China's Greatest Challenge: Not America, But Itself
Image Credit: The White House (Flickr)

China's Greatest Challenge: Not America, But Itself

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Back in February, at an Iowa state dinner held in his honor, Chinese Vice President Xi Jinping offered what the Des Moines Register described as a heartfelt toast to the Hawkeye state. Xi, who a quarter century before had visited Iowa as a local official, returned in 2012 as a national leader aiming for greater global exposure. In the presence of Iowa’s leading citizens, Xi shared his childhood memories reading Mark Twain and his long-held fascination with the Mississippi. And so he was glad that, on this most recent trip, “the unequaled beauty of Muscatine at sunset” had greeted him once again. The man who charmed the heartland of America will, at the 18th Party Congress in Beijing this coming October, officially become the President of China.

As China’s international profile continues to rise in tandem with its economic and political significance, one might conclude that the Chinese public is likely to expect Xi to carry a higher profile on the international stage. As the leader of a world power, Xi will have to devote more time to international affairs, take the lead in debates on global issues, interact more frequently with foreign audiences like the citizens of Iowa, and articulate China’s role as a shaper of world affairs. In reality, however, Xi may be preoccupied with addressing a host of economic and social challenges that China is likely to encounter in the decade ahead.

As China’s next leader, one of Xi’s main concerns will be managing the significant economic challenges that are beginning to surface.  In particular, Xi will have to shepherd his country through the most turbulent part of its gradual transition from an export-oriented economy to one that is based more on domestic consumption. For the past 30 years, low-wages and an abundance of able-bodied young workers has given Chinese manufacturing a huge comparative advantage and enabled its expansion.

In recent years, however, China’s economic model had become increasingly problematic. As consumers in Europe, Japan, and the United States, saddled with economic challenges at home, reduced their consumption, an export-centered economy has proven to be unsustainable, with unsold goods—everything from toys to automobiles—reportedly piling up on factory floors and showrooms across the country. Chinese wages, once the country’s greatest assets in attracting manufacturing, have been rising for years, leading some, like Boston Consulting Group, to predict that there will be a “manufacturing renaissance” in the United States. Meanwhile, should conditions continue to deteriorate and unemployment rise throughout China, the government will be particularly worried about social unrest, as was the case during the early stages of the global financial crisis that began in 2008.

Comments
33
Cool Economist
May 10, 2013 at 18:13

@a-canadian-observer,

I think the level the US is today you mean China will hopefully reach in 100 years is the national debt level and the level of national failures? Just to be exact and more accurate?

Wake Up Call
May 10, 2013 at 17:55

@a-canadian-observer,

Uncle Sam is more than worry. The camel back of Uncle Sam needs a major load release before the last straw breaking it anytime. Keeping China in line and busy is not just included in the US's things have to do list. It's actually the ONLY business Uncle Sam CAN do to shift the focus from his failures and mistakes. Desperate Diplomacy show is running outrageously by both Japan and US.

[...] Chinese presidency this month, charged with navigating a complicated international environment and significant domestic challenges. Here in Washington, as the Obama administration begins its second term, John Kerry, the newly [...]

Gordon Stark
November 4, 2012 at 11:59

We -all- have increasing issues to deal with at home.

Patrick Clay McDonald
October 16, 2012 at 20:59

Yeah the article is very sober and realistic. China has problems just like many of us in the rest of the world. Maybe We All will be living a full life. It was very human and super interesting to see Vice President Xi had read and enjoyed the writings of Mark Twain.

Gail Harris
September 7, 2012 at 09:48

An excellent and insightful article.  Gives an excellent update on the economic issues facing China.

Observer
September 5, 2012 at 13:15

Another huge problem for china and chinese - the absolute corruption of the power elite CCP.
 
 

Ling Gu, the son of   Ling Jihua, a loyal aide to President Hu Jintao, was the person killed in a March 18 Ferrari accident which initially garnered only minimal coverage in China's state media.
The report said Ling was half-naked when the crash occurred and his two passengers were naked or half-dressed, suggesting they had been involved in some kind of high-speed sex game.

 
Hundreds of millions of poor chinese are living in mud houses, caves, toilets, parking garages while the CCP people are living large. How sad.
 

mark burns
September 5, 2012 at 12:36

And perhaps Canada=Nepal

Jagiela
September 5, 2012 at 05:17

  Silly, silly article.  Sure China has problems but rising wages?  Get serious.  The only reason Chinese wages would be rising is that the productivity of Chinese workers is increasing.  Otherwise, the factory would close and the jobs go overseas UNTIL BALANCE WAS RESTORED.  But China's wages still rise meaning that the Chinese are growing more productive.
 
   Okay, so they have some rising inventory levels.  Common indicator of a business slowdown ahead but given China's rapid growth an occasional recession is to be expected.  Actually, China's "recession" is really just a period of slower growth.   Not exactly a trajedy.
 
    China isn't growing old before it gets rich- its people are rich by Chinese standards.  They certainly aren't expecting an American level of retirement benefits.  But if you grew up in the China of the 1940's any retirement pay would seem liike heaven on Earth.
 
    China wil be a world power because of the total size of its economy- not its per capita.  When it comes to military spending its your total spending that matters and China will blow us away. 
 
     As  far as playing a greater role in world affairs- they already do but they simply don't have a  wildly outrageous view of their interests.  Really, leaving other countries alone to solve their own problems seems to be a reasonable foreign policy.  Its what we pursued for the first hundred years of our existence and it worked just fine.
 
  

Kangmin Zheng
September 5, 2012 at 00:15

@John Chan,
Agreed on your point about Romney.   Xi need to reveal how much of his net worth comes from organ harvesting business.

Moira Garcia Gallaga
September 4, 2012 at 10:32

China's greatest challenge is definitely from within, and as the article correctly points out, these domestic/internal challenges will drive Chinese foreign policy. Assessing China's moves on the global stage should be done in that context. Advances in technology and growing inter-connectivity is going to make China's ability to exert control over its population difficult. The possibility of social unrest is likely to be simmering under the surface. 

a_canadian_observer
September 4, 2012 at 01:23

Don't worry, the US is capable of all of that, including keeping china in line.

a_canadian_observer
September 4, 2012 at 01:22

That's why in, hopefully, one hundred years from now, china will reach the level the US is today.

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