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Everything you thought you knew about China is wrong

Published in the Hobart Mercury, December 1, 2023

Everything you thought you knew about China is wrong.

At least that is my experience, after a hundred visits and a handful of years living in Beijing. China is a place where every assumption gets turned on its head, where everything seems uncertain, while simultaneously some things remain the same.

So, when people make claims about this or that concerning China, I always maintain a curiosity for the complete picture. Now that the Australia-China relationship seems to be on the mend, what do we know and what do we need to know about China?

Some things we can predict as likely. First, China is not going away, and will most likely loom larger in our region’s future.

After China’s rapid growth in the last generation, Chinese peoples’ lives are measurably better than ever before. Members of China’s huge middle class, now bigger than Europe and the United States combined, are rightly proud of what their country has achieved. We should get that, given how many wealthy Chinese tourists visited our shores pre-pandemic.

Of course, as Australians know, a more powerful China will also throw its weight around when it believes its interests are at stake, just like all major powers do.

We know that the US and Europe increasingly perceive rising China as a competitor and are portraying China in simplistic, negative terms. Australia on the other hand benefits from a huge trade surplus with China. That massive Chinese middle class is our biggest market and we also have strong people to people links, so for us there can be benefits all round from taking a more nuanced approach.

To be sure, many of us feel uneasy however about China’s political system. It’s not a democracy. In China social stability traditionally comes ahead of the rights of the individual. That’s a cultural clash, for sure, and it’s difficult to walk in the other’s shoes, even if only to try to understand.

A Chinese friend explained to me that China is like a traditional European absolute monarchy. Its modern-day emperor, Xi Jinping, sits atop a vast, hierarchical power structure that governs all levels of society. Indications are that most Chinese people are more or less satisfied, at least as long as the system continues to deliver stability and economic growth. In many ways, what looks like authoritarianism to us reflects a continuity of thousands of years, in which China was strong when it had a strong Emperor, weak when it became divided.

That’s also the reason the Chinese government and its people prize continuity and can be expected to double down on the economic growth model that has delivered for them so well in recent decades. That includes openness to foreign investment and free trade.

There are however contradictory forces encouraging economic nationalism. US sanctions against China’s tech sector have had the counter-productive effect of spurring subsidised Chinese investment in new technologies and will no doubt make China more self-reliant. Getting both big powers to cooperate on rules for new technologies seems a distant hope.

Another worry is China’s structural economic challenges, including slowing growth and rising debt. We will all benefit if China can resolve those challenges.

China’s recent economic slowdown is actually a policy choice, to bring debt under control and to avoid bursting property bubbles in its megacities. On the optimistic side, China’s debt is domestically-funded and China has a huge current account surplus, lots of domestic savings as well as massive foreign exchange reserves.

Any economist knows predicting the future is an uncertain science, but I wouldn’t bet against China’s continued growth after it gets through its current post-pandemic blues.

China remains a developing country, with lots of room to grow, if not at the spectacular rate of recent decades. There is much more urbanisation to come, high tech and green industrial transformation in a highly competitive economy, all of which will drive national and indeed global growth.

Finally, the fears of a China “threat” deserve clear-eyed assessment, not least because we are being urged by some to believe conflict is inevitable. Nothing is inevitable. To be sure, China is investing in a stronger military and that is something to watch carefully. To date, though, there is no evidence China seeks to wage conquest of the region and indeed it is surrounded by powerful rivals that would never allow China to become a hegemon.

Disputes and tensions are much more likely to be contained close to home, where China defines its “core interests”. We might disagree on what constitute some of those “core interests”, but wise leaders will look for areas of common ground and stabilisation to keep the peace.

The big question is whether we can live with a more powerful China or must fear it. The US will naturally resist an emerging rival. Those of us who live in or near Asia know however that our region is more than just China. The Asia Pacific’s future will also be shaped by decisions made by Japan, India, Indonesia and others including, of course, the US.

The track record of the Asia Pacific in recent decades has been open regionalism, free trade and calm negotiations behind the scenes to resolve or contain disputes. This mature approach continues to be in Australia’s interests. A balance of powers in Asia and the Pacific is more likely to sustain peace than a bipolar contest between two rivals. Nevertheless, we have a tense transition period ahead.

That’s why it’s so important for Australia to be investing in more than just the US alliance, but also building solid relationships to sustain stability, economic openness and consensus-building with all of the other powers in the region, as well as a sustainable relationship with China.

Given how many jobs in Australia rely on trade, investment and tourism with China, it is worth probing beyond the headlines to determine how we can protect our interests, seize opportunities and manage risks in the decades ahead. One thing’s for sure, it will be an interesting journey.

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