Yao Yang is a Professor and Director of the China Center for Economic Research at Peking University. On June 23, he delivered a speech at an event hosted by Zhenghe Island, a network platform for elites. The following are game-changing highlights gleaned from a translation by "Pekinology", an online platform affiliated with the Beijing-based world-renowned think-tank Center for China and Globalization (CCG):
(a) China's globalization in the 80's and 90's was characterized by integration and convergence with the then-much-admired American model, not only economically, but socially and to a certain extent, politically. However, after the 2008 financial crisis and increasingly after 2010, China became convinced of its own people-centred socialist path led by the Communist Party of China (CPC).
(b) This led to America elites' "disappointment" with China. As a self-proclaimed pinnacle nation, America considers its development path the only legitimate one for the world, intolerant of China's alternative model. The United States does not want China to play a leading role in regional or global affairs, seen as inimical to US leadership. This has driven an irrational, emotion-charged bipartisan pushback against China on all fronts.
(c) However, in economics, rationality inevitably prevails. U.S. trade war and attempts at technological decoupling or "de-risking" have not succeeded in isolating China globally. Although US-China direct trade is declining, America’s dependence on Chinese products is rising. By rules of origin, China’s share of U.S. imports has increased from about 20% in 2018 to 25%. This is because Chinese companies have embraced a global strategy, with many exports shipped from other countries instead of directly from China. (N.B. China's production is globally inter-connected, even for products not qualified as "Made in China", in terms of materials, parts, components or logistics. China remains the largest trading partner for 128 out of 190 nations across the globe.)
(d) The United States has hiked tariffs on China. Donald Trump said that if elected, he will increase tariffs on China to 60% and impose a 10% tariff on the rest of the world. It is likely that Europe would follow suit. However, China's cost-quality advantage is huge, ranging from 50% to 100% compared to Europe. Even with a 21% tax, most consumers are unlikely to budge. (N.B. If Chinese goods are totally debarred, American consumers and their European counterparts would struggle to cope as virtually all consumer products these days are either Made in China or contain Chinese materials or components).
(e) Absorbing knowledge and technology from other countries, China's past 40 years of Reform and Opening Up (1978-2018) saw a socio-economic revolution, dismantling class differences and shifting towards enterprise and individualism. However, this has fed wide-spread and deep-seated corruption and unbridled commercialization of compulsory education and excessive financialization of real estate and personal loans. These challenges have shocked social stability and must be rectified.
(f) The coming Third Plenum will announce the goals for 2035, detailing objectives to be achieved in a New Era of "High Level Socialism". This is likely to involve comprehensive modernization, tied to China's goal of doubling its income per capita by 2035 through technological competition. Next is Common Prosperity, adjusting the income distribution structure, improving the social security system, and promoting integrated urban and rural development. Third, high-level openness to the outside world (N.B. capitalizing on China's ubiquitous global connectivity, ushering in a new phase of globalization).
Last but not least, against US-led unprecedented stranglehold on China's access to nano semiconductor chips and other cutting-edge technologies, I should add that China is likely to double down on advancing technological self-reliance, building on its solid foundation as the latest acknowledged "scientific superpower".
