China's uncertain future & its new three-child policy

Ian Bremmer's Quick Take:

Hi everybody. Happy post long weekend. I want to do a quick take today on China, because you will have seen that the two-child policy has now gone the way of the one child policy. It is now a three-child policy. The one child policy, when they got rid of it, didn't really move people towards faster childbearing, as education rates improve, as well improves ... demographic explosion is reduced. And it's very hard to turn that around with a pro natality policy. Very few countries around the world have been able to accomplish that. And China is clearly not one of them.


But what is interesting, first of all, the fact that Xi Jinping recognizes that his policy isn't working. And so, he's moving forward with something new. I mean, frequently in authoritarian regimes, leaders don't get good information from the people around them. And so, they don't tend to admit mistakes or pivot to policies. And then when they have problems and we have seen that in the case of China, there is a lot of overreach. We've seen that. For example, with the shutdown recently, the trade war with Australia, it didn't work really well. And very quietly, the Chinese started buying a lot of essential Australian inputs. Again, we're seeing that now on the three-child policy, but there is I think in the west, this increasing presumption. Well, we know that China is on path to being the world's largest economy, that projection is by 2028 now.

It's probably going to be kicked out 2030 because the US economy is going to grow a lot faster this year than people had previously expected. The rebound is pretty sharp on the back of last year being, of course, a major contraction while China was growing. One of the only countries, the only G20 country that was growing in 2020. Vietnam was the next largest economy. I think they're number 35 or something like that. So can show just how extraordinary China efforts to lock down the coronavirus once they admitted to it actually were. But I feel a little cautious around projections of what China is going to be doing in the next 10 years. And I'd be cautious, not because I'm much more pessimistic than everyone else is, rather I think I'm much more uncertain than the economists are. I mean, on the downside, as you see demographics in China are getting problematic quickly, they are getting much older as a middle-income country.

That means you're not going to have as much consumption. It means you're not going to have as much labor and it makes it harder to stimulate growth. And ultimately, that means the size of the economy is going to be more constrained by these demographic facts. Also, the fact that China has to invest and stimulate to a greater and greater degree for lower and lower returns. And the reason for that is massive debt, particularly massive corporate debt, that they're unwilling to address. Addressing it immediately could create a financial crisis, addressing it over a longer period of time is going to limit your levels of growth. And so as a consequence, I mean every other middle income economy out there has had to deal with the so-called middle income trap. China's is of a much greater scale. And unless the rules don't apply to them, then at some point in the next 10 years, they are likely to underperform significantly.

And that should give us some different views of what their trajectory in power is going to look like compared to that of the United States. Okay. So that's on the negative side, but on the positive side, 10 years ago, there was no one out there that thought that China could be at parity in technology with the United States in 2020, 2021. And yet in many key areas of cutting-edge technology, that is exactly where they are today. In digital currency, they're ahead. In 5G technology, they're ahead. In voice recognition, in facial recognition, they're ahead. And in some other areas, they're behind. Semiconductors, they're probably behind by about five years right now. General research in artificial intelligence and towards neuro-mapping, they're behind. Biotech, it's close. Depends on what you're looking at.

But the point is that literally in 10 years, not just because of ripping off intellectual property though that's certainly happened, not just because of leveraging access to the Chinese market to get technology transfers, though they've done that too, but also because they have, by far, the world's largest set of data that they use in a consolidated way to engage in deep learning that helps to power new artificial intelligence breakthroughs and that plus an enormous amount of money being spent on research and scientists has given the Chinese an extraordinary acceleration in their technological capabilities to the extent that within 10 years, China has gone from being no better. In fact, worse than a lot of second tier technology countries in the world, say Japan or South Korea or Germany or Canada, to suddenly being competitive with the United States, the world's technology superpower. And if we got that wrong over the last 10 years, might we be getting it wrong in the next 10 years?

In other words, are the Chinese going to suddenly stop? Are they going to reach parity and that's it, or are they going to be able to actually continue to accelerate? And in 10 years' time, might the Chinese be the dominant technology power compared to the United States on cyber, on AI, in digital currency, in key apps and in key areas where companies really matter in exploiting not only how we consume, but also our national security, the ability to defend a countries wellbeing, it's economic wellbeing, its health, it's critical infrastructure. Right now, the US and China both have massive offensive capabilities that can do massive damage to each other, have very limited defensive capabilities. There's a level of mutually assured destruction between the US and China and the US and Russia on cyber. In 10 years' time, I feel quite comfortable saying the Americans are going to continue to be able to get beyond the Russians on this issue, but the Chinese, I'm not clear on that.

What about the future of 5G? Where will they be? Even on semiconductors? Can they catch up if they invest massive amounts of money for X? What they were spending in 2019 and spent in 2020, they're intending to do a similar kind of increase in 2021. Where does that get them? Even if we shut them down from Taiwanese semiconductors, even if we shut them down, if we say, no, not just Huawei, but other key technology champions of China, aren't going to be able to get them to put export controls on. That's an enormous question. We don't know. So the takeaway here is that there is much more uncertainty around China's trajectory than people generally presume.

I would like to see that kind of discussion more infused in the foreign policy establishment in the United States and American critical allies. It is not right now, perhaps it will be over time. Maybe this quick take makes a small bit of difference. Anyway, I hope everyone is well. Avoid fewer people. We're having a good time here and it is almost summer. Be good. Talk to you soon. Wear white pants if you feel like it. We're past Memorial Day.

Eni is helping to bring stable energy sources to the communities of Ghana. This means vaccines for children can now be safely stored, businesses can operate more efficiently, and the economy, as a whole, is strengthened and improved.

Watch to learn how Eni helps businesses grow and build for the future.

This week, the US Senate passed the so-called Endless Frontier Act, a $250 billion investment in development of artificial intelligence, quantum computing, the manufacture of semiconductors, and other tech-related sectors. The goal is to harness the combined power of America's public and private sectors to meet the tech challenges posed by China.

In its current form, this is the biggest diversion of public funds into the private sector to achieve strategic goals in many decades. The details of this package, and of the Senate vote, say a lot about US foreign-policy priorities and this bill's chances of becoming law.

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What do America's policies around the world mean for jobs, the economy, and the future of the country's future? This Tuesday, June 15. at 11 am ET, GZERO Media presents a a live discussion on trade, immigration, and how domestic issues like racism and deep partisan divides impact America's standing in the world. Our event, which is sponsored by Carnegie Corporation of New York, is free and open to the public. Please register to attend.

Judy Woodruff, anchor of the PBS NewsHour, will moderate the conversation with:

  • Donna Edwards, Member of Congress (2008-2017)
  • Ian Bremmer, President and Founder, Eurasia Group and GZERO Media
  • Anne-Marie Slaughter, CEO, New America
  • Miriam Sapiro, Managing Director, Sard Verbinnen & Co. (SVC) and Former Acting and Deputy U.S. Trade Representative
  • Cecilia Muñoz, Senior Advisor, New America

Special appearance by Governor Thomas H. Kean, Chairman of Carnegie Corporation of New York.

Far Away and Close to Home: How US Foreign Policy Impacts All Americans

Tuesday, June 15, 2021 | 11 am - 12:30 pm ET

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Listen: Is there a path to democracy for Europe's last dictatorship, Belarus? Exiled Belarusian opposition leader Sviatlana Tsikhanouskaya discusses her hopes and fears for the country with Ian Bremmer on the GZERO World Podcast. President Alexander Lukashenko has maintained a tight grip on power in Belarus for the last 26 years and rigged the results of his last election which led to widespread protest and unrest in his country, though few consequences globally. But will he now be held accountable after diverting a flight between two European capitals to arrest a dissident journalist? And just how close are he and Vladimir Putin?

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Nigeria's federal government earlier this month blocked Twitter from the country's mobile networks, after the social media company deleted a controversial post from President Muhammadu Buhari's account. The move by Africa's largest and most populous economy comes as many governments around the world are putting increased pressure on social media companies, with serious implications for free speech.

So what actually happened in Nigeria, and how does it fit in with broader trends on censorship and social media regulation? Eurasia Group analysts Amaka Anku and Tochi Eni-Kalu explain.

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Get insights on the latest news in US politics from Jon Lieber, head of Eurasia Group's coverage of political and policy developments in Washington:

What's the significance of the US-China bill, competition bill that passed the Senate earlier this week?

Well, the bill is a major investment in American technology, research and development, semiconductor manufacturing, and it's designed to push back on the China Made in 2025 push that lawmakers have become increasingly worried about in recent years. The opinion in Washington has shifted from seeing China as a strategic competitor to a strategic rival. And you're seeing what's now likely to be one of the only bipartisan bills in Congress now pushing back on that. Significant money for semiconductors in this bill, even though some of it was set aside for automotive purposes. That money's not going to come online fast enough to really make a difference to the current global semiconductor shortage, but it will help build up US long-term spending capacity and manufacturing capacity in semiconductors.

Other aspects of the bill, banned the application TikTok from going on government devices out of security concerns, created new sanctions authorities around Xinjiang and Hong Kong for human rights abuses, and mandated a diplomatic boycott of the Olympics, which is probably going to happen anyway once the Biden administration is able to align with its allies. Let the athletes play. Don't let any high level delegations go. This is probably the only bipartisan bill to happen this year, yet still, half of Senate Republicans voted against it because they were opposed to the kind of industrial policy they think this represents, but it does show the area where there's bipartisan agreement in a city that's very, very divided right now. China is the bad guy and Congress is moving in that direction.

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Carl Bildt, former Prime Minister and Foreign Minister of Sweden, shares his perspective from Europe:

What do you expect from President Biden's first European trip since taking office?

Well, first, it will be sort of reconnecting with Europe, reconnecting with the European Union, with NATO, with the partners in the G7, and going really from the initial message, which was, "we are back," to a more concrete message, "here is what we could potentially do together." That is the expectations. And let's see how it turns out.

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Marietje Schaake, International Policy Director at Stanford's Cyber Policy Center, Eurasia Group senior advisor and former MEP, discusses trends in big tech, privacy protection and cyberspace:

When President Biden and President Putin meet, will cybersecurity will be a key issue that they discuss?

Now, I'm sure that there will be many thorny issues on the table. But after American fingers pointed to Russia and hold it responsible for the SolarWinds hack, it's likely. Criminals in Russia were also not hindered when they held the Colonial Pipeline Company ransom through a ransomware attack. And really, when journalists and opposition leaders cannot speak a single critical word without being caught, how come cybercriminals can act with impunity in Russia? So the need for prevention and accountability really is significant. And I hope the President Biden can push and persuade Putin to change the confrontational and aggressive course that he is on.

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Watch "Far Away and Close to Home: How US Foreign Policy Impacts All Americans" live on Tuesday, June 15 |  11 AM – 12:30 pm ET

GZEROMEDIA

Subscribe to GZERO Media's newsletter: Signal

Watch "Far Away and Close to Home: How US Foreign Policy Impacts All Americans" live on Tuesday, June 15 |  11 AM – 12:30 pm ET

GZEROMEDIA

Subscribe to GZERO Media's newsletter: Signal