One World Two Systems

I wrote recently about the theory of enough in relation to China’s journey to a moderately prosperous nation by 2049. That it would be based upon a target for an economy which would provide adequate sustainable economies and societies, not based on debt and hedonism.

I suggested they might look to Northern Europe for models of balance that would have helped guide their thinking. Currently they are on their way from low cost export based model to enable peasants to move from poverty and over-crowding into urban based manufacturing and service industry jobs. China will be transformed from1 billion peasants out of a population of 1.3 billion in 1978, into a population of 1 billion urban dwellers and 200 million agricultural workers by 2030.

China has transformed its agriculture, industry and infrastructure. Now they are moving to a domestic consumption model, less dependent on Western markets and funds and with continuing substantial investment in creating a modern infrastructure which will be the envy of the world. Transportation across China and energy and power routes will all be major demands for many, many years to come, as will continued construction of towns across China.

They are moving into a Party led market economy – some find this easier to imagine as a form of managed capitalism – and this will create a more modest growth of 6-7pc as compared to the initial thirty year burst of towards 10pc. This will drop by the 2030’s towards 3-4pc, and then towards a modest growth related to population and demography.

This will be accompanied by social justice for the people of China based on health and education for all the people, and with a pension and welfare system that is funded and not a drain on tax revenues. China’s gini coefficient will continue to gradually drop as the benefits of New China are spread more evenly across the Chinese people. It’s current level of 4.7, down from 4.9, will drop below that of the U.S.A. at 4.2 towards Norway at 3.5 and probably lower towards 3.0 by 2049.

The goal is not equality but neither is it rampant capitalism with big differences between the have’s and the have not’s. China will regulate and lead a market economy. There will, inevitably, be a battle between the forces of private capital and the Party and State for control of this economy and society, and this will take different forms at different times. The anti-corruption movement is just one of these forms, as Officials are pushed back into modest living and serving the public good. At the same time the Provinces are being stopped from participating in funding and enabling corrupt private sector activities. The private sector will be “encouraged” to have an alignment with the values of the Chinese dream and see them themselves as guardians of the public wealth and owing a duty of care to society.

As all this is happening as China is developing major structures in the developing world – The BRICS’ New Development Bank , The Asian Infrastructure Investment Bank and other such institutions to follow. They are meshed with plans to re-create the Silk Roads from China through Central Asia to the Middle East and Europe. The maritime ocean route through South Asia to Africa is another substantial development. China’s initiatives of the SCO and the ASEAN plus One Free Trade Area are a part of that, as is the impending Free Trade Area of China, South Korea and Japan.

China has recently announced a Foreign Policy that prioritises relations with its 14 neighbours, which rises to 20 when immediately attaching areas such as Singapore are added. This then rises to around 60 as China adds in close nations whose stability and prosperity can affect China’s future.

So they decided to address their border area challenges in a unique way. Since the early 90’s China’s border areas have featured significant development on both sides of the border to create material success and peace for their neighbours and China. I have followed this in the Yunnan border areas since 1991.

But while some thought this was the strategy it was only a warm up for a much bigger idea.

The Policy of Common Prosperity.

This is markedly different from previous rising nations who tended to use their power to bring home the wealth. China’s studies of history showed they would become the world’s largest economy again, but if this led to the historical features of Empires, they would end up in a swallowing exercise which defeats itself.

This takes China into a grouping of nations who work together to develop Common Prosperity, support systems and safe areas with good security. It will be based upon spreading the sustainable rising living standards of a huge swathe of people.

This idea may take another 30-50 years to finish, but it is their plan and they have a way of patiently making things happen. There will be reverses and difficulties, antagonisms and pains but they will work slowly to overcome them.

The core area is around the term “One Belt, One Road” refers to the “Silk Road Economic Belt”, which includes China, Central and West Asian countries through to Europe, and the “21st Century Maritime Silk Road”. It connects China, ASEAN member nations, South Asia, Africa, and Europe.

This combined initial area contains a population of 4.4 billion. With 26 countries and regions, the size of its economy is $ 21 trillion. In the next ten years, China’s exports are expected to count for one third of the imports to these countries and China is likely to invest $1.6 trillion in this zone.

The development of an international renminbi will enhance this development and provide one of the global currencies for this new region. Others will follow. We may even see an Asian currency unit for efficient transfers, as opposed to a common currency.

This approach across almost 60pc of the population of the world is in contrast to the post Second World War structure established and led by the U.S.A. that is characterised by G7, the IMF, the World Bank, the Munroe Doctrine, the Washington consensus, and the WTO. It is latterly added to, it is proposed, by an EU-NAFTA Free Trade Area and TPPA which excludes China and many other nations.

So we have the prospect of two systems which are in constant contact with each other, but which could operate in isolation from each other. Or could they?

If they proceed separately in some form of new cold war, they will compete for resources which do not fit neatly into the two areas, and markets.

Some may fantasise about a new cold war, a new iron curtain but globalisation is too far developed to start separating the world. Some may try and the battles around East Ukraine may be a part of that old thinking. But corporations and people want global development to achieve relief from poverty, sustainable use of resources, and a peaceful development of modern innovations.

We shall have one-world two systems developing over the next 50 years but it is the task of leading statesmen and women to ensure they are two systems developing for the overall benefit of the globe.

China is thinking big, and, apparently, thinking in terms of mutual benefit.

Happy Chinese New Year

Stephen



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