From Japan to China-bashing

I see two emerging trends. One is in the West, the other is in China. I was at a meeting in Mumbai this week. Everybody there was more interested in the power consolidation in China than in the disarray in Washington. President Donald Trump, who has never been accountable to a board of directors in his life, is running the U.S. government like a private company. We have a drunk sitting in the driving seat of the U.S. government. Let me tell you what that feels like to a Turk in Mumbai.

Chinese President Xi Jinping has always been accountable to the huge Communist Party apparatus, and is now turning the Communist Party of China (CPC) into a constitutional entity. There is order in Beijing and chaos in Washington. Beijing looks at the world in a calm and confident manner, while Washington bashes China and the world order that the U.S. itself created.

The West has entered an age of pessimism. This is probably a kind of disillusionment with globalization. It first started with techno pessimism. It was about robots taking our jobs with artificial intelligence technology increasing its pace. Now the fear is taking the form of China taking over the world. This is much like the fear of Japan taking over the world economy during the Reagan years. Japan-bashing in the 1980s has been replaced by China-bashing today. Remember “Rising Sun,” the 1992 novel of the late Michael Crichton?

Back then the debate was about whether Japanese FDI in hi-tech sectors in the U.S. was beneficial. It’s much like whether “the national security innovation base” of the U.S. should be shared with the Chinese. Just check Trump’s national defense strategy document. The answer is “no” over there, unlike the Crichton answer back in 1992. And now possible restrictions on Chinese investments in the U.S. are under discussion. Why? “History repeats itself” says Karl Marx, “First as tragedy, the second time as farce.” We live in a world where Reagan, the tough Hollywood actor, is the serious part of the saying.

Let me cite two facts. First, robotics and AI are booming in China. Between 2000 and 2016, 1,477 companies were established in the AI sector and their financing reached $2.8 billion, according to an AI report by the Wuzhen Institute. The new technological revolution does not require emerging countries to follow the footprints of the old industrial ones. The Chinese know this.

Second, in 2016 around 56 percent of Chinese outbound investments in non-financial sectors were made by non-state owned companies. Compare this to the 19 percent in 2006 ODI by private companies in China. Things are changing.

China is becoming different in terms of private sector activity. Yet the dual legal system of the country is a problem. There is a constitutional order with government, courts, parliament and all the other agencies on the one hand, and there is an all-powerful Party apparatus, on the other. Furthermore, the presidency is only one of the three titles that Xi Jinping holds. He is also the general secretary of the Communist Party of China (CPC) and the chairman of the Central Military Commission. The presidency is really only a ceremonial job. Remember that there are no term limits for the latter two more important jobs.

The CPC has always been above the law. Not anymore. In 2012, Xi said that “no individual or organization can be above the constitution.” Then he added, in the podium of the Great Hall of the People, that “anyone who acts against the constitution or the law will be held accountable.” With this constitutional change, the CPC has not only become subjected to the Chinese Constitution, it is also now becoming the government itself.

There was once talk about a waning communist state freeing all its citizens. Just think back to the debate between Lenin and Rosa Luxemburg back in the 1920s? We are now going to witness the waning of a party within the state structure. Ending term limits appears to be the price that has to be paid to convince the party cadres. It’s all about doing business with a multi-layered party organization with deep roots in society. It’s all about politics. As American politician Tip O’Neill noted many years ago: “All politics is local.”