- IMD Business School

The Trump effect on China

IMD Professor Jean-Pierre Lehmann on Donald Trump and prospects for democracy and xenophobic populism in China
7 min.
March 2016

On this Super Tuesday, with the probable triumph once again of Donald Trump and an ever-stronger prospect that his long march to defeat the Republican Party establishment succeeds, it is high time to think about the Trump effect on China.

Millions of Chinese are watching the spectacle, including the roughly 2 ½ million citizens of the People’s Republic of China (PRC) living in the United States, but also millions more both at home and abroad. No doubt with some bemusement they are asking, “So this is democracy?”

Given the xenophobic populism that has become the hallmark of the Trump campaign, one must wonder how a similar mindset would play out in China.
Things are not going well in China. It is not just that the economy is in trouble and the environment stinks – literally and metaphorically – but that the CCP is losing its legitimacy.

Under Mao Zedong’s rule (1949-1976), and its personality cult, it did not matter too much that the management of the economy was disastrous.
But since the reforms instituted by Deng Xiaoping, the CCP has not claimed legitimacy based on ideology. The CCP regime’s legitimacy has rested on economic growth.

No growth: no legitimacy

Having no solid growth thus hollows out the party’s legitimacy. This generates anger and resentment especially among the “aspiring classes.”

In this context, it is important to know that a favorite read among Chinese intellectuals is Alexis de Tocqueville’s “The Ancien Régime and the Revolution” (1856), in which he demonstrates that revolutions occur not when the masses are downtrodden, but when things get better.

The current situation in China is in many ways reminiscent of pre-Revolutionary France where senior members of the CCP form a sort of feudalistic; corrupt, aloof, arrogant and nepotistic aristocracy that enjoys significant privileges.

These privileges are not available to the hard-working meritocratic aspiring middle classes. The scandalous behavior of their scions, the “princelings,” can appear especially offensive.

China has a fractured society, with huge gaps, indeed chasms, between urban and rural, central and peripheral, ethnic Chinese (han) and minorities (Tibetans, Uyghurs, etc), and rich and poor. China’s inequality is at least as great, if not greater, than that of the United States.

It also has major demographic problems, including a rapidly aging population and a significant gender imbalance.

Managing global and regional (South China Sea) geopolitical challenges is not easy, especially as the PRC has few friends.

Its only ally is the Democratic People’s Republic of Korea (i.e., North Korea). As the saying goes, with friends like that, who needs enemies?

As is the case currently in the United States with the triumphal rise of Trump, all of this is highly fertile territory for xenophobic populism.

Politically fragile moment

Until the Trump phenomenon, I used to fret that the worst possible post-CCP scenario would be the emergence of a “Chinese Putin.”

But what about the emergence of a Chinese Donald Trump? After all, the standard refrain of Western policy makers and thought leaders is to urge China to embrace democracy.

Given the apparent turn of events in the United States, perhaps they should be a bit more careful of what they wish for. At a minimum, this suggests great circumspection.

The Chinese are well aware that over a century of humiliation, impoverishment and exploitation at the hands of the Western powers and Japan lies barely behind them.

Under those circumstances, the fact that, following the economic reforms of the 1980s, China decided to re-join the global community should be celebrated.

At the same time, given the scars of the past, there is a strong potentially revengeful nationalist under-current. Since this is a time, after a quarter century of upward movement, that the national revival appears under some threat, this is politically a very fragile moment.

Nationalism through populism can be transformed into xenophobia – as we know so well from bitter experiences in Europe and see currently in the United States with Trump.

Trump’s lesson for China

If the Chinese believe that they are being thwarted from getting their due place in the global sun, popular anger may boil over.

A decade ago, I was a member of a team at the World Economic Forum (WEF) assessing scenarios for China to 2025.

The two major factors that would determine the scenarios, we proposed, would be (1) the degree to which China remained committed to reforms and (2) the degree to which the international environment would be open and collaborative or closed and confrontational.

To a very considerable extent, of course, the “international environment” means Washington.

The best scenario would be one where the international environment was open and collaborative and domestic reforms in all domains – political, economic, social and environmental – were implemented.

Presciently, we entitled that scenario the “New Silk Road.”

The worst possible scenario, for which we gave no name, so alarming did it sound, was one where the international environment was closed and confrontational and reforms eventually became still born. Based on current trends, that seems where we are heading.

To prevent a populist revolutionary uprising and the emergence of Mr. Chinese Trump, the CCP is in desperate and urgent need of fundamental reform.

In the 1980s, the CCP carried out dramatically radical agrarian reform, including through setting up multiple town-and-village enterprises, but especially unleashing surplus labor that poured into the new special economic zones such as Shenzhen.

This was followed by radical industrial reforms thereby unleashing the animal spirits of entrepreneurs inspired by Deng Xiaoping’s famous dictum, “to be rich is glorious.”

Time for reform

What is now urgently needed is political reform. Many among the more progressive members of the party know that, but fighting against the entrenched interests of the new party elite is proving immensely difficult.

At the moment, the party seems reactionary. Without reforms, the days of the CCP will become increasingly numbered.

Political turbulence is likely to occur that might witness the appearance of pluralism and some form of “democracy” – democracy with Chinese characteristics, of course!

However, if the “international community” – i.e., Washington – is provocatively stoking the fires of Chinese nationalism through aggressive words and policies, especially ones that appear to thwart, exclude or indeed discriminate against China, that too will provide scope for the emergence of Mr. Chinese Trump.

To give but one example, the TPP (Trans-Pacific Partnership) is a colossal mistake. This is the case not only in respect to the policy itself – which is bad enough in excluding China – but even more so when taking into consideration the rhetoric that accompanies it.

Not ready for two Trumps

President Obama’s statement “we can’t let countries like China write the rules of the global economy, we should write those rules” is especially offensive.
What rules were we (the West and Japan) playing to when we were carving up and exploiting China? Besides, would it not be more proper in the 21st century to be writing the rules together?

One could assume that an Obama administration would be reasonably sensitive and sophisticated. It has failed the test. Imagine a Trump administration!

The Trump spectacle is frightening for America and indeed for the world, especially for China. An American Trump as leader has good chances of begetting a Chinese Trump. There is no more frightening scenario than a “G2” composed of these two Trumps.

We are not there yet and we may never get there. However, one factor that may propel us in that direction would be complacency.

The world is a dangerous place. It would be far more dangerous with one Donald Trump in Washington. With two Donald Trumps, one in Washington, one in Beijing, the prospects become cataclysmic.

Jean-Pierre Lehmann is emeritus Professor of International Political Economy at IMD. Professor Lehmann teaches on the Orchestrating Winning Performance program.

This article first appeared in The Globalist


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