2019 FORECASTS (XVI) - CHINA

China’s main evolution characteristic, for 2019, as well as for the years to come, will be the political, economic and security competition with US. The so-called “Trade War” or the 2018 divergences from South China Sea are just an intermediate of this competition. According to a series of evaluations made in 2018 across the Economic Forum from Davos, it can be contented that until 2050, world’s biggest economies will be: China, India, US, Brazil and Indonesia, following this order.

We shall not forget that between 2017-2019, China’s contribution at GDP’s global growth is estimated to be approximately 35%, in comparison with US’s 18% and EU’s only 8%.

China is currently developing world’s biggest investment: Belt and Road Initiative, worth of $900 billion, for the creation of new highways, railways and ports. The projects across this huge investment are conducted on the territory of 65 countries. The goal is to directly connect trade, under the Chinese control, with the entire Asia, Middle East, Africa and Europe. The funding of the Chinese government is ensured by state banks and a small contribution from the Asian Infrastructure Investments Bank. This great project, initiated and strongly supported by president Xi Jinping, will continue also during 2019, China having a huge advantage in conducting imports and exports to and from the entire world.

After signing, in 2015, the Paris Treaty regarding climatic changes, China’s president promised to transform China into a “green house”. Until 2025 all new vehicles will be electric. In order to reduce charcoal as main energy source, it will be extended the high-speed electric railways system, given that China already has 60% of world’s length for this type of systems. The efforts for protecting the environment made Beijing’s air 30% fresher in 2018’s winter than in 2017.

China is, by far, the world’s leader in digital economy and credit cards payments. 90% from China’s population is using this type of payment. The online commerce reached some unbelievable levels, which cannot be compared with other states of the world. The Alibaba company made, in only one day, sales worth of $25 billion, a lot more than the US’s Black Friday best-sales. This will continue also not only in 2019, but also in the years to come.

President Xi Jinping is really concerned with mass education, but also the high-level one. Two universities from China are listed among world’s best universities and other 40 are quite the same.

2018 was a tough year for China-US relations. US president, Donald Trump, probably wanted to apply the same principles alike in the relation with EU, without considering that the commercial balance disequilibrium between these two big powers is smaller than in Germany’s case, and US would suffer more due to China’s products increase, than China from stopping the US market products.  

According to what is mentioned above, People’s Daily, Communist Party’s main publication, wrote recently an article according to which China would not be interested to be US’s enemy. China’s Commerce Ministry states that a delegation from the US Department of Commerce would come to China for “productive and constructive” discussions with a Chinese group work.

These are just small signs that both parts are seeking for taking down the economic relations. This is why we can state that 2019 will be the year of deescalating tensions between trade relationships. China will want to upkeep the dialogue with US open, firstly in economic relations. It will probably want to buy a large volume of US products and will decrease the rates for the investments in China. This will be supported also by the reform from the public-private sector, recommending foreign investments in financial, auto and energy domains. Moreover, it will be raised all kinds of restrictions in important fields, like healthcare and education.

As for the relation with the US, but other countries also, China will carefully control the evolution of the national currency, yuan, avoiding its decrease through reducing rates for the US investments and goods in China. They will seek to impose yuan as tender in the transactions with states which are on Belt and Road Initiative. In order not to depend on the US trade exchanges, China will quickly develop economic relations with other states in the region, through free trade agreements like the Regional Comprehensive Economic Partnership, in Indo-Pacific area or the trilateral negotiations with Japan and South Korea. It will extend the trade relations with South-East Asia states, like Malaysia, Indonesia or Filipines, as these depend on China in a series of fields, firstly being the high-tech one. Given the financial volatility of these states, in order to ensure great trade contracts, these will seek to get financings from China’s banks.

If US will show availability for the economic negotiations, it will worsen the security relations between the two states too. During the long trade negotiations, probably, there will be military tensions from both sides in the South China Sea, as a method to reach their economic targets . Actually, when they announced that the economic negotiations with US will start, Xi Jinping gave the first order for 2019: the rise of the emergency condition for the Chinese army. US’s fleet presence in the South China Sea and the Taiwan bays will be more and more solid, challenging China to increase the level of readiness on short-term, and to build more and more sophisticated defence systems, on long term.

In order to strengthen the security relation with the US, China will develop cooperation security partnerships with Japan, India, but also with ASEAN (Association of Southeast Asian Nations) member states, trying to diminish US’s influence in the region.

As a response, politically speaking, US will raise Taiwan’s status from the international organizations, will support the armament acquisition, will ensure the naval patrol in coastal area, ignoring the “One China” political principle, supported by China. In 2019, US will probably organize a visit on the Navy ship in Taiwan, increasing the tensions in South China Sea. At the same time, it will develop the cooperation with Japan, India and Australia, where China is actually developing bilateral trade projects. The US-ASEAN military exercises, as well as the cooperation in defense area with Vietnam will be US’s attempts to limit China’s influence.

As for the relation with Russia, China will allocate huge funds in 2019 to bail it out, in order to compensate the loses after the sanctions. It will do anything to convince Russia to make investments in China for artificial intelligence, high-tech, energy resources, transports and other common interest fields. Of course, Russia will invest in the military domain, but also in aeronautics and missiles’ techniques.

 Modifying or giving up to a series of agreements for guns control, will actually intensify the arms race between Russia and US, a process that China will join as well. Although from a military perspective China will not be global power, on short and medium term, economically speaking it is obvious that the Chinese model is a successful one.

World’s liberal world is starting to fail. They cannot solve the complexity of economic and security risks which are emerging from nowhere. They are starting to consider new forms of democracy, capable to promptly respond to world’s economic changes. World’s states development does not follow the same rhythm, firstly because of the different ways to apply the economic systems, often inadequate to their national inheritance. However, Chinas’ current system seems to work. This does not mean that it should be applied all over the world. Regardless, seeking for solutions for a new world economic order will certainly be analyzed an applied by the Sunrise country.