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Forget the Crystal Ball; China’s Future is Clear

Forget the Crystal Ball; China’s Future is Clear

Chinas future will shape the entire world. Obvious as this affirmation may seem, it gains significance when one realizes that China has not yet begun to put its full weight into world affairs. For centuries, a strict policy of isolationist protectionism, embodied by the Great Wall, prevented China from playing a role that befit its rich history. Today, thanks to globalization, insular countries with closed-door economies are no longer viable. The isolationist representation is outdated, and the Dragon is shifting its weight to the international arena.

So what to expect from China in the future? Crystal balls and the unforeseeable aside, most analysts agree that records set in years past are by now a fond memory; China’s growth will continue, but at a slower pace. The old development model, based on the unchallenged predominance of investment, is unsustainable. Deferred profitability measures will inevitably be taken, by increasing protection of labor and environmental standards, driving domestic consumption, and creating a softer welfare system. China will not dismantle its productive machine, but it will be in good company by providing a better quality of life for its citizens. Butter and Guns, we would say in the west.

Even the race to catch up with American GDP – a real obsession for the western media – will lose its importance. China may not overtake the US as soon as expected, and maybe not at all, but in any case the topic has lost its impact. On the one hand, the United States has a history of bouncing back after a crisis, and the economy is likely to regain momentum after the elections in November. Washington already appears to be in a better economic mood. On the other hand, Chinese leadership could make the wrong decisions, resulting in long term consequences. The challenge is not a matter of inability, but of the sheer difficulty presented by the unprecedented task at hand: the new leadership in Beijing will be called on to redirect a massive apparatus, while rejuvenating an economic model that has proved successful for decades. Not an easy mission. On the international plane, the alliances Beijing has built are showing weakness; pragmatism is less durable than friendship. African countries want to regain control over their own resources, and neighboring Asian capitals fear an assertive foreign policy from China. The other BRICS countries have been wary to commit to a comprehensive partnership, and provide their support only on specific issues. They treasure China, but at the same time are afraid of its overwhelming role. In this picture one thing is certain: the decline of Europe, a continent lacking collective ideals and charismatic leadership.

China does have stronger tools than Europe at its disposal to drive growth. Beijing relies on political will and social cohesion as an antidote against stagnation and instability, but the path to the top still winds uphill. It is not just a matter of consequence that because one is the most populous country in the world it must also command economic supremacy. Beijing knows full well that the road ahead is fraught with obstacles, and contradictions, clashes, and fights are bound to happen when tackling them. China will have to be selective when offering opportunities to outside investors, in choosing its alliances, and in dictating strategies. Gone are the times of unbridled development, now China must select the best investments. Making these complex decisions is something China is not accustomed to, and will provide a challenge. China should forget about overtaking the US at all costs; the most important goal is that the development of the country be orderly, structured, and long-lasting.

Alberto Forchielli

About Alberto Forchielli

Alberto Forchielli has written 264 post in this blog.

Alberto Forchielli, born in 1955 - MBA with Honors from Harvard Business School and BA cum laude in Economics from University of Bologna - is Founder, Partner, Managing Director, Investment Committee Member and Member of the Board of Mandarin Capital Partners; Founder and President of Osservatorio Asia, a non-profit Research Center focusing on Asia; Founder and President of Cleantech srl, a renewable energy company mainly focused on developing and managing utility-grade solar energy projects. From July 2012 he is Director of the Executive Council of CEIBS (China Europe International Business School) in Shanghai. Forchielli is an expert in international business development, particularly in China and India, thanks to his strategic abilities based on a 30 years experience. He publishes a weekly release: ‘Notebook from Shanghai’ on Radiocor Il Sole 24 Ore, the largest Italian Financial Press Agency. He also holds weekly interviews on China economy on Radio 24 - Il Sole 24 Ore and he publishes his own Blog on Caixin Media website in China: fugeli.blog.caixin.com/, and his own English blog: www.albertoforchielli.com. Born in Bologna, in his own operative background he experienced working and extensively living in several Countries all over the world: Singapore at Finmeccanica, Washington DC at World Bank, Luxembourg at European Investment Bank, Rome at IRI Group, Turin, Boston and London, Santiago and Lima at Mac Group, Hong Kong and Shanghai at Mandarin Capital Partners.

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