The 2020s will be a crucial decade for China, and even its leaders know the good times may not last

Chinese leader Xi Jinping delivering a speech in Tiananmen Square.
Chinese leader Xi Jinping.

  • The 2020s will be a crucial decade for China as it readjusts to being richer, older, and more resource-deprived.
  • China’s own policymakers have expressed concerns for the future, seeming to realize that the good times may not roll on forever.
  • See more stories on Insider’s business page.

For the past four decades, a narrative has taken hold among policymakers and the general public alike suggesting that China’s rise will continue indefinitely, even when mathematics and demographics suggest otherwise.

Between the 1980s and the turn of the millennium, this notion was fueled by China’s astonishing double-digit growth. In more recent years, although expectations of growth have been tempered, hopes for and fears that China is on the rise both politically and militarily have given the impression that Beijing’s progress is unstoppable.

In a recent Foreign Affairs article, Ryan Hass, a senior fellow at the Brookings Institution, even had to remind readers that “China is not ten feet tall,” and that “the United States remains the stronger power in the US-Chinese relationship.”

The first months of 2021, too, brought a flood of excited headlines marveling at China’s exceptionally fast recovery from the pandemic, and predicting more Chinese economic success to come.

There is no doubt that China has had economic successes, not just in the COVID-19 period, but also over the past two decades and more.

The country’s reinvention of itself as a major innovator in technology; its development of a foreign direct investment strategy through the Belt and Road Initiative; and its experimentation with ideas like digital currency in its domestic market have created a unique ecology for economic development.

China Marks 100th Anniversary Of The Communist Party
Chinese President Xi Jinping speaks during the celebration for the 100th anniversary of the founding of the Chinese Communist Party at Tiananmen Square, July 1, 2021.

But China’s growth is not going to be a linear story of infinite extension. The 2020s will be a crucial decade for the nation as it readjusts to being a richer – but not, per capita, rich – older and more resource-deprived country.

Even China’s own policymakers have expressed concerns for the near future, both explicitly and by implication. The Chinese Communist party, or CCP, seems to realize that the good times may not roll on forever.

From 2030 onward, the country will begin to feel the effects of the One-Child Policy imposed by the CCP in the late 1970s. Though that restriction officially ended in 2015, giving way to a two-child policy and, very recently, a three-child policy meant to increase birth rates, China’s population is likely to shrink by 48% by the end of this century, from 1.4 billion in 2017 to 732 million in 2100, according to a projection published in The Lancet.

That drop-off, combined with low education levels in China’s vast countryside – only 30% of China’s workforce has finished secondary education – may mean that China will lack the human capital to escape the “middle income trap” and sustain its current growth going forward.

Meanwhile, severe droughts in northern China have caused significant drinking water shortages and fears of food insecurity, even as new, major cities are being built there.

There is little likelihood that China’s economy will collapse, as some of its more apocalyptic detractors suggest, or perhaps hope. However, observers should be skeptical of the idea that China will continue along its current trajectory indefinitely.

The 5-year plan

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A Chinese soldier in front of a statue of Deng Xiaoping at an exhibition in Hong Kong, August 21, 2014.

Although the Chinese Communist Party’s messaging these days presents China as a “confident nation,” its newly endorsed Five-Year Plan details many areas of concern – food insecurity, increased defense spending, sustainable development and the significant debts incurred by local governments.

In doing so, it reveals a caution underlying the exuberant rhetoric. And the plan’s significance goes beyond its policy prescriptions. It also reveals a wider ideological shift in which China’s Marxist-Leninist political framework has become ever more explicit.

Of course, China has been a communist country since 1949, when Mao Zedong capped off the decades-long Communist Revolution by founding the People’s Republic of China. But from 1978 on, China entered an era of reform, spearheaded by Deng Xiaoping, during which it implemented economic reforms to achieve “socialism with Chinese characteristics.”

Along the way, the new leadership downplayed the importance of the state’s ideological foundations in favor of a loosely defined pragmatism. Deng spoke of “crossing the river by touching the stones” to describe the kind of experimentation that marked the reintroduction of market mechanisms to the country’s economy.

In contrast, in recent years, the Marxist-Leninist strand in Chinese political thinking, never absent, has become much more noticeable, with the Marxist element underpinning many of the state’s economic assumptions and the Leninist element guiding its approach to political control.

The framework that current Chinese leader Xi Jinping and other top leaders use to frame China’s dilemmas draws increasingly on classic Marxist terminology such as “struggle,” or douzheng in Chinese, and “contradiction,” or maodun; the former, when invoked, can relate either to China’s current global standoff with the United States or the party’s desire to purify itself domestically through anti-corruption reforms.

Last year, the Chinese state media outlet Xinhua even used the term “rectification” to describe intraparty reforms in certain cities, bringing to mind the first usage of the term, by Mao, amid his ruthless campaign to remodel the party in his own image in the 1940s.

chinese communist party centenary
A performance at the Bird’s Nest national stadium in Beijing on June 28, 2021, ahead of the July 1 celebration of the Founding of the Communist Party of China.

More explicitly, in an August article for the CCP’s political theory journal Qiushi, Xi took pains to point out that the “foundation of China’s political economy can only be a Marxist political economy, and not be based on other economic theories.”

His goal was to reject the idea that “capitalism,” a term that the CCP firmly associates with a Western system they perceive to have failed, has any connection with the economy of today’s China, even though the accumulation of capital is central to its strategy.

Xi also commonly refers to key societal “contradictions,” a part of Marxist theory drawn originally from the German philosopher Hegel, that was also greatly beloved by Mao. “Contradictions” refer to crucial differences between the needs and wants of unequal social classes, which can be either “antagonistic” and resolved through “struggle,” or “non-antagonistic” and resolved through debate.

For Xi, one of the major “contradictions” today is how growth can be both sustainable and green, since up to now, economic progress has concentrated purely on GDP without much assessment of the quality of life associated with that growth.

This is a challenge China shares with the rest of the world, to be sure – but few ruling parties other than the CCP define sustainable, green growth in such explicitly dialectical terms, to use another bit of Marxist terminology.

Leninism is namechecked with less frequency than Marxism, but it is visible throughout the political style of today’s leadership. The philosophy depends on top-down political control and the ruthless exercise of state power to achieve wider social goals. The civil society and social media networks that emerged during the early 2000s have since been heavily repressed, a tactic that Lenin would have easily recognized.

These are not abstruse observations. They relate to the way the CCP will implement its Five-Year Plan in reality and explain many decisions taken in the past decade as China’s politics has become more top-down and heavily controlled.

In addressing the many issues listed in the plan – from reforming the financial sector to implementing green growth – the CCP will rely on the exercise of party-state power.

Hopes from the 1990s that China will liberalize its markets – or indeed its politics – must give way to acceptance that a “socialist market economy” is a real model in both theory and practice. And in that system, when the liberal confronts the Leninist – that is, when there is a choice between greater economic freedom and greater political control – the CCP’s choice will almost always be for political control.

Ideology in practice

Beijing military flypast communist party centenary
Planes flying over Tiananmen Square for the 100th anniversary of the Communist Party of China, on July 1, 2021.

How successful has China’s approach been so far – and how will this reaffirmed Marxist-Leninist devotion affect its trajectory going forward?

The country has made a remarkable recovery from the COVID-19 pandemic, with an 18.3% growth rate in the first quarter of 2021. Consumer behavior is steadily returning to normal in many areas, including in the entertainment, hospitality and domestic travel industries.

Nonetheless, CCP leadership is concerned about the pressure from outside forces, notably the United States, that mean China no good.

In response, they have placed a “dual circulation” strategy at the heart of the Five-Year Plan, which aims to reduce reliance on overseas supply chains in favor of domestic production and to stimulate domestic consumption while remaining a significant exporter to the world.

The contradictions in the strategy, which demands a large export surplus and increased domestic consumption, have not been resolved. China’s workers still have relatively little to spend compared to their counterparts in other emerging economies, so if the state hopes to boost domestic consumption, it will at some point have to make the hard decision to give them more cash.

But then there will necessarily be a period when China exports less, until production levels can meet the rising demand at home. Doing so isn’t impossible to pull off, but it will mean making some difficult economic and political choices that, in a democratic society, would at least be debated. In China, they will likely be imposed without a proper discussion of how this particular contradiction can be resolved.

Meanwhile, the complexities of China’s global initiatives will also come to the fore in the 2020s. The Belt and Road Initiative, or BRI, the state’s foreign direct investment strategy adopted in 2013, has been a mixed bag of positive and negative outcomes. Its infrastructure projects in Sub-Saharan Africa provided badly needed capital, even as lending to countries like Pakistan has enabled the building of coal-fired power stations that will exacerbate climate change.

The strategy behind the campaign also fosters a reliance on Chinese contractors and manufacturers, which has led many in the West to characterize the BRI as a form of Chinese imperialism. But the real problem with the initiative is that the money is too frequently funneled into financially high-risk investments, such as the project to build a high-speed rail line in Laos.

china belt and road
The China-Kazakhstan logistics terminal was built in 2014 to boost the construction of the Belt and Road Initiative.

So instead, in the 2020s, the BRI is being reoriented to focus on technology and health, bringing together the areas where China has – or expects to have – advantages over its competitors.

This shift has involved the mass rollout of Chinese COVID-19 vaccines in countries like the United Arab Emirates and Malaysia, as well as the provision of cheap 4G and 5G networks. The latter is heavily subsidized, requiring customers to weigh their desire for efficient broadband against fears that installing Chinese equipment may create pathways for the CCP to conduct industrial espionage.

The pivot toward technology has also involved attempts to set international norms in the tech and cyber areas, a mission that it can be expected to double down on in the 2020s.

The West, once more, sees dangers in this approach – but their political priorities are often less of a concern for Global South economies that need support to recover from the coronavirus pandemic right now, and not in a decade’s time.

Furthermore, China’s approach to technology development, which combines the capabilities of the civil and military to innovate for both markets, is likely to find a massive, untapped market in the 2020s among emerging economies that want cheap technology suited for middle-class lifestyles and products that can serve for either defense or internal repression.

But in the tech arena, too, the CCP is balancing its desire for growth with its desire for social control. One recent focus of attention has been the increasing prominence of China’s antitrust regulators, notably the Anti-Monopoly Enforcement Agency. Its powers have been updated and made more prominent in 2021, and its most high-profile victim has been Jack Ma, founder of the Chinese e-commerce giant Alibaba, which was recently hit with a $2.8 billion antitrust fine by state regulators who want to see the behemoth split up into smaller, competing entities.

At first, the regulators’ strategy brings to mind former US President Theodore Roosevelt’s campaigns to break up powerful monopolies in the early 1900s, including, most prominently, US Steel. But in the Chinese case, even if giant tech majors like Alibaba, Huawei, Didi Chuxing, Meituan and Tencent are broken up into seven or eight competing companies, the one-party state will remain in control, with party members at the helm of each new entity.

The breakups would provide greater competition and – crucially – more, not less, leverage for the CCP in the domestic market. The liberal notion that competition creates the market is close to the opposite of the Chinese strategy, in which government is the deciding factor. And so far, in China, this alternate approach seems to be working.

There is also a performative motive behind this antitrust campaign, in addition to the economic one. For the past decade, the only Chinese figures with genuine global reach, glamour and credibility have been the tech innovators and marketers, in particular Alibaba’s Jack Ma and Pony Ma, the founder of Tencent, the technology conglomerate behind the messaging app WeChat.

With the recent public pressure on Alibaba and Tencent, the CCP has made clear that no individual Chinese person should be seen to be bigger than the party – with one exception: Xi Jinping. If the concentration on party over market forces creates economic distortions, too bad.

Hong Kong is another area being subjected to the new Chinese model. The city’s liberal economy and civil liberties once made it especially attractive to foreign investors, and analysts once believed this economic value would protect the city from the repression found in mainland China.

But, in the wake of a national security law implemented in July 2020, Hong Kong’s legal and financial systems are likely to work more closely with those of southern China in the coming decade.

Shenzhen, a major Chinese city just across Hong Kong’s border, is now home to one of the liveliest tech ecologies in China. The value of Hong Kong, meanwhile, has become less about its role as a global financial center and more as an entry point for venture capitalists looking to cash in on the mainland’s burgeoning tech sector.

China will try to redefine “one country, two systems” – the policy that previously allowed Hong Kong a degree of democracy and openness – as “one country, two economies,” while using economic revival in Shenzhen and elsewhere in the southeast as proof that its implementation of a “socialist market economy” has been successful.

Struggle in the new decade

China Marks 100th Anniversary Of The Communist Party
Members of the Chinese military orchestra march on Tiananmen Square for the centenary of the Chinese Communist Party, July 1, 2021.

To be sure, there are several known unknowns standing in China’s way in the decade ahead. The first and most unpredictable problem is one the country shares with the rest of the world.

Last year’s hopes that the COVID-19 pandemic would be swiftly defeated with lockdowns and quickly developed vaccines were clearly over-optimistic. Given its low case numbers and economic recovery, China’s domestic situation is better than that of many other countries, at least for now, but it still faces systemic problems that muddy the picture.

Recently, China’s top disease control official, Gao Fu, suggested that Chinese vaccines may be much less effective than the ones developed by Pfizer-BioNTech and Moderna in the West, and that anyway, it will take well into 2022 to vaccinate the whole population.

China more recently announced that it hopes to vaccinate 40% of its population by the end of June, but nevertheless plans to keep border restrictions in place for at least another year, according to The Wall Street Journal.

And China has a problem that no other sizeable economy does. Pandemic performance in the US, Brazil, India and across the European Union has been very poor at times – but the extent of this underperformance has always been relatively clear. The governments of these countries collect and publish sufficient information to make known the reality on the ground, and to allow governments and experts to assess what needs to be done in order to return to something like normal.

Outside observers and investors will find it difficult to make such an assessment about China. The anecdotal impressions have been impressive – there is no doubt that China has done a good job in repressing the pandemic – but precise infection figures are hard to obtain, as is peer-reviewed information about the efficiency of the Chinese-developed vaccines.

This makes calculations about how fast China will recover in the medium term challenging and unreliable. China has never been a liberal society, but before the pandemic, its economy was well-connected to the outside world, with millions of visitors coming in and out for business and tourism. It’s hard to imagine a version of this cosmopolitanism returning until 2023 at the earliest.

Biden and Xi Jinping
Then-Vice President Joe Biden with Chinese President Xi Jinping at a meeting in California.

Chinese antagonism – another good Marxist term – toward the US is driven in large part by a crucial similarity between the two countries: They are the only ones that tell apocalyptic stories about themselves and each other, often claiming that only one of their systems can endure in the longer term.

But the 2020s are likely to be more prosaic for China: Its economy will likely grow and may even become the world’s largest by GDP, but growth alone will not address the challenges it faces in areas as different as the environmental crisis to the undereducation of rural workers.

More lurid scenarios, much debated in policy circles, are possible as this decade unfolds – ranging from a climate catastrophe that would make life in newly-built cities all the more difficult to the outbreak of war with the US over Taiwan.

In either of these cases, it is likely that China’s prospects would darken quickly – and given its ties to economies across the developing world, it would take the world’s stability and security with it as it fell. The fall of China in the 2020s would be a lot more problematic than its rise in the 2010s.

But since its founding a century ago, the CCP has proven itself a remarkably flexible institution, changing from a command economy into a capitalist behemoth – despite its ideological aversion to capitalism – and drawing on advice from figures as far apart as Lee Kuan Yew,* Milton Friedman and Henry Paulson. Its incarnation in the 2020s may yet surprise us too.

*Editor’s note: The original version of this article incorrectly spelled Lee Kuan Yew’s name as Lee Kwan Yew. WPR regrets the error.

Rana Mitter is a professor of the history and politics of modern China at the University of Oxford. He is the author of several books, including most recently “China’s Good War: How World War II Is Shaping a New Nationalism,” published in 2020.

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China’s ‘wolf warrior diplomacy’ has come to Wall Street

Xi jinping at CCP 100th anniversary
Chinese President and Chairman of the Communist Party Xi Jinping appears on a large screen as performers dance during a mass gala marking the 100th anniversary of the Communist Party on June 28, 2021 at the Olympic Bird’s Nest stadium in Beijing, China.

  • China’s assertive, nationalistic behavior – known as “wolf warrior diplomacy” – has come to the financial markets.
  • This week Beijing punished a Chinese tech company that listed on the New York Stock exchange, and announced rules to govern all Chinese companies listed abroad.
  • Consider this part of the Chinese Communist Party tightening its grip on power at home, and closing its doors power from abroad.
  • This is an opinion column. The thoughts expressed are those of the author.
  • See more stories on Insider’s business page.

It was only a matter of time before Beijing’s heightened nationalism came to Wall Street.

This week, Chinese authorities punished Didi, a ride sharing company, for its June 30 public debut on the New York Stock Exchange. Shortly after the Didi crackdown, Beijing announced new measures that could restrict Chinese companies going public abroad.

What all this is telling us is that Beijing is no longer going to tolerate its tech stars making foreigners rich on foreign exchanges. And it is further evidence that China is closing its society and economy to the West.

Bring it all back home

In order to more freely list on foreign stock exchanges, Chinese companies create something called a “variable interest entity.” In such an arrangement, a Chinese company creates another company in a tax haven like the Cayman Islands where foreigners can invest. The Chinese company then signs an agreement that gives control and profits to the Cayman entity, from which money is distributed to shareholders and the company back in China. For years, Beijing generally looked the other way when it came to VIEs.

Now, according to Bloomberg, Beijing’s new regulations are designed to limit the ability of Chinese companies to set up these entities. The proposed rules would govern what data can and can’t be shared abroad, target “illegal securities activities,” and set up extra-national laws Chinese companies would have to follow regardless of where they are listed.

Didi shares are down around 20% since it’s IPO, in part because Beijing announced these measures, and in part because it has become a target for authorities at home. On July 2, the Cyberspace Administration of China announced it was investigating Didi. Two days later China’s app stores were ordered to stop allowing users to download Didi. The CAC claims that Didi was illegally collecting user data.

And perhaps that’s true. But it’s also likely that this is a signal that “wolf warrior” aggression – a kind of Chinese diplomacy named after a hyper-nationalistic film- has come to financial markets. Two other Chinese tech companies listed in the US – Kanzhun and Full Truck Alliance – also had their downloads halted by Chinese regulators. The almost 250 Chinese companies worth $2 trillion in market cap listed on major US exchanges should all be watching their backs.

China is closing

There are two main reasons for this seemingly sudden crackdown – one is China’s increasing antagonism with the West, and the other is the Chinese Communist Party’s own desire for power and self-preservation. Together they amount to the reality that China is once again closing its doors to the world, reversing the opening that began in the 1970s.

As part of a larger crackdown on civil society, the Chinese Communist Party has been tightening its control over any sources of power that might challenge it at home. That includes tech billionaires like Alibaba founder Jack Ma, who has recently been publicly brought to heel by Beijing. And it includes tech companies, like Tencent and Pinduoduo, another e-commerce giant.

Targeting tech companies that list abroad also puts pressure on Chinese companies to consider an IPO to list in Shanghai or Hong Kong instead. It is no secret that China’s encroachment into Hong Kong prompted an exodus of financial firms from the city. Making it the new landing place for Chinese tech companies to go public could help it maintain its status as a global financial center.

It is also no secret that the US and China are at risk of what some call “decoupling”– essentially breaking ties and creating a world with separate US or China-centric technologies and financial centers. In some ways, because the two powers have become so antagonistic, this is already happening. Domestically, Beijing has been investing in technological advancements with the hopes making the country a techno-superpower by 2025. Now it’s calling its companies home.

What’s doubly important is that none of the above is primarily about making China rich. It’s all about hoarding power for the CCP. Under President Xi Jiinping that has become Beijing’s motivation above all else, and we should all expect it to act accordingly – even when it means hurting its own domestic companies.

A chilling effect

Last year Congress passed the Holding Foreign Companies Accountable Act, which requires foreign companies listed on US stock exchanges to be audited by the Public Company Accounting Oversight Board’s. If they refuse for three years in a row they can be delisted. Last month, the Senate passed a law that would shorten the time frame to two years in a row.

The problem with this is that so far, Chinese regulators will have absolutely none of it.

This is a stare down. If Chinese companies listed here in the US do not comply they will be delisted. If they do comply Beijing could come down hard on these companies at home. In the meantime recriminations are flying. GOP Sen. Marco Rubio of Florida called the Didi IPO “reckless and irresponsible” weeks before Beijing clamped down on the company, arguing that Didi is a black box.

Rubio and Democratic Sen. Senator Bob Casey of Pennsylvania introduced a bill in May that would prohibit companies from going public on US exchanges if they do not comply with US regulators and submit to an audit from the Public Company Accounting Oversight Board.

All of this pressure from Beijing and Washington will, without a doubt, have a chilling effect on Chinese companies listing here in the United States. So yes, this is another form of decoupling – and it’s coming from both sides of the Pacific.

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Xi Jinping whitewashes China’s record of human rights abuses in speech at site of Tiananmen Square massacre

Chinese leader Xi Jinping delivering a speech in Tiananmen Square.
Chinese leader Xi Jinping warned other countries against attempting to bully China during a chest-thumping speech.

  • Xi Jinping delivered a chest-thumping speech warning other countries against bullying China.
  • The speech marked the 100th anniversary of the founding of China’s Communist Party.
  • Xi said China has never oppressed other countries, while ignoring human rights abuses at home.
  • See more stories on Insider’s business page.

In an incendiary speech marking the 100th anniversary of the founding of China’s Communist Party, Chinese leader Xi Jinping on Thursday portrayed China as an innocent player on the global stage while issuing a grave warning against bullying his country.

“The Chinese people will never allow foreign forces to bully, oppress or enslave us,” he said. “Whoever nurses delusions of doing that will crack their heads and spill blood on a Great Wall of steel built from the flesh and blood of 1.4 billion Chinese.”

“We will not accept sanctimonious preaching from those who feel they have the right to lecture us,” Xi said. “We have never bullied, oppressed, or subjugated the people of any other country, and we never will.”

Xi, an authoritarian with a long record of human rights abuses, said this without a hint of irony while speaking from Tiananmen Square – where Chinese troops in 1989 killed hundreds, possibly thousands, after opening fire on unarmed pro-democracy and pro-reform demonstrators.

The Chinese leader’s remarks effectively whitewashed China’s ongoing human rights abuses within the country’s borders. China has continued to crackdown on pro-democracy protests in Hong Kong, while committing what is widely considered genocide against the Uyghurs in Xinjiang.

Kenneth Roth, executive director of Human Rights Watch, in a Thursday tweet said: “In his speech for the 100th anniversary of the Chinese Communist Party, Xi Jinping warns that China will not be ‘oppressed.’ Sadly, under his rule, the people of China will be oppressed.”

It’s true that under communist leadership China has not engaged in the same type of blatant interventionism as many Western countries, but Xi’s comments also painted a misleading picture of China’s role in the world.

China has rapidly expanded its global influence in recent years, bolstering its military and technological capacities while becoming more intertwined in the economies of countries worldwide. In the process, US-China relations have quickly deteriorated over the past few years as they’ve butted heads on everything from trade and the COVID-19 pandemic to Taiwan and the South China Sea.

President Joe Biden has warned that the the US and China are in a competition to “win the 21st century.” The Biden administration has confronted China on a range of issues, and slapped sanctions on Chinese officials over human rights abuses, among other moves. There are also bipartisan efforts in Congress aimed at seeing the US challenge China more aggressively, particularly in terms of investments in research and development.

As the competition ramps up and both countries engage in chest-thumping from across the globe, Xi and his government have accused the US of employing a Cold War mentality.

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Xi Jinping said other countries will ‘crack their heads and spill blood’ if they come after China, a stark warning to mark 100 years of the Communist Party

Xi Jinping speaks at a microphone with the Communist Party of China logo in front of him.
Xi Jinping at a ceremony marking the centenary of the CPC in Beijing on July 1, 2021.

  • The Communist Party of China marked 100 years in since its foundation on Thursday.
  • President Xi Jinping used the event to warn other countries against trying to influence China.
  • He said they would “get their heads bashed” if they tried.
  • See more stories on Insider’s business page.

China’s president used his party’s 100 year anniversary to warn other countries against trying to influence China.

Xi Jinping said that they would “crack their heads and spill blood” if they tried.

He was speaking in Beijing on Thursday at an event marking the centenary of the Communist Party of China, founded in 1921.

The party has ruled continuously for the past 72 years, after triumphing in a long civil war in 1949.

Xi said: “The Chinese people will never allow foreign forces to bully, oppress or enslave us. Whoever nurses delusions of doing that will crack their heads and spill blood on a Great Wall of steel built from the flesh and blood of 1.4 billion Chinese.”

Xi said that China would not allow “sanctimonious preaching” from other nations.

Relationships between the US and China have been deteriorating, and other countries have increasingly condemned China for its human rights record, including its placing of millions of Uighur Muslim people in camps.

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This was one of the worst weeks for China on the world stage in a while

China's President Xi Jinping rubs his eyes
Chinese President Xi Jinping rubs his eye as he arrives for the seventh plenary session of the first session of the 13th National People’s Congress (NPC) at the Great Hall of the People in Beijing.

  • It was a bad week for China on the world stage.
  • President Biden is getting a warm reception in Europe rallying our democratic allies in the G7, the EU and NATO.
  • And at home, our squabbling US Senate somehow managed to pass a $250 billion bill countering China.
  • This is an opinion column. The thoughts expressed are those of the author.
  • See more stories on Insider’s business page.

This week the leaders of the Western world turned their eyes toward China, and as a result it was one of the worst weeks for Beijing on the world stage in some time.

In Washington, Democrats and Republicans in the Senate set aside their differences to pass a $250 billion industrial policy bill aimed at preparing US commerce and government for competition with Beijing. And while on a diplomatic trip to Europe, President Joe Biden is reinvigorating our ties to our allies in Europe, the G7 group of nations, and NATO. On the top of the agenda in these meetings is the question of how to counter an aggressive, totalitarian China on the rise.

This comes as every indication points to China moving farther and farther away being an open, even remotely democratic society.

Earlier this week Amnesty International published an in-depth look at life for Muslims living in the Xinjiang Uyghur Autonomous Region, calling it a “dystopian hellscape” where Muslims are terrorized and arbitrarily forced into labor camps as part of “part of a larger campaign of subjugation and forced assimilation.” The Times also reported the Chinese government is seizing Uyghur Muslims who flee abroad.

On the economic front, the Chinese legislature rushed through a bill expanding the government’s means and methods to retaliate against foreign sanctions including the ability to seize foreign companies’ Chinese assets, deny visas, and block the ability to do deals in China. Foreign businesses in the country were caught flat-footed.

At the heart of China’s bellicose behavior is the belief, held among many elites in the Chinese Communist Party, that the US and its partners in the West are in a state of decline. This idea took root during the 2008 financial crisis, and then was reaffirmed by the European debt crisis, the election of Donald Trump and his agression towards our European allies, and the United State’s handling of the coronavirus pandemic.

To the CCP, our way of life looks like chaos – a cacophony of voices sometimes forcefully pulling our discourse to the right then back to the left. They’ve convinced themselves that we can no longer organize and unify our societies to do the ambitious things that need to be done to win the future. This week the West showed China signs that – when it comes to countering a strengthening totalitarian power – that may not be the case.

A matter of trust

China squandered a massive opportunity over the last four years. As president, Donald Trump snubbed America’s traditional allies and made overtures to the world’s thugs and petty dictators. That could have been a moment when China cozied up to Europe as a more stable alternative, instead China wound up alienating the continent with its overbearing behavior.

For example, at the beginning of this year it seemed certain that the European Union and China would sign a trade deal, against the wishes of the United States. But in March, when the EU sanctioned China over its treatment of Uyghur Muslims, Beijing – in keeping with its policy of aggressive “Wolf Warrior” diplomacy – responded by sanctioning members of EU Parliament. This put the EU-China trade deal on an indefinite hold.

That brings us to Biden and his current trip to Europe, where the president is trying to rebuild trust among nations. His administration is working on undoing the tariffs the Trump administration put on its EU partners with an aim to lift them by the end of the year. He is encouraging unity on the European continent, urging UK Prime Minister Boris Johnson to settle his differences with the EU over Brexit and keep the peace on the Ireland-Northern Ireland border. Biden also announced that the US would donate 500 million doses of Pfizer’s COVID-19 vaccine to over 100 countries “no strings attached.”

Trump’s betrayal of our allies left commentators around the world wondering if US-led groups like the G7 would be able to cooperate enough to do hard things again. This week we’re seeing signs that they can and will. The first sign was Treasury Secretary Janet Yellen’s momentous announcement that the G7 had come to an agreement on an international minimum corporate tax to stop the race to the bottom in taxing the world’s richest companies.

And now it appears Biden is also rallying our allies to counter China. Before he left for Europe, Biden met with NATO Secretary-General Jens Stoltenberg at the White House. Addressing the press after their meeting Stoltenberg said China “doesn’t share our values.” Biden will attend a NATO summit on Monday, and it will produce the strongest statement in its history on NATO’s stance on China, according to the Wall Street Journal.

From the comfortable primeval mud

Legendary American diplomat George Kennan – known for outlining the US policy of containing the USSR during the Cold War – used to say that the US people are always about 10 years behind its diplomats when it comes to seeing danger from abroad. Lecturing back in 1950 he compared democracies to a giant prehistoric monster “with a body as long as this room and a brain the size of a pin” that needs to be directly confronted with a problem before it awakens from the “comfortable primeval mud.” But when a challenge does gain our attention, Kennan said, the country lashes out with “such blind determination that he not only destroys his adversary but largely wrecks his native habitat.”

Perhaps the US has learned something from Kennan. Consider the Senate’s passage of a 2,400 page bill aimed at shoring up the US as an economic and technological superpower. The size and scope of the bill shows that our leaders are trying to meet a challenge before it’s an emergency.

The bill allocates $52 billion to building up the semiconductor industry in the US in order to decrease our dependence on semiconductors from China and Taiwan. The bill also funds major research, allocating $81 billion to the National Science Foundation from 2022 to fiscal 2026 and $120 billion into technologies like artificial intelligence and quantum computing.

There are also diplomatic and intelligence measures. It bars US diplomats from attending the Olympics in Beijing, and requires the intelligence community to produce a report about China’s efforts to influence international bodies like the World Bank, International Monetary Fund, World Trade Organizations and United Nations. It passed the fractious US Senate – sometimes sardonically referred to as Mitch McConnell’s “legislative graveyard” – on a vote of 68 to 32.

China responded to the bill saying that it “slanders China” and is “full of Cold War mentality and ideological prejudice.”

In a time when the leaders of the richest country in the world are squabbling amongst themselves over whether or not to fund the building of roads and bridges, this bill is a heartening sight. The most important ways the US can counter China are by strengthening itself domestically and by preparing for the worst with its allies. If the giant prehistoric monster hasn’t awakened, this week shows that it now at least has one eye open.

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Biden said America’s survival depends on proving to China that democracy can outpace autocracy

Biden and Xi Jinping
Then Vice President Biden met with Chinese President Xi Jinping at a 2012 meeting in California. China now has the lead in 5G infrastructure, but experts say don’t count Silicon Valley out yet.

  • Biden said Xi Jinping is betting democracy can’t outpace China’s autocratic model.
  • He framed overcoming the challenges ahead as key to the survival of democracy and proving Xi wrong.
  • Biden said it was crucial to him to be successful in his first 100 days as part of this effort.
  • See more stories on Insider’s business page.

President Joe Biden on Wednesday said Xi Jinping is betting democracy can’t “keep up with” autocracy, and warned that proving the Chinese leader wrong is key to the survival of the US.

“They’re going to write about this point in history,” Biden said to reporters ahead of his first address to a joint session of Congress, in remarks first reported by CNN. “Not about any of us in here, but about whether or not democracy can function in the 21st century.”

“You know, things are moving so damn rapidly,” Biden went on to say. “Things are changing so rapidly in the world, in science and technology and a whole range of other issues, that – the question is: In a democracy that’s such a genius as ours, can you get consensus in the timeframe that can compete with autocracy?”

Biden said that these questions surrounding democracy and autocracy have been at the heart of his debates and conversations with Xi.

The president, who is approaching 100 days in office, said that it was vital to him to hit the ground running after being sworn in as part of a broader effort to prove that democracy still works.

“Because if we go four more years like we had in the last four, I really, honest to God, believe we’re in real jeopardy as a nation,” Biden said, portraying the challenges the US faces as an existential threat.

This is why Biden said he pushed a $1.9 trillion COVID-19 stimulus package through Congress, despite having no GOP support.

“Ease the pain, save lives, put people in a position where they have reason to believe that they could actually get back and earn a living and provide for their families. That’s how I looked at the first 100 days,” Biden said, underscoring that he couldn’t “afford to lose out of the box.”

The president has made competing with and challenging China a top priority. And since his inauguration, which came just two weeks after a violent insurrection at the US Capitol, Biden has repeatedly emphasized the importance of showing that democracy is superior to China’s autocratic model. He’s consistently injected commentary on China into discussions on virtually every major issue, ranging from defense to infrastructure.

Biden came into office at a time when tensions between the US and China were already at historic heights, with experts warning a new Cold War was on the horizon. This was largely fueled by former President Donald Trump’s trade war with Beijing and the COVID-19 pandemic, which Trump blamed on the Chinese government.

The Biden administration has ramped up pressure on China over human rights abuses in Xinjiang and attacks on democracy in Hong Kong, slapping new sanctions on Chinese officials last month for “genocide” against the Uyghurs. Meanwhile, Biden has pushed for more investments in research and development to keep the US competitive with China in technology and science.

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When it comes to China, the US need to figure out which fights are principled, and which fights are petty

Biden and Xi Jinping
Then Vice President Biden met with Chinese President Xi Jinping at a California meeting aimed at strengthening Chinese investment in the state. China has now the lead in 5G infrastructure, but experts say don’t count Silicon Valley out yet.

  • John Kerry was in China this week discussing climate change and some people are upset about it.
  • They think cooperation on that issue could stop the US from being aggressive with Beijing about a host of other issues.
  • They’re delusional.
  • This is an opinion column. The thoughts expressed are those of the author.
  • See more stories on Insider’s business page.

President Joe Biden’s special envoy on climate, John Kerry, went to Shanghai this week to discuss how best the two largest economies in the world can address the threat of climate change. Despite the meeting being pretty standard stuff, it still has some US-China watchers completely losing their minds.

This freak out crew would prefer to have cordial relations between the two countries end tomorrow and instead have the US put maximum pressure on the Chinese Communist Party. They would prefer a world completely split in two, divided by a “digital iron curtain” with the US and fellow democracies on one side, and China, Russia, and their allies on the other. Economic ties would be cut, the flow of people would slow to a trickle, and the prospect of war would heighten across the world.

To them, Kerry and his message of cooperation on climate change could derail that future. That’s a false choice, but despite it’s absurdity the idea has become pervasive. Over at the Brookings Institution they decided that Kerry could go rogue, becoming a one-man wrecking ball for the entire government’s more muscular China policy. This is ridiculous on its face. Ultimately it is President Biden who will decide the direction of our China policy – and, as one former Obama administration Asia hand told me dismissing this theory, “John Kerry is no panda hugger.”

This is a delicate moment. The boundaries of the US-China relationship are being redrawn. We are watching trust rapidly dissipate between world powers in real time, and we shouldn’t waste what little trust we have now on empty antagonism. There will likely come a time when we wish we had that trust back.

A bomb and the time bomb

In the 1950s and 1960s the end of human civilization was staring its destruction in the face in the form of the nuclear bomb. The bomb was getting bigger and deadlier; spreading to more countries; and had already laid waste to cities and contaminated populations.

And so in 1963 during some of the most frigid times of the Cold War between the United States and USSR, the key nuclear powers of the time (which also included the United Kingdom), signed the Limited Testing Ban Treaty. The treaty regulated how and where countries could test their bombs, and it set up an emergency line of communication between powers to avert disaster – “the hotline.”

This all amounted to one critical thread of cooperation between the US and USSR during an otherwise entirely uncooperative period. The Cold War went on, but the prospect of nuclear winter shrank.

Today the threat facing human civilization is climate change, and the two countries that most need to work together to solve it – the US and China – are on the verge of another conflict that will force the planet to choose sides. In both countries there are people who are calling for a cessation of cooperative interactions. To them, every cooperative meeting is a Trojan Horse, during which one side will magically convince the other to forget every other issue pulling them apart.

But what we learned from the Cold War is that the US and an adversarial superpower are perfectly capable of sustaining fierce competition, while also cooperating enough to keep the world from destroying itself. When it comes to the US and China today, not only are we not in as dark a place as we were with the USSR in 1963, but we also have far more economic and business ties to break before we get there.

Until we’re serious about breaking those ties entirely (we’re not yet), we shouldn’t act like we are. That’s called posturing, and the United States ought to be above that.

That doesn’t mean we aren’t aggressive regarding issues that concern us – like Xinjiang, Hong Kong, North Korea, and Taiwan. It does not mean we aren’t aggressive when China bullies our allies, like Australia, or engages in cyber hacking. It does not shrink our commitment to democracy. But it does mean finding ways to cooperate where we can and keeping lines of communication open.

I mean my God, even in 1963 they had the hotline.

Cooperation

Here’s how I know we’re not serious about cutting commercial and social ties with China just yet. Right now the Senate Foreign Relations Committee is working on a sweeping bipartisan bill to address China’s rising power. In it there’s hundreds of million of dollars for defense and programs to country China’s telecommunications rise. But for companies that want to move their operations and supply lines out of China there’s just $15 million. The US government loses $15 million in the couch cushions. That is not serious money.

But what people who do business in China will tell you is that getting public data, or having the mobility and access to interview customers to do business there, is getting harder. On March 19, Anne Stevenson-Yang, founder of China-focused investment firm J Capital Research Ltd testified before the US-China Economic and Security Review Commission on Capitol Hill.

She told attendees that more and more of China is state run – that it’s not opening it’s economy anymore, that it’s closing it. Public economic data that used to be easy to get started evaporating back in 2015, shortly after Chinese President Xi Jinping took power. This back pedaling does not just make Chinese society more brittle, she argued, but it also creates incentives in the Chinese economy that put investors and multinational corporations at risk. The solution, in some of those instances, is more cooperation – not less.

“The practical remedy for faked data, for example, on a corporate, industrial, and macroeconomic level, is to grant American researchers unfettered access to conduct surveys, interview individuals, and review financial records of all sorts in a legal proceeding, including tax records, audit papers, invoices, and communications,” she said. “A key impediment to such data collection is China’s law forbidding independent surveys. Survey teams need to be able to access respondents within a framework of privacy law but not one of data supervision.”

Achieving that requires cooperation, but that doesn’t mean Stevenson-Yang isn’t realistic about where it is not possible. For example, she recommends treating Huawei, ZTE, and other Chinese network gear as spyware and supports technology export restrictions.

If China closes and gradually makes itself a terrible place to do business, that is on China. It is on the US government to ensure that our multinational corporations are ethical, transparent, and consider our domestic interests at the center of their business. In the meantime the most productive thing to do is engage with China to protect investors and US businesses as best we can.

Besides, this is America and we do capitalism. If you want to do business in China and don’t mind the uncertainty of having your product randomly barred from military complexes and personnel; or you want to deal with your company being harassed and boycotted for not endorsing cotton from Xinjiang or whatever, knock yourself out.

Separating the principled from the petty

In this fragile moment, there is a danger of confusing the principled with the petty. When that happens, any slight can lead to a stand off.

There are petty new features of this more antagonistic relationship we all just have to get used to rolling off our backs. For example, China forced the world to get used to its hyper-aggressive “Wolf Warrior” diplomacy, and now it has to get used to a US strategy that it dislikes – US led multilateralism. To China, when we rally our allies to make joint statements about things like human rights abuses in Xinjiang, that’s bullying.

Too bad. When the US is run correctly, that’s how we do things. Beijing will have to get over it.

This is to make space for the issues that Beijing and Washington cannot get over, most of which was discussed between President Biden and Japanese Prime Minister Yoshihide Suga on Friday. Suga will be the first foreign leader to visit the White House since Biden took office. It is a sign of the gravity of the matters they have to discuss – like North Korea, Taiwan and a maintaining “free and open Indo-Pacific.”

Perhaps it’s a coincidence that Kerry’s and Suga’s meetings fall at the same time, perhaps it’s not. Both are meant to address exigent situations that demand cooperation at highest levels of government and both must be had. Until the day comes when we are serious about ending the US-China relationship – and that day very well may come – we should continue to seek cooperation where it benefits the people and institutions of the United States of America. Anything else is an exercise in fantasy, or worse – just posturing.

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Chinese leader Xi Jinping warns against the consequences of a ‘new cold war’ in first speech since Biden’s inauguration

Biden and Xi Jinping
Then Vice President Biden met with Chinese President Xi Jinping at a 2012 meeting in California. China now has the lead in 5G infrastructure, but experts say don’t count Silicon Valley out yet.

  • Chinese leader Xi Jinping preached about multilateralism at the World Economic Forum on Monday.
  • Xi warned about the consequences of a “new Cold War,” in a veiled message to President Joe Biden. 
  • “We cannot tackle common challenges in a divided world and confrontation will lead us to a dead-end,” Xi said.
  • Visit Business Insider’s homepage for more stories.

China’s leader Xi Jinping on Wednesday emphasized the importance of multilateralism and urged against “arrogant isolation,” in a speech to the international community at the annual World Economic Forum. 

“We have been shown time and again that to beggar thy neighbor, to go it alone and to slip into arrogant isolation will always fail. Let us all join hands and let multilateralism light our way toward a community with a shared future for mankind,” Xi said. 

Without explicitly mentioning the US, the Chinese leader also warned against the dangers of a “new Cold War.”

“To build small circles or start a new Cold War, to reject, threaten or intimidate others, to willfully impose decoupling, supply disruption or sanctions, and to create isolation or estrangement will only push the world into division and even confrontation,” Xi said. 

“We cannot tackle common challenges in a divided world and confrontation will lead us to a dead-end,” Xi added in his first speech to the global community since President Joe Biden was inaugurated. 

 

Tensions between the US and China reached historic heights under former President Donald Trump, who waged a controversial trade war against Beijing and blamed the Chinese government for the COVID-19 pandemic. In 2020, experts warned that the US and China appeared to be on the brink of a new Cold War that could have major consequences for the global economy. 

Biden has made challenging China on the global stage a key part of his foreign policy agenda. The new president and his advisors have expressed agreement with Trump’s diagnosis of problems with China, while signaling a desire to take a less boisterous, unilateral approach to these issues. 

Antony Blinken, Biden’s nominee for secretary of state, during his Senate confirmation hearing last week said, “Trump was right in taking a tougher approach to China.” But Blinken added that he did not agree with all of Trump’s methods. 

Blinken at the time also said that he agreed with outgoing Secretary of State Mike Pompeo’s assessment that China’s treatment of the Uighurs in Xinjiang constituted “genocide. Under Xi’s authoritarian regime, China set up “reeducation camps” where hundreds of thousands of predominantly Muslim Uighurs are imprisoned without trial, often for nothing more than appearing suspicious, and where they are reportedly subjected to torture, sexual assault, and medical experiments.

Though Xi preached a message of global cooperation on Monday that appeared to be a veiled overture to Biden, it came less than a week after the Chinese government announced sanctions against 28 former US officials and their families. China also flew warplanes close to Taiwan over the weekend, prompting the State Department to issue a statement. 

“We urge Beijing to cease its military, diplomatic, and economic pressure against Taiwan and instead engage in meaningful dialogue with Taiwan’s democratically elected representatives,” State Department spokesperson Ned Price said, adding that the US commitment to Taiwan is “rock-solid.” 

White House press secretary Jen Psaki on Monday said the Biden administration is “starting from an approach of patience as it relates to our relationship with China.”

“That means we’re going to have consultations with our allies … with Democrats and Republicans, and we’re going to allow the interagency process to work its way through,” Psaki said. 

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