No one knows what China’s future holds despite many of faulty predictions of systemic collapse or stagnation. Neither is likely, although they face challenges that are far more serious than many observers seem to think

No one knows what China’s future holds despite many of faulty predictions of systemic collapse or stagnation. Neither is likely, although they face challenges that are far more serious than many observers seem to think

Chinese President Xi Jinping seems to be on a roll. He has sent a rocket to the dark side of the moon, built artificial islands on contested reefs in the South China Sea, and recently enticed Italy to break ranks with its European partners and sign on to China’s Belt and Road Initiative. Meanwhile, US President Donald Trump’s unilateralist posture has reduced America’s soft power and influence.

China’s economic performance over the past four decades has been truly impressive. It is now the main trading partner for more than a hundred countries compared to about half that number for the United States. Its economic growth has slowed, but its official 6% annual rate is more than twice the American rate. Conventional wisdom projects that China’s economy will surpass that of the US in size in the coming decade.

Perhaps. But it is also possible that Xi has feet of clay.

No one knows what China’s future holds, and there is a long history of faulty predictions of systemic collapse or stagnation. While I don’t think either is likely, the conventional wisdom exaggerates China’s strengths. Westerners see the divisions and polarization in their democracies, but China’s successful efforts to conceal its problems cannot make them go away. Sinologists who know much more than I do describe at least five major long-term problems confronting China.

First, there is the country’s unfavorable demographic profile. China’s labor force peaked in 2015, and it has passed the point of easy gains from urbanization. The population is aging, and China will face major rising health costs for which it is poorly prepared. This will impose a significant burden on the economy and exacerbate growing inequality.

Second, China needs to change its economic model. In 1978, Deng Xiaoping wisely switched China from Maoist autarky to the East Asian export-led growth model successfully pioneered by Japan and Taiwan. Today, however, China has outgrown the model and the tolerance of foreign governments that made it possible. For example, US Trade Representative Robert Lighthizer is focusing on the lack of reciprocity, subsidies to state-owned enterprises (SOEs), and coerced intellectual property transfer that have allowed China to tilt the playing field in its favor. Europeans are also complaining about these issues. Moreover, China’s intellectual property policies and rule-of-law deficiencies are discouraging foreign investment and costing it the international political support such investment often brings. And China’s high rates of government investment and subsidies to SOEs disguise inefficiency in the allocation of capital.

Third, while China for more than three decades picked the low-hanging fruit of relatively easy reforms, the changes it needs now are much more difficult to introduce: an independent judiciary, rationalization of SOEs, and liberalization or elimination of the hukou system of residential registration, which limits mobility and fuels inequality. Moreover, Deng’s political reforms to separate the party and the state have been reversed by Xi.

That brings us to the fourth problem. Ironically, China has become a victim of its success. The Leninist model imposed by Mao in 1949 fit well with Chinese imperial tradition, but rapid economic development has changed China and its political needs. China has become an urban middle-class society, but its ruling elites remain trapped in circular political reasoning. They believe that only the Communist Party can save China and thus that any reforms must strengthen the Party’s monopoly on power.

But this is exactly what China does not need. Deep structural reforms that can move China away from reliance on high levels of government investment and SOEs are opposed by Party elites who derive tremendous wealth from the existing system. Xi’s anti-corruption campaign can’t overcome this resistance; instead, it is merely discouraging initiative. On a recent visit to Beijing, a Chinese economist told me that Xi’s campaign cost China 1% of GDP per year. A Chinese businessman told me real growth was less than half the official figure. Perhaps this can be countered by the private sector’s dynamism, but even there, fear of losing of control is increasing the Party’s role.

Finally, there is China’s soft-power deficit. Xi has proclaimed a “Chinese Dream” of a return to global greatness. As economic growth slows and social problems increase, the Party’s legitimacy will increasingly rest on such nationalist appeals. Over the past decade, China has spent billions of dollars to increase its attractiveness to other countries, but international public opinion polls show that China has not gained a good return on its investment. Repressing troublesome ethnic minorities, jailing human-rights lawyers, creating a surveillance state, and alienating creative members of civil society such as the renowned artist Ai Weiwei undercut China’s attraction in Europe, Australia, and the US.

Such policies may not hurt China’s reputation in some authoritarian states, but modern authoritarianism is not ideologically based the way communism was. Decades ago, young revolutionaries around the world were inspired by Mao’s teachings. Today, although “Xi Jinping Thought on Socialism with Chinese Characteristics” has been enshrined in the Party constitution, few young people in other countries are carrying that banner.

China is a country with great strengths, but also important weaknesses. American strategy should avoid exaggerating either. China will increase in importance, and the US-China relationship will be a cooperative rivalry. We must not forget either part of that description. No country, including China, is likely to surpass the US in overall power in the next decade or two, but the US will have to learn to share power as China and others gain strength. By maintaining its international alliances and domestic institutions, America will have a comparative advantage.


Joseph S. Nye, Jr., is a professor at Harvard University and author of Is the American Century Over? and the forthcoming Do Morals Matter? Presidents and Foreign Policy from FDR to Trump. This content is © Project Syndicate, 2019, and is here with permission.

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Predictions... "The powerful yen has backed off a tad from its recent high, but on April 19, the economy of Japan came within an eyelash of surpassing that of the US."
https://www.latimes.com/archives/la-xpm-1995-05-08-fi-63836-story.html

Today, although “Xi Jinping Thought on Socialism with Chinese Characteristics” has been enshrined in the Party constitution, few young people in other countries are carrying that banner.

It would be hard to get anywhere establishing a youth movement in the West that promoted "Socialism with Chinese Characteristics". I presume he means socialism with local, nationalist, characteristics.

While repressing troublesome ethnic minorities, jailing human-rights lawyers, creating a surveillance state, and alienating creative members of civil society might be appealing to certain segments of the population I'm pretty sure such a movement would be verboten in Western states. Therefore its not at all surprising we see few young people carrying this particular banner.

A parallel to Xi Jinping Thought in the West may be a party like TOP or the Greens that seek to bring equality to the people while repressing and alienating Boomers with harsh taxes. Just a thought.

No country, including China, is likely to surpass the US in overall power in the next decade or two,

Then they won't, ever.

This graph has said it all, and been on track for 40 years:
https://us.resiliencesystem.org/looking-back-limits-growth

They're all out of time. And it's unlikely that they don't know it. This guy is another who reporte the 'Belt and Road' without understanding the significance of same. Just like so many who don't understand the reason the US had to control Iraq.

When these articles about the future of China are published if the 'guest' works in China then it avoids the strengths and weaknesses of the Chinese communist party. When written by an American it may overstate the power of the USA. The conclusion that China cannot overtake USA in the next 20 years might be right but given sufficient Trump like govt the USA can go into reverse. Once Britain ruled the world and then a few years later they woke up and realised they were dependent on the USA.
There is some sense in the last four points but the demography argument is true for all developed countries except those with high immigration which (a) brings its own problems (b) the immigrants get older so only a temporary fix.

China's political system has two advantages that a contemporary western democracy doesn't have: 1. the ability to plan long-term. 2. the longevity of a long term strategy and the consistency of the delivery of it. These are because the (only) ruling party doesn't need to worry about losing the immediate elections. Though these can be disastrous in the wrong hand (e.g the first 30 years of the PRC), they can also produce sound results.

Two good points. The ability to plan long term is something NZ needs. One obvious issue is climate change - I suspect a reasonable long term plan for climate change might be close to the currect 'wait and see' default rather than the 'panic' recommended by activists but it will be good to have an actual plan whatever is in it. Another long term issue is a population policy.
Back to China - much depends on President Xi's succession; if he hasn't planned it then the next president will arrive with his own entourage an establish his own plans. In other words is President Xi a creature of the Chinese communist party or is it vice versa?

A good read. Beijing's leadership might be the most hardcore growthists on this planet. They are willing to do anything to keep the economy floating, at any cost.

Legal or otherwise. It's interesting that so many want to get out of China though. Sure, some will be wanting to take over/ invade other countries by sheer numbers, and then influence policy to be pro China. But I think these people will be far outnumbered by those who would prefer the western way of life with its freedoms, and who will fit in way better as a consequence. And who want to get money out of China because they do not trust the communists.

I think what we're beginning to understand about China is that they have similar problems to the rest of us. A mix of over & unbalanced population run by a group of greedy elites.

with a fundemental difference though: the Chinese system does not allow the ordinary people to influence and challenge the policy makers.

Interesting very recent article from the BBC: How much of Europe does China own?
https://www.bbc.com/news/world-47886902

This a fine, balanced piece.