China’s welcome appearance on the international stage was evident with the 2008 Olympics. Many people are concerned about the 2022 Winter Games. China is today a formidable power. China’s political system and economic model have serious flaws, and its aggressive rhetoric and strategic ambitions are causing growing resistance.
2008’s financial crisis weakened the hierarchy of the global political economy. A new era was marked by the intervention of the Group of 20 whose cooperation prevented another global depression. However, its members chose different paths. The EU imposed austerity which caused stagnation and increased inequality. Although the U.S. took a Keynesian approach, its stimulus was too short-term and large. Populist reaction grew.
China turned on the taps. China turned on the taps with an extraordinary level of investment. This construction boom, along with rising exports, maintained an annual economic growth rate above 6 percent for more that a decade. Its economy was the biggest in the world by purchasing power parity. In 2015 Beijing launched its Made in China Initiative, which aims to achieve global dominance in 10 key sectors, including robotics, electric vehicles, and artificial intelligence by 2025. By 2018, the middle class had grown from fewer than 40 million to more than 700 million. China’s per-capita income had risen by 120 percent since the crash. However, its US$15 trillion economy was responsible for 45 percent of the world’s GDP growth over the same period. China had created more than the U.S. by 2021.
Many believed that Xi Jinping’s elevation to the presidency would signal liberalization. His tenure, however, has resurrected political power and the Communist Party’s hegemony in state and society, and cemented the rule of the state within the economy.
Many dissidents were imprisoned by the new administration, which took a tough stance against rights lawyers, independent media, and civic organizations. Its broad anti-corruption drive to capture ” tigers” quickly ensnared political opponents. Soon, Mr. Xi concentrated power and orchestrated the end of the presidential two-term limit. He also reversed key reforms initiated by Deng Xiaoping. More than 100,000 people sought asylum abroad after the repression wave. Thousands have returned through intimidation campaigns or forced returns. A wider strategy of ruling is evident in the harsh crackdown in Hong Kong, and mass internment camp established in Xinjiang in recent years.
But Mr. Xi’s accumulation of power has brought about its own problems. Social consent is limited when severe coercion is used to attain political goals. In the short-term, the party’s informal power-sharing rules, which were once rife with corruption, may be less effective in consolidating its political authority. Uncertainty over who and when power will be transferred creates instability. In the past, elite machinations have thrown out previous leaders. Veteran observers believe that Mr. Xi’s decision not to attend the COP26 climate conference at Glasgow last November was due to his fear of what might happen.
It is also questionable whether China’s development model can be sustained. The debt to GDP ratio has doubled, from around 140 percent in 2008 to 280 percent in 2020. More than half of the corporate sector’s debts are owed. Chinese companies filed more patents in 2019 than their U.S counterparts, while the European Patent Office awarded 10 percent more patents in 2020 than any other large economy. However, investment returns have declined. The state-owned enterprises still enjoy preferential access to capital markets and public banks, but this is limiting the accessibility of small and medium-sized enterprises. This accounts for 80 percent of non-government jobs.
Beijing has so far managed to manage its increasing debt burden. Recent steps to curb overheated real estate markets and rein in overdrawn companies have demonstrated resolve. It is difficult to know if the party will be able to steer the transitions without destroying household wealth and depleting local government revenues.
In fact, China’s growth strategy is causing more social and demographic tensions. Over the past decade, urban economic inequality has increased while economic growth has slowed. Many people have difficulty getting on the property ladder. China’s old one-child policy may have boosted relative wages temporarily, but it has seen a decline in working-age people since 2011. However, its long-term consequences are grave. As society ages, the welfare burden will be greater for future generations. This is because they are likely to have higher taxes and more responsibility for social services. It was unwise to allow three children to be born to families, as the recent decision has not reversed this trend. The relentless grind and anxiety experienced by many workers in hypercompetitive economies has led to a growing anticonsumerist backlash from millennials. They prefer ” lying flat ” to “996” (from 9 to 9 p.m., six times a week). This passive disobedience could threaten national ambitions.
Last summer, Mr. Xi stated that “to regulate excessively rich incomes” was necessary to ensure “common prosperity.” He also charged well-known celebrities with tax violations, imposed curbs on private tutoring , and extended the government’s crackdown on foreign public listings by large tech companies. In return, leading entrepreneurs have pledged billions of dollars to social welfare programs. Many believe that Mr. Xi uses populist rhetoric to mobilise mass support and displace any potential threats to his rule. His main goal is to make China a high-income country by 2049. But it is possible that China will age before it becomes rich.
