So far, China’s presence in the world has been most clearly articulated through the “Made in China” label and, of course, countless Chinese restaurants all over the planet. In the coming years, Chinese ideas and concepts could also influence the world more. This is the thesis of the new book “The Idea of China: Chinese thinkers,” written by a team of authors from the European Council on Foreign Relations (ECFR).
Slogans such as “democratization of international relations” may sound meaningless to outsiders, but they actually contain complex ideas. In this case, it describes Beijing’s attempt to reinterpret established concepts such as human rights, democracy and sovereignty in the Communist Party’s favor. This also includes all attempts to undermine what China often describes as “US hegemony.”
Alicja Bachulska is co-author of the book and explains in an interview with Angela Köckritz why Chinese intellectuals are trying to combine Marxism with AI and why the narrative of green change sounds so much more positive in China than in the West.
Meanwhile, Fabian Kretschmer looks at the security situation in East Asia, where cooperation between Russia and North Korea is viewed with suspicion – no doubt also by Beijing. After all, the People’s Republic has to watch as North Korea frees itself to some extent from its dependence on China thanks to foreign currency from Moscow.
A stronger North Korea also increases the risk of escalation on the Korean peninsula. Despite having its own border with North Korea, Russia would have fewer problems with such a conflict than Beijing, where a hotspot could emerge in its own backyard.
In your new book “The Idea of China: Chinese Thinkers,” which you co-authored with Mark Leonard, Director of the European Council on Foreign Relations (ECFR), and Janka Oertel, Director of the ECFR Asia Program, you present Chinese thinkers and ideas. What was the idea behind the book?
Our main idea behind the book was to bring ideas originating in China under Xi Jinping closer to non-Chinese audiences. Essentially, if the last few decades have been characterized by the spread of Chinese goods and capital, the coming decades could be strongly influenced by Chinese ideas. Many of the “Chinese solutionists” – as we call them – want to create distinctively Chinese ideas to respond to the questions of the age of uncertainty – the period of “great changes unseen in a century,” as Xi Jinping likes to put it.
This is a rather vacuous sounding term, but it is of huge importance for the leadership.
It is Beijing’s diagnosis of the current state of the international order, the global political, economic, technological and cultural shifts. Beijing needs to navigate through this era to secure regime stability and prosperity for China’s population. In this context, security is key
While “Chinese solutionists” work for the system and understand its limitations, they do not have a complete monopoly over knowledge-making in China. Other voices, often marginalized or operating from abroad, try to bring new perspectives into this debate. We also tried to reach out to them – that is why the chapter “People” is heavily focused on topics such as feminism, alternative identities, and discourse power.
Another term is the so-called democratization of international relations.
China’s political lexicon shares this concept with Russia. It is essentially about reclaiming the meaning of some well-established concepts, mostly originating in the West, and giving them a new meaning in line with the interests of the leadership. This concept stands for all efforts conducive to the weakening of what many in China see as “US hegemony.” Yet, in the systemic context, it is about strengthening the CCP’s ability to assert its own rules over the interpretation of basic liberal democratic notions such as human rights, sovereignty, multilateralism, etc.
The Chinese leadership is striving for a utopian future. What does it look like?
Its goal is to re-write the rules of the game for China to become a global leader in AI, the green transition, and, potentially in the long run, the international financial system. Chinese intellectuals are trying to merge seemingly contradictory ideas, for example Marxism and the study of AI, to create an intellectual basis for the authorities to use
As Janka Oertel has put it: “If Chinese technology companies provide the backbone of the green and digital transition, state actors’ access to personal data will be eased, and data flows will increasingly be routed through Chinese servers for updates, maintenance, and system security.” What might sound like a utopia to the authorities in Beijing might easily turn into a dystopia for the Europeans.
In the West, discussions about climate action often resonate with a sense of loss. In China, the narrative of green modernity sounds quite optimistic.
The authorities in China, alongside many intellectuals, are trying to give a positive spin to the debate on climate progress. Beijing does not emphasize the need to de-growth. Quite the contrary, the Chinese leadership tries to make the case that development and emissions reductions are possible at the same time.
The Chinese leadership attempts to create a new model of financial architecture to better serve its interests. What could it look like?
Under current circumstances, the debate on China’s financial power is the most controversial because of the overall slowdown in Chinese economy and the political gravitas of the topic. The authorities do not trust financial markets, which translates into an underdeveloped stock market and limited interest in liberalizing the renminbi. At the same time, they want to make the renminbi strong enough to be useful in case of a major conflict and make it attractive for others to use to hedge their US exposure.
The CCP is very keen to create a national identity that supports its goals. Where does it draw its inspiration from?
Against the backdrop of growing complexity and economic downturn, Beijing wants to build a self-image of China, and Chinese people, that are strong and proud, able to “eat bitterness.” Essentially, it is about fostering an identity that could endure in an era of prolonged uncertainty.
These ideas, however, might not be that easily digestible to younger audiences. It is by now clear that many alternative identities have emerged over the years in China, with concepts such as “involution” and “lying flat” becoming increasingly mainstream and reflecting the fact that many young people are opting out of the rat race and are not that willing to subscribe to the official line.
This ideal identity also includes an ideal family.
China under Xi has experienced a revival of traditional norms and related narratives. Challenged by the demographic crisis, the authorities are trying to convince women to have more children, either by shaming unmarried and childless women as “leftovers” or by creating encouraging stories about the seemingly bright side of the neo-Confucian revival. The authorities are cracking down on organized feminist movements, but they have so far met with little success. The popularity of feminism-inspired works of culture, such as films, series, and books, testifies to the fact that gender discussions are far from extinct in China
Alicja Bachulska is Policy Fellow at the European Council on Foreign Relations. You can download the book “The Idea of China” for free here.
At 12 p.m. sharp on Monday afternoon, Mark Rutte walked purposefully towards the podium at the NATO headquarters. “Today, I can confirm that North Korean troops have been sent to Russia, and that North Korean military units have been deployed to the Kursk”, said the NATO Secretary General. The Pyongyang-Moscow axis would not only represent a “significant escalation”, but also a “dangerous expansion of the Russian war of aggression“.
Shortly before, Rutte had exchanged views with high-ranking representatives of the South Korean intelligence service and the Ministry of Defense. The intelligence service assumes that North Korea will send 10,000 soldiers to Russia by December. Around 3,000 are believed to already be in the country and are being prepared for a war mission. Initial estimates suggest that these are not the usual foot soldiers of the 1.3 million-strong People’s Army – those who are often malnourished and poorly trained.
Instead, it is believed that dictator Kim Jong-un is deploying a total of four brigades from the notorious 11th Army Corps of the North Korean People’s Army – a special unit of at least 40,000 soldiers with skills comparable to those of the US Army’s Rangers. “These units are probably North Korean elite soldiers who have certain special skills“, commented Chun In Bum, a retired lieutenant general in the South Korean army, recently. Kim had personally inspected units of the 11th Army Corps at least twice since September.
North Korea also likely supplies Russia with military technology. A recent study by the Friedrich Naumann Foundation on Monday estimates North Korean arms deliveries since the start of the full-scale war of aggression against Ukraine to be between $1.7 and $5.5 billion. The figures are based on intelligence reports and leaked documents.
The cooperation brings North Korea urgently needed foreign currency. The Central Bank in Seoul estimates North Korea’s economy to be just 23 billion US dollars. Kim’s mercenaries in Russia provide the regime with additional capital.
Beijing probably does not take kindly to the unprecedented rapprochement between Pyongyang and Moscow, if only because it reduces North Korea’s dependence on its powerful neighbor China. However, although China’s President Xi Jinping has always spoken out against the “bloc formation” of the Cold War era, the CP leadership has refrained from public criticism.
So far, the Chinese Foreign Ministry has tried to avoid the issue. In response to questions about North Korean soldiers in Russia, it simply says: “China is not aware of the situation.” However, reading between the lines reveals: The Chinese ambassador in Pyongyang, for example, was absent from a ceremony commemorating the end of the Korean War – just a few weeks after Kim and Putin signed a comprehensive military pact.
Because of its political sensitivity, the topic is treated with caution in China’s academic circles anyway. “Under immense pressure, North Korea and Russia are striving to restore Cold War-era blocs (…) with a strong intention of drawing China into their camp,” comments Feng Yujun, a historian at the renowned Peking University. But it is precisely this plan that is doomed to failure. He argues that the strength of Russia and North Korea is not enough to challenge NATO and its partner states in East Asia. Feng believes that Russia and North Korea could achieve short-term advantages, but the strategic disadvantages would outweigh this in the long term. He concludes that China should be careful not to cause unnecessary trouble.
But the fact is that the close cooperation between the neighbors poses an increasing potential threat to the region itself. “The Ukraine war has worsened the security situation in East Asia. Russia and North Korea are working to destabilize the international order,” said Frederic Spohr, head of the Friedrich Naumann Foundation Korea.
That is why Seoul wants to put the issue on the international agenda. North Korea’s soldiers in Russia have been the dominant topic for days now. It dominates newspaper front pages, opens the evening news on television and mobilizes the population to hold public rallies. The growing financial leeway for the North Korean regime and the combat experience of its soldiers are reasons why concerns about an escalation with the North are currently on the rise again in South Korea.
How Seoul should deal with this is a controversial issue in the country. For instance, the political left clearly opposes rapprochement with Ukraine – for fear of being drawn into an escalating conflict. The president “shouldn’t engage South Korea in a proxy war with North Korea to cause conflict in a faraway land,” said party leader Park Chan-dae, who leads the opposition Minjudang. Some members of parliament even believe that President Yoon Suk Yeol’s tough stance has actually pushed North Korea to forge closer ties with Russia. Fabian Kretschmer
The regulation on EU tariffs on electric cars from China is expected to be published in the Official Journal of the EU on Wednesday afternoon. And by Thursday, the time has come: Manufacturers will have to pay tariffs of up to 35 percent on imported vehicles, unless the Commission and the Chinese government agree on other remedial measures before then. However, there are currently few signs of this happening.
The EU side wants assurances from manufacturers that they will not sell their models below a specific minimum price in Europe. However, Beijing rejected this – probably also out of concern that this would set a precedent for other industries. On Monday, the Beijing Ministry of Commerce once again warned the Commission against negotiating directly with manufacturers.
It remains to be seen how Beijing will react to the countervailing duties. For its part, the government might get serious and impose higher tariffs on EU brandy, pork and dairy products. The Ministry of Trade also suggested higher import duties on cars with an engine capacity of 2.5 liters or more – which would be a nightmare for German premium manufacturers.
However, the Chinese leadership is unlikely to be interested in allowing the trade conflict with the Europeans to escalate shortly before the US presidential election. If Donald Trump wins the election there, Beijing could still need the EU. It is therefore more likely that Brussels and Beijing will continue to negotiate beyond Wednesday, as Commission President Ursula von der Leyen had already offered. tho
When it comes to economic slowdowns, things often get worse before they get better. This is being borne out in China, following the government’s introduction in late September of its biggest stimulus package since the COVID-19 pandemic.
The government’s announcement took many by surprise, but abrupt policy shifts are nothing new for China. The regulatory crackdown on the internet sector in 2021, the end of the zero-COVID policy in 2022, and the changes to fertility rules since 2014 were similarly sharp reversals.
In my recent book, High Wire: How China Regulates Big Tech and Governs Its Economy, I explain that Chinese policymaking has three defining features: hierarchy, volatility, and fragility. Sudden and dramatic policy shifts are made possible by China’s centralized decision-making structures, in which policy is dictated from the top down (hierarchy). Policies tend to follow a cyclical pattern, with often-sharp swings between tightening and easing (volatility). And, even when well-intentioned, they often generate unintended consequences, which may take so long to materialize that, by the time the authorities grasp them, reversing course carries high costs (fragility).
China’s delayed response to the looming threat of deflation fits squarely within this pattern. Though the warning signs have been apparent for more than a year, the government was reluctant to take bold steps to jump-start growth, for a few (legitimate) reasons. Most notably, the authorities are acutely aware of the need to shift away from the economy’s traditional reliance on real-estate and infrastructure investment, toward more sustainable sources of growth, like high-tech innovation.
It does not help that China is still grappling with the effects of the massive 2008 stimulus, especially excessive debt accumulation among local governments and state-owned enterprises – a trend that pushed the country to a critical threshold of systemic financial risk a few years ago. In addition, China’s top leadership worries that consumption-driven growth could pave the way for a welfare state, which they viewed as wasteful and misaligned with their long-term vision of China as a self-reliant industrial and technological powerhouse.
So, rather than heed calls for bold stimulus measures, China’s government took only modest steps to stave off economic decline. Predictably, these steps did little to address the deflation threat. Meanwhile, policymakers focused on maintaining fiscal discipline while continuing to invest in production, even though this exacerbated the overcapacity that, in sectors like solar panels and electric vehicles, is fueling trade tensions with the rest of the world.
Now, China is staring down the barrel of a Japan-style “lost decade” of deflation and stagnation. And the longer deflation persists, economists warn, the costlier it will be to reverse. Fortunately, China’s leaders finally seem to be listening: in a dramatic shift, the government has fully mobilized its monetary and fiscal tools to rescue the faltering economy.
This was the right move. A supercharged stimulus effort is exactly what China needs at this point. But it is not without its risks. The stock market responded to the stimulus with a powerful rally, and equities recorded their best week since 2008. With investors expecting the government to roll out more fiscal measures to prop up the economy, speculation is running rampant.
The fear now is that this sudden injection of capital into the economy could create stock-market bubbles, sowing the seeds of the next financial crisis. If this risk materializes, Chinese policymakers will once again face a crisis-management situation that resembles a game of Whac-A-Mole: as soon as one crisis is quashed, another emerges.
To avoid this outcome, China must take steps to minimize the unintended consequences of its policy interventions, such as creating mechanisms for obtaining real-time, accurate feedback that can guide mid-course corrections before bubbles form and crises erupt. More fundamentally, China must break its habit of hasty and dramatic policy shifts, based on top-down decrees, and return to the approach that served it so well in the past: gradual and incremental reforms, based on decentralized policy experimentation.
Such experimentation was a hallmark of the first three decades of China’s market-reform process, when the economy achieved year after year of double-digit GDP growth. By empowering sub-national authorities to leverage local knowledge and test new ideas, the central government ensured that policy innovation flourished. In recent years, however, the central government has increased its reliance on sweeping top-down decision-making, to the economy’s detriment.
Bold stimulus may buy China time, but it won’t deliver lasting prosperity. For that, China must embrace the kind of decentralized governance that powered its rise. This means restoring local governments’ autonomy and encouraging bottom-up initiatives through which authorities test solutions tailored to their regions’ circumstances. The question is whether Beijing is prepared to cede any control in its quest to secure greater long-term command over the economy.
Angela Huyue Zhang, Professor of Law at the University of Southern California, is the author of High Wire: How China Regulates Big Tech and Governs Its Economy (Oxford University Press, 2024) and Chinese Antitrust Exceptionalism: How the Rise of China Challenges Global Regulation (Oxford University Press, 2021).
Copyright: ProjectSyndicate, 2024.
Editorial note: Now more than ever, discussing China means controversial debates. At China.Table we want to reflect the diversity of opinions to give you an insight into the breadth of the debate. Opinions do not reflect the views of the editorial team.
Halloween celebrations are not permitted on the streets of Shanghai this year. The authorities want to prevent people from expressing social criticism through their costumes, as they did last year – like this young man who commented on the grotesque character of the Covid lockdowns with a lance-sized Q-tip. The authorities set up barriers on Julu Road, where the biggest crowds gathered in 2023, on Friday. On Saturday, police officers hauled away costumed people and forced them to unmask, even if they were only wearing cat ears. “Festivities must not disrupt public order,” explained a city spokesperson, adding that anyone wanting to celebrate Halloween should go to Disneyland, where an officially announced Halloween party is taking place.
So far, China’s presence in the world has been most clearly articulated through the “Made in China” label and, of course, countless Chinese restaurants all over the planet. In the coming years, Chinese ideas and concepts could also influence the world more. This is the thesis of the new book “The Idea of China: Chinese thinkers,” written by a team of authors from the European Council on Foreign Relations (ECFR).
Slogans such as “democratization of international relations” may sound meaningless to outsiders, but they actually contain complex ideas. In this case, it describes Beijing’s attempt to reinterpret established concepts such as human rights, democracy and sovereignty in the Communist Party’s favor. This also includes all attempts to undermine what China often describes as “US hegemony.”
Alicja Bachulska is co-author of the book and explains in an interview with Angela Köckritz why Chinese intellectuals are trying to combine Marxism with AI and why the narrative of green change sounds so much more positive in China than in the West.
Meanwhile, Fabian Kretschmer looks at the security situation in East Asia, where cooperation between Russia and North Korea is viewed with suspicion – no doubt also by Beijing. After all, the People’s Republic has to watch as North Korea frees itself to some extent from its dependence on China thanks to foreign currency from Moscow.
A stronger North Korea also increases the risk of escalation on the Korean peninsula. Despite having its own border with North Korea, Russia would have fewer problems with such a conflict than Beijing, where a hotspot could emerge in its own backyard.
In your new book “The Idea of China: Chinese Thinkers,” which you co-authored with Mark Leonard, Director of the European Council on Foreign Relations (ECFR), and Janka Oertel, Director of the ECFR Asia Program, you present Chinese thinkers and ideas. What was the idea behind the book?
Our main idea behind the book was to bring ideas originating in China under Xi Jinping closer to non-Chinese audiences. Essentially, if the last few decades have been characterized by the spread of Chinese goods and capital, the coming decades could be strongly influenced by Chinese ideas. Many of the “Chinese solutionists” – as we call them – want to create distinctively Chinese ideas to respond to the questions of the age of uncertainty – the period of “great changes unseen in a century,” as Xi Jinping likes to put it.
This is a rather vacuous sounding term, but it is of huge importance for the leadership.
It is Beijing’s diagnosis of the current state of the international order, the global political, economic, technological and cultural shifts. Beijing needs to navigate through this era to secure regime stability and prosperity for China’s population. In this context, security is key
While “Chinese solutionists” work for the system and understand its limitations, they do not have a complete monopoly over knowledge-making in China. Other voices, often marginalized or operating from abroad, try to bring new perspectives into this debate. We also tried to reach out to them – that is why the chapter “People” is heavily focused on topics such as feminism, alternative identities, and discourse power.
Another term is the so-called democratization of international relations.
China’s political lexicon shares this concept with Russia. It is essentially about reclaiming the meaning of some well-established concepts, mostly originating in the West, and giving them a new meaning in line with the interests of the leadership. This concept stands for all efforts conducive to the weakening of what many in China see as “US hegemony.” Yet, in the systemic context, it is about strengthening the CCP’s ability to assert its own rules over the interpretation of basic liberal democratic notions such as human rights, sovereignty, multilateralism, etc.
The Chinese leadership is striving for a utopian future. What does it look like?
Its goal is to re-write the rules of the game for China to become a global leader in AI, the green transition, and, potentially in the long run, the international financial system. Chinese intellectuals are trying to merge seemingly contradictory ideas, for example Marxism and the study of AI, to create an intellectual basis for the authorities to use
As Janka Oertel has put it: “If Chinese technology companies provide the backbone of the green and digital transition, state actors’ access to personal data will be eased, and data flows will increasingly be routed through Chinese servers for updates, maintenance, and system security.” What might sound like a utopia to the authorities in Beijing might easily turn into a dystopia for the Europeans.
In the West, discussions about climate action often resonate with a sense of loss. In China, the narrative of green modernity sounds quite optimistic.
The authorities in China, alongside many intellectuals, are trying to give a positive spin to the debate on climate progress. Beijing does not emphasize the need to de-growth. Quite the contrary, the Chinese leadership tries to make the case that development and emissions reductions are possible at the same time.
The Chinese leadership attempts to create a new model of financial architecture to better serve its interests. What could it look like?
Under current circumstances, the debate on China’s financial power is the most controversial because of the overall slowdown in Chinese economy and the political gravitas of the topic. The authorities do not trust financial markets, which translates into an underdeveloped stock market and limited interest in liberalizing the renminbi. At the same time, they want to make the renminbi strong enough to be useful in case of a major conflict and make it attractive for others to use to hedge their US exposure.
The CCP is very keen to create a national identity that supports its goals. Where does it draw its inspiration from?
Against the backdrop of growing complexity and economic downturn, Beijing wants to build a self-image of China, and Chinese people, that are strong and proud, able to “eat bitterness.” Essentially, it is about fostering an identity that could endure in an era of prolonged uncertainty.
These ideas, however, might not be that easily digestible to younger audiences. It is by now clear that many alternative identities have emerged over the years in China, with concepts such as “involution” and “lying flat” becoming increasingly mainstream and reflecting the fact that many young people are opting out of the rat race and are not that willing to subscribe to the official line.
This ideal identity also includes an ideal family.
China under Xi has experienced a revival of traditional norms and related narratives. Challenged by the demographic crisis, the authorities are trying to convince women to have more children, either by shaming unmarried and childless women as “leftovers” or by creating encouraging stories about the seemingly bright side of the neo-Confucian revival. The authorities are cracking down on organized feminist movements, but they have so far met with little success. The popularity of feminism-inspired works of culture, such as films, series, and books, testifies to the fact that gender discussions are far from extinct in China
Alicja Bachulska is Policy Fellow at the European Council on Foreign Relations. You can download the book “The Idea of China” for free here.
At 12 p.m. sharp on Monday afternoon, Mark Rutte walked purposefully towards the podium at the NATO headquarters. “Today, I can confirm that North Korean troops have been sent to Russia, and that North Korean military units have been deployed to the Kursk”, said the NATO Secretary General. The Pyongyang-Moscow axis would not only represent a “significant escalation”, but also a “dangerous expansion of the Russian war of aggression“.
Shortly before, Rutte had exchanged views with high-ranking representatives of the South Korean intelligence service and the Ministry of Defense. The intelligence service assumes that North Korea will send 10,000 soldiers to Russia by December. Around 3,000 are believed to already be in the country and are being prepared for a war mission. Initial estimates suggest that these are not the usual foot soldiers of the 1.3 million-strong People’s Army – those who are often malnourished and poorly trained.
Instead, it is believed that dictator Kim Jong-un is deploying a total of four brigades from the notorious 11th Army Corps of the North Korean People’s Army – a special unit of at least 40,000 soldiers with skills comparable to those of the US Army’s Rangers. “These units are probably North Korean elite soldiers who have certain special skills“, commented Chun In Bum, a retired lieutenant general in the South Korean army, recently. Kim had personally inspected units of the 11th Army Corps at least twice since September.
North Korea also likely supplies Russia with military technology. A recent study by the Friedrich Naumann Foundation on Monday estimates North Korean arms deliveries since the start of the full-scale war of aggression against Ukraine to be between $1.7 and $5.5 billion. The figures are based on intelligence reports and leaked documents.
The cooperation brings North Korea urgently needed foreign currency. The Central Bank in Seoul estimates North Korea’s economy to be just 23 billion US dollars. Kim’s mercenaries in Russia provide the regime with additional capital.
Beijing probably does not take kindly to the unprecedented rapprochement between Pyongyang and Moscow, if only because it reduces North Korea’s dependence on its powerful neighbor China. However, although China’s President Xi Jinping has always spoken out against the “bloc formation” of the Cold War era, the CP leadership has refrained from public criticism.
So far, the Chinese Foreign Ministry has tried to avoid the issue. In response to questions about North Korean soldiers in Russia, it simply says: “China is not aware of the situation.” However, reading between the lines reveals: The Chinese ambassador in Pyongyang, for example, was absent from a ceremony commemorating the end of the Korean War – just a few weeks after Kim and Putin signed a comprehensive military pact.
Because of its political sensitivity, the topic is treated with caution in China’s academic circles anyway. “Under immense pressure, North Korea and Russia are striving to restore Cold War-era blocs (…) with a strong intention of drawing China into their camp,” comments Feng Yujun, a historian at the renowned Peking University. But it is precisely this plan that is doomed to failure. He argues that the strength of Russia and North Korea is not enough to challenge NATO and its partner states in East Asia. Feng believes that Russia and North Korea could achieve short-term advantages, but the strategic disadvantages would outweigh this in the long term. He concludes that China should be careful not to cause unnecessary trouble.
But the fact is that the close cooperation between the neighbors poses an increasing potential threat to the region itself. “The Ukraine war has worsened the security situation in East Asia. Russia and North Korea are working to destabilize the international order,” said Frederic Spohr, head of the Friedrich Naumann Foundation Korea.
That is why Seoul wants to put the issue on the international agenda. North Korea’s soldiers in Russia have been the dominant topic for days now. It dominates newspaper front pages, opens the evening news on television and mobilizes the population to hold public rallies. The growing financial leeway for the North Korean regime and the combat experience of its soldiers are reasons why concerns about an escalation with the North are currently on the rise again in South Korea.
How Seoul should deal with this is a controversial issue in the country. For instance, the political left clearly opposes rapprochement with Ukraine – for fear of being drawn into an escalating conflict. The president “shouldn’t engage South Korea in a proxy war with North Korea to cause conflict in a faraway land,” said party leader Park Chan-dae, who leads the opposition Minjudang. Some members of parliament even believe that President Yoon Suk Yeol’s tough stance has actually pushed North Korea to forge closer ties with Russia. Fabian Kretschmer
The regulation on EU tariffs on electric cars from China is expected to be published in the Official Journal of the EU on Wednesday afternoon. And by Thursday, the time has come: Manufacturers will have to pay tariffs of up to 35 percent on imported vehicles, unless the Commission and the Chinese government agree on other remedial measures before then. However, there are currently few signs of this happening.
The EU side wants assurances from manufacturers that they will not sell their models below a specific minimum price in Europe. However, Beijing rejected this – probably also out of concern that this would set a precedent for other industries. On Monday, the Beijing Ministry of Commerce once again warned the Commission against negotiating directly with manufacturers.
It remains to be seen how Beijing will react to the countervailing duties. For its part, the government might get serious and impose higher tariffs on EU brandy, pork and dairy products. The Ministry of Trade also suggested higher import duties on cars with an engine capacity of 2.5 liters or more – which would be a nightmare for German premium manufacturers.
However, the Chinese leadership is unlikely to be interested in allowing the trade conflict with the Europeans to escalate shortly before the US presidential election. If Donald Trump wins the election there, Beijing could still need the EU. It is therefore more likely that Brussels and Beijing will continue to negotiate beyond Wednesday, as Commission President Ursula von der Leyen had already offered. tho
When it comes to economic slowdowns, things often get worse before they get better. This is being borne out in China, following the government’s introduction in late September of its biggest stimulus package since the COVID-19 pandemic.
The government’s announcement took many by surprise, but abrupt policy shifts are nothing new for China. The regulatory crackdown on the internet sector in 2021, the end of the zero-COVID policy in 2022, and the changes to fertility rules since 2014 were similarly sharp reversals.
In my recent book, High Wire: How China Regulates Big Tech and Governs Its Economy, I explain that Chinese policymaking has three defining features: hierarchy, volatility, and fragility. Sudden and dramatic policy shifts are made possible by China’s centralized decision-making structures, in which policy is dictated from the top down (hierarchy). Policies tend to follow a cyclical pattern, with often-sharp swings between tightening and easing (volatility). And, even when well-intentioned, they often generate unintended consequences, which may take so long to materialize that, by the time the authorities grasp them, reversing course carries high costs (fragility).
China’s delayed response to the looming threat of deflation fits squarely within this pattern. Though the warning signs have been apparent for more than a year, the government was reluctant to take bold steps to jump-start growth, for a few (legitimate) reasons. Most notably, the authorities are acutely aware of the need to shift away from the economy’s traditional reliance on real-estate and infrastructure investment, toward more sustainable sources of growth, like high-tech innovation.
It does not help that China is still grappling with the effects of the massive 2008 stimulus, especially excessive debt accumulation among local governments and state-owned enterprises – a trend that pushed the country to a critical threshold of systemic financial risk a few years ago. In addition, China’s top leadership worries that consumption-driven growth could pave the way for a welfare state, which they viewed as wasteful and misaligned with their long-term vision of China as a self-reliant industrial and technological powerhouse.
So, rather than heed calls for bold stimulus measures, China’s government took only modest steps to stave off economic decline. Predictably, these steps did little to address the deflation threat. Meanwhile, policymakers focused on maintaining fiscal discipline while continuing to invest in production, even though this exacerbated the overcapacity that, in sectors like solar panels and electric vehicles, is fueling trade tensions with the rest of the world.
Now, China is staring down the barrel of a Japan-style “lost decade” of deflation and stagnation. And the longer deflation persists, economists warn, the costlier it will be to reverse. Fortunately, China’s leaders finally seem to be listening: in a dramatic shift, the government has fully mobilized its monetary and fiscal tools to rescue the faltering economy.
This was the right move. A supercharged stimulus effort is exactly what China needs at this point. But it is not without its risks. The stock market responded to the stimulus with a powerful rally, and equities recorded their best week since 2008. With investors expecting the government to roll out more fiscal measures to prop up the economy, speculation is running rampant.
The fear now is that this sudden injection of capital into the economy could create stock-market bubbles, sowing the seeds of the next financial crisis. If this risk materializes, Chinese policymakers will once again face a crisis-management situation that resembles a game of Whac-A-Mole: as soon as one crisis is quashed, another emerges.
To avoid this outcome, China must take steps to minimize the unintended consequences of its policy interventions, such as creating mechanisms for obtaining real-time, accurate feedback that can guide mid-course corrections before bubbles form and crises erupt. More fundamentally, China must break its habit of hasty and dramatic policy shifts, based on top-down decrees, and return to the approach that served it so well in the past: gradual and incremental reforms, based on decentralized policy experimentation.
Such experimentation was a hallmark of the first three decades of China’s market-reform process, when the economy achieved year after year of double-digit GDP growth. By empowering sub-national authorities to leverage local knowledge and test new ideas, the central government ensured that policy innovation flourished. In recent years, however, the central government has increased its reliance on sweeping top-down decision-making, to the economy’s detriment.
Bold stimulus may buy China time, but it won’t deliver lasting prosperity. For that, China must embrace the kind of decentralized governance that powered its rise. This means restoring local governments’ autonomy and encouraging bottom-up initiatives through which authorities test solutions tailored to their regions’ circumstances. The question is whether Beijing is prepared to cede any control in its quest to secure greater long-term command over the economy.
Angela Huyue Zhang, Professor of Law at the University of Southern California, is the author of High Wire: How China Regulates Big Tech and Governs Its Economy (Oxford University Press, 2024) and Chinese Antitrust Exceptionalism: How the Rise of China Challenges Global Regulation (Oxford University Press, 2021).
Copyright: ProjectSyndicate, 2024.
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Halloween celebrations are not permitted on the streets of Shanghai this year. The authorities want to prevent people from expressing social criticism through their costumes, as they did last year – like this young man who commented on the grotesque character of the Covid lockdowns with a lance-sized Q-tip. The authorities set up barriers on Julu Road, where the biggest crowds gathered in 2023, on Friday. On Saturday, police officers hauled away costumed people and forced them to unmask, even if they were only wearing cat ears. “Festivities must not disrupt public order,” explained a city spokesperson, adding that anyone wanting to celebrate Halloween should go to Disneyland, where an officially announced Halloween party is taking place.
