Notes on the Rise of China

For all China's potential, it faces very real obstacles that it might not be ready to acknowledge

Students attend their college graduation ceremony in Shanghai's Fudan University / Reuters

I spent two days recently at the second annual FutureChina Global Forum in Singapore, a conference on major trends in China sponsored by BusinessChina, itself an organization created by former Singaporean Prime Minister Lee Kwan Yew to help his country become "the leading bilingual and bi-cultural channel for closer collaboration with China" as well as to strengthen knowledge of Chinese language and culture in Singapore itself. The theme of the Forum this year was "China in the Next Phase: Marching to a New Drumbeat." Unlike many similar gatherings about China, the participants included many speakers and audience members from China who spoke only Mandarin; simultaneous translation was provided from Mandarin into English and English into Mandarin. They also included young digital entrepreneurs from China and Singapore, such as an intrepid and refreshing 26-year old Chinese woman who edits and directs the website umiwi.com, the mayor of Chengdu, a number of Indian scholars and policy makers, and a wide range of academic experts from Hong Kong, Singapore, and China itself as well as France, Britain, and the U.S.

At many points over the two days I reached for my blackberry to tweet some interesting fact or opinion, but was unsure of the Twitter ground rules for the conference. As it happens, a number of very talented young Singaporean students were micro-blogging for Weibo, the Chinese version of Twitter. Next year, the Twitterati may also be able to follow along in some guise; for now, here are some of my take-aways.

• Singapore has a refreshingly 21st-century attitude to young Singaporeans and other foreign nationals being educated in Singapore and then going abroad (or returning home) to make their fortunes. The country treats them as living links back to Singapore who will provide a source of demand for Singaporean goods and services abroad and a deep knowledge about foreign culture when they return to Singapore.

• An analysis of the actual quality of rapidly rising number of patents in China tells a very different story than the one we usually hear about how soon China will be an innovation giant. Only 1700 Chinese patents were granted last year by the U.S. Patent and Trademark Office, which has much higher standards than the Chinese patent office, although that represents a 30 percent increase over the previous year. And in terms of deep technological innovation, some venture capitalists in Beijing estimated that it will take 20 to 30 years before China can produce a Google or an Apple.

• Water, water, water! One hundred and ten cities in China already face major water shortages, and as China's energy use goes up, China's water supplies go down -- not only from hydropower, but also because coal-fired electricity in China uses 30 trillion gallons of water; it will soon account for 40 percent of Chinese water consumption. Add to that the planned massive diversions of water from south to north and the massive droughts China is already experiencing from climate change, and China's future hinges as much on its water usage as it does on its ability to innovate.

• Instead of describing the Chinese political system as an "autocracy," some at the conference argued that we should think of it as a system of "internal pluralism," where the checks and balances are all inside the party and government structure. The Communist Party has 80 million members -- with a collective leadership of nine members, growing local power, and calls for internal party democracy, there is far more pluralism in the Chinese system than first meets the eye. This view of Chinese politics may well be overly sanguine, but it's an interesting perspective.

• Most young Chinese get their news from micro-blogging, both because it is so fast and because it is very difficult for the authorities to control or censor all of the micro-blogs at the same time; if information on a particular subject is blocked on one, then it is likely to be available on another. Individual Chinese micro-bloggers (think Twitter users in the U.S.) are also growing rapidly and getting large numbers of followers. It is a way for Chinese young people who have been uprooted from their traditional families and communities to say "pay attention to me."

• E-commerce is growing like gangbusters in China, but China has no equivalent of Fed-Ex or UPS, meaning that these new Chinese companies have to develop their own distribution networks. Imagine if Amazon had to have an Amazon parcel delivery service, E-Bay another, and every major department store that sells on line still another. As one Chinese E-commerce entrepreneur put it, "Retail is a lot of detail."

• Even as younger Chinese women enjoy rising incomes and independence, the cultural tradition of women controlling family finances remains in place. The result is that "women ARE the market," as one speaker put it, for all major consumer decisions in China. Those women in turn want to be able to shop in a way that allows them to juggle work and family, the same factors that are driving the explosion of E-commerce in this country.

• Every rising power in modern history developed an ideology to justify its more assertive behavior. Britain had the "White Man's Burden," the U.S. had "manifest destiny," and China has developed "peaceful rise" or "peaceful development." China's leaders embraced this mantra as a way of convincing both their neighbors and their own population that China's rising economic power would not and should not be accompanied by aggressive international behavior. But that was before the 2008 financial crisis and the concomitant sense among Chinese citizens that the U.S. is a declining power. China's government seems to have underestimated the strength of public confidence and nationalism, intensified by their feeling that U.S. is a power in decline.

Overall, I came away with an affirmation of my overall sense both of China's potential and of the many obstacles that both China's government and people face in achieving that potential in a straight-line trajectory. But I had one other overall reaction, which that most of the businesspeople present, from Singapore but above all from China itself, really did not want to hear about the problems. Their confidence in China's continued supersonic growth was so strong that they seemed to think it could be a self-fulfilling prophecy. In the world of markets, that can happen. But in the world of water and power shortages, sharp shifts in economic policy, political transitions, and dramatic demographic changes, confidence may not be enough. For my money, the future of China is bright, but not undimmed.