Opinion

Ian Bremmer

Alibaba, Weibo and China’s potential for growth

Ian Bremmer
Apr 10, 2014 22:02 UTC

In recent weeks, there has been a surge in Chinese tech sector IPOs — including Alibaba, Weibo and JD.com — all planning to list on American exchanges. They’re smart to list away from home: doing so will give them access to more liquidity, and allow them to avoid certain restrictions — like the rule that companies cannot IPO in China if they haven’t yet turned a profit.

There are also compelling reasons for global investors to get excited about these offerings. China’s domestic consumer market is rapidly growing, and e-commerce is perhaps the most robust segment. There were over 6 billion parcels delivered in China in the first nine months of 2013 — up a staggering 61.2 percent from the same period a year prior. Online shoppers received half of those packages.

President Xi Jinping’s reforms are ambitious and unprecedented, and seek to transform the Chinese economy from a state-stimulated growth engine to a digital age, middle-class, consumer-driven economy in a country of more than 1.3 billion people. If these economic reforms succeed, they will unlock huge opportunities for tech companies that benefit from rising domestic consumption and a growing middle-class that has embraced the Internet.

Yet warning signs surrounding the economic reforms are giving potential investors pause. Recently, we’ve seen wealthy Chinese leaving China. Key leaders are concerned that Xi’s anti-corruption campaign is going too far, threatening to create fissures among powerful political factions. And investors are worried that faltering economic growth —  a “new normal” of 7 percent growth, rather than the 10 percent or more of past years — will force China’s leadership to return to traditional stimulus measures, instead of continuing with the current pace of reform.

However, in all of these instances, there is reason to believe that the economic reform agenda will remain on track. Let’s start with the diaspora of Chinese elite. In a recent survey of China’s wealthiest citizens (defined as having a net worth above $1.6 million), 64 percent said they have already left the country or are planning to leave, up from 60 percent in 2013. This exodus is a sign of successful economic reform, because opening the economy and fighting corruption will threaten the vested interests of many of China’s super rich, prompting some of them to safeguard their fortunes overseas.

Is the China-Japan relationship ‘at its worst’?

Ian Bremmer
Feb 11, 2014 22:58 UTC

At the Munich Security Conference last month, Chinese Vice Foreign Minister Fu Ying said the China-Japan relationship is “at its worst.” But that’s not the most colorful statement explaining, and contributing to, China-Japan tensions of late.

At Davos, a member of the Chinese delegation referred to Shinzo Abe and Kim Jong Un as “troublemakers,” lumping the Japanese prime minister together with the volatile young leader of a regime shunned by the international community. Abe, in turn, painted China as militaristic and overly aggressive, explaining how — like Germany and Britain on the cusp of World War One — China and Japan are economically integrated, but strategically divorced. Even J.K. Rowling has played her part in recent weeks, with China’s and Japan’s ambassadors to Britain each referring to the other country as a villain from Harry Potter.

Of course, actions speak louder than words — and there’s been no shortage of provocative moves on either side. In November, Beijing declared an East Asian Air Defense Identification Zone (ADIZ) — which requires all aircraft to follow instructions issued by Chinese authorities, even over contested territory, which pushed tensions to new highs. The following month, Abe visited Yasukuni Shrine — a site associated with Japanese World War militarism that makes it an automatic lightning rod for anti-Japanese sentiment among Japan’s neighbors.

China’s air zone announcement was just the beginning

Ian Bremmer
Dec 9, 2013 15:37 UTC

When China announced its decision to claim a wider air zone that encompassed the disputed Senkaku/Diaoyu Island territories, the East China Sea erupted into conflict reminiscent of the Cold War era. In response, the United States and Japan declared the zone illegitimate and flew military aircraft through it, while China deployed fighter jets to identify them.

But this was not a simple instance of China overstepping and getting burned — nor was it as sudden and unexpected as headlines suggest. Rather, it was the manifestation of a longstanding Chinese regional strategy that is only just beginning. And China is likely quite pleased with how it is playing out thus far.

For years, China has been looking for opportune moments to test the existing status quo of regional security, and then advance its self-interests. Ever since the summer of 2012, when Japan’s Noda-led government announced its intention to purchase more of the Senkaku Islands from a private owner, China has felt that the precarious equilibrium between the two countries had shifted. It was only a matter of time before China would try and change the status quo.

In search of self-aware diplomacy

Ian Bremmer
Nov 26, 2013 16:11 UTC

In 2005, Karen Hughes became George W. Bush’s undersecretary of public diplomacy. Her charge, both poorly defined and ill-timed, was to improve America’s international image in the years after the country had launched two wars. Other countries will side with us and do what we want if only we better explain our point of view, the thinking went, and make them see us as we see ourselves. By the time Hughes left office in 2007, international opinion of the U.S. was no higher than it was when she arrived, according to polls.

And yet, this kind of if-we-say-it-clearly-enough-they-will-listen diplomacy is not exclusive to the Bush administration. It has carried over into the Obama White House. So when an Obama administration official says that Washington welcomes a “strong, responsible, and prosperous China” that plays a “constructive” role in regional and global institutions, Chinese officials are left to wonder who gets to decide what the words “responsible” and “constructive” mean for China’s foreign policy. Responsible and constructive for whom?

And when senior U.S. officials describe their relationship with Iran as “marked by open hostilities since the 1979 Islamic Revolution in Tehran,” they are insulting the intelligence of the men they’ve been negotiating with. From the Iranian perspective, bad relations with the U.S. didn’t begin in 1979. They started back in 1953, when Kermit Roosevelt Jr., grandson of Teddy, led a CIA-backed coup to remove an Iranian prime minister — proving that Americans would violate Iran’s sovereignty to ensure its favored politician ruled the country.

Making sense of China’s meager typhoon aid

Ian Bremmer
Nov 14, 2013 22:18 UTC

Faced with a devastating typhoon a mere 700 miles away, Chinese President Xi Jinping this week pledged financial support for the Philippines, as did nearly every other industrialized nation. Australia offered $30 million; the Europeans $11 million; the United Arab Emirates promised $10 million. China offered $100,000.

The media backlash was immediate. Within days, an embarrassed Beijing upped its pledge to $1.6 million. That’s still less than a sixth of the total offered by Japan, China’s main regional rival. In 2010, China overtook Japan as the second-biggest economy in the world.

What gives — or doesn’t give, as the case may be? Why is an economy so big, a government so willing to invest abroad, and a country so eager to win favor in the region stiffing a neighbor in need? Because China is still a new enough power that it has no tradition of shelling out helpings of foreign aid — and because the Philippines is not China’s favorite country at the moment.

Chinese reform is coming, but not the political kind

Ian Bremmer
Nov 1, 2013 16:00 UTC

In a western democracy like the United States, we assume that the best time for a leader to accomplish something is in the first year of his first term. The election has just ended, the opposition is still scattered, and the legislative mandate is intact. Everybody still talks about Franklin Delano Roosevelt’s first 100 Days for a reason.

In authoritarian governments, like China’s, it’s supposed to be different. Steering such a large bureaucracy takes time, as all the moving pieces catch up with one another. What matters is minimizing risk surrounding the transfer of power, and then engaging in a slow buildup of consensus. And yet, Xi Jinping is proving the conventional wisdom wrong. After just six months at the helm, Xi is already clearly on track to accomplish far more than his predecessor Hu Jintao.

The constellation of China’s leadership left Xi Jinping with more room to maneuver upon taking office: the Politburo Standing Committee, the top brass in China’s government, was consolidated from nine members to seven. Over the next few months, Xi built up a track record of successful reforms. He has worked at overhauling the banking system and shaking out its bad loans. Through his anti-corruption efforts, he has increased the accountability for the leaders of state-owned enterprises and provincial leaders. He improved product safety and the environment by changing the reward structure for the people in charge and implementing air pollution regulations. We’ve also seen the establishment of a free trade zone in Shanghai.

The countries not letting a crisis go to waste

Ian Bremmer
Jul 25, 2013 14:57 UTC

In 2008, before the financial crisis had even reached its nadir, Rahm Emanuel famously said: “You never want a serious crisis to go to waste.” Emanuel’s quote became the conventional wisdom for crisis management, even if the idea is age-old: John F. Kennedy Jr. famously pointed out that the Chinese word for “crisis” is composed of two characters, one for “danger” and one for “opportunity. 

Nearly five years after the global economic meltdown, we can now look at the world’s major powers and assess how well they’ve responded to their various crises. Three categories emerge. Who took advantage of crisis? Who never really had a true crisis? And who is letting crisis go to waste?

A crisis unwasted: Japan and the Euro zone

Let’s begin with Europe, which experienced a real and urgent crisis. Remember that as little as 18 months ago, the media and bond markets had the euro zone pegged for imminent fracture, when the debts of its member countries and the untenable divide between its core countries and those on the periphery threatened to overwhelm the political unity and economic cohesion that the bloc enjoyed. A lack of fiscal coordination, political and monetary dexterity, and balance between strong and weak states pushed the world’s largest economic bloc into existential crisis.

Will China’s slowing growth lead to unrest?

Ian Bremmer
Jul 19, 2013 19:04 UTC

Recently, it seems no developing country is safe from sudden, unexpected protests. In Brazil and Turkey, empowered middle classes pushed back against perceived governmental injustice; protests erupted, and leaders’ approval ratings dropped precipitously. In Egypt, the economic picture was as ugly as the political one, and the military’s ouster of President Mursi has fomented conflict and instability.

China may look like a candidate for the type of protests currently sweeping the developing world. Not only is a newly empowered middle class demanding better services and more accountability from government — growth has also tapered off in recent quarters. Don’t hold your breath. At least for the time being, China is well-positioned to navigate such challenges far better than its emerging market competitors.

Let’s start with the economy. For years pundits, and many Chinese government officials, thought that if China’s GDP growth rate ever fell below 8 percent, it would set off an unemployment crisis that would raise the risk of social and political instability in the country. Well, China’s finance minister was in Washington last week and said that the Chinese economy could handle 7 percent or even 6.5 percent growth — a lower rate than China has experienced in 23 years.

The underappreciated tensions between China and Brazil

Ian Bremmer
May 28, 2013 17:46 UTC

If you believed the conventional wisdom, this week’s meeting between Chinese Premier Li Keqiang and Indian Prime Minister Manmohan Singh was bound to be fraught. The leaders of the world’s two largest countries, only a month removed from a standoff in the Himalayas, were meeting. Acrimony was sure to follow, right?

No. Instead, Li said he offered India a “handshake across the Himalayas” and mused about how China and India could increase their trade to $100 billion by 2015. China and India, you see, aren’t as antagonistic as pundits make them out to be.

Aside from each having more than 1 billion people, China and India actually have very little in common. The two are divergent — yet their economies are largely complementary. India is struggling to regain its torrid growth of the mid-2000s; China is closer to maintaining it. India, thanks to corruption and regulation, doesn’t build much infrastructure; China can’t stop. Indians have started to bring their entrepreneurship to China, since their domestic market is so flawed and because China itself has so few entrepreneurs. China, meanwhile, has started to send some basic low-scale manufacturing to India, as the cost and quality of Chinese labor rises.

New strings attached

Ian Bremmer
Apr 4, 2013 16:06 UTC

China’s influence in Africa goes so deep that African leaders are starting to shape their own agendas after China’s. In February 2012, South African President Jacob Zuma gave his “state of the nation” speech in Cape Town, but he might as well have been in Beijing. “For the year 2012 and beyond,” he said, “we invite the nation to join government in a massive infrastructure development drive.” By October, Zuma was vowing $100 billion in Chinese-style infrastructure investment to help create jobs. In welcoming Xi Jinping, China’s new president, to South Africa last month for a BRICS conference, Zuma gushed, “We view China’s success as a source of hope and inspiration.” Apparently, he also views China as a model for his country’s development.

The infatuation is mutual. Xi Jinping recently made his first major foreign diplomacy trip, choosing to go to Africa (after a brief visit to Moscow), stopping in Tanzania, South Africa and the Republic of Congo as he made the rounds of one of China’s most important regions for investment. After all, China’s foreign direct investment in Africa stood at less than $100 million in 2003; today, it’s more than $12 billion. China is already responsible for more than a quarter of all foreign investment in Africa — and commerce is still growing at a rapid clip.

At the BRICS summit in South Africa, Xi explained that African leaders need not worry that China is the same kind of benefactor as the U.S. “China will continue to offer, as always, necessary assistance to Africa with no political strings attached,” he said. Of course, there may not be political strings attached, but there are plenty of economic strings, and China is keen to pull them.

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