Opinion

Ian Bremmer

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.

But unlike many other emerging markets, China views slower growth as a manageable challenge. The government actually recognizes that a slowdown is necessary to meet its reform and rebalancing goals, and is working now to score political points among the population by arguing that it’s doing so. In particular, Beijing hopes that the slowdown will force industrial consolidation and less resource consumption, which could slow environmental degradation — which has been a major point of political vulnerability for the government. Slower growth should also calm the real estate sector, where rising prices have been a major sore point for urban Chinese. China’s new leadership is betting that progress on these fronts will outweigh the downside risks they’ll face as job losses tick up in the face of slower growth.

From a global perspective, there is a strong case to be made that China’s slowing growth rate is actually a good sign. The fact that Beijing hasn’t just reflexively pumped capital into the system to keep growth rates up shows that it is willing to begin undertaking modest economic reforms; it is, in effect, letting bubbles shrink rather than grow until they pop. This approach is characteristic of the new leadership that took charge in March of this year: they are less risk averse and they have a more long-sighted handle on the necessary economic changes that China will have to undertake.

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.

Xi dreamed a dream of China’s rise…

Ian Bremmer
Mar 20, 2013 20:35 UTC

China’s new president, Xi Jinping, gave his big inaugural address last week, talking at length about the “Chinese Dream.” He said: “We must make persistent efforts, press ahead with indomitable will, continue to push forward the great cause of socialism with Chinese characteristics, and strive to achieve the Chinese dream of great rejuvenation of the Chinese nation.”

All that talk of ‘great this’ and ‘great that’ should sound familiar to Americans—it’s the same exceptionalism that their leaders espouse during any major national address. Both the American Dream and the Chinese Dream are patriotism without the isolationism—clarion calls for the nation as well as the individual. For America, it’s about holding on (or reasserting) its claim as the world’s foremost nation. For China, it’s about wresting that title away—or at least providing an alternative prototype that other nations can follow.

If China wants to become the world’s foremost country, it’ll mean jettisoning its more isolationist approach to foreign affairs. For 10 years we’ve heard Chinese officials say that they can’t intervene. We’re too poor; we’re still developing. In 2007, then-president Wen Jiabao described China’s economic growth as “unstable, unbalanced, uncoordinated, and unsustainable.” But now that the financial crisis has exposed cracks in the Western capitalist model and China appears destined to one day overtake the United States as the world’s largest economy, China can’t stay on the sidelines anymore. It needs to secure its economic interests in every corner of the globe—and that will mean sometimes getting its hands dirty.

China shouldn’t leave Kim Jong-un alone

Ian Bremmer
Mar 13, 2013 16:18 UTC

Tensions are running high on the Korean Peninsula, and instability is coming if it’s not already there. North Korea is declaring that truces no longer apply, claiming that the UN is faking its report on North Korean human rights abuses and threatening “thermonuclear war” against its aggressors.

I was in China last week, where I met with senior Chinese foreign policy officials who told me they don’t have the influence over North Korea they once had. There’s a self-promotional reason to say the situation is increasingly out of their hands – it insulates them from pressure to play a leading role in punishing miscreant North Korean behavior.  But I think we should start to believe them. Thus far, the normal Chinese channels have not worked. The officials told me that China has resorted to unofficial contacts – through business leaders, informal contacts, etc. – to try to pass on the word to Pyongyang. Mao Zedong famously once called China and North Korea’s relationship as “close as lips and teeth.” Today, when it comes to private bilateral communication, it seems Pyongyang’s lips are sealed, and China’s teeth are grinding.

How, then, do you solve a problem like Dear Leader? There are some within China asking whether the Chinese should break off contact altogether. A senior Communist Party official claimed that delegates discussed whether to “keep or dump” North Korea at the Chinese People’s Political Consultative Conference in early March. In a Financial Times piece entitled “China Should Abandon North Korea,” the deputy editor of the journal of the Central Party School of the Communist Party argued that the China-North Korea alliance was “outdated” and that “nuclear blackmail” from Pyongyang in the future couldn’t be ruled out. The silent treatment would be a last-ditch attempt to get North Korea’s attention by calling its bluff.

The top 10 grudges in the G-20

Ian Bremmer
Mar 7, 2013 20:14 UTC

The G-20 is no happy family. Comprised of 19 countries and the European Union, once the urgency of the financial crisis waned, so too did the level of collaboration among members. Unlike the cozier G-7 — filled with likeminded nations — the G-20 is a better representation of the true global balance of power … and the tensions therein. So where are the deepest fault lines in the G-20? 

Below is a ranking* of the 10 worst bilateral relationships in the G20. Russia is in four of the worst, while China is in three (although Russia and China’s relationship is fine). Several countries are also in two of the worst relationships: the United States (with the two belligerents mentioned above), Japan, the UK and the EU. 

1.   China–Japan

China and Japan have a historically troubled relationship, which has reached its most contentious point in decades as their dispute over territorial claims to the Senkaku/Diaoyu islands has escalated, leading to renewed geopolitical tensions and possible confrontation. When the world’s second- and third-largest economies are butting heads, it carries huge global ramifications.

Culture of silence

Ian Bremmer
Feb 19, 2013 19:41 UTC

American companies are at war, but don’t ask them why. They won’t tell. They’re besieged not by one another, but by hackers who target their intellectual property and confidential information. Just how deep this cyberwar goes is largely unknown to all but the companies being targeted. That’s because they are staying silent in an effort to not aggravate the countries in which they are being hacked. China is the site of the most cyber-aggression, and in many instances, the biggest opportunity for many businesses. Companies are turning the other cheek in an attempt to turn another check.

If the companies are not talking, how do we know it’s happening? Because the U.S. government has noticed.  On Tuesday, The New York Times ran a piece highlighting the link between anti-U.S. cyberattacks and the Chinese military.  In the Washington Post last week, word leaked that the United States has put out a National Intelligence Estimate that “identifies China as the country most aggressively seeking to penetrate the computer systems of American businesses and institutions to gain access to data that could be used for economic gain.”

This is the front in the U.S. cyberwar that we’re not winning. We know the U.S. does fine when it comes to its sovereign cyber-warfare, waged on a state-to-state platform.  Take Stuxnet — the US/Israel initiative to destroy Iranian nuclear centrifuges through a complex cyberattack (not to mention an odd follow-up that purportedly blasted AC/DC’s ”Thunderstruck” at odd hours). But when it comes to corporate sabotage and espionage, the United States is far less experienced than China. Blame free-market capitalism: The U.S. government does not intervene on the private sector’s behalf to obtain information that would benefit the economy. China, however, is far more adept at this because of its use of state capitalism (a system in which the state uses markets to create wealth that can consolidate its hold on power).

Too much of a good thing: the risks of information

Ian Bremmer
Jan 23, 2013 17:53 UTC

Another year, another Davos. Last year’s World Economic Forum was overwhelmingly about Europe’s existential crisis. But Europe has quieted down, at least for now, and so we’re entering the first non-crisis Davos in years. But that doesn’t mean things have settled into, as Mohamed El-Erian puts it, a ‘new normal.’ It remains difficult to find markets with good risk/return, or an area of the world without serious geopolitical tensions. 

Faced with this ‘new abnormal,’ where the only certainty is that shocks will arise from unexpected places, what is this year’s Davos about? 

Everything and nothing. The United States, the Middle East, emerging markets, Japan – all of these are on the agenda, but they’re not all necessarily connected. The emissaries at Davos are in the midst of their own locavore movement – their agendas are remarkably domestic.

2013′s top 10 political risks

Ian Bremmer
Jan 8, 2013 16:18 UTC

It was a close call at times, but we made it through 2012. Now we’re set to encounter a new set of risks ‑ but not in the world’s advanced industrialized democracies, which are much more resilient than feared. This year, with the global recession on the wane, attention shifts back to emerging markets, the economies that are usually the ones that pose the most political risk. You can read the whole report from my political risk firm, Eurasia Group, here, but an executive summary of this year’s top 10 risks, in video and text, is below:

10.) South Africa: Africa overall looks like it will continue its recent growth. But South Africa, one of the continent’s most complex and important economies, is floundering. Its dominant political party, the African National Congress, is resorting to populism to maintain its base among the urban and rural poor. That means more state intervention, more labor unrest and more assertive unions. We’re not predicting a fundamental political crisis, but the country is moving along a path that offers little reason for optimism.

9.) India: We’ve all read the predictions that India is poised to become the world’s next infinite-growth country. Not so fast. Despite initial optimism, the 2009 election hasn’t freed Prime Minister Manmohan Singh to reform the country as anticipated, with the tough choices continually being kicked to the next parliamentary session. (Americans should find this familiar.) Corruption continues to reign, and as we’ve seen in the rape protests of the past few weeks, there are fundamental cultural issues that India has yet to resolve. As general elections draw closer, the government’s ability to execute robust economic policies will decline even further.

The three 2012 themes that matter most

Ian Bremmer
Dec 27, 2012 15:47 UTC

2012 – the year of the primary, the election, the Diamond Jubilee, the superstorm, the flying dictator, the escaped dissident, the embassy attack, the empty chair, the tech protest, the Olympics, and dozens of other stories already forgotten. It was a busy year and a terribly volatile one, too. Which of these stories will actually matter five years from now? By my count, three:

1)     China rising

2)     The Middle East in turmoil

3)     Europe muddling along

They’re the good, the bad, and the ugly of 2012.

The Good: For the sake of our listless global economy, thank goodness for China’s rise. The country’s Commerce Minister is promising that China will hit its GDP growth target of 7.5 percent for the year. (In the first three quarters of 2012, it grew 7.7 percent.) China’s ability to power through the financial crisis provided global markets with much-needed energy, and its momentum, despite the crisis in the Eurozone, a key trade partner, has helped limit the damage. If it wasn’t for the resilience of the world’s second-largest economy, we’d all be a lot worse off.

The Bad: In 2012, almost every key story in the Middle East has gotten more complicated and more dangerous. Syria, Israel, Gaza, Iran, Jordan, Iraq, Yemen, Egypt. Israel has become increasingly isolated within the region, facing Palestinian rockets, a nuclear-driven Iran, and the prime minister of a former ally dubbing it ‘a terrorist state’. Egypt’s president pulled off a power play, and the Syrian nightmare deepened. Iraqis struggled to build a new society in the wake of U.S. withdrawal, and (supposedly allied) Afghans killed a record number of U.S. troops before they could reach the exits. When the Arab Spring first began to take shape, many observers hoped it would be just that – a rebirth. But you can’t spin it now. It’s bad and getting worse.

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