The emergence of China as a global superpower cannot be overlooked. China will play a hugely significant role in shaping both the developing world and redefining the developed world.
A staggering economic revolution will see China become the world’s dominant economic power by 2030, though widespread state corruption and environmental concerns have somewhat tarnished China’s otherwise remarkable rise to power.
Martin Jacques is Senior Fellow at the Department of Politics and International Studies at Cambridge University, Visiting Professor at Tsinghua University Beijing and world renowned Ted talker, indeed there are few who are as qualified as he to speak on the subject of China and its relationship to the West. Jacques’ global best-seller When China Rules the World: the End of the Western World and the Birth of a New Global Order, is justly hailed by the New York Times as being a work of ‘considerable erudition, with provocative and often counterintuitive speculations about one of the most important questions facing the world today’.
OgilvyOne have been speaking to Martin Jacques to develop our understanding of a market that will play such a crucial role in our professional and non-professional lives.
OgilvyOne: You have frequently touched on the opposing evolutions of Chinese and Western modernity. Do you think there is any common ground or are they completely unique from one another?
Martin Jacques: Obviously there are common traits, and this is evident from the extent to which China since 1978 has clearly been influenced and is equally trying to learn from Western experiences. So, it is not that they don’t have things in common, they clearly do and very broadly speaking China after 1978 moved towards a market based system rather than central planning and that was to draw on very important strands of the Western experience. Therefore, it is not that modernity is completely different, there are common strands, but there are fundamental differences. The problem with the Western view seems to be that they believe that modernity rests on being like the West; this is a very powerful mentality and draws on what the West perceive as defining normative characteristics of competition, markets and technology. They ignore completely, and don’t bother giving any serious consideration or analytical insight to, history and culture. Yet history and culture are clearly fundamental! And China’s history and culture are profoundly different from that of the West.
OgilvyOne: A few people have criticized China’s development model saying that investment centered on white-collar development in the form of low cost production is short sighted when compared to the development model for India where emphasis is placed on blue-collar infrastructure.
Martin Jacques: I think more or less everything you have just said is wrong. China has a much longer-term way of thinking than India. One of the great problems of India is that while we in the West understandably celebrate the democracy of India in fact what it produces is a state that is not fit for purpose. Maybe we will see a longer-term shift under Modi but currently the Indian state is hugely more corrupt than the Chinese state and is very poor at getting things done. The great shift from the countryside to the cities, from rural to industry and services has required huge amounts of employment to be created. That is one of the great achievements of China and is, of course, crucial to why poverty reduction has been so successful with over 600 million people being taken out of poverty. You only have to look at the figures; after the war, during the time of independence and the revolution in China in 1949, the Indian economy was significantly larger than the Chinese economy and today the Chinese economy is four to five times the size of the Indian economy – those facts speak louder then any words that I can utter.
OgilvyOne: China’s growth is under global scrutiny. What is your view on the ecological and environmental implications of sustaining such rapid development in China?
Martin Jacques: Well, I suppose ultimately we don’t know the answer to this question because it is still very difficult to estimate what the environmental consequences of China’s overwhelming prioritisation of economic growth might be. What we can see very vividly are the problems of air quality in the major cities and very large parts of central and eastern China and we can recognise the problems of water supply and the pollution of ground water. So we can see and measure some of these things already and they are very serious, there is no question of that. The question is, I suppose, to what extent will China pay a price in the future; we don’t know the answer to that question.
One thing is clear. The Chinese leadership understands and recognizes these problems. If you look at what has happened over the last five to ten years they have clearly made a decision to shift the economic center of gravity away from growth at all costs. The new economic reforms are based on this idea. But it is very difficult to achieve because the mentality has grown up at all levels of Chinese governance that economic growth is the overriding priority. They have very good regulations on a lot of environmental questions but too many of them are not implemented. If you look on the energy front, for example, China has, for a long time, accepted the argument about global warming and has prioritized, as you know, solar energy, wind power and so on. Unlike the US under Bush, the Chinese leadership has never rejected the science of global warming, on the contrary. The Chinese are trying to give material substance to these things, but shifting is not easy. I remember when I was a boy in England growing up in the 1960s in Manchester facing one hell of a pea-soup smog, a phenomenon still commonplace in 1960s Britain – you would never get anything like that in a UK city now but it took time to deal with. The same will happen in China.
I think the Chinese will deal with it but we don’t know what the potential longer-term damage will be, that is something we will probably find out in the next two decades.
OgilvyOne: As Ogilvy we talk to many small and medium sized businesses who are scared and confused when confronted by the Chinese state – which is arguably the gateway to doing business in China – because the required means of dealing with the state are either unfamiliar, illegal or both. So how can companies be comfortable doing business in China given that it is alien on such an elemental level to many in the West?
Martin Jacques: If you are going to operate in China, you cannot operate in a way that works in the West; you have to develop a deep understanding of China. Why? Because China is historically profoundly different and the Chinese state is a very good example of this. So what does it mean? It means that companies regardless of whether they are small, medium or large, need to start with the assumption that China is different and therefore they need to develop their understanding of it. Secondly, they need to be in it for the long haul – there is no point in a fly-by-night operation only to pull out after a few years because they haven’t made any money. Take Volkswagen for example. They were there from the 1980s and they were in it for the long haul and they have done very well, in fact they call China their other home apart from Germany. So you have to be in for the long term. Ultimately there is no point in whining on about the state. The state is fundamental to China; this is not new, this is not just a feature of the period since 1949, on the contrary, the state and China have always had a very different relationship to that in the West. Is it good or is bad? That is beside the point. The fact is that China doesn’t really work unless the state works well. In a calamitous period like the century of humiliation from the mid 19th CE to the mid 20th CE, the state was not fit for purpose: China did very badly and one of the reasons for this was that the state wasn’t functioning properly. You have to get used to the idea that the whole way in which the Chinese perceive the state, the role of the state and its function and relationship to society, is very different from the kind of utilitarian and instrumentalist view that prevails in the West.
There is a very widespread assumption in the West that somehow or other the Achilles Heel of China is the state. Wrong! One of the great strengths of China is the state. This is a very impressive, formidable and highly effective institution. Does it have lots of problems? Of course it does, but it also has lots of strengths. The state has presided over China’s economic transformation, the greatest economic transformation in modern history; we have not seen anything like it in the last 200 years. It is on a scale far greater than the British industrial revolution and America’s transformation from the end of the civil war to 1914. We need to have a different mindset and stop seeing the state as a problem! This is something that we need to understand if we are going to operate in China, it is part of the fabric of the Chinese economy and Chinese society.
Companies around the world who have any real ambition have to go into China. The Chinese economy is larger than the American economy, the projection is that by 2030 the Chinese economy could well be twice the size of the American economy, in other words the Chinese market will be twice the size of the American market. So, if a company is serious about its future, it has got to get into China! Furthermore, the Chinese way of doing things is going to influence the way the West does things, the cultural flow, including economic thinking, has stemmed from America, but it is going to come increasingly from China. America’s influence is declining and will continue to do so. We will see this unfold over the next two decades, as indeed we have been seeing it over the past two decades. This raises some very important questions for Western companies.
OgilvyOne: In light of this, as Chinese power grows and the West looses global significance, how do you see the relationship between China and the West panning out over the next decade?
Martin Jacques: It is estimated that the Chinese economy will be 20% larger than the American economy by 2019, and we should bear in mind that Western projections have consistently underestimated the rise of China and over-estimated the projected position of the West. Take the question of East Asia, home to one-third of the world’s population and now the largest economic region in the world. I think America’s so-called ‘pivot to Asia’ or ‘rebalancing’ – which in my view is a form of a containment of China – will fail; indeed it has essentially already failed. The American emphasis on military alliances in its so-called pivot is a typical example of anachronistic American thinking because the reason for China’s rise and America’s decline is not military. The truth is that China spends relatively little on the military. The reason for China’s rise in the region is economic; it is a great trading nation, it is the largest trading partner for virtually every country in the region, and is a very large source of capital. America has gone in the opposite direction over the past 10 to 15 years, it used to be the largest market for East Asian countries and now it is more or less where China was in around 2000. What happens in East Asia is very important because to some degree it is likely to prefigure what will happen globally.
In geo-political terms, American decline is happening very quickly, the Middle East being the classic example. America is now on the back foot in the region which it has prioritized for so long. China’s way of seeing the world is very different from the American global outlook. The Chinese way is win-win, partnership and cooperation; it is essentially economic. How are the Chinese, for example, going to tackle the problem of Central Asia? While the Americans have seen it in overwhelmingly military terms, most obviously in its huge military involvement in Afghanistan, the Chinese think of Central Asia primarily in economic terms. They will open it up through trade, investment and infrastructure, just as they have in East Asia. This is very different way of seeing things.
An interesting fact about China is that they don’t have any allies. Instead they see the world in terms of relationships that are mutually beneficial for both parties. In contrast, the American view of the world is based on enemies and allies, which first and foremost priorities military relationships. The most significant development in the past year is the formation of the Asian Infrastructure Investment Bank, against which the Americans campaigned vigorously in an attempt to try and dissuade Asian countries from signing up for it. In the end only two Asian countries didn’t sign up – Japan and South Korea – plus Australia and New Zealand. It was a stunning demonstration of China’s growing influence in the region on the one hand and the declining pull of the United States.
Over the coming decade, we will see a huge infrastructural development across East Asia in large measure funded by China. We are looking at something on the same historical scale, relatively speaking, as Marshall Aid that the Americans funded Europe for after the Second World War. We will see the progressive crumbling of the American international system. Look what is happening to the World Bank, which is rapidly being marginalized. And in time the RMB will rabidly replace the dollar as the world’s most important currency.
Ogilvy One: Other than China – do you see any Asian countries playing a significant role in global development?
Martin Jacques: I don’t think the story is just about China – I think there is something far more important taking place than just the rise of China: a shift from the developed world to the developing world, from 15% to 85% of the world’s population. We should remember that in the mid-1970s the developed world accounted for two-thirds of global GDP and by 2030 it is estimated that the situation will be exactly the opposite – the developing world will account for two-thirds of global GDP and the developed world will account for one-third of global GDP – which is an extraordinary historical shift in a relatively short period of time. In terms of managing its rise, China’s relationship with the U.S is very important, but strategically China’s real interest is not in the developed world but the developing world. China’s rise is above all about the 85% not the 15%. Part of the reason China understands the developing world is that, like them, China is a developing country too and consequently has an affinity with the conditions, circumstances and needs of developing countries which the western countries don’t have.
To see Martin Jacques’ biography and bibliography, please visit www.martinjacques.com. His hugely successful Ted talk can be found at http://www.ted.com/talks/martin_jacques_understanding_the_rise_of_china.