Factors Influencing China's Future: A Brief Overview (2013)

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Factors Influencing China's Future

Factors Influencing China’s Future (1/4/13)

The West: The Realm of the Rational / Responsible Individual [1]

  • Classical Greek heritage - abstract ideas allowed rationality to be effective for problem solving and science to provide a sound foundation for technological advances
  • Rationality fails in dealing with complex systems (in management, government, economics)
  • West created simplified social spaces (as a by-product of Christianity) in which rationality was useful for problem solving via: individualism; rule of law; capitalism; democracy.

The Mysterious East: The Realm of the Autocratic, Hierarchical and Intuitive Ethnic Group [1]

China’s History

  • China as the ‘Middle Kingdom’ - tributaries gained material benefits from submission to China
  • Civil wars > the Diaspora (eg China’s ‘commercial’ south > SE Asia but still China focussed)
  • C16th - Western expansion / China’s decline (Confucian ‘history’-based guidance inadequate)
  • 1912 - Nationalists replace emperor - progress to 1930s
  • 1930s - Japan’s ‘Asian Co-prosperity Sphere’ push in WWII - efforts to get support of China (Japan’s ‘big brother’) both alienated China and seriously disrupted its economy
  • 1949 - Mao’s Communists (‘spiritual’ north) expel Nationalists (‘commercial’ south) to Taiwan
  • Mao: Great Leap Forward > mass starvation / cultural revolution > loss of knowledge / skills

East Asian Economic ‘Miracles

China’s Economic Progress

  • ‘Socialism with Chinese Characteristics’ (?) from 1978. Agriculture de-collectivised; foreign investment / ‘private’ enterprise allowed; most industry state owned. 1990s more controls cut
  • Eammon Fingleton suggests Japan’s methods passed to China in 1979. Economic progress required reintroducing the Confucian-style social elites whose suppression had been the goal of Mao’s cultural revolution, In China the so-called Communist Party apparently took bureaucracy’s role (and Party connections provided opportunities to boost family wealth)
  • rapid export-based industrial development / financial repression / high investment /urbanisation

China’s Economic Challenges

  • Responded to GFC by boosting industrial / property / infrastructure investment - mainly by lifting bank credit > investment ‘bubble’ - industrial / property overcapacity (cf Japan in 1980s [1, 2])
  • Poor balance sheet but large forex reserves; large local / national government debts
  • Inflation risks: weak exchange rate / currency tied to $US > imports loose US monetary policy
  • Seeking: (a) to shift to domestic demand / more commercial banking / industries requiring creativity / ‘private’ rather than state-owned enterprises (? Unlikely though state-linked may increase); and (b) to internationalise Yuan and to diversify from $US forex reserves (eg to gold)

China’s Other Challenges [1]

  • State ‘legitimacy’ depends on economic success (and getting ‘revenge’ for past humiliation)
  • Environment challenges - groundwater / air pollution
  • Social issues - disharmony (inequality / corruption / abuses of power)
  • Population aging (a global issue that reduces scope for export-based economic growth)
  • Neo-Confucian hierarchy vs Communist social equality / Bo Xilai case / risk of revolution (?)
  • Need political reforms to cut corruption / inequality. Communist Party seeks to better respond to / orchestrate Chinese community (domestically and globally) - opposes democratisation
  • Religions - traditional (Daoism / Buddhism / Confucianism officially promoted (globally) / domestically resisted); new (Christianity - fast growth / Falun Gong - restore emperor?)
  • Future ‘education’ to favour rote learning of classics? This discredits ‘understanding’ as the basis for decision making (consider “The Dao which can be known is not the true Dao”) and encourages responsiveness to neo-Confucian elites (“Just do it”).
  • Seeking to create international order (eg BRICS) independent of ‘liberal’ Western-style order
  • China’s consensual political system (‘Communist’ Party) no basis for Western-style diplomacy
  • Rising Chinese militarism (? What happens when battles can’t be fought with words)
  • ‘System’ achieves success at the expense of individuals - then the latter ask ‘what about me?’
  • Risks: whole world can’t go this way; mistakes risk catastrophe; can’t handle finance

International Economic / Political Environment

  • Global Institutions - UN (ineffectual) / World Bank / IMF (changing) / G20 (GFC issues)
  • US (recovering) / Europe (sick) / emerging economies (dependent?) / SE Asia (inputs to China) / India (serious competitor) / Africa (Chinese neo-colonialism) / Latin America (links)
  • Financial systems (imbalances; monetisation; rising public debts esp. in Japan / China / US)
  • Asian Monetary Fund (based on ‘Asian values’; advocated by Japan); BRICS seeking similar
  • Greater China - Diaspora are part of ‘China’; SE Asia (Diaspora influential); Japan (‘block of granite’ cf China’s ‘tray of sand’) / Taiwan (‘commercial’ south?) / North Korea (vassal state?)
  • China and West - USA (‘pivot’ to Asia / wants China to ‘play by the rules’ / seeking trade bloc with Europe?) / Europe (favoured as less ‘individualistic’ than Anglo world; Roman Law > state priority over individuals ) / Hong Kong returned to China in 1997 (one country two systems)
  • Democratic capitalism’s stresses (complexity / unreal expectations / finance vs real economy)
  • Fukuyama’s ‘End of History and We (??) won’ (cf Sakikabara’s ‘End of Progressivism’)
  • Future - return to Middle Ages (? no global order); neo-Confucian order for part of world?