The Chinese economy has witnessed substantial headwinds over the past few years. From the pandemic and the pandemic-initiated mass quarantine and isolation measures, to ongoing concerns over the sustainability of the country’s tech and real estate sectors, to broader structural worries over its tenability as a logistics and commercial nexus in the aftermath of the incandescent, zealous push for more ‘onshoring’ and ‘decoupling’ from Western counterparts, there may well be reasonable questions that could be raised over the Chinese economy.
Yet such charges, I would suggest, must be placed within the broader context of the Chinese economic trajectory – a heavy reliance upon infrastructure and investment as primary engines of growth has come with natural bottlenecks that China is witnessing today; however, it has also provided its economic bureaucrats with a degree of wherewithal and institutional resource that – if channelled effectively – could pave the way for the country’s successful search for an alternative growth engine: one that would increase the economy’s net productivity qua Total Factor Productivity (TFP), thus ensuring that state-owned enterprises and private firms alike can more effectively translate inputs into demonstrable outputs.
The ongoing efforts at improving China’s technological standing and capacity are apparent – as scrutiny over the country’s tech firms abroad, as well as over the semiconductor supply China has access to, continually grows, it is only inevitable that many in China are now calling upon the country to be more self-reliant. Independence from external forces, they insist, is the only risk-averse means of guaranteeing the security of the Chinese state. Self-sufficiency has thus been touted by economists of a more orthodox, conservative leaning in their approaches – one that takes the present geoeconomic climate as intrinsically hostile towards China, and that construes the logical response as one of quasi-autarky.
Now, I do not dispute the need for Beijing’s leaders’ opining that the country must cultivate greater economic self-sufficiency – one that would enable its people to weather the effects of potential, geopolitically oriented and targeted reprobation from the world at large. Yet this vast economy’s recipe for success has historically been, and remains, in my view, its dexterous resolve to engage the world at large. Self-reliance alone is insufficient. Political scientist Zheng Yongnian has advanced the concept of ‘Re-Globalisation’ (第二次入世) – a concept that maps onto China’s further liberalisation of its financial sector, greater regulation and introduction of external competition within the state-owned sector, as well as engagement with a wider array of markets and production-cum-supply-chain constituents. Only through deepened engagement with the world at large, could China see to its transition from a raw input (labour, capital)-driven economy into one where technology plays a truly amplificatory role.
So what does this look like? Re-globalisation is all fair and square in theory, but how can we actualise it without compromising concerns pertaining to national security and geopolitical autonomy, which are core tenets of the present administration’s foreign policy worldview?
The first, and most immediate, solution, is for China to diversify the range of origins and sites of investment, whilst implementing more stringent quality control mechanisms over its investment (especially over short-term rate-of-returns, domestic medium-term productivity improvements, and debt securitisation at large). ASEAN, Latin America, the Middle East, Sahel Africa, and Central Asia are by and large – in somewhat descending order – increasingly prominent markets (containing economies both emerging and developed) for China, which should seize upon the comparative advantages of each respective nation to pursue more transparent, bilaterally beneficial, and mass-oriented trade and financial partnerships. Transparency is key, as a means of assuaging (often undue) fears over China’s allegedly predatory practices in its debt and lending patterns. Bilateral benefit, with such benefits percolating through to the people on the ground, is thus all the more important – buy-in can only be maintained if the public views trade, investment, and economic engagement with China as genuinely emancipatory and helpful in uplifting quality of life. China should also leverage Hong Kong’s relative openness (which must stay that way, in order for it to remain valuable) as a repository of capital – one that not only supplies China with the necessary liquidity, but also a gateway to engaging the rest of the world. Globalisation need not be centered around the Global North – but nor should it be restricted to only regions and countries with clear and unambiguous allegiance to China’s political objectives and domestic vision. Economic statescraft requires a modicum of pragmatic flexibility and willingness to tolerate, if not interlocute and collaborate, with those with differing viewpoints on political matters. Such was the wisdom of Deng Xiaoping, who opted for a growth- and development-driven approach to trade, as opposed to giving way to particular ideological underpinnings.
The second course of action is for China to unthaw its supply chains as soon as possible. China remains a crucial engine of global recovery from the pandemic-induced recession. Yet much of its prominence is dented by the fact that supply chains to and from China have been undermined by the country’s public health approaches. None of this is to say the country should opt for a radically divergent COVID-19 policy that deviates from its overarching public interests – but it is to say that Beijing must find a cautious modus vivendi that allows for the opening-up of logistical borders, in ways that allow for resumption of trade and delivery of supplies from the country. Re-globalisation goes hand-in-hand with doubling down on, as opposed to undercutting, China’s significant role to play as the “world’s factory” – whilst such an accolade may no longer be an exclusive title claimed by China, given the rise of competing economies in ASEAN with cheaper labour costs, the country’s assets and virtues remain apparent, and should be granted the room to thrive and flourish amidst these trying times. Indeed, clearer, less ambiguous signals concerning the openness and availability of ports and other facilities should be conveyed, as a means of addressing the concerns of international conglomerates and manufacturers.
Finally, it is high time that China seeks to install economic guardrails in its relations with the United States. Liu He and Janet Yellen’s recent dialogue reflected the fact that neither Beijing nor Washington stands to gain from the negative-sum tariffs slapped onto Chinese goods. The soaring prices in America – paired with the prospects of a looming global recession induced by the war in Ukraine – point to the case for a partial reset to bilateral commercial relations, in order to serve truly the interests of both peoples. Whilst China and America alike seek to diversify away from dependence upon one another, such a process is likely to take more than time – it would indeed be most costly. Washington must make the first move, as it seeks to normalise its trade relations with its largest counterpart, and undo the four years of damage inflicted upon bilateral relations under Donald Trump. The path forward for re-globalisation is by no means straightforward, but it falls upon savvy trade negotiators and technocrats to spearhead the process.