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The Future of China and What it Means for the West

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China and its people have experienced a tumultuous century. After over 400 years of stable dominance by a few, China attempted to transform itself with all the dreams of Communism. Unfortunately, these did not materialise. Between 1934 and 1935, Mao Zedong rose to lead the Communist party, and in 1949 after 20 years of civil war, and  shortly after the Japanese were defeated in World War II, Zedong’s party achieved victory against the nationalists,. This gave rise to the People’s Republic of China, the world’s third Communist nation.

Through the struggle of the Korean War, which proved extremely costly, as well as purges after the Hundred Flowers Campaign, a new China emerged. In 1958 a five-year plan, coined the Great Leap Forward, in which farming was collectivized, led to an economic breakdown so severe that it was abandoned after two years. Under Mao’s plan, between 14 and 45 million people perished, more than the number of people who died from the atomic bombs. Not long after this, between 1966 and 1976, China underwent the infamous Cultural Revolution, 10 years of political and ideological campaigns to revive revolutionary spirit but which paradoxically led to mass social upheaval, and yet more deaths. The year 1976 not only saw the end of the Cultural Revolution, but also the death of Mao Zedong, who had been in charge for 27 years, but had been a strong force for far longer. A year later, Deng Xiaoping emerged as the leader, introducing far-reaching economic reform, which would have a dramatic effect. Much of this was reflected in 1986, with the introduction of China’s Open Door Policy, allowing foreign investment and the development of a market economy for the first time.

Since these dramatic changes to China’s policy, it has grown into an economic powerhouse Milton Friedman could only dream of. In 1989 stock markets opened in Shanghai and Shenzhen, and two years later the International Monetary Fund (IMF) pronounced China the third largest economy in the world. Politically, 1997 saw Hong Kong, with all of its economic development and its key role in the global economy, return to China after a 99-year lease to the United Kingdom. By February 2011, China formally overtook Japan to become the world’s second largest economy.

So what do all these facts and history about China’s development mean? China has seen the development of its society from a strictly Communist model into a still totalitarian one-party state, but with state-driven capitalism. Its GDP continues, in the most recent figures, to grow at a year on year rate of 8.1 percent. The banks are incredibly stable with a fifth of all deposits held in reserve by the central bank and an aggregated savings rate across the economy of 51 percent. The West’s nature of overspending into a deficit has been accompanied by an increasing surplus for China. In short, the Chinese economy is incredibly resilient and ready to continue growing. In fact, one prediction by Lawrence Saez, at the School of Oriental and African Studies in London, goes as far as to state that China will have the largest economy by 2021 and may soon overtaketake America as the world’s next superpower (even if America’s soft power endures longer).

The World Bank has recently released a detailed and penetrating analysis of what China needs structurally, institutionally and politically in their report titled: “China 2030: Building a Modern, Harmonious, and Creative High-Income Society.” This report includes recommendations that the state should have a lesser role in the economy, as well as a suggestion that China should gradually increase its spending on social security by between seven to eight percent over the next 20 years. The problem then is whether or not the undemocratic minority relinquish the benefits they get from state owned enterprises (SEOs) as well as reducing tax expenditure on their lavish lifestyles?

Addressing these causes of discontent is the prerogative and responsibility of the political elite. It is very unlikely that democratisation, or people power, will occur, given the context of a centralized one party state. Yet the state does realise that concessions need to be made. In December 2011 in Wukan, a Southern fishing village, locals taking a stand against land seizures by officialserupted in violent protests. The aftermath resulted in two local officials being sacked after central authorities sided with the villagers. In July 2012, construction on a copper alloy plant in Shifang city halted, following violent protests by local residents. It is likely as time goes on that more such compromises will be made by the central government.However, political change on a grand scale is still at the mercy of a system-threatening crisis, such as a slowdown in economic growth.

China warded off the global financial crisis with a $580 billion stimulus package and a loosening of bank lending, but has still been hit by the global recession, due to reduction in demand. In the United Kingdom we are still experiencing a recession, whilst China has not once dipped in to negative growth. Still, China has slowed significantly from the 11-12 percent growth it was achieving. There are of course other problems facing China’s future: limited supplies of energy and raw materials, environmental degradation, and political challenges linked to unrest regarding social mobility. China’s rulers are only too aware that if there is a drop in growth to around 5 percent, then their greatest fear,widespread civil unrest could materialize. In other words, as long as economic growth is both substantial and sustained, the Chinese people will accept the lack of political liberties. As soon as economic growth falls away, they will begin to demand the freedoms that they have long been denied.

So, what does all this have to do with the United Kingdom and the West as a whole? China, as stated, has a resilient economy, which is likely to continue growing at astounding rates. Yet, as slow as the political concessions may be, and as ignored as the World Bank report may initially be, political concessions from a slowdown are likely to lead to a larger cultural link between China and the West. This leads to the possibility of China garnering more power and support internationally (as democratic countries usually do), depending on the reception the international community gives to its reform. Either way, it is likely that China will gain more power within the United Nations Security Council, as well as in the wider global political arena. This increasing power has already caused problems in Syria. Direct or indirect conflict between the West and China is a choice, not a necessity, but stronger and more integrated links will need to be made to make sure that this remains the case. In an age of globalisation that has become as much political as economic (one needs only to look as far as the European Union), it is vitally important that good relations with China are maintained, whilst also upholding the values and morals that we live by.

The EU must become powerful enough, through integration, to act as a check on China, whilst also respecting the different cultures of its member states. Meanwhile, the UK must develop strong economic growth to ensure that our nation is not left behind. This may mean putting even more emphasis on our strongest suit, the banking sector (even though recent developments show how banking culture needs to change). The simultaneous growth and liberalisation of China is an exciting prospect, not only for Western business but also for cultural integration.

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About James Nickerson

  • Igor

    The spurt of growth following the abandonment of Maoism has made people over-optimistic about Chinas future. But China has huge long-term and short-term problems of governance to solve. In the short-term they have yet to show either a political or financial/business capability that is beyond feudalism and they seem to have no future plan at all. In the long-term it is even worse. They have no model to imitate because no predecessor has ever become that big and it is readily apparent that even mature countries such as USA and Europe have great problems scaling their governments and economies upward. And given their penchant for micro-managing from a central government I predict massive political problems and even civil wars with geographic breakup.

    Dictators always over-estimate the efficacy of absolute power. It doesn’t help if they’re drunk from a few successes.

  • swoosh

    The west want to have all of its cake. It wants to have a unified EU, yet it wants to maintain each members’ identity. It wants Chinese money, yet it treat China like hostile enemy or worse like treating a student who need lecture from the stupid teacher. But of course, the west can’t have its cake. So now they’re screaming how unfair the Chinese has treated them, and how the PIIGS has dragged down whole of EU.