What’s Next for China?

China has transformed in recent decades, building itself into an economic power with tremendous capital and capacity to build infrastructure. But it will need to transform itself again in order to keep growing. Amid significant uncertainty about the state of the domestic economy, China is now launching an ambitious foray to extend its influence overseas. Whatever the result, it will have an impact on the rest of the globe.

After decades of double-digit growth, China’s economy has slowed. Is the slowdown part of a controlled shift into a new service- and consumption-oriented mode?  Or a major setback that could herald the end of an era of growth that has helped drive the global economy? Christine Lagarde, managing director of the International Monetary Fund, believes that China has the “policy tools and financial buffers to manage this transition” to a more balanced economy. Her view is underscored by the IMF’s decision to make the renminbi one of the global reserve currencies.

China’s newest five-year plans calls for 6.5% annual growth. Harvard economist Martin Feldstein, writing in Project Syndicate, argues that it will be difficult to reach that target but he notes that a range of programs including a push for additional urbanization may bring on “a period of rising consumer spending and an improving standard of living.”

Helen Siu, professor of anthropology at Yale and the founder of the Hong Kong Institute for the Humanities and Social Sciences, told Yale Insights that to understand what’s next for China it is instructive to look to the past. “To understand what China is doing today, its motives and mode of operation, and its impact on local societies, it will be useful to go back to very different layers of history to see the similarities and differences,” she said.

China was the world’s factory before. “If you look back on the 18th century, China was producing for a very global market. Ceramics, furniture, wallpaper—everything under the sun—tea, tobacco.” she said. And more recently China sought to extend its geopolitical influence. “From the ’50s to the ’70s, actually under the height of socialism, China wooed many African countries as socialist brothers with foreign aid or construction,” Siu noted. “A lot of what was done then is also being done now.”

The recent decades in China have been somewhat akin to the sloshing of tremendous waves. When China joined WTO and reduced its barriers to trade, foreign direct investment surged into the country, which led to development of infrastructure and manufacturing capacity; that “triggered massive migrations of laborers from the countryside looking desperately for employment,” Siu said. The nearly 300 million migrants from rural regions built modern urban China with its new highways, airports, rail system, and towering, if smoggy, skylines. 

“This influx of capital has fundamentally changed the entire rural/urban landscape of China in very serious social, cultural, political, and economic ways,” Siu said. And now that internal development is slowing, the energy is flowing outward, renewing both the Silk Road and its maritime equivalent, which ties the South China Sea, Indian Ocean, and Mediterranean together.

According to the Financial Times, “If the sum total of China’s commitments are taken at face value, the new Silk Road is set to become the largest program of economic diplomacy since the U.S.-led Marshall Plan for postwar reconstruction in Europe, covering dozens of countries with a total population of over 3 billion people.” China is trying to expand its influence across Asia, the Middle East, and Africa. “The scale demonstrates huge ambition. But against the backdrop of a faltering economy and the rising strength of its military, the project has taken on huge significance as a way of defining China’s place in the world and its relations—sometimes tense—with its neighbors.”

Siu said that visiting the new Silk Road reveals China’s capital and capacity for infrastructure development being unleashed across the Middle East and Africa. Expatriate Chinese managerial and technical workers direct the building of roads, ports, special economic zone, dams, power stations, oil extraction, and mining projects. At the same time, entrepreneurial Chinese migrants are operating shops and restaurants.

The historical and renewed networks have led Siu and other academics to study the ways the regions knit together.  “We try not to see them as comparisons, or even separate bounded categories; instead, we see connectedness,” Siu said. “These areas have always been linked by trade and commerce, by migration, by certain sharing of cultures, and obviously by political and strategic alliances.” 

Professor of Anthropology, Yale University