Are China’s top leaders immune to jet lag? One week, Prime Minister Wen Jiabao flies to Bali, where he tells a summit of Asian leaders that the continent’s future depends on China, receiving a standing ovation. Another week, President Hu Jintao touches down in Latin America, where he woos political leaders with promises of massive Chinese investment and aid. Another week, Hu travels to Saudi Arabia, where he warrants an audience with the ruling family’s private council.

Wen and Hu’s globetrotting is only the most evident part of China’s new- found international assertiveness, a posture that American policymakers are taking seriously. American diplomats are frantically cabling assessments of China’s increasingly sophisticated diplomacy back to Foggy Bottom, while Foreign Service officers marvel at the new breed of Chinese envoys–suave, well-spoken young men and women, many with academic training in Europe and the United States. In its annual reports, the U.S. military highlights China’s arms build-up, while the Pentagon’s top brass worry about China’s strength. In short, as China scholar David Lampton notes, the American policy-making establishment seems to have adopted a "strong China paradigm"–namely, that China will continue developing economically while maintaining political stability and that it will increasingly use its strength to exert power abroad.

But the emergence of the strong China paradigm has led some American policy-makers to forget another China, the one that dominated discussions of the People’s Republic before the 1989 Tiananmen Square crack down: a weak China. And it’s one they would be wise to remember, because even as China flexes its economic and diplomatic muscles abroad, Beijing today faces greater internal fissures than it did before 1989–fissures rooted in a growing disparity between an urbanized rich and an agrarian poor, environmental degradation, and the pressures that openness to the free world brings to a still-authoritarian regime. Then, a weak or fractious China would have had a huge impact on American interests in the region. Now, China’s domestic social, economic, political, and environmental troubles will have major ramifications for the rest of the world.

The United States faces a monumental, double-sided, politically challenging task: dealing with a rising power that is at once strong and weak. It is a task comparable to that which faced the United States and Great Britain in the 1920s and early 1930s, when two other rising powers, Germany and Japan, emerged onto the global scene. Like China today, Germany and Japan were strong and weak at the same time, expanding abroad while facing internal tensions that could have empowered both liberal and conservative sections of society. In that era, London and Washington failed either to prepare for German and Japanese expansionism or to assist liberal, anti-fascist forces within those two nations.

Today, the United States faces a similar challenge: helping China help itself at home while simultaneously preparing for a China strong enough to rival American power. To accomplish the former will take strengthening elements inside China. To do the latter will take developing a strong alliance with the other country often lumped together with China as America’s newest economic threat: India. Indeed, the future of our Asia policy begins in the South: India could be the reliable, democratic, and economically strong ally the United States needs in the region. More important, it could be a force for democratization in Asia, a role other Asian democracies have been reluctant to play.

China’s Weaknesses
At the 2005 APEC CEO summit held in South Korea, Hu Jintao outlined China’s stunning progress. "Since the late 1970s, China has enjoyed sustained and rapid economic development, leading to greater national strength and a better life for 1.3 billion Chinese people," he announced. Hu’s boasts are not untrue. From 1991 to 2003, China grew by nearly 10 percent annually, and by 2050 China may have the largest economy in the world.

Between 1981 and 2001, according to the World Bank, growth in China lifted some 400 million people out of poverty. China also clearly has enjoyed success in winning friends around the world. Through more effective diplomacy, greater disbursements of aid, promises of increased investment, new trade agreements, and the promotion of Chinese culture, Beijing has drastically changed perceptions of China in many nations, from potential enemy to friend and partner. A 2005 British Broadcasting Corporation poll of 22 nations found nearly all believed China played a more positive role in the world than the United States. Similarly, in a 2006 poll of nine countries by Germany’s Bertelsmann Foundation, a majority of respondents believed that the United States would no longer be the world’s unchallenged power by 2020, because China would rival U.S. influence.

But this record of achievement does not elicit similar pride in China’s hinterlands, among its millions of low-wage laborers and displaced agricultural workers, where violent unrest, rather than development and harmony, is becoming the norm. Take Dongzhou, in southern China, where police shot 30 people last December after villagers protesting land seizures clashed with security forces. Or the workers at the Jilin oil fields, who found no state institutions they could approach to protest being laid off from work. After traveling to Beijing in a fruitless attempt to petition Communist Party leaders, the oil workers committed mass suicide. Incidents like these reveal another story: the institutional weakness plaguing the People’s Republic. China today faces five major fault lines, which are weakening state control and, one day, could lead to state collapse.

Urban-Rural Divide
First, even as China’s economy booms, it is leaving behind vast numbers of Chinese, primarily farmers. Most have small plots, a vestige of communal farming, which cannot compete as China opens its markets to the world and faces agriculture giants like Australia. Beijing also has focused state funds on cities, leaving less public money for rural areas. As a result, according to one report, roughly three-quarters of rural Chinese have seen their income dwindle since 2001, when China entered the World Trade Organization.
Unable to survive on agriculture, peasants are undertaking one of history’s largest mass migrations, making America’s 1930s Dust Bowl exodus look like a family vacation.

According to several studies, some 300 million Chinese will migrate to cities within the next 20 years. China’s cities are already home to some 140 million migrant workers, who are either unemployed or employed in construction, mining, and other largely unregulated industries. In turn, these migrants are forming a massive urban underclass, with no social welfare net, job security, legal rights, or unions. (China allows only one state-dominated union.) The Chinese government itself estimated in 2004 that migrant workers together are owed at least $12 billion in back wages, and most migrants work more than 11 hours a day, in jobs that are often hot, dangerous, and exposed to poisons. To take one example, more than 6,000 Chinese miners die each year in accidents, making China home to the most dangerous mining industry on earth (no small feat, given the horrific state of mining in places like Congo).

It is even worse for those who stay on the farm. As farmers lose their capital and their clout, they fall prey to rapacious local officials who want to expropriate their land to build new housing developments and industrial parks, which often offer sizable kickbacks to Party members. Since land tenure in much of China remains uncertain, a legacy of Mao-era collectivization, these officials have little trouble. One estimate suggests that as many as 40 million farmers have lost all or part of their land, receiving only minimal compensation in return.

China today risks turning into an Asian version of Latin America–a highly unequal society in which elites, primarily in eastern cities like Shanghai, enjoy developed-world standards of living while hundreds of millions live in poverty. While Beijing boasts of the hundreds of millions lifted out of poverty, China’s uneven growth also threatens to push some 200 million beneath the UN-defined poverty line. In fact, while China once had among the smallest Gini coefficients in the world (a measure of inequality), now it has one of the largest, with urban incomes three times that of rural income.

This growing divide, and increasing migration, will only foster instability. Already, Chinese cities have witnessed rising crime levels, attacks on business people and other elites, and massive protests by laid-off workers. In the long run, this divide could topple the government, as it did in the nineteenth century, when social unrest, catalyzed by the Taiping Rebellion and other movements, helped bring down the last emperor.

Environmental Destruction
Rapid migration, swelling cities, and growing consumption all lead to the second fault line: a looming environmental catastrophe. China’s megacities simply cannot cope with the simultaneous influx of new people and the consumption habits of an expanding middle class, which will soon make China the world’s largest consumer of oil, copper, iron ore, aluminum, platinum, and timber. As Elizabeth Economy, an expert on the Chinese environment, writes in her seminal book The River Runs Black, pollution from China’s growing car culture, factories, coal usage, and urbanization has resulted in two-thirds of Chinese cities having air qualities below World Health Organization standards. China has 16 of the world’s 20 most polluted urban areas, and 90 percent of its cities suffer from polluted water systems. Industrialization, combined with deforestation, is expanding China’s deserts at an unsustainable pace. Growing by almost 4,000 square miles a year, they are swallowing farmlands and causing massive dust storms. 
 
The World Bank estimates that this pollution cuts as much as 12 percent off China’s annual Gross Domestic Product (GDP) because of lost productivity from diseases. The environmental crises could hinder China’s rise in other ways, too. Environmental disasters will exacerbate popular mistrust of the government, especially when officials hide the scope of the catastrophes. The lack of clean water and clean air will only heighten the conflict for scarce public services in growing Chinese cities, a common problem in other Asian megacities.

Unrest
Furious at losing their land, frustrated at being unable to find decent urban jobs, exploited by officials, living in the worst areas of increasingly polluted cities, China’s underclass has begun to strike back. Increasingly, they are joined by middle-class Chinese who share their anger at officials’ expropriation of land, corruption, and horrendous environmental mismanagement, and who believe that, in an increasingly modern China, citizens should enjoy greater rights. Since the early 1980s, these middle-class Chinese have seen the country develop a more sophisticated legal system, which some have used to settle commercial disputes, giving them a taste of the rule of law.

Together, the poor and the middle class are creating a third fault line: aggressive, popular unrest. To an average visitor to China’s glittering eastern cities, the People’s Republic seems a blissful place, with few of the noisy street demonstrations one might find in, say, France. But that’s because many of China’s protests take place away from the east coast cities, in the vast hinterlands, where they are becoming routine events. According to the central government’s own figures, China faced some 87,000 protests in 2005, up from 74,000 the year before. The protests are becoming larger and more sophisticated, with leaders using text messaging and the Internet to organize and to contact reporters. They also are turning violent: Dongzhou marked the first time Chinese police had shot protestors since the Tiananmen crackdown. Chinese media and advocacy groups have documented a litany of recent violent incidents, from 10,000 workers in the city of Dongguan smashing up their factory to mobs in the town of Guiyang destroying police cars after the authorities beat up a migrant worker. As weapons increasingly leak into China from lawless nations like Burma, the potential for social instability and violence will mushroom.

Some impoverished Chinese have tried to salve their material pain by rediscovering God, but this too has created a fertile environment for protest. Buddhism, a traditional religion in China, has undergone a revival as the Communist Party has loosened some restrictions on freedom of worship. In 2001, thousands of Chinese decamped upon a remote Buddhist monastery in western China called Sertar, living communally and receiving teachings from prominent monks. (Alarmed at the vast numbers of Chinese moving to Sertar, the government eventually forced most worshippers to leave.) At the same time, many Chinese have embraced evangelical Christianity. China today boasts as many as 100 million Christians, and its most popular evangelical movements can draw 5,000 worshippers for one church service.

In other Asian nations, such as Taiwan and South Korea, Buddhist organizations played a vital role in political change, uniting nascent civil society organizations; the same could easily occur in China. Christian groups, too, could prove a force for change: Chinese Christians first began organizing in order to challenge state restrictions on assembly and worship. But, in recent years, as the government has jailed and even executed Christians, the groups have crossed over from challenging restrictions on religion to broadly challenging the government, from protests against specific grievances to broader anti-state campaigns not unlike those seen during the anti-communist period in Poland.

Political Stasis
Part of the reason Chinese protests turn violent more quickly than those in democracies like France is that China does not yet possess the political culture and institutions to handle them. In fact, in some respects China’s political institutions, political elites, and political culture actually are less open and less able to channel popular consensus than a generation ago. In the 1980s, Chinese officials created a task force of liberal intellectuals designed to push for political reforms, while Zhao Ziyang, the second most important Chinese leader at the time, advocated for elections. But Zhao was placed under house arrest after 1989 and died last year, and no leaders since have exhibited such liberal tendencies. Meanwhile, the Communist Party has essentially bought out liberal intellectuals who might have reformed the political system. In a new book, my Carnegie Endowment colleague Minxin Pei notes that the Communist Party now "showers the urban intelligentsia, professionals, and private entrepreneurs with economic perks, professional honors, and political access … Nationwide, 145,000 designated experts, or about 8 percent of senior professionals, received ‘special government stipends,’ or monthly salary supplements in 2004."

At the same time, the institutional reforms suggested in the 1980s have sputtered. Nascent attempts at village elections have not led to polls in cities or provinces, even though places like Shanghai, with a GDP per capita of more than $4,500, certainly have populations educated enough to participate in democracy. In the past two years, the state has cracked down on Chinese reporters and websites; launched a campaign to criticize "neoliberal" ideas; imposed restrictions on foreign journalists; and fostered a hard-line Marxist group inside the party that wants to roll back progress toward true private property rights. Besides exacerbating violent protest, these restrictions will impede growth in other ways. If China is to move up the value-added chain, exporting not only low-cost goods but also its own high-tech products, it will need to foster greater domestic innovation, a fact the government acknowledges. Yet it will be impossible to do so in a climate where the regime increasingly quashes public discussion. Even a less repressive Asian state, Singapore, has found it difficult to encourage innovation after decades of government control of public life.

Graft
The backsliding on reform has had another effect, creating China’s fifth potential fault line. Without a modern judiciary or rule of law, China is plagued by high-level corruption and fiscal mismanagement, highlighted by the recent arrest of the highest-ranking party official in Shanghai, for graft. China’s own official news agency revealed in 2004 that some 4,000 corrupt officials had fled the country, carrying with them some $50 billion in state money. Some officials approximate Louis XIV in their indulgence: Beijing’s vice mayor, for example, allegedly used state money to build himself a palace full of concubines.

Since China’s state-linked companies still account for nearly 40 percent of its GDP and over 60 percent of the financial sector, this graft infects the entire economy and banking system, making it difficult for China to develop truly modern, innovative companies. One recent study by accounting firm Ernst & Young estimated that China’s banks, riddled with self-dealing and graft, have nearly $1 trillion in nonperforming loans, an astronomical figure. Perhaps under pressure from Beijing, Ernst & Young backed away from its own report, but other analysts also believe China’s bad loans are rising, potentially pushing the country toward financial crisis. Since the state directs banks, and instructs them to favor government-linked firms, truly private, entrepreneurial Chinese companies have trouble obtaining financing. By comparison, in India entrepreneurs have been able to develop globally competitive private firms, such as technology giant Infosys and pharmaceutical manufacturer Ranbaxy.

What It Means for the World
Thus an irony: China’s increasing wealth and openness mean that its continued–and in some cases worsening–weaknesses will have an undue impact on its neighbors and the rest of the world. Take, for example, the possibility of a global economic crisis stemming from China’s black hole of a banking system, currently sustained by average Chinese citizens’ high savings rates and by infusions of government capital. Today, China is a leading world currency trader and holds nearly $1 trillion in currency reserves. But that could change quickly if Chinese customers lose faith in the banking system. And were an insolvent Chinese banking sector to melt down, it could cause a global financial crisis.

But it would not take a full-on collapse to have a global impact. If financial problems created pressure against its currency, Beijing would likely defend the renminbi by dipping into its reserves, as many Asian nations tried to do during the 1990s financial crisis. Yet China’s reserves, unlike those of Thailand, play a vital role in the world economy. Its reserves of American dollars, for instance, allow the United States to amass massive current account deficits. If the United States could no longer run these deficits, and American consumers could no longer spend at will, the U.S. economy, and likely the world’s, could grind to a halt.

Nor would the United States be the only one to suffer. Today, China is becoming a major aid donor and investor overseas. It is the third-largest donor of food aid in the world. In fragile neighboring nations like Cambodia, Burma, and North Korea, Chinese aid and investment, though problematic in that it supports nasty regimes, also keeps their economies from imploding, and their people from starving. If a Chinese economic implosion were to occur, it would ripple through these countries as well, causing dramatic refugee outflows.

A failing China would affect its neighbors in other ways. In the past ten years, as China has opened its borders and encouraged cross-border trade, tens of thousands of Chinese businesspeople have migrated into neighboring states like Kazakhstan, Russia, Burma, Thailand, and Vietnam, as well as to other continents like Africa and Latin America. Migrants from China now dominate towns like Mandalay, in Burma, where some 200,000 people have arrived in recent years. But without a solid public health infrastructure, open trade and migration also provide a conduit for disease. As seen during the 2003 SARS crisis, China’s combination of massive urban populations living in close proximity to live fowl and pigs breeds new and dangerous diseases, which can spread quickly into neighboring countries. To be sure, since 2003 China has taken strides to manage transnational diseases, cooperating with other countries in Asia to plan for managing future crises. Yet a weaker Chinese government, spread thin from concentrating on protests, environmental disasters, and other fissures, could prove incapable of managing future killer diseases, endangering all of Asia.

Or take the environment. China’s environmental disasters leak chemicals into other nations’ water and air and its rising consumption stresses the world’s resources. To be sure, China is making an effort to control environmental disasters. But, compared with the central government, local officials have exhibited far less interest in environmental controls. If China’s central government weakens, the situation would become worse; local officials would amass more power, likely killing any attempt at environmental management. A similar scenario could play out with regards to China’s newfound diplomatic influence. Today, it plays a vital role in Asia and at the UN, particularly in dealing with nations like North Korea and Iran, which have virtually no relationship with the West. Should China weaken, it would probably grow more suspicious of Western powers, as it did around the time of Tiananmen, when Beijing seemed to fear that the West was trying to bring down the government. A more suspicious China could refuse to cooperate with the international community, making it impossible to solve any issues before the Security Council.

A weaker China could also be a more nationalist China. In fact, the pieces are already in place. Beijing has organized mass rallies and youth groups and revisited Japan’s World War II crimes as a way of rallying public opinion against its ancient enemy. A weaker China, as in 1920s Japan and Germany, might be tempted to push nationalism further. In 2005, China’s nationalism exploded into violent anti-Japan riots across the country, which took days for the Chinese security forces to bring under control. In the months since these riots, after Japan began drilling for gas in disputed waters between the two nations, Chinese state media warned that conflict between Beijing and Tokyo was "inevitable."
Ultimately, this promise might come true. In April, two leading Chinese academics suggested, in a much-noted article, that Beijing now might fight a war to secure its energy.

If China and Japan continue searching for oil and gas in disputed waters, their navies will likely come into conflict. In 2005, Chinese warships sailed to a Chinese drilling platform near where Japan had staked its claim. According to Japan, the Chinese ships targeted a Japanese reconnaissance aircraft hovering overhead, before choosing not to shoot it down. If China becomes more nationalistic, those ships might make a different decision.

How to Help
Beijing’s leaders, and many average Chinese, recognize their country’s looming internal problems. Wen Jiabao recently admitted that China’s unequal income distribution is creating "acute problems" and promised a new economic plan designed to reduce income inequality, while a survey of Beijing citizens found that 80 percent thought income inequality was a major problem. The Chinese government has tried to increase state spending on environmental protection. This summer, Hu Jintao admitted that fighting corruption would be essential to the future of the Communist Party’s survival. Yet, as Chinese protest expert Murray Scot Tanner notes, Hu is trying to address some of the results of China’s closed political and legal system without liberalizing the system itself, an experiment that has not succeeded in human history.

Ultimately, whether leaders like Wen and Hu actually address China’s fault lines may depend upon support from China’s major partners. Thus the challenge for American policymakers is not how to deal with a strong China, but how to prevent it from becoming a weak one without strengthening an authoritarian regime or providing ammunition to a potential future competitor. Even if such a policy could be crafted, offering Beijing help would prove a politically hard sell to a Congress angry at Chinese currency manipulations and an American public that often views China as a vacuum sucking up American jobs.

Walking this tightrope means addressing the symptoms of China’s weaknesses so that the country does not collapse, without strengthening the state’s hold on society. In other words, a kind of tactical engagement–helping China help itself only on issues where American assistance will not squash nascent political reform. For example, cooperation on environmental and health issues would enjoy the support of Beijing without threatening Chinese (or offending American) liberals. And this is an area where the United States could do a lot more than it does today. Many important U.S. government players with environmental and health expertise, such as the United States Agency for International Development, do not cooperate enough with China’s environmental agencies, depriving Beijing’s environmental regulators of key technology, expertise, and understanding of how to write stronger laws. The United States also should give Beijing more of a stake in health issues, forcing China to take on serious problems like SARS or avian bird flu or malaria in Africa. Allowing China to host a donor conference on bird flu in January 2006 was a solid start.

In addition, the United States must find ways to create quasi-institutional arrangements that unite Beijing and Washington. It could, for example, push China to join a kind of "consumers’ cartel" to combat OPEC and other major oil producers, who are currently enjoying high oil prices and salivating at the possibility of growing U.S.-China energy competition. In such a consumers’ cartel, the United States and China, along with Japan and India, would cooperate to pressure big producers like Saudi Arabia to reduce oil prices, help China develop a strategic petroleum reserve, and even engage in joint exploration of new oil and gas fields. It should also expand the high-level dialogue initiated by Treasury Secretary Henry Paulson and Chinese Vice Premier Wu Yi to include many global issues relevant to both Beijing and Washington, such as cooperation in overseas aid policies and solving failing states in Asia and Africa.

On China’s rising inequality, the United States should encourage China to adopt reforms that would slow the spread of violence, but not reduce political space for middle-class Chinese beginning to assert their rights. One obvious reform: allowing farmers to truly own their land, with real titles. Such a reform has the potential to protect farmers from predatory officials, since farmers would have titles; it also would make it easier for farmers to modernize and consolidate their land, putting them in a position to compete with major agricultural producers. They could then take mortgages, sell property to other farmers, and generally build a modern agricultural sector.

Or the United States, working with the Vatican, could support efforts to foster reconciliation between Beijing and the Catholic Church in Rome. If the United States and the Vatican could convince China to recognize the Holy See–Beijing currently recognizes only a China-controlled "official" Catholic Church–it would lessen pressure on Chinese Catholics and increase freedom of worship, which might carry over to evangelical Christians. A greater Vatican presence in China, though adding the Church’s blessing to Beijing’s leadership, also could foster political liberalization nevertheless, as it has done in other nations.

A Passage to India
Yet even as the United States balances between a weak and strong China, it must also find ways to strategically contain China–whether it becomes an aggressive world power or a dangerous basket case. This means, first of all, creating a kind of buffer ring of democratic containment around China, an informal community of Asian democracies with which Washington would consult closely on regional issues. Working with these democracies, America can then deal with China from a position of greater strength, placate Congress, and more easily envision cooperating with Beijing on certain issues.

Leading such an effort should be the other emerging Asian power, India. India shares the American goal of preventing China from becoming the dominant power in Asia, and it can be viewed as a political model by other developing nations–a model in sharp contrast to the one China sells to poor countries. In addition, as a country with some 150 million Muslims, a stable India serves as an example of democracy to the Arab-Muslim world. Such an approach, in fact, is the strongest reason for strengthening America’s ties with India. While significant differences abound between them, a tighter U.S.-India alliance is critical in dealing with a strong-weak China. India is the youngest major nation in the world, with a median age of 25, compared with 33 in China. The vast majority of these young Indians do not share the anti-U.S. sentiments of their elders–one reason why, even as the Bush Administration alienates almost the entire world, polling in India still reveals positive opinions of the United States.

India also is proving that, in the long run, it might enjoy more stable, equitable development than China. True, its fractious democracy and sophisticated legal system slow permits and infrastructure, but they allow it to create genuine, bottom-up consensus behind government policies. Its open banking system and stock market support globally competitive private companies like Infosys, who then reap the profits of their innovations, unlike companies in China that just produce goods for foreign owners. Despite massive income inequality in parts of India, its political institutions channel most popu