No one knows what China’s future holds, and there is a long history of faulty predictions of systemic collapse or stagnation. Neither outcome is likely, though the country is facing several challenges that are far more serious than many observers seem to think.
Chinese President Xi Jinping seems to be on a roll. He has sent a rocket to the dark side of the moon, built artificial islands on contested reefs in the South China Sea and, recently, enticed Italy to break ranks with its European partners and sign on to China’s Belt and Road Initiative. Meanwhile, U.S. President Donald Trump’s unilateralist posture has reduced America’s soft power and influence.
China’s economic performance over the past four decades has been truly impressive. It is now the main trading partner for more than a hundred countries compared to about half that number for the United States. Its economic growth has slowed, but its official 6% annual rate is more than twice the American rate. Conventional wisdom projects that China’s economy will surpass that of the USA in size in the coming decade.Perhaps. But it is also possible that Xi has feet of clay.
No one knows what China’s future holds, and there is a long history of faulty predictions of systemic collapse or stagnation. Neither is likely, and the conventional wisdom exaggerates China’s strengths. Westerners see the divisions and polarization in their democracies, but China’s successful efforts to conceal its problems cannot make them go away. Knowledgeable Sinologists describe at least five major long-term problems confronting China.
First, there is the country’s unfavorable demographic profile. Second, China needs to change its economic model. Third, while China for more than three decades picked the low-hanging fruit of relatively easy reforms, the changes it needs now are much more difficult to introduce. Fourth, China has become a victim of its own success. And, Fifth, there is China’s soft-power deficit.
Bob Weir has over 50 years of investment research and analytical experience in both the equity and fixed-income sectors, and in the commercial real estate industry. He joined eResearch in 2004 and was its President, CEO, and Managing Director, Research Services until December 2018. Prior to joining eResearch, Bob was at Dominion Bond Rating Service (DBRS).
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Chinese President Xi Jinping seems to be on a roll. He has sent a rocket to the dark side of the moon, built artificial islands on contested reefs in the South China Sea and, recently, enticed Italy to break ranks with its European partners and sign on to China’s Belt and Road Initiative. Meanwhile, U.S. President Donald Trump’s unilateralist posture has reduced America’s soft power and influence.
China’s economic performance over the past four decades has been truly impressive. It is now the main trading partner for more than a hundred countries compared to about half that number for the United States. Its economic growth has slowed, but its official 6% annual rate is more than twice the American rate. Conventional wisdom projects that China’s economy will surpass that of the USA in size in the coming decade.Perhaps. But it is also possible that Xi has feet of clay.
No one knows what China’s future holds, and there is a long history of faulty predictions of systemic collapse or stagnation. Neither is likely, and the conventional wisdom exaggerates China’s strengths. Westerners see the divisions and polarization in their democracies, but China’s successful efforts to conceal its problems cannot make them go away. Knowledgeable Sinologists describe at least five major long-term problems confronting China.
First, there is the country’s unfavorable demographic profile. Second, China needs to change its economic model. Third, while China for more than three decades picked the low-hanging fruit of relatively easy reforms, the changes it needs now are much more difficult to introduce. Fourth, China has become a victim of its own success. And, Fifth, there is China’s soft-power deficit.