Today I gave a short talk to the lunch meeting of the Rotary Club of Redlands, California.
By natural inclination I am more of an introvert than a joiner; one reason I so like being a professor is that I am left alone with my books much of the time. But the cheery, do-good-and-be-friendly ethos of the Rotarians is infectious, I must say. I like them.
My topic was China, of course.
About 20% of the audience had been China, a quick, show-of-hands poll suggested. A smaller percentage said China’s rise has already directly affected their business. A significant fraction also raised their hands to say, yes, China’s development has already affected their own lives.
I then said I would try to persuade them that everyone should have raised a hand, because China’s transformation has already affected us all. For example, most of us have a mortgage, car loans, student loans or credit card debts; China’s purchase of US government debt helps keeps those interest rates (and our taxes) lower. I pointed out that a nearby shopping center—the one containing our local Walmart (and one of the better Chinese restaurants in town)—was recently purchased by a Chinese investor for $17 million, in cash, as reported by our hometown paper. I observed that the stuffed peppers we’d just been served quite probably contained pork processed by Smithfield, now owned by the Chinese company Shuanghui. I also observed that if we took off everything we were wearing that was made in China, we’d be mostly shirtless, shoeless and pantless (a vision perhaps not everyone would want to meditate upon). If any of us recently bought a child a toy (or just about anything else at Target or Walmart), we’ve bought something made in China. The prices we pay for gas and other commodities—and the cost of our lunch itself—is already influenced by China’s development (a trend only likely to intensify, it seems). I also noted that our cameras, our smartphones and the televisions we’ve been watching March Madness on all probably come from China, whatever their brand. I also mentioned the page one, above-the-fold article from last week’s LA Times about how Chinese buyers are affecting the prices of housing just a bit closer to LA.
Having, I hope, persuaded them that China’s rise does already affect all our lives, I then asked them which of the following scenarios seems to most likely predict the state of the world 100 years hence:
- The US will remain the world’s predominant superpower. We will continue to have by far the largest economy, most powerful military and greatest global influence. Our institutions—our economic, political and legal system, our individual freedoms—will be widely admired and emulated. We will remain the world’s center of technological innovation and progress. The US Dollar will remain the key global currency. Our popular culture will remain the world’s most influential. Meanwhile China will have grown and developed but will not have surpassed the US, and China will have evolved to be much more like the US (with multi-party elections, less censorship and greater rule of law).
- China will be the world’s most important country, with the largest overall GDP, the most influence in global affairs and the most formidable military. The RMB will be the world’s principal reserve currency. Mandarin Chinese will be the language elites around the world learn to communicate with each other, and it will be the language that people in poorer countries learn to increase their chances of prosperity. China’s success will have created a new consensus about the optimal institutional arrangements and values for getting and maintaining a rich, strong country; state-led development and authoritarianism, not lightly regulated markets and democracy, will be the new global standard. Chinese culture will exert a powerful influence around the world.
- Neither China nor the US will disproportionately dominate the future, but we will instead have a multipolar world, some kind of new relations among great powers, with the US and China both prospering and peacefully coexisting. They will buy a lot more from us, and we will benefit from China’s increased contributions to human progress (China will massively generate, not only copy, major innovations).
I got a few takers for each choice, and a lot of people abstained. I told them I don’t think that I know which scenario will occur, that the longer I’ve studied China—now some 25 years—the more circumspect I’ve become about oracular pronouncements. Normatively, I of course prefer scenarios in which China has a continued peaceful rise—a heaping jueqi, and I hope that in the future China does become more free and democratic. I don’t expect China’s growth to continue unabated, and I don’t imagine that China’s authoritarianism will become the new global aspirational model. But declaring who will be the world’s most powerful country 100 years hence, or what mix of authoritarian and liberal values China will adopt? Can’t say.
I then offered a quick version of what is essentially my China stump speech, something I’ve developed and polished in classes introducing students to China. I first offer a list of ways China matters, making explicit various facets of its importance. Perhaps the Rotarians are great humanists, but because I normally teach undergraduate business students, I try to persuade them that China matters by appealing to their crass commercial interests. I suggest that even if they don’t yet have a passport, don’t like Chinese food and hope never to visit Asia, China is likely to matter to them if they like money. In particular, China matters as a place to:
- Make things (examples of how China is the world’s factory already abundant—no need to belabor the point);
- Sell things (I trotted out the usual examples about cars, smartphones and tablets, gaming, outbound tourism, luxury goods);
- Invest capital (and as an investment thesis even for non-Chinese firms), citing examples like Baidu and YUM, and
- Get capital, citing the US Treasury auctions and examples like Smithfield and Nexen.
Nothing too original there, and the idea that China is reshaping the world isn’t much contested. The list mainly serves to get everyone thinking about the overall impact of China’s rise; I think it’s better to lay out the multiple dimension of impact than just invoke a couple of tried examples of how China is the “world’s factory” and “a huge market.” Of course, China’s environmental, political and military impact may exceed the impact of all these business dimensions of its importance, and one could add other dimensions—China may increasingly become a source of cultural soft power, and global business competitors may increasingly come from there). But the case is made; I only had a few minutes (and, frankly, know less about some of those other, critical dimensions of China’s like the military implications).
I then listed a few reasons it’s hard to grasp this obviously important topic, reasons to resist facile claims:
- China is big and diverse. It’s a continent, like the US. Hard to generalize across China’s regional differences and rural-urban divides. I hazarded a prediction that Alabama will not be an early adopter of same-sex marriage, for instance, so visiting LA or New York City and thinking you’ve seen the US would be misleading. Same is true, even more so, in China.
- China is changing rapidly. It’s spectacular urban skylines, impressive infrastructure (gleaming airports, high speed rail, new ports) and even the pace of new policy developments can make one feel lost, visit to visit.
- China’s long history—or more precisely people’s understanding of it—is relevant to many contemporary issues, though it’s unfamiliar for most of us. This summer’s 25th anniversary of the 1989 Tiananmen Square protest, the May Fourth Movement, the tragedies of the Great Leap Forward and the Cultural Revolution, the Japanese invasion and occupation in WW II, the Opium Wars and the Imperial era—all that is relevant to understanding various current events.
- China’s institutions are quite different and often opaque; they have organizations called companies with boards of directors—they even have shares listed on stock markets—but the Communist Party is really in charge of these “companies,” or can be; they also have a legislature with elected representatives, but the Communist Party is, no doubt, actually in charge.
- China’s development model is unprecedented. What do we call it? Market Leninism? Hard to name and understand it.
- And, finally, it’s all happening in Chinese. That makes us rely on a small number of reporters who are based in a few major cities. There is a lot of great journalism about China, but, chances are, they are missing something.
So, it’s a good idea to be humble about saying, “this is how China is” or “this is what’s going to happen.”
I concluded with a list of challenges China faces. I ran out of time before listing many (a half-hour talk goes by like that), but before inviting questions I mentioned: the environment, corruption and the wobbly or inefficient financial system. I could have added: their challenging demographics (their grey-before-rich problem—the looming, acute problem of a decreasing number of workers supporting an increasing number of retirees); ethnic tensions (as events in Kunming and Tibet vividly illustrate); risk of increased frictions with trading partners; tensions with neighbors; the risk of domestic political unrest; income inequality; a lack of social trust; weak civil society; deng, deng.
Unfortunately there wasn’t time for much discussion, but many seemed eager to chime in. I got good questions on the environment (no, it doesn’t look to get better soon), rising wages (yes, China no longer is the cheapest place to do many things, but they have other advantages: competitive infrastructure, vast know-how and, for better or worse, apparent political stability), the mechanics of Chinese people buying houses for cash in Orange County (suitcases of cash, I speculated, or wire transfers refracted through Hong Kong or Macau, possibly with some over-invoicing, and I observed that although some of the cash infusion could be about securing ill-gotten gains offshore (the spoils of corruption), much of it is likely legitimate earnings, a reflection of how big the Chinese economy now is (its export success and the development of the domestic economy), though the phenomenon may reflect pessimism on the part of some Chinese about China’s continued rise and stability, or at least the continued appreciation of real estate prices there vs. the value available here).
. . . I enjoyed the iced tea and cauliflower puree (I passed on the stuffed peppers; I’ve been eating a vegan diet for several months—no cheese or meat for me, a topic for another time). I hope the Rotarians were satisfied with how I sang for my supper (or, ah, lunch). I had a little jaunt in my step this afternoon, their upbeat piano songs echoing in my head.