In a world tailor-made to the specifications of the Communist Party of China (in a let’s say ideal scenario from the perspective of the CPC), the population of China would reject any and all Western components, elements the Party considers detrimental to its very self-preservation interests. Unfortunately for the CPC, that’s not exactly how things work and from this perspective, China finds itself in a bit of a “pick your poison” situation.
Does it reject economic interconnectedness so as to shield itself from unwanted cultural influences and enable the political status quo to persist or keep embracing the economic interconnectedness that has helped it achieve tremendous economic growth over the past decades, with everything it encompasses (including imports when it comes to culture and, yes, ultimately ideology as well)?
For most of its history, China has embraced a modus operandi which revolved around the former, around shielding itself from cultural influences and not being interested in interconnectedness… economic, cultural or otherwise. For more details on how that worked out for them, click HERE to read an article that briefly covers a very extended period of time.
In a nutshell, let’s just say that this self-imposed isolationism ended up resulting in the most humiliating period of China’s history, with it being dominated by countries that were on the receiving end of the Industrial Revolution’s many technological advancements, technological advancements which were brought to China’s attention but to no avail. While China kept its cultural framework intact, it ended up suffering from every other imaginable perspective.
Fast-forward to the Deng Xiaoping days, when the exact opposite started happening. Deng understood that China’s economic growth could only be sub-par in the absence of a meaningful connection to the worldwide economy and as such, embarked on a journey which would have been considered nothing short of ideological treason by many past leaders: warming up to the West and being willing to learn from it, embracing economic interconnectedness and so on. Did it work? From an economic perspective, the answer is a resounding yes and we have multiple decades of indisputable economic data which confirms this. However, let’s call them ideological purists have been continuously complaining about the high cultural price that needed to be paid, with them perceiving most cultural elements “imported” from the West as toxic, anything from fast food to pop culture, Hollywood and other examples.
Once again, pick your poison.
Each Chinese administration ends up facing the same ideological predicament: should China re-embrace isolationism, the very isolationism that brought about its most humiliating historical period, just to preserve the cultural and political status quo?
Up until this point, China’s leaders have chosen to for the most part preserve Deng’s status quo.
While there have been particularities from one administration to another, for example Jiang Zemin being criticized for going after what some observers believed to be economic growth at all costs or, on the other end of the spectrum, Hu Jintao and Xi Jinping who have tried to embrace policies one can consider more inclusive, so as to combat the inequality many economic observers have criticized and which can most definitely be considered a more or less unwanted byproduct of its explosive economic growth.
It remains to be seen what the Xi Jinping administration chooses to do as of this point and, of course, what future administrations will have in mind, especially in light of the fact that trade-related tensions such as the one with the United States might end up having repercussions when it comes to this debate as well.
This much is certain: a certain degree of Westernization brought about by anything from Western pop culture and Hollywood to the PR departments of Western companies is undeniable. One step at a time, from small changes such as the Chinese increasingly choosing to become pet owners (a topic we have actually dedicated an article to, an article which can be read by clicking HERE) to meaningful and potential status quo-altering changes such as the political change demands some members of China’s increasingly affluent middle class have in mind, the West is leaving its mark on China.
Can we consider China economically trapped in this respect?
- If it reverses course, the economic consequences brought about by this renewed isolationism could be so dire that social unrest generated by economic problems could become an issue more than capable of altering the political status quo
- If it doesn’t reverse course, then one step at a time, the Westernization of China from a cultural perspective might bring about changes that… once again, are quite likely to alter the political status quo
Of course, a valid case could be made that the current interconnectedness of the global economy traps pretty much all individual economies in one way or another, with the many political implications this brings about. As such, analyzing China in isolation paints a picture that is incomplete at best and ignorant at worst.
Should the economic status quo when it comes to economic interconnectedness and the many more or less unwanted transfers it brings about (economic transfers, cultural transfers, political/ideological transfers, etc.) be altered, it is the opinion of the ChinaFund.com team that this will most likely be the result of a global set of circumstances rather than the result of the decisions of just one economic actor, be it China or the United States.
At the end of the day, investors (regardless of how exposed they are to Chinese assets) have no choice but to carefully monitor these developments, as changes when it comes to the global economic landscape cannot help but be portfolio-altering. Should you be in need of assistance with just that, whether this assistance pertains to the Chinese asset portfolio you own or your overall/diversified portfolio, the ChinaFund.com team is only a message away.