There are many flowery metaphors for the relationship between China and India, such as that of the dragon and the elephant, each with their different speeds. One thing is certain: India is currently in need and China is sending aid. This division of roles fits well with China’s self-image as a successful nation that now supports other emerging economies. But the exuberant pride in what has been achieved has obscured the essentials: Instead of helping altruistically, the focus is on India’s backwardness – which causes so much anger in its neighbor that it would prefer to reject the deliveries.
Tesla is as much the PR miracle as the range miracle among EV manufacturers. But high profile makes a brand an even bigger target for attacks from social media – especially in China with its very demanding customers. Censorship does not hold its protective hand over the foreign supplier either, so criticism of Elon Musk and his cars continues to escalate. This can also serve as a warning for German brands: Pride comes before a fall in the public perception, regardless of whether the accusations of poor quality are justified.
The Taiwanese chip manufacturer TSMC currently plays a key role for several industries – from cars to gaming to mobile phones. Due to its delivery problems, production lines are even at a standstill in Germany. Now, for the first time in months, there’s good news here: The company sees “some relief“. For how long? Unfortunately, only until next month. For managers in the automotive industry, this attempt at reassurance probably sounds far too vague.
Meanwhile, Green chancellor candidate Annalena Baerbock provides hints about her ideas for a readjustment of Germany’s China policy. “We must not be naive about China,” she said at an event on Monday evening. Europe must protect itself from too much influence from the Far East. But at the same time – and this is typical for the Greens in the 2021 election campaign – she showed herself to be realistic and pragmatic: China was “far too big a market” to close off from it. Other leaders before her had already come to this conclusion.
The tweet on the Chinese short message service Weibo was short. Yet, it had a destructive effect on the relationship between India and China. It was written on Saturday by the Central Political and Legal Commission of the Communist Party of China – an important and powerful institution that oversees law enforcement by the Chinese police, for example. The current chairman is Guo Shengkun, who is also a member of the Political Bureau of the CCP Central Committee.
Specifically, it is a collage of two photographs: On the left, a Chinese space rocket ignites as it launches into orbit; on the right, Indian aid workers light COVID pandemic dead on pyres. The accompanying text: China lighting a fire versus India lighting a fire.
The message has since blighted the cooperation between the two neighboring countries on the COVID pandemic. “This tweet is full of arrogance, aggression, and contempt,” laments foreign policy expert Rajeswari Rajagopalan of Delhi-based think tank Observer Research Foundation (ORF).
In normal times, such a tweet would lead to heated discussions on Indian television’s evening talk shows. Newspaper commentators would criticize the tastelessness and probably invoke Indian pride, on which such vituperation should roll off. But not this time. Not now.
For now, India is in the throes of a humanitarian crisis. “We need all the help that is available,” Rajagopalan says in no uncertain terms. “Actually, from China as well.” India is currently ravaged by the second COVID wave – and brutally so. On Saturday alone, health authorities recorded 392,488 new infections. The number of deaths reached its highest level ever, at 3689. And observers are certain: These figures are much lower than the real numbers. The Institute for Health Metrics and Evaluation at the University of Washington estimates that probably only three to four percent of infections are detected in India. The capital’s crematoria burn so many bodies that it rains ash in some districts. Some places are already running out of firewood.
An end to the catastrophic development is not in sight. According to forecasts by the Indian Institute of Technology in Kanpur, the official figure will peak between May 4 and 8 at 440,000 new infections a day. Other researchers expect an increase to even 800,000 to one million per day.
It is clear that India urgently needs help from abroad. But the US, of all countries, initially refused to help Delhi, saying it wanted to vaccinate its own population first. Washington has since reversed its decision, but China immediately positioned itself as a partner willing to help. China and India have been arch-rivals for decades, and the two great powers have even been at war with each other. But it seemed the COVID pandemic could bridge such divides. China’s President Xi Jinping personally sent a message to his Indian counterpart Narendra Modi last Friday. It said, “China is willing to strengthen cooperation with India in the fight against the pandemic, provide support, and assist India.” At this point, China could still have emerged as a savior and earned Brownie points.
Over the weekend, several aid shipments from abroad did indeed arrive in India. A total of 40 countries delivered medical equipment, medicines, and protective gear. Germany provided 120 respirators. A mobile oxygen system is also to be set up this week. And cargo planes have also landed from China.
But not only planes came from Beijing, but also the aforementioned tweet. It has completely changed the view of Chinese behavior. “Supplies from China are not aid, they are commercial goods,” explains Pramit Pal Chaudhuri of the Hindustan Times newspaper. “For anything from China, India has to pay.” Beijing, he said, had merely helped remove COVID concerns from cargo suppliers, thus indirectly enabling the airlift. Sichuan Airlines, among others, had suspended its flights to India due to the pandemic in the subcontinent.
Devastating as the situation may be, Delhi won’t accept the offer of aid from China now, predicts Happymon Jacob of Jawaharlal Nehru University in Delhi. “In reality, Beijing is not concerned with humanitarian aid, but simply propaganda to use for its own ends.” He said the tweet showed this mindset quite clearly. ORF director Rajagopalan is even more explicit: “China has become a powerful but exceedingly arrogant nation under Xi.” It shows no respect for others or for international law. “It seems to have reached the point where it doesn’t even care how others feel about the country.”
The scientists, professors, and journalists all point to the fragile state of relations (China.Table reported). Relations have deteriorated dramatically since last summer. At that time, military incidents had occurred on the common border in the Himalayas, in which several soldiers were injured and killed on both sides. This border confrontation is still ongoing. Military units armed with weapons are facing each other. The relationship with China remains tense and abnormal, Chaudhuri explains.
It was into this situation that the tweet burst. There is an order from above “that says it’s okay to point out India’s failures,” Chaudhuri speculates. While it’s not “wolf-warrior diplomacy, it’s an expression of China’s general attitude towards India.” The journalist points out that Beijing’s diplomats are fond of saying in negotiations with their Indian counterparts, “Always remember, you are only one-fifth of us.” What is meant, he says, is the gross national product of the two neighboring countries.
After fierce criticism at home and abroad, the momentous tweet has since been deleted. But even the reaction of the Chinese Foreign Ministry in Beijing is not helping to ease the situation. It says that the image in question cannot currently be found on the Weibo account. The diplomats were unable to come up with an apology that might have clarified everything.
What has again been brought to light, however, is the deep rift between China and India. It is dramatic that in a humanitarian crisis like the COVID pandemic, such political games do not take a back seat. A look back at the beginning of the pandemic shows how things were supposed to work: When the coronavirus was discovered in Wuhan, India was one of the first countries to send aid to the Chinese metropolis.
US carmaker Tesla apparently fears a slump in its sales figures on the Chinese market. The company is working feverishly to avoid completely squandering its reputation in the country. Its sales had more than doubled in the People’s Republic last year – but now a dip is looming. The company has therefore recently become a regular attendee at government-organized auto industry roundtables, contrary to its custom, Reuters reports. Tesla is also looking to hire new employees, mainly to handle relations with government agencies in the country. The increased involvement is an indication that Tesla is taking the massive criticism it has received in recent weeks very seriously.
The change of heart is the result of a plethora of warnings, threats, protests, and accusations that have been raining down on Tesla in China since last year. Until now, the electric pioneer had sat out all the problems with its usual stubborn ignorance and even generated record sales of $6.6 billion in China in 2020. But now there is a red alert. State media are stirring up resentment with harsh comments, and criticism of the manufacturer is multiplying by the millions.
Although Tesla vehicles continue to sell extremely well in the People’s Republic, there is a growing danger that more and more market share will fall to Chinese competitors (China.Table reported). This is a scenario that should certainly please the Chinese government as part of its industrial policy. While Beijing took advantage of the signaling effect of Tesla’s commitment to the electric segment in China, it actually wants to build Chinese champions that will then conquer the world. Foreign companies should no longer use China as a base for a global victory march.
In China, success or failure is often determined by the network of relationships that a company maintains. Tesla initially enjoyed special treatment, from which the manufacturer benefited enormously. China’s authorities rolled out the red carpet for the Americans, took care of the smooth financing of the construction of a Gigafactory 3 in Shanghai, were generous with the tax rate, and did not even force the global market leader into a joint venture. Tesla was only too happy to slip into the role of best in class but failed to accept this appreciation with sufficient humility.
Instead of showing interest and commitment in the exchange with the authorities and regulators, the management skipped appointments. That went well for a few years. But as reports of legal actions against Tesla by Chinese customers and recalls due to technical defects began to accumulate, the authorities and state media began to seethe. Suddenly, a rage against Tesla took hold that always grips foreign companies in China when they give the impression – justified or not – that they don’t care enough about their Chinese customers (China.Table reported).
The stakes are high. “China is a linchpin for Tesla’s global success,” writes stock market analyst Daniel Ives in an assessment for clients of financial services firm Wedbush Securities. Tesla has gotten a “black eye” in recent weeks, Ives balances. Apparently, the company realized that when it looked in the mirror, too. The task of the newly hired staff is now to “build a harmonious external environment and support business development in the regional market”.
A harmonious environment in the People’s Republic usually consists of two components: no stress with the authorities and satisfied customers. But Tesla’s relationship with drivers, in particular, has suffered. On the one hand, various technical problems provoked the recall of a total of around 86,000 vehicles in China and allegedly also led to various accidents. On the other hand, too many customers simply felt cheated by Tesla’s sales department. In several cases, buyers of the brand complained about sales personnel who had assured them that they did not have to fear any future discounts through government rebates or special promotions by the manufacturer. But the opposite was true, and some customers felt cheated out of nearly €10,000 because they had decided to buy a Tesla three months earlier than others.
Back in December, the Chinese industry portal Sina Tech reported that Tesla’s management in China had allegedly pressured its sales staff to give preference to certain vehicle variants of the Model 3 produced in Shanghai. However, in one case, a Shanghai court had dismissed a buyer’s lawsuit because, according to the judge, there was not enough evidence of fraud. However, such court decisions only help Tesla to a limited extent as long as the top employees put their foot in their mouths.
Grace Tao is the company’s head of communications in the People’s Republic. Of all people, she made a serious faux pas. After a customer hijacked the manufacturer’s stand during the Shanghai auto show and loudly voiced her displeasure with Tesla from the roof of a vehicle on display, Tao suggested that the woman’s action might be supported by “interest groups”. Tao knows her home country all too well, which is why her reasoning seemed justified. But it was not wise to voice these thoughts publicly. After all, the authorities were also perfectly entitled to feel that they had been approached. And the military had already taken an interest in Tesla – after all, the cameras on the networked cars are constantly recording images that are theoretically also suitable for espionage.
Economic reporting about China focuses far too much on total GDP and not enough on per capita GDP, which is the more revealing indicator. And this skewed coverage has important implications, because the two indicators paint significantly different pictures of China’s current economic and political situation. They also focus our attention on different issues.
A quick search through all English-language news outlets in the ProQuest database for the ten-year period from 2011-21 shows that 20,915 articles discussed China’s GDP, whereas only 1,163 mentioned its GDP per capita. The difference was proportionally even larger among the eight largest and most elite papers, including the New York Times, Wall Street Journal, and Washington Post, where 5,963 articles referred to Chinese GDP and only 305 discussed the per capita measure.
In 2019, China’s GDP (measured at market exchange rates) of $14 trillion was the world’s second largest, after that of the United States ($21 trillion), with Japan ($5 trillion) in third place. Aggregate GDP reflects the total resources – including the tax base – available to a government. This is helpful for thinking about the size of China’s public investments, such as in its space program or military capacity. But it has much less bearing on Chinese people’s everyday lives.
Most economists therefore care more about China’s per capita GDP, or income per person, than the aggregate measure. And the key takeaway here is that China remains a poor country, despite its phenomenal headline GDP growth over the past four decades.
China’s per capita GDP in 2019 was $8,242, placing the country between Montenegro ($8,591) and Botswana ($8,093). Its per capita GDP in purchasing power parity (PPP) terms – with income adjusted to take account of the cost of living – was $16,804. This is below the global average of $17,811 and puts China 86th in the world, between Suriname ($17,256) and Bosnia and Herzegovina ($16,289). In contrast, GDP per capita in PPP terms in the US and the European Union is $65,298 and $47,828, respectively.
To understand the extent of poverty in China, we also need to consider the degree of inequality across its large population. China’s current level of income inequality (measured by the Gini coefficient) is similar to that found in the US and India. Given that 1.4 billion people live in China, the country’s inequality implies that there are still hundreds of millions of impoverished Chinese.
The Chinese government has said that 600 million people have a monthly income of barely CN¥1,000 ($155), equivalent to an annual income of $1,860. Of these people, 75.6% live in rural areas.
To leave the ranks of the world’s poorest countries, China must significantly boost the incomes of a population about the size of that of Sub-Saharan Africa, and with a similar average income of $1,657. And the Chinese government is aware that it must do so in order to maintain popular support. All else being equal, it will be preoccupied for at least another generation by the need to increase domestic incomes.
But all else is rarely equal in politics, and governments can also bolster their popular support in ways that do not foster economic growth. The Chinese government, for example, emphasizes its role in defending the population against external or impersonal forces, such as earthquakes or the COVID-19 pandemic. It has also recently adopted an assertive stance regarding territorial disputes in the South China Sea and along the Chinese-Indian border.
Western countries have responded to these and other Chinese actions in a variety of ways. The US is ramping up its military presence in the South China Sea, while China also faces the threat of economic sanctions and a boycott of the 2022 Beijing Winter Olympics because of human-rights concerns.
Experience suggests that sanctions, boycotts, and military pressure are unlikely to achieve their intended aims. Russia, for example, has faced Western economic sanctions since 2014 – and US President Joe Biden’s administration recently announced further punitive measures – but the Kremlin has persisted in its policy of occupation in eastern Ukraine’s Donbas region. Likewise, the boycotts of the 1980 Moscow Olympics and the 1984 Games in Los Angeles had little effect on either side in the Cold War.
On the contrary, military aggression often provokes a political backlash in the targeted country and strengthens support for its government. Economic sanctions can have similar effects and solidify public opinion behind more hardline policies.
The backlash effect is easily observed in China nowadays. Many Chinese think the West is seeking to reassert political dominance and feel painful reminders of colonialism and World War II, when China lost 20 million people, more than any country except the Soviet Union. The strong emotions triggered by Western policies toward China overshadow the fact that some of China’s actions are troubling countries like India, Vietnam, and Indonesia, which also suffered brutal colonial policies.
These emotional reactions also distract attention from important domestic issues, not least the need to boost incomes. China’s poor, most of whom probably care little about border disputes or international sporting events, will bear the brunt of any collateral damage.
To engage effectively with China, other countries should remember: Contrary to first impressions, it is not an economic monolith. Behind the world’s second-highest GDP are hundreds of millions of people who just want to stop being poor.
Nancy Qian, Professor of Managerial Economics and Decision Sciences at Northwestern University’s Kellogg School of Management, is Founding Director of China Econ Lab and Northwestern’s China Lab and leads the Kellogg development economics initiative.
Copyright: Project Syndicate
Produce Pandas is the name of the first plus-size boy band from China. Their five members bring a new wind into the industry by visually setting themselves apart from the beauty ideal of previous boy bands. Instead of looking like “little fresh meat” – as the willowy, light-skinned young men in the film and music industry like to be called – and sticking to strict diets, Produce Pandas are taking a different approach.
There are many flowery metaphors for the relationship between China and India, such as that of the dragon and the elephant, each with their different speeds. One thing is certain: India is currently in need and China is sending aid. This division of roles fits well with China’s self-image as a successful nation that now supports other emerging economies. But the exuberant pride in what has been achieved has obscured the essentials: Instead of helping altruistically, the focus is on India’s backwardness – which causes so much anger in its neighbor that it would prefer to reject the deliveries.
Tesla is as much the PR miracle as the range miracle among EV manufacturers. But high profile makes a brand an even bigger target for attacks from social media – especially in China with its very demanding customers. Censorship does not hold its protective hand over the foreign supplier either, so criticism of Elon Musk and his cars continues to escalate. This can also serve as a warning for German brands: Pride comes before a fall in the public perception, regardless of whether the accusations of poor quality are justified.
The Taiwanese chip manufacturer TSMC currently plays a key role for several industries – from cars to gaming to mobile phones. Due to its delivery problems, production lines are even at a standstill in Germany. Now, for the first time in months, there’s good news here: The company sees “some relief“. For how long? Unfortunately, only until next month. For managers in the automotive industry, this attempt at reassurance probably sounds far too vague.
Meanwhile, Green chancellor candidate Annalena Baerbock provides hints about her ideas for a readjustment of Germany’s China policy. “We must not be naive about China,” she said at an event on Monday evening. Europe must protect itself from too much influence from the Far East. But at the same time – and this is typical for the Greens in the 2021 election campaign – she showed herself to be realistic and pragmatic: China was “far too big a market” to close off from it. Other leaders before her had already come to this conclusion.
The tweet on the Chinese short message service Weibo was short. Yet, it had a destructive effect on the relationship between India and China. It was written on Saturday by the Central Political and Legal Commission of the Communist Party of China – an important and powerful institution that oversees law enforcement by the Chinese police, for example. The current chairman is Guo Shengkun, who is also a member of the Political Bureau of the CCP Central Committee.
Specifically, it is a collage of two photographs: On the left, a Chinese space rocket ignites as it launches into orbit; on the right, Indian aid workers light COVID pandemic dead on pyres. The accompanying text: China lighting a fire versus India lighting a fire.
The message has since blighted the cooperation between the two neighboring countries on the COVID pandemic. “This tweet is full of arrogance, aggression, and contempt,” laments foreign policy expert Rajeswari Rajagopalan of Delhi-based think tank Observer Research Foundation (ORF).
In normal times, such a tweet would lead to heated discussions on Indian television’s evening talk shows. Newspaper commentators would criticize the tastelessness and probably invoke Indian pride, on which such vituperation should roll off. But not this time. Not now.
For now, India is in the throes of a humanitarian crisis. “We need all the help that is available,” Rajagopalan says in no uncertain terms. “Actually, from China as well.” India is currently ravaged by the second COVID wave – and brutally so. On Saturday alone, health authorities recorded 392,488 new infections. The number of deaths reached its highest level ever, at 3689. And observers are certain: These figures are much lower than the real numbers. The Institute for Health Metrics and Evaluation at the University of Washington estimates that probably only three to four percent of infections are detected in India. The capital’s crematoria burn so many bodies that it rains ash in some districts. Some places are already running out of firewood.
An end to the catastrophic development is not in sight. According to forecasts by the Indian Institute of Technology in Kanpur, the official figure will peak between May 4 and 8 at 440,000 new infections a day. Other researchers expect an increase to even 800,000 to one million per day.
It is clear that India urgently needs help from abroad. But the US, of all countries, initially refused to help Delhi, saying it wanted to vaccinate its own population first. Washington has since reversed its decision, but China immediately positioned itself as a partner willing to help. China and India have been arch-rivals for decades, and the two great powers have even been at war with each other. But it seemed the COVID pandemic could bridge such divides. China’s President Xi Jinping personally sent a message to his Indian counterpart Narendra Modi last Friday. It said, “China is willing to strengthen cooperation with India in the fight against the pandemic, provide support, and assist India.” At this point, China could still have emerged as a savior and earned Brownie points.
Over the weekend, several aid shipments from abroad did indeed arrive in India. A total of 40 countries delivered medical equipment, medicines, and protective gear. Germany provided 120 respirators. A mobile oxygen system is also to be set up this week. And cargo planes have also landed from China.
But not only planes came from Beijing, but also the aforementioned tweet. It has completely changed the view of Chinese behavior. “Supplies from China are not aid, they are commercial goods,” explains Pramit Pal Chaudhuri of the Hindustan Times newspaper. “For anything from China, India has to pay.” Beijing, he said, had merely helped remove COVID concerns from cargo suppliers, thus indirectly enabling the airlift. Sichuan Airlines, among others, had suspended its flights to India due to the pandemic in the subcontinent.
Devastating as the situation may be, Delhi won’t accept the offer of aid from China now, predicts Happymon Jacob of Jawaharlal Nehru University in Delhi. “In reality, Beijing is not concerned with humanitarian aid, but simply propaganda to use for its own ends.” He said the tweet showed this mindset quite clearly. ORF director Rajagopalan is even more explicit: “China has become a powerful but exceedingly arrogant nation under Xi.” It shows no respect for others or for international law. “It seems to have reached the point where it doesn’t even care how others feel about the country.”
The scientists, professors, and journalists all point to the fragile state of relations (China.Table reported). Relations have deteriorated dramatically since last summer. At that time, military incidents had occurred on the common border in the Himalayas, in which several soldiers were injured and killed on both sides. This border confrontation is still ongoing. Military units armed with weapons are facing each other. The relationship with China remains tense and abnormal, Chaudhuri explains.
It was into this situation that the tweet burst. There is an order from above “that says it’s okay to point out India’s failures,” Chaudhuri speculates. While it’s not “wolf-warrior diplomacy, it’s an expression of China’s general attitude towards India.” The journalist points out that Beijing’s diplomats are fond of saying in negotiations with their Indian counterparts, “Always remember, you are only one-fifth of us.” What is meant, he says, is the gross national product of the two neighboring countries.
After fierce criticism at home and abroad, the momentous tweet has since been deleted. But even the reaction of the Chinese Foreign Ministry in Beijing is not helping to ease the situation. It says that the image in question cannot currently be found on the Weibo account. The diplomats were unable to come up with an apology that might have clarified everything.
What has again been brought to light, however, is the deep rift between China and India. It is dramatic that in a humanitarian crisis like the COVID pandemic, such political games do not take a back seat. A look back at the beginning of the pandemic shows how things were supposed to work: When the coronavirus was discovered in Wuhan, India was one of the first countries to send aid to the Chinese metropolis.
US carmaker Tesla apparently fears a slump in its sales figures on the Chinese market. The company is working feverishly to avoid completely squandering its reputation in the country. Its sales had more than doubled in the People’s Republic last year – but now a dip is looming. The company has therefore recently become a regular attendee at government-organized auto industry roundtables, contrary to its custom, Reuters reports. Tesla is also looking to hire new employees, mainly to handle relations with government agencies in the country. The increased involvement is an indication that Tesla is taking the massive criticism it has received in recent weeks very seriously.
The change of heart is the result of a plethora of warnings, threats, protests, and accusations that have been raining down on Tesla in China since last year. Until now, the electric pioneer had sat out all the problems with its usual stubborn ignorance and even generated record sales of $6.6 billion in China in 2020. But now there is a red alert. State media are stirring up resentment with harsh comments, and criticism of the manufacturer is multiplying by the millions.
Although Tesla vehicles continue to sell extremely well in the People’s Republic, there is a growing danger that more and more market share will fall to Chinese competitors (China.Table reported). This is a scenario that should certainly please the Chinese government as part of its industrial policy. While Beijing took advantage of the signaling effect of Tesla’s commitment to the electric segment in China, it actually wants to build Chinese champions that will then conquer the world. Foreign companies should no longer use China as a base for a global victory march.
In China, success or failure is often determined by the network of relationships that a company maintains. Tesla initially enjoyed special treatment, from which the manufacturer benefited enormously. China’s authorities rolled out the red carpet for the Americans, took care of the smooth financing of the construction of a Gigafactory 3 in Shanghai, were generous with the tax rate, and did not even force the global market leader into a joint venture. Tesla was only too happy to slip into the role of best in class but failed to accept this appreciation with sufficient humility.
Instead of showing interest and commitment in the exchange with the authorities and regulators, the management skipped appointments. That went well for a few years. But as reports of legal actions against Tesla by Chinese customers and recalls due to technical defects began to accumulate, the authorities and state media began to seethe. Suddenly, a rage against Tesla took hold that always grips foreign companies in China when they give the impression – justified or not – that they don’t care enough about their Chinese customers (China.Table reported).
The stakes are high. “China is a linchpin for Tesla’s global success,” writes stock market analyst Daniel Ives in an assessment for clients of financial services firm Wedbush Securities. Tesla has gotten a “black eye” in recent weeks, Ives balances. Apparently, the company realized that when it looked in the mirror, too. The task of the newly hired staff is now to “build a harmonious external environment and support business development in the regional market”.
A harmonious environment in the People’s Republic usually consists of two components: no stress with the authorities and satisfied customers. But Tesla’s relationship with drivers, in particular, has suffered. On the one hand, various technical problems provoked the recall of a total of around 86,000 vehicles in China and allegedly also led to various accidents. On the other hand, too many customers simply felt cheated by Tesla’s sales department. In several cases, buyers of the brand complained about sales personnel who had assured them that they did not have to fear any future discounts through government rebates or special promotions by the manufacturer. But the opposite was true, and some customers felt cheated out of nearly €10,000 because they had decided to buy a Tesla three months earlier than others.
Back in December, the Chinese industry portal Sina Tech reported that Tesla’s management in China had allegedly pressured its sales staff to give preference to certain vehicle variants of the Model 3 produced in Shanghai. However, in one case, a Shanghai court had dismissed a buyer’s lawsuit because, according to the judge, there was not enough evidence of fraud. However, such court decisions only help Tesla to a limited extent as long as the top employees put their foot in their mouths.
Grace Tao is the company’s head of communications in the People’s Republic. Of all people, she made a serious faux pas. After a customer hijacked the manufacturer’s stand during the Shanghai auto show and loudly voiced her displeasure with Tesla from the roof of a vehicle on display, Tao suggested that the woman’s action might be supported by “interest groups”. Tao knows her home country all too well, which is why her reasoning seemed justified. But it was not wise to voice these thoughts publicly. After all, the authorities were also perfectly entitled to feel that they had been approached. And the military had already taken an interest in Tesla – after all, the cameras on the networked cars are constantly recording images that are theoretically also suitable for espionage.
Economic reporting about China focuses far too much on total GDP and not enough on per capita GDP, which is the more revealing indicator. And this skewed coverage has important implications, because the two indicators paint significantly different pictures of China’s current economic and political situation. They also focus our attention on different issues.
A quick search through all English-language news outlets in the ProQuest database for the ten-year period from 2011-21 shows that 20,915 articles discussed China’s GDP, whereas only 1,163 mentioned its GDP per capita. The difference was proportionally even larger among the eight largest and most elite papers, including the New York Times, Wall Street Journal, and Washington Post, where 5,963 articles referred to Chinese GDP and only 305 discussed the per capita measure.
In 2019, China’s GDP (measured at market exchange rates) of $14 trillion was the world’s second largest, after that of the United States ($21 trillion), with Japan ($5 trillion) in third place. Aggregate GDP reflects the total resources – including the tax base – available to a government. This is helpful for thinking about the size of China’s public investments, such as in its space program or military capacity. But it has much less bearing on Chinese people’s everyday lives.
Most economists therefore care more about China’s per capita GDP, or income per person, than the aggregate measure. And the key takeaway here is that China remains a poor country, despite its phenomenal headline GDP growth over the past four decades.
China’s per capita GDP in 2019 was $8,242, placing the country between Montenegro ($8,591) and Botswana ($8,093). Its per capita GDP in purchasing power parity (PPP) terms – with income adjusted to take account of the cost of living – was $16,804. This is below the global average of $17,811 and puts China 86th in the world, between Suriname ($17,256) and Bosnia and Herzegovina ($16,289). In contrast, GDP per capita in PPP terms in the US and the European Union is $65,298 and $47,828, respectively.
To understand the extent of poverty in China, we also need to consider the degree of inequality across its large population. China’s current level of income inequality (measured by the Gini coefficient) is similar to that found in the US and India. Given that 1.4 billion people live in China, the country’s inequality implies that there are still hundreds of millions of impoverished Chinese.
The Chinese government has said that 600 million people have a monthly income of barely CN¥1,000 ($155), equivalent to an annual income of $1,860. Of these people, 75.6% live in rural areas.
To leave the ranks of the world’s poorest countries, China must significantly boost the incomes of a population about the size of that of Sub-Saharan Africa, and with a similar average income of $1,657. And the Chinese government is aware that it must do so in order to maintain popular support. All else being equal, it will be preoccupied for at least another generation by the need to increase domestic incomes.
But all else is rarely equal in politics, and governments can also bolster their popular support in ways that do not foster economic growth. The Chinese government, for example, emphasizes its role in defending the population against external or impersonal forces, such as earthquakes or the COVID-19 pandemic. It has also recently adopted an assertive stance regarding territorial disputes in the South China Sea and along the Chinese-Indian border.
Western countries have responded to these and other Chinese actions in a variety of ways. The US is ramping up its military presence in the South China Sea, while China also faces the threat of economic sanctions and a boycott of the 2022 Beijing Winter Olympics because of human-rights concerns.
Experience suggests that sanctions, boycotts, and military pressure are unlikely to achieve their intended aims. Russia, for example, has faced Western economic sanctions since 2014 – and US President Joe Biden’s administration recently announced further punitive measures – but the Kremlin has persisted in its policy of occupation in eastern Ukraine’s Donbas region. Likewise, the boycotts of the 1980 Moscow Olympics and the 1984 Games in Los Angeles had little effect on either side in the Cold War.
On the contrary, military aggression often provokes a political backlash in the targeted country and strengthens support for its government. Economic sanctions can have similar effects and solidify public opinion behind more hardline policies.
The backlash effect is easily observed in China nowadays. Many Chinese think the West is seeking to reassert political dominance and feel painful reminders of colonialism and World War II, when China lost 20 million people, more than any country except the Soviet Union. The strong emotions triggered by Western policies toward China overshadow the fact that some of China’s actions are troubling countries like India, Vietnam, and Indonesia, which also suffered brutal colonial policies.
These emotional reactions also distract attention from important domestic issues, not least the need to boost incomes. China’s poor, most of whom probably care little about border disputes or international sporting events, will bear the brunt of any collateral damage.
To engage effectively with China, other countries should remember: Contrary to first impressions, it is not an economic monolith. Behind the world’s second-highest GDP are hundreds of millions of people who just want to stop being poor.
Nancy Qian, Professor of Managerial Economics and Decision Sciences at Northwestern University’s Kellogg School of Management, is Founding Director of China Econ Lab and Northwestern’s China Lab and leads the Kellogg development economics initiative.
Copyright: Project Syndicate
Produce Pandas is the name of the first plus-size boy band from China. Their five members bring a new wind into the industry by visually setting themselves apart from the beauty ideal of previous boy bands. Instead of looking like “little fresh meat” – as the willowy, light-skinned young men in the film and music industry like to be called – and sticking to strict diets, Produce Pandas are taking a different approach.
