In the next decade, will China strengthen or weaken? Its economic weight, global political influence and growing military might make this question crucial in all regions of the world. The answer will depend on whether brute economic strength or technological development proves to be more important for a prosperous and secure future.
China’s economic prospects are getting cloudier, but it’s possible that its status as an emerging tech superpower will speak louder. The rise from poverty to ever greater power has created more opportunities for more people — in China itself and around the world — than any other economic trend in history. It created a Chinese middle class and a global middle class.
Two advantages were at the base of this achievement. First, decades ago, China benefited from the largest pool of cheap labor in human history. Second, their low wages persuaded manufacturing companies in rich countries to relocate their operations to the country to reduce their production costs and increase their profits. These two advantages have already disappeared.
Chinese wages have risen sharply as workers have increased their skills, and today poorer countries are able to offer the lowest wages that China no longer has.
In addition, China’s one-child policy has limited long-term population growth, reducing the relative supply of labor and intensifying upward pressure on wages. Today, the global economy depends more on trade in services than was the case a generation ago, reducing demand for factory labor, and governments and private companies, especially in the US, have come under political pressure to bring manufacturing jobs back. that were transferred to China.
For all these reasons, it is possible that China’s rise has finally reached a dead end. Economists warn that many emerging countries fall into a “middle income trap” when they lose the advantages that helped them escape poverty, without, however, equipping themselves with the necessary tools to compete with richer countries whose economies are based on knowledge and operated by forces highly skilled workers.
It’s a dangerous position, especially for a ruling party that demands recognition for achievements that have created steadily rising public expectations, while refusing to admit blame when growth stalls.
Another problem is that China’s policymakers face an Everest of public debt. For years, the Chinese government has protected its largest companies in many different sectors from default, to save large numbers of jobs and protect the solvency of Chinese banks.
These interventions have compounded the problem, because they have convinced both borrowers and lenders that they can expect protection from their own misguided decisions.
Solving this problem requires tolerance for economic pain, something that is lacking at a time when Covid is wreaking havoc on the Chinese economy, when Russia’s war on Ukraine is making China’s fuel and food more expensive — and at a time when Xi Jinping is preparing the Communist Party, later this year, to abandon its past practice and grant him a third presidential term with unprecedented power.
However, China’s rapidly increasing technological development will limit the damage caused by its economic vulnerabilities. Not so long ago, advances in communications technology empowered the individual at the expense of the state. The growing global access to the internet allowed users to find information from an unusual variety of sources and communicate with each other in real time, across different countries and around the world.
In the last ten years, however, this trend has been losing ground to the so-called “data revolution”, which allows authoritarian governments and the world’s largest technology companies to collect the immense volumes of data we produce in the digital world, to discover much more about who we are, what we want and what we are doing to get it.
China has great and lasting advantages in this area. Their companies have shown increasing sophistication not just in digital commerce but in facial and voice recognition, something an authoritarian country can develop with far fewer obstacles than would be the case in a system that limits the concentration of political power. Furthermore, the sheer size of the Chinese population allows for a larger database that allows for faster technological advancement.
But China’s greatest technological advantage lies in the state’s ability to direct technology companies to create products that meet the state’s political needs, in the state’s ability to direct mountains of money into these development projects, to coordinate their work and expand China’s international influence by selling surveillance technologies to other countries, both authoritarian states and democracies, prepared to pay for products that advance national security — or at least the security of the ruling elite.
The future of China will depend on one more important question that is more imponderable: how will the United States, Europe and Japan react to the next chapter of China? For now, Russia’s invasion of Ukraine has brought transatlantic partners closer than at any time since the Cold War ended, and China’s support for Russia, limited though it still is, has reinforced well-founded Western doubts about foreign policy intentions. chinese.
At the same time, it must be clear to leaders in all countries that China’s importance to the globalized economy means that the country’s weakness represents a global vulnerability. Whether Chinese and Western leaders will manage to keep this crucial factor in mind as they manage their relationships in constant motion may turn out to be the most important question of all.
