severe economic problems and the fall out will be felt by most
other countries around the globe.
Internally, there is a strong driving force to bring about some
level of economic reform within China. That force comes from
President Xi Jinping. Just three years after taking the reins of
power, Xi has already placed his stamp firmly on his country,
his region and China’s relationship with the rest of the world.
A number of China experts have postulated that Xi is perhaps
the most powerful Chinese Leader since Mao Zedong. Unlike
his predecessors who preferred a relative low profile, Xi has
employed what could best be called “Strongman Tactics” to
achieve his objectives at home and abroad. Shortly after his
rise to power Xi commenced a consolidation of personal power
through a massive crackdown on corrupt Chinese officials at all
levels and also civil activists. As it turned out many of the corrupt Chinese officials happened to be Xi’s political rivals. His
relentless attack on corrupt officials and civil activist has raised
grave concerns with a number of China watchers. Some feel
that Xi’s strategy for China isn’t a vision of electoral democracy.
Instead, it’s fairly clear that he wants a more efficient authoritarian state with a strong leader at its helm, namely Xi.
As aggressive as Xi has been in consolidating his power base
inside China he has also made his mark in the international
arena. We have seen China assert its territorial claims by constructing artificial islands in the South China Sea, placement of
airstrips and outpost on those islands all over the objections
of the U.S. and its various allies. By the way, those islands are
still there, the airstrips are still there, Chinese personnel are
still there and all of this appears to be expanding. Xi has also
done the same thing in waters claimed by the Philippines and
Vietnam. Not all actions by Xi have been regarded as hostile.
He is expanding Chinese influence in Southeast and Central
Asia through the founding of new international organizations
and providing huge sums of money to promote infrastructure
investments abroad.
Actions at home and abroad has provided Xi with enormous
popularity and political capital. His move to shrink the role of
the central government by giving market forces a more decisive
role in China’s economy has caused many of his supporters to
refer to Xi as “The Reformer.”
In truth, Xi is pursuing a genuine reform agenda. He is hoping
to move the Chinese economy away from historical sources of
growth which relied on cheap exports, heavy industry and cheap
labor. Xi is committed to a new economy, one that is based on
a more Western definition of Service, Consumption, Innovation
and market leadership. However, progress has at best been spot-
ty. Xi has achieved a small movement of the Chinese economy
away from industries such as steel and cement (both of which
are also high polluting sources). However, in an example of tak-
ing one step forward and two backwards, when the Chinese
stock market bubble began to burst, the Xi leadership pumped in
money, reduced interest rates in a desperate attempt to keep the
stock market going. That move and a sudden devaluation of the
RMB fueled speculation that Xi may be willing to sacrifice deep
reform in the hope of securing short-term growth.
Xi has pursued a strategy to build his public image as a
strong leader devoted to the Chinese people. There are no accurate polls in China that would assess how successful Xi has
been with this strategy but anecdotal evidence suggest Xi is
extremely popular at home. Even with enormous personal
power, popular support the question becomes “Can Xi transform the Chinese Economy without causing a hemorrhaging
of unemployment and dissatisfaction at home?” Xi has made
a lot of powerful enemies along the way, all of whom would
like to see him fail and return China to a more status quo
situation. Xi’s continued head butting with the U.S. and other
countries over his overt actions in the Southeast Asia arena
carries with it enormous risk. U.S. President Barrack Obama
has only slightly more than 12 month remaining in his term.
The next President may see the world very differently which
could raise the tension level between China and the U.S. Such
an action would negatively impact on Xi’s ambitious reform
plans for China. We probably want know the outcome of
all of this for several years. However, there is one thing that
we do know. With Xi almost guaranteed another seven more
years in power, the U.S. and its allies will need to wrestle with
China relations in the age of Xi, a man with a vision and the
ability to make that vision reality.
China is here to stay. Their influence in the world market
is solid and will only grow over time. The world powers
now include China and in truth, China and the other nations
need each other. True, the China growth strategy is slowing
down. How much decline is difficult to determine. China
maintains that their GDP will drop from double digits to a
more normal seven percent level. Various China watchers
feel that the real GDP number for the future of China may
well be in the four percent level. Of course, the U.S. would
be delighted to see a sustained GDP of four percent or better. Don’t expect to see a mass exit of foreign investors from
China because of this economic slowing. Businesses and
Countries have all become a committed part of the future
of China. China is still regarded by a number of economist
as an opportunity even though it may be approaching what
some regard as a “maturing position.” Like all investments,
China investors should do their due diligence before jumping into anything. CW
“China is here to stay...China is
still regarded by a number of
economists as an opportunity
even though it may be
approaching what some regard
as a maturing postion.”
