Wednesday, October 18, 2017, will be an important day for the world. Its ultimate significance is likely to be even greater than the 2016 US presidential election.
On this day, the 19th Communist Party of China National Congress will convene in Beijing to review the Party’s work over the past five years, discuss and set the future direction for the country, and to elect a new central leadership.
During this Congress, it is widely expected that Chairman Xi Jinping will both secure his legacy and tighten his grip on power. It appears an almost foregone conclusion that he will come away from the Congress with a grip on power not seen since the reign of Mao Zedong himself, although no leader will ever quite achieve the historical status that Chairman Mao has.
Assuming that comes to pass, the world can expect Chairman Xi to double down on the major initiatives of the past five years for the next five, at least. All will be aligned with achieving the Chinese Dream at the heart of Xi’s political, social, and economic agendas. It is a redemptive legacy designed, first and foremost, to assign the Chinese Century of Humiliation (roughly 1850-1950) to the historical dustbin. This task will both influence and define everything else.
That said, here are my predictions for the next five years and beyond.
1. Energy – According to China Daily, more than 2.5 million people currently work in China’s solar power sector. That’s roughly ten times the number employed by the solar industry in the US. And in January of this year China vowed to invest 365 billion USD in renewable power generation by 2020.
Starting in 2019, China’s automotive companies will be required to begin the phase out of cars powered with internal-combustion engines. Some have predicted that by 2030 they will be outlawed completely.
China will continue to take the global lead in renewable energy and climate change. It has to and it wants to. China’s environmental degradation is not sustainable and it believes that the world will ultimately face the same challenges it does as population levels continue to rise. That spells economic opportunity for those companies at the forefront of renewable and alternative energy technology.
2. SOE Reform – Following China’s “opening up”, a process that began in 1989 and ushered in an era of unparalleled economic growth, many state-owned enterprises were privatized. Much of China’s economic growth, and a significant share of its burgeoning personal wealth, flowed from this transformation.
Some of China’s most powerful and influential industries, however, such as banking and financial services, remain under government ownership. By the end of this year, however, the Party has committed to turning all SOE’s into limited liability or joint-stock companies. This may well unleash an even more powerful surge in economic growth at a time when the Western economies continue to struggle for wage and inflation growth. China’s economy, as a result, now the second largest in the world, should equal the US in the next one or two decades.
3. South China Sea – There will be no backing down by China. China will risk World War III to protect its sovereignty. In its mind, it has no option. The West will ultimately be forced to accept this reality, with or without armed conflict.
4. North Korea – In one form or another, the rogue province will ultimately become a sovereign territory of China. China cannot and will not allow South Korea and its American ally to occupy the 880-mile (1,420 km) border it shares with North Korea.
For both environmental and competitive reasons, moreover, China needs to decompress the geographic concentration of its heavy industry (e.g. steel) and find new sources of low cost labor. North Korea will provide a convenient and geographically well-positioned opportunity to address both needs while providing a security buffer to China’s all-important southern region.
5. Regulation – Despite the ownership reforms cited above, government regulation will both federalize and increase in the future. The environment will be regulated with an iron fist. The Chinese Internet will be rigorously defended as both a Chinese asset and a tool for social and economic progress, not a medium for personal political expression. American technology companies will find limited opportunity there.
6. Hong Kong and Taiwan – Neither will be granted the kind of political independence that Western political activists would like to see. This won’t even be considered. (On the contrary, North Korea will ultimately join them.) And any resulting social unrest, which should be quite limited, will be swiftly quelled.
7. Belt & Road – Otherwise known as China’s Silk Road Initiative, China will continue to view this as a top foreign policy initiative. China views this as its best chance to economically develop its western provinces and release some of the cultural and political pressure it currently faces there. This will have a significant impact on all of Central and South Asia, including India, Pakistan, and many of the former members of the Soviet axis.
8. Politics – China will exhibit no desire to export its political model except in matters of national security. Nor, however, will it move to adopt any form of the US political model. To most Chinese, the American model is not an attraction. If they are to borrow any foreign political ideals they will look to the socialism of Scandinavia, with “Chinese characteristics”, of course.
Is this good or bad news for the US and the West? In the end, it doesn’t matter. It will happen. The West, for a myriad of reasons, has lost the ability to shape world events. Phase III of Western imperialism (i.e. I. colonization, II. de-colonization, III. colonial dominance—the global dominance of the former colonies) will inevitably unfold.
As a pragmatist, I accept this reality. It is what it is. And if forced to choose, I believe, on balance, that this can be a period of positive replenishment for the US and its citizens. We will achieve far more by focusing our resources and our energy on renewing the American spirit, revitalizing American infrastructure, and revitalizing opportunity for all American citizens and immigrants, than we will on continuing to pursue inevitably ineffective attempts to reshape the world in our image.
It’s not a digital choice, however. We aren’t limited to putting America or the rest of the world first. Isolation isn’t a realistic option, as China itself has learned. By being a collaborative partner and embracing the diversity of the world, and accepting the inevitable ills of unfettered free markets and their corporate champions (e.g., polarized wealth distribution), we can help to usher in an era of unparalleled global prosperity, peace, and enlightenment.
And it could all start on October 18.
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