On December 6, I was a guest lecturer at Florida State University (FSU), providing an overview of what’s happening in China these days. I ended the lecture by making some educated guesses about what the future holds for China. Here is the gist of it.
1. One More Decade of Xi
It is fair to assume that part of what the future holds for China is more Xi Jinping. Xi clearly has no interest in adhering to recent Chinese Communist Party (CCP) convention by stepping down upon completion of his second term. As the Guardian put it, “barring an accident of nature, Xi will be reappointed for a third term as party general secretary at the 20th party congress (to take place in November 2022).” Among other things, this will likely mean a continuing focus on “common prosperity” and redistribution. This will impact foreign companies in different ways. Those focusing on China’s top earners could see sales decrease as luxury goods – and their consumers – are hit with additional taxes and societal messaging turns against conspicuous displays of wealth. On the other hand, companies with more run-of-the-mill products could see their consumer base grow.
2. The Techno-Authoritarian Dance
Increasingly capable tech-enabled control is part of what the future holds for China. As the CCP continues to harness technology to serve its aims, transparency will be expected from digital actors, including foreign companies in China. There will be no place to hide in cyberspace. The widespread use of payment platforms such as Alipay has gone a long way toward giving Chinese authorities full visibility into commercial transactions. Back in 2005, when I first lived in China, few businesses accepted credit cards, even in first-tier cities. Cash was king. By the time of my last pre-COVID visits, cash was all but dead even in China’s third- and fourth-tier cities. I would not be surprised if one day cash goes away completely in China, with foreigners and others who cannot use the payment platforms needing to buy stored-value cards at authorized locations where their passports can be scanned. The technological sky is the limit to what the authorities will roll out.
3. What the Future Holds for China, Inc.
With Chinese authorities devoting considerable resources to upgrading China’s manufacturing capabilities, it is inevitable that the country’s share of global technological innovation will grow. In my FSU presentation I quoted a MacroPolo report that predicted that “by 2025, China’s technology ecosystem will have matured and be on par with Silicon Valley in terms of dynamism, innovation, and competitiveness.” Imagine a world in which half of the major technological advances of the past two decades originated in China. How would that be different to a world in which the West continued to dominate tech? Last year, USA Today published a list of the 21 most important inventions of the 21st century. One of the items on the list is the birth control patch. In the next few years, will Chinese biotech companies be looking to develop the next big thing in birth control – or will they be focused on spurring natality, in patriotic support of the three-child policy? What does the future hold for artificial intelligence research? Will there will be more focus on avoiding biased results against certain demographics, or on precisely identifying members of suspect groups?
4. Growing Challenges for the CCP in the Years to Come
The changes China has seen since the start of Reform and Opening have been dizzying. Folks who were awed by jeans and cassettes smuggled from Hong Kong now cross the border with ease for a day of shopping and high tea. All around, the quality of infrastructure has dramatically improved. Vast numbers of Chinese have gone from hardscrabble villages to modern apartment buildings in a relatively short span of time. The CCP’s play is to promote higher value-added manufacturing, in an effort to keep the GDP growth party going. What the future holds for China will greatly depend on whether that gambit works out. If incomes in China continue to climb, the party may be able to square the circle and institutionalize its revolution. But if not, grumbling will likely gradually increase. Much will also ride on how efforts to promote “common prosperity” are handled. Too much redistribution could dilute incentives for entrepreneurship, complicating the economic picture.
5. China Will Remain a Contentious Issue in the West
In the years immediately preceding Xi Jinping’s arrival to power, China largely managed to foil the dragon slayers, not least because the panda huggers’ embrace was so tight. But it’s gotten tougher to put in a good word for the CCP. The business sector’s defenses of engagement have a creepy ring to them nowadays. Meanwhile, human rights are back on the agenda. Back in 2008, then-President Bush sent the First Family to attend the opening ceremony of the Beijing Olympic Games – in 2022 the U.S. is leading a diplomatic boycott. Chinese investment, trade practices and bourse listings increasingly raise concerns overseas. The genie is now out of the bottle, and won’t go back in. Scrutiny of everything China does – and everything foreign companies and governments do in China – will be the norm.
6. The Global South Will Be More Receptive to China
Though the West is having an epiphany regarding China, in other parts of the world it’s business as usual. Facing icier climates in advanced economies, it makes sense for China to double down on its efforts to engage countries in Latin America, Africa, the Middle East and elsewhere and that is exactly what it’s doing.
There was a time not that long ago when you could tell whether a country was part of the Free World by looking at the equipment flown by its national airline. Nowadays, even Aeroflot flies Boeings and Airbuses. But perhaps in the future Comacs will be a common sight at international airports. If they are, in addition to Chinese airlines, expect them to be used by carriers from China’s new spheres of influence. Along the same lines, Chinese students and researchers might increasingly opt to head to universities and institutions where they are subject to less scrutiny. The Confucius Institute may be booted out of Western campuses, but students in many countries will welcome the chance to learn the language of their greatest trading partner. Politically, this will all be of great import, as a pro-China bloc emerges, undergirded by a sympathetic segment of that bloc’s population.
Of course, these are just guesses of what the future holds for China. What do you think? We’d love to hear other views on the subject!