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05
Tue, Jul

Xi Jinping’s China Faces Challenges Of Its Own

CHINA POLICY - David Goldman’s remarks on America’s challenges against China are, for the most part, spot-on.

He is particularly on-target about two realities that may displease traditional conservatives: the failure of Trump’s China policy, and the need for some form of industrial policy.

Goldman may have voted twice for Trump (I did not), but he is no MAGA die-hard. He can read the numbers, which show growing dependence on China and an ever-widening trade deficit: imports from China rose over 30% more starting in January 2018, when Trump imposed tariffs. This 19th-century strategy simply did not work in the 21st.

But perhaps Goldman’s boldest move is to endorse some form of national “industrial policy.” This reflects a growing conservative break with both libertarian ideologues and the board room suite. The shift away from free-market fundamentalism comes from the ground up—it is motivated by constituents in the Heartland, the South, and Main Street, as well as what is left of industrial unions.

These policy proposals were the focus of Goldman’s talk. But perhaps he could have spent more time exposing what he calls “a technocratic elite” that has benefited from China but hurt most Americans. Since 1990, the U.S. deficit in trade goods with China has ballooned from under $10 billion annually to $419 billion last year. This has enriched many of our leading manufacturing companies while costing an estimated 3.4 million job losses in the States since 2001.

Besides the giant retail chains, who benefited from cheap imports, the biggest China boosters can be found in two sectors: finance and technology. Leaders in these areas have thrived while much of the economy stagnated. Apple, for instance, negotiated its own $275 billion deal, guaranteeing China access to the latest technology. Worried about our dependence on Taiwanese and Korean chips? Apple recently announced plans to source some of its chips in China. Apple also underwrites and profits from China’s ever-expanding surveillance state.

Wall Street follows a similar cast. Ray Dalio, founder of the giant Bridgewater Associates hedge fund, dismisses China’s repression of its Uighur population and its crackdown on democratic sentiment in Hong Kong as the result of a “sacrosanct” desire for sovereignty. Wall Street’s recent embrace of crushing Environmental, Social, and Governance (ESG) requirements places ever greater burdens on U.S. firms to cut carbon while demanding little from China, though its notoriously supply chains are notoriously high-carbon and it emits more greenhouse gases than the United States and the E.U. combined. The hypocrisy of financial firms like Blackrock calling to shut down U.S. energy while sending cash to China, which continues to build new coal plants, seems extreme even by Wall Street standards.

Systems Failure

But though I agree with Goldman on the nature and depth of China’s threat, I am somewhat more optimistic about America’s chances and less so about the Middle Kingdom. Today, China is an aging, increasingly class-ridden society facing slowing economic growth, a looming property melt-down, and demographic collapse.

China’s greatest accomplishment—a large drop in poverty and the creation of a large middle class—is in the rear-view mirror. Xi Jinping seems keenly aware that the Communist Party’s “mandate of heaven” rests ultimately on improving the lives of its subjugated masses. Being at least a nominal Marxist, Xi has made no bones about addressing the country’s vast class divides. But since 1978, China’s Gini coefficient, which measures inequality of wealth distribution, has tripled. As documented in David S. G. Goodman’s Class in Contemporary China, The country has gone from being highly egalitarian to becoming more stratifiedthan Mexico, Brazil, or Kenya, as well as the United States and virtually all of Europe. China, notes one observer, is now developing “something resembling a permanent caste system.”

As the income of the ultra-wealthy expanded by more than twice the national average rate, the share of the economy controlled by ordinary Chinese, once great beneficiaries of the country’s growth, has fallen precipitously. Even middle-class Chinese people now find it difficult to buy property or get ahead. A growing percentage of all apartments are rentals, particularly in large cities such as Beijing and Shanghai. Most young Chinese people may be destined to pay rent throughout their lives to the landowning class rather than own a piece of the pie themselves. Their prospects do not match those of earlier generations: In 2017, eight million college graduates entered the job market to find they could only earn salaries that they might have gotten by going to work in a factory straight out of high school.

China now reprises some of the very class divides that sparked peasant rebellions in the past, as well as the Nationalist and Communist takeovers in the last century. Since 2000, many billionaires from tech and other sectors have entered the Communist Party in a seamless manner that Mao Tse-Tung would never have countenanced. China thus has two intertwined elites—one political, the other economic. Nearly 40% of private entrepreneurs also belong to the Communist Party.

The real challenge may come from further below. Two-thirds of all Chinese people are either peasants, agricultural laborers, industrial workers, or migrant laborers—and most work in the unregulated “informal economy.” Because of the generally poor quality of education in rural areas, migrants and their offspringtypically lack the skills needed to find work in the growing sectors of the economy.

Around every major Chinese city, and many smaller ones, are the settlements and dingy apartments of migrant workers—estimated to number over 280 million—from the impoverished countryside. They come to work on construction sites, bus tables, and perform other tasks that are generally eschewed by the more fortunate Chinese who have urban hukou, or residence permits. As scholar Li Sun, now at the University of Leeds, points out in Rural Migration and Policy Intervention in China, China’s migrants often lack access to education and health care. They do many of the most dangerous jobs, but barely one in four has any form of insurance against injury at work. They often work sixty-hour weeks for barely $63 a week in pay, reprising the role played for millennia by their ancestors who built the wealth of the Middle Kingdom but shared in little of it.

This represents a profound challenge for a regime that fears any discord. There have been numerous protests by migrant laborers although activists often find themselves prosecuted for threatening “the social order.” Communist officials have been put in the awkward position of cracking down on Marxist study groups at universities, whose working-class advocacy conflicts with the policies of the nominally socialist government.

The other big challenge lies in China’s declining working-age population (those between 15 and 64 years old), which peaked in 2011 and is now projected to drop 23% by 2050. By 2050, China is expected to have 60 million fewer people under age fifteen, a loss approximately the size of Italy’s total population. At the same time, China will have nearly 190 million more people who are age 65 and over, approximately equal to the population of Pakistan, the world’s fourth-most populous country. The ratio of retirees to working people in China is expected to have more than tripled by then, which would be one of the most rapid demographic shifts in history. By 2100, reports the South China Morning Post, the country’s population could be halved.

Chinese society is rapidly losing the familialism that long has been its essential glue. Today the country has 200 million unmarried adults, including 58 million single people between 20 and 40 years of age. The proportion of people living alone in China, once a virtually unimaginable situation, has risen to 15%. This decline will be exacerbated by the effects of the now-discarded one-child policy, which led parents to abort an estimated 37 million Chinese girls since it came into force in 1980. These grim statistics have created an imbalance between the sexes that could pose an existential threat to President Xi’s “China dream,” and perhaps to the stability of the Communist state.

Reclaiming American Exceptionalism

None of this minimizes the threats Goldman articulates so eloquently. But the current challenge is also civilizational, as the late political scientist Samuel Huntington suggested a quarter-century ago. Fueled by resentment over past mistreatment by the Western powers, China’s leaders have an appetite to recover the mighty perch long occupied by their civilization. As late as the seventeenth century, China was not only more populous and richer than Europe but enjoyed an industrial infrastructure that was equal, at the very least.

Awed by the West during the period of European imperialism, Asian societies now routinely ascribe their recent ascendency to their “superior culture.” In seeking to reduce their dependence on the old capitalist powers, their natural alliances tend to be with powers outside the grip of western liberalism, notably the Islamic states of Pakistan and Iran as well as Russia. “If the U.S. has long sought to make the world safe for democracy,” suggests one analyst, “China’s leaders crave a world that is safe for authoritarianism.

Our response should not be to mimic China’s approach, but to show—as we did during the Second World War and the Cold Wars—that we can tap our nation’s industrial might and resources without massive corporatist privileges or state-run companies. But we also have to do it in a way that reflects our own values and promises. We can never beat the mandarins in tyrannical control, whether over religion, political dissent, or lockdown polices, as we now see in Shanghai.

Hollywood seems already willing to subject our cultural production to Chinese approval, which is bad enough. But technology will clearly be a prime battlefield. In certain sectors, including e‑commerce and mobile payments, China has already established a powerful lead. Centrally driven policies can create remarkable achievements—as we saw in Nazi Germany, the USSR and now China—but conformism and control have their limitations.

America does not need to become more nativist, “woke,” or socialist, but to reaffirm our commitment to a diverse, post-racial society, including immigrants from China. Our estimated 2.5 million Chinese immigrants represent part of America’s “secret sauce,” an amalgam of population diversity, innovation, and the highest level of economic freedom possible within the constraints of modern history.

America’s ideals may be abandoned by its elites, but the country still has the natural and human resources that, if husbanded, could prevent this century from becoming a springtime for autocracy.

(Joel Kotkin is a Washington Fellow at the Claremont Institute Center for the American Way of Life and the Presidential Fellow in Urban Futures at Chapman University and executive director of the Urban Reform Institute. His new book, The Coming of Neo-Feudalism, is out now from Encounter.)