China has hit a rough patch. As it widened its COVID lockdown catchment areas in 2022, the economic ramifications caught up with it, resulting in its second-worst economic growth rate since the 1970s. Late in the year, just as President Xi Jinping secured another decade-long term atop the party-state, people across China began to challenge its procrustean COVID policies with demonstrations beginning in Beijing and spreading as far afield as Kunming and Lanzhou. This winter has now seen a reversal of the Chinese state’s 36-month zero-COVID policy and a wave of infections and deaths across the country.
China’s economic heft is such that it is still a welcomed presence across the developing world.
Adding to China’s woes, new demographic reporting from Beijing’s National Bureau of Statistics reveals that the country’s population is in decline. The barrage of news prompted economist Noah Smith to argue that “the popular myth of Chinese inevitability and invincibility … has been decisively punctured.” But while some in the West may interpret this series of unfortunate events as an authoritarian state’s comeuppance, that outlook allows the preference for a flattened Chinese ascendancy curve to obscure more sober evaluation.
Despite its recent economic sluggishness, submission to the virus, and demographic problems, China is not in the throes of decay but rather remains a rising economic, technological, and geopolitical force. Consider artificial intelligence. As Kai-Fu Lee describes in his 2018 book AI Superpowers, China has structural characteristics that position it to claim global preeminence in the emerging field. With its population of 1.4 billion, a friendly regulatory environment, and a culture that Lee believes prioritizes convenience over privacy, China is the world’s most fertile terrain for the data collection that will hone AI’s prowess. If anything, COVID has augmented this advantage, as it has driven ever more human activity in China to digital and online-to-offline spaces. With more data at their fingertips, Chinese companies like Baidu, Alibaba, and Tencent will supply the domestic market with increasingly sophisticated and useful products — and will have a leg up on global competitors. U.S. export controls targeting AI “chokepoint” technologies aim to stop this ascent but may in the long run have the unintended consequence of catalyzing Xi’s preferred dual-circulation model.
Data availability gives China advantages on developing technologies like autonomous vehicles and vehicle-to-infrastructure communication, which will dramatically improve roadway safety and efficiency. Another area where China will likely be at the cutting edge is the range of smart home products that fall under the umbrella of “domotics.” While we are now all familiar with home assistants like Amazon’s Echo, domotics is on the cusp of delivering products that offer more than just quick answer to a trivia question. Smart home features will soon play a helpful role, for instance, in monitoring the health and safety of the home’s occupants — vital for a rapidly aging country like China, or the U.S., for that matter.
China’s advantages extend beyond the technology realm and into that of natural resources, where it has seized a commanding market position on many of the minerals hailed as the keys to a clean-energy future. Something for U.S. and allied policymakers to factor into decisions on energy is that China processes between 30 and 40 percent of global copper and nickel, 55 to 60 percent of global cobalt and lithium, and 85 percent of rare-earth elements, according to the International Energy Agency. The country also digs up a majority of the global rare-earth elements needed for wind turbines and of the graphite that composes battery anodes. If policy steers the market to non-fossil energy, China will stand to benefit.
Even at a more proximate, less speculative distance, China’s status is hardly dire. Morgan Stanley thinks that China’s economy will grow by 5.4 percent this year after the lockdown-marred 2022. And as the Economist’s Chaguan columnist bore witness to in the Jan. 21 issue, China’s trains really do run on time. “In the case of China’s railways, at least,” Chaguan observes, “[Xi’s] promise of order and efficiency has been kept.”
“Underestimation,” Nye rightly notes, “breeds complacency.”
China’s infrastructure is part of a connectivity and agglomeration advantage that will prove durable, bolstering its economic productivity. With its massive (even if falling) population heavily situated within cities in its eastern half, China enjoys and will continue to enjoy the economic spillover effects that flow from clustering. Cities like Shenzhen are magnets for the talented, ambitious Chinese who now find themselves more confined professionally to China than they have been in the recent past and who will build the technologies that promise a continued economic rise.
Even if its economy and technology continue to advance, China’s recent antagonism toward regional players like Taiwan, India, and Australia prompts assumptions in some quarters that China is rapidly approaching international pariahdom. While some evidence, like Japan’s rearmament, support that assessment, China retains enough soft power in Southeast Asia that Thailand greeted Chinese tourists back to the country in January — for the first time since COVID struck — like soldiers returning from a foreign campaign. China’s economic heft is such that it is still a welcomed presence across the developing world.
As the calendar turned to 2023, scholar Joseph S. Nye Jr. asked if we have already seen “Peak China.” Recent travails notwithstanding, much evidence suggests otherwise. While the overestimation of China’s prowess to which Smith alluded can indeed stoke undue fear, “[u]nderestimation,” Nye rightly notes, “breeds complacency.” China is a flawed polity — and someday its flaws may prove fatal — but it has a lot of life left in it yet.
Jordan McGillis is a policy analyst at the Manhattan Institute, a free-market think tank. He was formerly deputy director of policy at the Institute for Energy Research and resides in Southern California.
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