomenon could also be related to the change in the political atmosphere in China. Young people view jobs in the government and state-owned sector as better career opportunities. The frequent and lasting lockdown in China due to the “Zero-COVID” policy in the past three years reinforced such attitudes, i.e., to avoid risk as much as possible. Young people today are more inclined to work in government and state-owned sectors and are less willing to work in private and foreign enterprises.

Figure 7: Sector distribution of the placement for new college graduates

For example, as shown in Figure 7, the proportion of college graduates going to government agencies, public institutions, and state-owned enterprises has increased steadily in the past three years, from 37.39% in 2019 to 49.1% in 2022. Likewise, the proportion going to foreign and private enterprises has decreased year by year. In the three-year period, the proportion of new college graduates going to foreign and private enterprises has declined by 10 percentage points, while those working for the government increased by more than 11 percentage points. This trend is a sharp reversal compared with the early stage of reform and opening in China during the 1980s and 1990s when college students were more interested in joining private sectors after graduation.

One reason for the increased proportion of college graduates’ job placement in the public sector could be that the government is getting bigger and employs more people. In this case, the trend may not reflect the change in preference for job searches. However, the number of applicants for the national civil service examination increased from less than 1.5 million in 2010 to more than 2.5 million in 2022 as shown in Figure 8. The number of applicants shows an increasing trend, but the acceptance rate started to decline in 2015, from 1.99% to 1.05% in 2022. Moreover, starting in 2019, the number of applicants rose steadily but the acceptance rate dropped continuously. It is unclear how much the Zero-COVID policy contributed to the trend. However, the extremely high competition to get into the government sector as civil servants demonstrates the changing preferences of young college graduates.

Figure 8: National civil service examination

5.2 The Impact of school closure

The Zero-COVID policy in the past three years has caused widespread school closures from elementary schools to colleges. For example, China extended the 2020 Spring Festival holiday, delaying the start of the spring semester for all primary, secondary schools, and colleges. Moreover, online teaching became normal as a substitution for in-person teaching. For example, based on data from the Ministry of Education, a total of 1,454 universities launched online teaching, in which 1.03 million teachers offered 1.07 million courses online, with a total of 12.26 million courses. A total of 17.75 million college students participated in online learning.⁸ Such practices have had significant impact on the quality of education because of the inadequate communication between students and teachers in an online setting.

Although the data from China are not sufficient to do an in-depth study, existing studies using data from other countries show the impact of school closure on student human capital accumulation. For example, a survey conducted in the United State shows that COVID-19 has led to 13% of college students delaying graduation, 12% of students intending to change majors, and 40% losing a job or job offer. These students report a decreased interest in taking online courses, and moreover, honor students show a stronger preference for in-person classes (Aucejo et al., 2020).

Researchers studied the negative impact of online teaching on primary students in the short and long term. For example, they found that the learning progress of primary school students during an eight-week school closure was 2.4% slower than before the school closure, and the learning speed of secondary school students was 0.4% slower (Tomasik et al., 2021). Based on a study using data from Argentina, a reduction of in-person teaching time in primary schools by half a year reduced long-term earnings by 3.2% for men and 1.9% for women (Jaume and Willen, 2019).

In the last three years since 2019, widespread school closures have been common in China. Almost all schools closed for at least three months in the Spring of 2020, and for many places lasted for as long as a whole year. As such, the negative impacts of school closure and online teaching on education quality and future earnings would last for a few generations in China. Its effects on the country’s human capital accumulation, unemployment, innovation, and economic growth are yet to be further investigated.

6. Conclusion

The COVID-19 pandemic caused declining consumption, production, and all economic activities, resulting in lower economic growth in China. Because of strict public health measures, we saw a slowdown of new foreign-invested enterprises and accelerated closure of existing ones. Unemployment problems also rose during the pandemic, especially for young workers. Moreover, the diminishing aptitude for entrepreneurship and risk-taking spirit among young people and online teaching due to the school closures may contribute substantially to slowing youth human capital accumulation.

China’s economy is standing at a crossroads. Its growth, employment, and human capital have recently experienced significant fluctuations and even downturns. To confront this instability, the deep causes of these problems need to be further explored. An upturn in the business cycle is not likely to be sufficient.

References

1. Aucejo E M, French J, Araya M P U, et al. The impact of COVID-19 on student experiences and expectations: Evidence from a survey [J]. Journal of Public Economics, 2020, 191: 104271.
2. Gita Gopinath, IMF Staff Completes 2022 Article IV Mission to the People’s Republic of China. 2022. https://www.imf.org/en/News/Articles/2022/11/21/pr22401-imf-staff-completes-2022-article-iv-mission-to-the-peoples-republic-of-china
3. Guénette J D, Kose M A, Sugawara N. Is a Global Recession Imminent? [J]. Available at SSRN, 2022.
4. International Monetary Fund, Crisis upon Crisis—IMF Annual Report 2022. 2022. https://www.imf.org/external/pubs/ft/ar/2022/downloads/imf-annual-report-2022-english.pdf
5. Jaume D, Willén A. The long-run effects of teacher strikes: evidence from Argentina [J]. Journal of Labor Economics, 2019, 37(4): 1097-1139.
6. Tomasik M J, Helbling L A, Moser U. Educational gains of in‐person vs. distance learning in primary and secondary schools: A natural experiment during the COVID‐19 pandemic school closures in Switzerland[J]. International Journal of Psychology, 2021, 56(4): 566-576.
7. World Bank, Navigating Uncertainty—China’s Economy in 2023. 2022. https://thedocs.worldbank.org/en/doc/b8644c8a79ee3376b2cd3c16a9f90cc7-0070012022/original/CEU-December-2022-ENG.pdf
8. World Bank, Global Economic Prospects. 2023. https://openknowledge.worldbank.org/bitstream/handle/10986/38030/GEP-January-2023.pdf

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Public opinion polls over the past several years reveal a significant shift in the American public’s attitudes toward China. The public increasingly believes that China, and the Chinese Communist Party (CCP) in particular, pose a long-term threat across a broad spectrum of U.S. strategic interests from advances in technology to military capabilities and economic security. As recently as 2018, 51% of respondents in a Gallup Poll cited the threat from North Korea as the most significant, with China lagging far behind a distant third after Russia at only 11%. Although China moved up to the second position in a 2019 Pew Research Center poll at 21%, 32% of respondents that year ranked Russia as the greatest strategic danger.

However, since 2019 results across multiple polling organizations demonstrate a dynamic change in the American public’s view of China. A survey in 2020 conducted by the Chicago Council on Global Affairs, which has been documenting the public’s views on foreign affairs since 1974, found that 55% of Americans consider “the development of China as a world power” a critical threat. In July 2020, 73% of U.S. adults in a Pew survey had an unfavorable view of China, up from 26% just two years earlier. Results from a 2020 Center for Strategic and International Studies survey showed that 56% of respondents had an overall negative view of China.

Quantitative and qualitative research of polling data covering a broad array of foreign policy topics over the course of the 20^th century demonstrates a complex relationship. Still, it often points to a direct correlation between the public’s attitudes and the subsequent implementation of American foreign policy decisions. Based on historical precedence and recent polling data indicating a shift in the American public’s perception of China, this essay argues that U.S. political and foreign policy decision-makers have the public support necessary to take decisive action and implement a concerted long-term strategy utilizing its tools within the diplomatic, information, military, and economic realms to counter China’s moves targeting the stability of existing regional and global structures.

Shifting Perceptions of China

The American public’s perceptions of China have varied dramatically since Mao and the CCP first came to power in 1949. Those perceptions arose in the context of the broader Cold War that witnessed direct U.S. involvement in Korea, Vietnam, and Taiwan, as well as the Chinese Cultural Revolution and China’s emergence as a nuclear power in the 1960s. Despite official and open hostilities between the CCP and U.S. political leaders during this time, analysis of data on public polling beginning in the mid-1950s indicates a persistent preference among Americans for “slow, gradual increases in desires for rapprochement (Shapiro 1988).” By the 1970s, more Americans favored United Nations’ admission of China than opposed it, and support for the recognition of China rose a dramatic 31% between its lowest point during the Vietnam War in 1968 and 1977, when the Carter administration officially recognized China (Shapiro, 1988). Despite a few exceptions, further analysis of public polling data during this timeframe found a remarkably high correspondence between public preferences and U.S. policy toward China (Holsti, 1992). The two, in large part, were believed to be in harmony and provided the baseline public support needed by the Nixon administration to radically shift and implement their foreign policy objectives toward China (Shapiro, 1983; Holsti, 1992). The trend toward a more positive evaluation continued until 1989 when, following Tiananmen Square, results from a Gallop poll highlighted the number of Americans who viewed China in “very” or “somewhat” favorable terms declined from 72% to 34%. Significant parallels between public perception and policy decisions highlighted throughout the history of U.S.-Chinese relations sent a strong message to policymakers that there are direct, significant electoral consequences if they fail to pay close attention to the public’s opinions on China issues (Holsti, 2004).

In 1974, the Chicago Council on Global Affairs was created at the behest of then Secretary of State Henry Kissinger to determine whether there was a renewed public desire to move toward U.S. isolationism following the Vietnam War. Since then, the council has conducted surveys to gauge public opinion on several key strategic issues associated with foreign policy and the U.S.’s place in the world.

One of the key findings that has remained relatively constant is Americans’ desire for the United States to stay engaged in world affairs. More specifically, over the past several years, polling data from the Chicago Council and several other public and private organizations, such as Gallup and the Brookings Institution, have highlighted a significant shift in the public’s attitudes toward China.

Results from the Chicago Council’s latest surveys from 2020 and 2021 are most telling. In 2020, Americans rated China an average of 32 degrees on a “feeling thermometer” between 0 to 100, where 0 represents a very negative feeling, and 100 represents a very favorable feeling. These results showed a noticeable decrease of 13 degrees from the last survey conducted in February 2018, which was the lowest rating given to China in the history of Chicago Council surveys dating back to 1978. In addition, 55% of Americans believed the development of China as a world power to be a critical threat to U.S. vital interests, a sharp increase from just 38% of those polled in January 2020. Additional data from the 2021 Chicago Council survey show the trend continuing and highlight a concern that the U.S. is falling behind its near-peer competitor in key areas believed to be critical to the U.S. maintaining its global influence. A plurality (40%) said China was economically stronger, up from 31% in 2019, and only 27% believed the U.S. maintained an economic advantage. For the first time in Council polling, fewer than half of Americans (46%) said the U.S. was stronger than China militarily, down from 58% in 2019. A majority of Americans (58%) in 2021 believed trade between the U.S. and China did more to weaken U.S. national security, up from 33% in 2019 during the height of the U.S.-China trade war. More Americans also expressed a willingness to use military force to defend allies and partners across a range of scenarios. Described as a “striking shift” by the Chicago Council, for the first time, a slight majority of Americans (52%) supported using U.S. troops if China were to invade Taiwan, up from 41% in 2020.

Understanding the Shifting Perceptions

The circumstances and reasons behind this significant shift in the public’s perceptions toward China over a relatively short period of time are many and complex, stemming from possible complicity in the COVID pandemic, regional expansionism, and the military development and occupation of islands in the South China Sea, human rights issues in Xinjiang and Hong Kong, economic coercion and espionage, and the dismissal of accepted international laws and norms, just to name a few. How these issues are communicated to the public by foreign policy elites and their associated interest groups and how China is portrayed in the news media also play a significant role in shaping public perceptions. Past case studies that identify a strong relationship between the U.S. public’s perception and foreign policy outcomes, along with historical precedents demonstrating an alignment between contemporary public perception and U.S.-China policy, have provided the impetus and public backing for further stringent policy actions spanning the entire diplomatic, informational, economic, and, if necessary, military spectrums.

A new alignment countering China requires a concerted foreign policy campaign by the U.S. that is persistently and clearly communicated through open dialogue with the American public outlining the long-term threat China poses not only to the U.S. but also to our allies and partners in the existing international order. The Biden administration’s “Foreign Policy for the Middle-Class” plan is a step in that direction and seeks to align foreign policy objectives more closely with the desires of Americans outside the Beltway in Washington affected by these policy decisions. A majority of Americans polled in The Chicago Council survey in 2021 said that improving public education (73%) and strengthening democracy at home (70%) were crucial to maintaining U.S. global influence. Alongside domestic priorities, maintaining America’s economic power (66%) and military superiority (57%) were viewed by respondents as strategic elements critical to upholding the U.S. standing as a global leader against the direct challenge presented by a rising China.

The Military Factor

Although the capabilities gap between the U.S. and Chinese militaries continues to shrink, there is broad consensus among contemporary military analysts that for at least the next 5-10 years, the U.S., specifically its Navy, will maintain the edge primarily due to operational and tactical efficiencies in certain warfare areas, to include submarine and anti-submarine warfare, and U.S. experience and ability to conduct joint operations. Sustaining that military edge in the long term is imperative as both a deterrent and to demonstrate the U.S. has the capability to back its strategic ambitions to counter Chinese aggression. Moreover, U.S. political leadership is in the advantageous position to implement a set of clearly defined strategic objectives against our adversaries in the competition sphere and ensure we remain militarily prepared if ever faced with the decision to go to war in the Pacific theater.

Any conventional war with a near-peer competitor like the PRC, even if confined to a regional conflict in the South China Sea, would be unique in its speed, complexity, and, most likely, lethality against U.S. military forces. The number of American casualties in such a conflict would likely have an immediate and direct impact on the psyche of that critical leg in Clausewitz’s “triad,” the American public and its will. Richard Eichenberg conducted an ordinary least squares regression analysis to study all U.S. public opinion polls on instances where the U.S. threatened or used military force between 1981 to 2005 to look at relationships between the public’s will and its support for military intervention (Eichenberg, 2005). The study found the initial base level of public support for any military intervention is conditioned on the campaign’s strategic objective and, once implemented, the success and/or failure of that objective. Public concern over casualties was conditional and affected by both the strategic objective and the outcome of the conflict. Specifically, “data show a clear hierarchy of U.S. public support that differentiates the unpopularity of intervening in internal conflicts from the much higher levels of support for humanitarian interventions and the restraint of aggressive behavior of other sovereign states (Eichenberg, 2005).” U.S. involvement in situations of internal political change, or what could be defined as “essentially civil war situations,” as well as peacekeeping missions following an internal conflict, were not popular among respondents.

Eichenberg’s study revealed the use of military force under the pretext of internationally accepted rules and norms as defined by international institutions, for example, the U.N., and multilateral efforts alongside allies and partners, both provide an additional degree of legitimacy in the public eye, as opposed to the U.S. “going it alone.”  Conveying principal policy objectives and the success or failure of a military operation are crucial factors determining the level of citizen support in its aftermath. The public’s sensitivity to the loss of human life must be understood within this context. If the United States accomplishes what it sets out to do, citizens generally respond that it is “worth it.”  Mission failure impacts public support. Lastly, other considerations, such as multilateral support, also influence public opinion (Eichenberg, 2005).

Conclusion

The trend lines in recent polling make clear that the American public’s attitude toward China has evolved, and more and more Americans are concerned that China’s rise as a global power and strategic competitor threatens U.S. standing in the world to the detriment of peace and security. These concerns extend to the CCP’s stranglehold over its citizenry and China’s human rights record against ethnic minorities and individuals who speak out in opposition to the Party. Elected decision-makers have an opportunity to develop a long-term, comprehensive strategic plan with identifiable and measurable objectives that the American public understands and can support. These policy decisions should remain heavily focused on the diplomatic, information, and economic spheres of strategic engagement. But based on public opinion polls, the U.S. must ensure it is prepared to confront and defeat China on the battlefield if called to do so. As indicated in research conducted by Eichenberg and further supported by the Chicago Council poll showing 52% of Americans agree the U.S. should intervene militarily if China invades Taiwan, the public is more tolerant and accepting of military intervention to defend against aggressive actions by one sovereign against another. Public popular support for U.S. assistance to Ukraine against the predations of Russia provides further evidence.

Public perceptions of China, as reflected in polling data, must be considered and incorporated into current and future foreign policy decisions. There exists a symbiotic relationship between public opinion and foreign policy decision-makers within our liberal democracy. The American public has an appreciation for, and an increasingly sophisticated understanding of, the critical role U.S. foreign policy plays in maintaining stability within the global order and how closely our own domestic prosperity and security are linked to the international system. Just as importantly, this relationship further reinforces our foundational principle that political leaders remain beholden to the will of the governed.

References

Center for Strategic and International Studies. 2021. “Americans Overwhelmingly See China as the Greatest Foreign Challenger to the United States.” https://chinasurvey.csis.org/analysis/americans-see-china-greatest-challenger/ 

Eichenberg, Richard. 2005. “Victory Has Many Friends:  U.S. Public Opinion and the Use of Military Force.”  International Security 30(1):140-177.

Galston, William A.  2021. “A Momentous Shift in U.S. Public Attitudes Toward China.”  Brookings; https://www.brookings.edu/blog/order-from-chaos/2021/03/22/a-momentous-shift-in-us-public-attitudes-toward-china/

Holsti, Ole R.  2004. Public Opinion and American Foreign Policy. The University of Michigan Press.

Holsti, Ole R.  1992. “Public Opinion and Foreign Policy:  Challenges to the Almond-Lippman Consensus Mershon Series:  Research Programs and Debates.”  International Studies Quarterly 36(4):439-466.

Page, Benjamin and Robert Shapiro. 1983. “Effects of Public Opinion on Policy.”  The American Political Science Review77(1):175-190.

Rielly, John. 1979. “American Public Opinion and U.S. Foreign Policy 1979.”  The Chicago Council on Global Affairs;https://www.thechicagocouncil.org/sites/default/files/2020-11/1978-Chicago-Council-Survey-PDF-Report.pdf

Shackelford, Elizabeth, Dina Smeltz, and Jamie Druckman.  2021. “Public Opinion and Foreign Policy – Does It Matter, and if So, How?”  The Chicago Council on Global Affairs; https://www.thechicagocouncil.org/events/public-opinion-and-foreign-policy-does-it-matter-and-if-so-how

Shaprio, Robert and Benjamin Page.  1988. “Foreign Policy and the Rational Public.”  The Journal of Conflict Resolution32(2):211-247.

Silver, Laura, Kat Devlin, and Christine Huang. 2021. “Most Americans Support Tough Stance Toward China on Human Rights, Economic Issues.”  Pew Research Center;  https://www.pewresearch.org/global/2021/03/04/most-americans-support-tough-stance-toward-china-on-human-rights-economic-issues/ 

Smeltz, Dina and Craig Kafura.  2020. “Do Republicans and Democrats Want a Cold War With China? American Views of China Plummet; Public Split on Containment or Cooperation.”  The Chicago Council on Global Affairs; https://www.thechicagocouncil.org/research/public-opinion-survey/republicans-and-democrats-split-china-policy

Smeltz, Dina, Ivo Daalder, Karl Friedhoff, Craig Kafura, and Emily Sullivan. 2021. “A Foreign Policy for the Middle Class – What Americans Think. Results of the 2021 Chicago Council Survey of American Public Opinion and U.S. Foreign Policy.”  The Chicago Council on Global Affairs; https://www.thechicagocouncil.org/research/public-opinion-survey/2021-chicago-council-survey

SU.S. Navy Chief of Information (CHINFO).  December 2021. “Gallup National Survey Findings.” https://portal.secnav.navy.mil/orgs/OPNAV/foses/Documents/CHINFONationalSurve yFindingsQ4Nov2021.pdf

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The film can be read as an elegy for the vanishing rural world in contemporary China. With the mass exodus of local young peasants migrating to urban industrial cities like Shenzhen and Dongguan — which Ma Youwen and Ma Chengwan briefly represent in the film — there are many discarded vacant houses for the homeless Ma Youtie and his newlywed wife to dwell in temporarily.

Many of the senior peasants who remained behind have transferred their right to use the land and abandoned farming, too. Against this background, Ma Youtie is depicted as what I call “China’s last peasant,” who maintains a quintessential bond with the soil and the farmland. Usually taciturn and refrained, Ma delivers strikingly thought-provoking lines in the film. In one scene, he told Guiying: “Everything starts from and grows in the soil. Dirt is very clean. The soil doesn’t despise us. How can we despise soil? The soil rewards us whether you’re rich and powerful, or an ordinary person. You plant a bag of wheat, and it will repay you with tenfold or even twenty-fold of bags.” In another scene, he asks rhetorically while sowing: “How can a peasant live without land?”

Later, when he is offered the opportunity to live in a new apartment in a tall building because of a government policy on poverty alleviation, Ma’s immediate reaction is, “If I move there, where would I keep my donkey, pigs, and chicken?” When millions of Chinese peasants are forced to experience urbanization, they are uprooted from the soil, annihilating their identity as peasants. In an extremely sympathetic and nostalgic tone, the film meticulously documents and poetically presents the disappearing rural lifestyle, the bucolic and pastoral landscape, and the simple joy that the couple savors, such as the wheat flower and the straw donkey.

Ma’s singularity as the last peasant is symbolically hinted at in the plot as he is the only villager with the rare Rh negative blood type, or “panda blood,” as referred to in the film. In this sense, Ma’s marginality and exclusion are doomed. In the film, Youtie is abandoned by his blood brother, despised by fellow villagers, neglected by the village cadres, and exploited by the new rich. Yet at the same time, his character is romanticized and idealized as embodying all the “rare” lost values and virtues: kindness, integrity, endurance, and perseverance. The film thus portrays a unique yet ambivalent peasant image. Ma Youtie is capable of farming and skilled in house-building, yet he spent the past 40 years of his life living with his brother as a free laborer. He is indifferent to the ridicule and contempt from others but is emotional and sensitive enough to care for Guiying, the swallow, their donkey, and the chicken.

Unlike Ermo, in the Fifth generation director Zhou Xiaowen’s film Ermo (1994), who sells blood and finally earns a TV, Ma Youtie is forced to give his blood for free to a sick entrepreneur and finally offers a paper 8D TV as a sacrifice on Guiying’s tomb. Ma is also different from the madman narrator Zhang Yinsheng in Jia Pingwa’s novel Qin Opera (2005), which similarly presents a marginalized and dwindling peasant culture in southeast Shaanxi with the increasing marketization and urbanization in the late 1990s. But interestingly, one of the most memorable lines in Return to Dust is from a madman, who may be Ma’s alter ego:

“To the sickle, what could the wheat say?

to the pecking sparrows, what could the wheat say?

to the grinder, what could the wheat say?

to be seeded, what could the wheat say?”

In a related scene, when Guiying mistakenly pulls out a wheat seedling, Ma says: “That’s OK. It’ll become fertilizer for other crops. Everyone has his own destination. Wheat is no different. It has its fate, too. When summer comes, it’ll be cut down anyway.” Like the wheat, Ma is powerless and helpless in the face of the unavoidable decimation of the countryside and rural life. To a certain degree, the magic of romantic love might have empowered the vulnerable Youtie and accounts for his dramatic change after marriage. Yet, their love is so fragile and ephemeral. After Guiying dies by drowning, Ma lies down with a bottle of pesticide on the table. At the very end of the long ending credits, a small line reads: “With the help of the government and the kind-hearted villagers, Ma Youtie moves to the new apartment and starts a new life.” The ambiguous and sarcastic ending of the film renders the last peasant powerless and even unable to control his own death of “returning to dust.”³

This rural film, simple in plot yet rich in detail, received the highest rating (8.5/10) of the Chinese films in 2022 on the review platform douban (similar to Rotten Tomatoes). Interestingly, the dramatic surge in the film’s box office revenue did not happen during the exclusive theatrical window of its first month of showing, but rather after it became available for online streaming after August 9, 2022, defying the film industry norms.

Among others, the short videos on TikTok (douyin in China), kuaishou, Bilibili, Wechat, and other video-sharing platforms played a key role in promoting the film and spurring the audience to watch the film on the silver screen. Various film clips were edited, reworked, and analyzed by influencers, forwarded by their mass followings, and widely circulated on social media. According to an independent study on the film market,  TikTok videos on this film garnered 100 million new views on August 26 and increased to 300 million new views in three days on August 29.⁴ Correspondingly, the audience for this film is no longer limited to the cultural elites and intellectuals in big urban cities, as was the case for earlier independent arthouse films. Instead, the film attracted a large lower-class audience in small cities and outlying towns, who are the same target users of the short video platform kuaishou. For instance, the viewers from third- and fourth-tier cities accounted for almost one-third of the total theatre audience during the last week in August.⁵ Many urban and suburban audiences relate the film to their agricultural roots, while many others echo the suffering of the protagonists from similar experiences of survival and struggle in the third year of the pandemic, which witnessed many tragic and horrendous events in 2022, such as the chained woman incident in January, the Shanghai lockdown in April, and the Tangshan restaurant attack in June, not to mention the daily stress from China’s zero-Covid restrictions. Yet as the audience becomes more heterogenous, the receptions to the film also become more varied and controversial. Like the Fifth generation and Sixth generation filmmakers, Li Ruijun is maligned with accusations of self-Orientalism and self-exoticism to cater to the international festival judges (the film won the nomination for the Golden Bear at the 72nd Berlin International Film Festival in February 2022).

How did such an underground art film exposing the dark side of China receive initial approval from censors? The director may have strategically set the film in 2011, exactly one year earlier than 2012, when Xi Jinping came to power. The final “happy ending” I mentioned above may also be a tactic to win the censors’ approval. However, as Brian Henderson argues, films often treat issues facing society at the time of their production rather than the time in which they are set.⁶ Although Return to Dust is set in 2011, it inadvertently includes footage from a Youku outdoor reality show, On the Road (lü xing), about the man-eating fish or piraña in the Amazon rainforest in Brazil, which was produced in 2014. Moreover, the film touches on several government policies. Although “building new villages” has been a Party slogan since Hu Jintao’s regime, a zhihu (similar to Quora) user, daoyiweiming, argues that the official policies such as the option to rent land, renting,  demolition of older peasant homes, and poverty alleviation were implemented in Gansu actually around 2015-2020, during Xi’s reign.⁷ More crucially, Xi had declared victory in ending extreme poverty, one of his trademark achievements, in 2021. Therefore, it is not surprising that this grim film on poverty was banned one month before the 20^th CCP National Congress, which was held in October when Xi secured his third term as China’s paramount leader. Just as its Chinese title, yin ru chen yan (“hidden and fell into oblivion”) suggests, this film has to be hidden and invisible from the public.

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Inner Mongolia, officially an autonomous region stretching across a wide area of north China, has become a battleground for expressing linguistic and cultural identity. The crisis stems from the Beijing’s decision to push for Mandarin Chinese language education in the region’s school system at the expense of Mongolian, the primary language of the province’s titular Mongolian minority group. Protests that arose because of the policy not only shed light on ethnic Mongolians’ struggle to preserve their heritage, but also emphasize Beijing’s troubling tendency to increasingly impose on minority rights to consolidate its authority both domestically and internationally.

Initially, the ethnic Mongolian community and Beijing seemingly enjoyed a close-knit relationship. In 2016, authorities permitted schools catering to ethnic Mongolian students to use Mongolian as the chief language of instruction to advance their linguistic capacities and promote bilingualism.¹ Starting in 2020, Beijing reversed its previous tolerance of Mongolian language education and began to aggressively campaign for the use of Mandarin Chinese. In August 2020, the federal government announced that all primary and secondary schools throughout Inner Mongolia had to conduct history, morality and law, and language and literature classes in Mandarin Chinese, rather than in the Mongolian language.²

Government representatives justified the measure by arguing that it would familiarize Mongolian students with Mandarin Chinese from a younger age and provide them with better educational and career prospects in the long run.³ Mongolian families, however, denounced the change, as they feared that Beijing would use this policy as a first step in replacing all forms of Mongolian-language instruction with Mandarin Chinese. In turn, they claimed that using Mandarin Chinese as the sole medium for education would disconnect young generations of Mongolians from their ancestral language and culture.⁴

Ironically, the ethnic Mongolians of Inner Mongolia had earned a reputation as China’s “model minority” because of their relatively amicable relationship with Beijing, especially when compared to other prominent ethnic minority groups such as the Uyghurs in Xinjiang or the Tibetans in Tibet.⁵ Ethnic Mongolians account for more than 4 million residents (approximately 18%) of Inner Mongolia’s total population of 24 million people.⁶ In fact, almost twice as many ethnic Mongols live in Inner Mongolia compared to the nation-state of Mongolia (also known as Outer Mongolia).⁷ Inner Mongolia has a long history of integration with China. During the 17th century, the territories that comprise modern-day Inner Mongolia and Outer Mongolia became incorporated into Qing China.⁸ After the fall of the Qing dynasty in the early 20th century, the regions of Outer Mongolia united and, with the backing of the Soviet Union, declared independence.⁹ On the other hand, Inner Mongolia remained with China and formally became the Inner Mongolia Autonomous Region in 1947, two years before the Chinese Communist Party established the People’s Republic of China.¹⁰ Following the foundation of the new government, Beijing encouraged internal migration to Inner Mongolia — particularly from the Han Chinese ethnic majority, which makes up over 90% of China’s population¹¹ — but still vowed to grant ethnic Mongolians special rights and privileges to preserve their cultural identity.¹²

Overall, the ethnic Mongolian community has complied with the province’s national government policies. Most notably, they have not yet pursued a major separatist movement, and intermarriage rates between ethnic Mongolians and the Han Chinese are higher than their Uyghur and Tibetan counterparts.¹³ In turn, Beijing has tended to be more permissive in allowing ethnic Mongolians to use the Mongolian language and adhere to traditional practices and beliefs. Thus, Inner Mongolia had seemingly achieved a balance of promoting assimilation with Beijing’s preferences and the growing Han Chinese presence in the province while still allowing ethnic Mongolians to express their cultural heritage.

However, the campaign to require the use of Mandarin in schools when the academic year began in September 2020 led ethnic Mongolians to rebel against the education policy by staging protests and homeschooling their children.¹⁴ Federal authorities retaliated by threatening families with job losses and other penalties unless they sent their children back to school.¹⁵ Beijing also pursued a campaign of mass incarceration. An estimated 10,000 people were detained during the height of the 2020 protests.¹⁶ The events in Inner Mongolia gained international attention and sparked solidarity protests, most notably in Mongolia, but also in countries such as the USA¹⁷, France¹⁸, and Japan¹⁹.

Despite the widespread condemnation of Beijing’s policies in Inner Mongolia and abroad, protests eventually ebbed in the final months of 2020. Beijing, meanwhile, decided to push its Mandarin Chinese agenda in Inner Mongolia even further. CCP officials advocated ramped-up recruitment for Mandarin Chinese-speaking teachers²⁰ to work in the region. As of Fall 2021, kindergartens must conduct all childcare activities in Mandarin Chinese²¹. Longer-term changes focus on entrance exams: junior middle school students will have to take senior middle school entrance exams in Mandarin Chinese starting in 2023, while 2025 senior high school graduates must take their college entrance exams in Mandarin Chinese.²² Beijing’s crackdown on Mongolian has also seeped into the cultural sphere. An additional Fall 2021 revision to the provincial educational curriculum excluded the use of books on Mongolian history and culture in the classroom.²³

Beijing’s assault on Mongolian language and culture has extended outside school environments. In January 2021, provincial state media removed Mongolian programs and replaced them with Mandarin Chinese shows.²⁴ Arts and cultural performances that previously celebrated traditional Mongolian elements now feature Peking opera, CCP anthems, and other Han Chinese influences.²⁵ CCP officials have helped proliferate the slogan “Learn Chinese and become a civilized person”²⁶ throughout Inner Mongolia.

As Beijing’s anti-Mongolian crusade has heightened intensity, the ethnic Mongolian population has grown weary over their resistance resulting in virtually zero reform. Moreover, the international community’s attention has also largely shifted to other issues, most notably Russia’s invasion of Ukraine and the threat of a Chinese invasion of Taiwan. These factors have increased anxieties that a “cultural genocide” is quietly but steadfastly occurring in Inner Mongolia.

The Chinese government’s actions in Inner Mongolia draw parallels to escalating crackdowns on ethnic minority rights in other Chinese provinces, including the mass detainment of Uyghurs in “re-educational camps” throughout Xinjiang²⁷ and the forced placement of Tibetans into “training programs” in Tibet.²⁸ Researchers and analysts on China claim that these measures reflect President Xi Jinping’s campaign to aggressively promote Sinicization throughout China.²⁹ The Xi regime has pursued an agenda of pushing out minority languages and cultures in favor of Mandarin Chinese and Han Chinese culture, as ruling authorities believe that such measures will guarantee loyalty to Beijing and nullify internal threats to China’s ascension to global superpower status. Xi’s policies have also significantly impacted China’s foreign relations. The case of Inner Mongolia has ignited debates in Mongolia on the nature of its bilateral relationship with China and how to advocate for the rights of ethnic Mongolians while not risking major repercussions, especially in trade relations.³⁰ The treatment of ethnic minorities in China has also spurred discussions about the future of the liberal world order, especially concerning human rights discourse, in the international community.³¹

Although the situation for Inner Mongolia currently looks grim, it is not to say that all is lost. If the international community takes a stronger stand to call out China for its human and minority rights abuses, then Beijing may ease up some of its policies in Inner Mongolia. Furthermore, an Inner Mongolian resident who was interviewed by Radio Free Asia stated that the Chinese government cannot take away Mongolians’ souls and minds, and their community can endure this hardship and hold onto their identities.³² Whatever the ultimate outcome of the language policy in Inner Mongolia will be, it not only has critical ramifications for the province’s ethnic Mongolians, but also for the future of Chinese nationhood and global norms and protocol as a whole.

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