With China’s New Year arriving, and a terrible flu virus struggling to be contained within it at the same time, it’s time to reflect again on China’s future and impact for New Zealand.
Do yourself a huge favour and go to one of the many Chinese New Year
celebrations on now. It’s a blast.
China has had a hugely impressive three decades. After triumph in the
Cold War, both the west and the cause of liberal democracy has by
comparison continued to stumble. So perhaps an autocratic China is
sure to become the world’s dominant power in a few decades? No. It’s
possible but unlikely.
In the 1980s Japan was supposed to be the “number one”. It’s
stagnating in every sense now.
Rapid and sustained national success should not be presumed to be permanent. Exaggerating the benefits of centralized direction over economic and political competition doesn’t work either. As detailed over numerous case studies in Why Nations Fail, unless you have really robust public institutions, buffers and regulators, national economies tend to get rigid and brittle, and absence of political competition makes flexibility, intergenerational continuity and handover, and self-renewal become unlikely. The result is often rapid decline through civil war or simple torpor and anomie.
China has had an astonishing run that has pulled off the greatest poverty-eradication programme in the history of humanity. China still has great potential for continuing to catch up on productivity levels of the more advanced countries. It also has a proven ability to generate sustained growth. But we saw the same in Japan in the 1980s. Similar policies of ultra-high investment and rapid debt accumulation which kept China growing after the 2008 GFC, make it vulnerable to a sharp deceleration.
For one and a half decades, China benefited from the reforms introduced by Zhu Rongji, Premier from 1998 to 2003. No comparable reforms have happened since his time, but too few say that.
Today, credit is still being preferentially allocated to state businesses, while state influence over large private businesses is growing. With so much pressure being put on it by the United States through trade aggression, the state is centralizing power when it needs to let businesses and markets react faster than governments ever could. At the cost of outright finical crises, innovation and flexibility of response to new economic conditions gets slowed down.
Many of China’s neighbours continue to grow from the aftermath of war to sustained prosperity for many. Vietnam and Korea are the standouts. Hong Kong and Taiwan are Chinese territories that have forged their own paths and become powerhouses for the world because of the specific freedoms, institutions and regulatory mechanisms they support and enjoy. China could well be on the way to sacrificing the global wealth and standing of Hong Kong independence through its nasty suppression of democratic dissent.
China needs to learn from its neighbours if it is to remain a high growth country and become a high income country. Otherwise it could see growing resistance to even its most resolute nation-building efforts, such as the Belt and Road programme.
New Zealand and Australia, as low-innovation and bulk commodity driven economies, can’t really claim that same status as role models to sustained Chinese multi-factor prosperity. But for New Zealand, China is about as economically indispensable as it gets.
Yet at exactly the moment global sentiment is turning away from the United States, China’s governmental authoritarianism provides no alternative ally to turn to in its place.
That authoritarianism goes hand in hand with a ridiculous defensiveness to criticism, as our own Professor Brady amply illustrates.
China’s influence is growing here as in Australia, and they don’t like having that pointed out to them.
So it’s really complex.
It’s only on the days of Chinese New Year that we feel the full flourish of Chinese cultural influence really step into the street. New Zealand had a poor history of engaging with China, but now that it is our most important trading partner, it should also be our most important diplomatic partner too.
While it’s great that our government is slowly waking up to the need to resist foreign ownership on the kind of scale that comes with engaging with China,
We have been historically racist to the Chinese. Even recently, it’s pretty hard to see any hue and cry against the likes of U.S. corporations like Coca Cola expanding in southern Auckland and Christchurch, when compared to a Chinese company taking water from New Zealand.
But the triumph of Chinese authoritarianism is far from inevitable. As has been shown by U.S. support for Hong Kong and Taiwan, the alternative to Chinese government authoritarianism can stay supported and can thrive if it’s allowed to. Nations who continue to find successful new mechanisms of renewal and innovation are all around China, staring it in the face. China is awesome, but needlessly brittle. It can decline as it has before, just as many democracies are declining now.
In case China’s government needed a test, Coronoa Virus is providing
it right now.
A pandemic in China right on Chinese New Year is as good a test for the necessity of authoritarianism as one could conceive.
China is the one country in the world with all the governmental power it needs to continue change, all the economic momentum it needs to renew, and all the risk that it could fall.