- 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.
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
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.
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
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.
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
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.
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.