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Is China turning inward?

Robert Wihtol
Fifty years ago, China started to open up. Now it is once again isolating itself
Adjunct faculty at the Asian Institute of Management
National emblem of the People's Republic of China

Half a century ago, the Cultural Revolution was tearing China apart. The country was poor, chaotic and isolated from the rest of the world. After breaking with the Soviet Union in 1960, China had few friends.

Then everything changed. On 25 October 1971, the United Nations (UN) General Assembly accepted the People’s Republic as China’s sole legitimate representative, at the same time ousting Taiwan from the UN. Early the following year, US president Richard Nixon visited China to meet Mao Zedong. The visit is often referred to as the week that changed the world.

Subsequently, China rapidly expanded its diplomatic relations. In December 1978, China’s supreme leader Deng Xiaoping announced the opening of China’s economy.

In 1980, the People’s Republic was accepted into the International Monetary Fund and the World Bank, and the funds started to flow. China established special economic zones in key coastal cities to attract foreign investment.

In 40 years, China’s GDP per capita increased from $200 to nearly $9,000. During the same period, almost 600 million people left the country’s rural areas. China urbanised, industrialised and prospered. China also internationalised, and in 2001 was accepted into the World Trade Organization.

Moving gears

When Xi Jinping came to power in 2012, China’s internationalisation shifted into high gear. At the start of his first term, Xi travelled abroad more frequently than any other world leader. In 2015, Queen Elizabeth hosted a state banquet in Xi’s honour at Buckingham Palace, and in 2017 president Donald Trump entertained him at his Mar-a-Lago estate in Florida.

In 2017, Xi was the first Chinese head of state to participate in the World Economic Forum in Davos. Addressing the global elite gathered at the exclusive Alpine resort, Xi talked about globalisation, free trade, the strategic development goals and the Paris climate accords.

The speech could have been given by any world leader, while president-elect Trump stayed away from Davos. The general impression was that China was taking over world leadership, while the US was withdrawing.

A changed approach?

During the COVID crisis, China has once again turned inward.

China has taken a zero-tolerance stance to managing the pandemic. In doing so, it has almost completely closed its borders, and is implementing a strict quarantine regime. It is unlikely to ease restrictions anytime soon.

Concerned about the slowing economy, last year Xi introduced an economic policy of “dual circulation” that gives priority to domestic consumption “while remaining open to international trade and investment”. The new policy emphasises self-reliance, insulates the domestic economy and is expected to gradually replace China’s export-based growth.

China’s military and diplomatic assertiveness have triggered a strong counter reaction. The US and its English-speaking allies have enhanced their intelligence cooperation in the context of “Five Eyes”, while the “Quad”—a security group including Australia, India, Japan and the US—is actively expanding its operations throughout the Indo-Pacific.

In response to China’s maritime challenge, Australia recently ordered eight nuclear-powered submarines from the US. The UK and the US will provide technical support under the newly established AUKUS pact. The deal has raised China’s hackles.

Relations are also tense on other fronts. China’s financial regulators recently cracked down on the retail giant Alibaba, the fintech Ant-group and other private enterprises, rattling investors.

Chinese education authorities, again, are limiting the role of Western values in the education system and cutting ties between Chinese and Western universities. They recently introduced “Xi Jinping Thought” in the school curriculum.

The flow of information has also been impacted. China-based foreign correspondents face increasingly tight restrictions, and many have left the country. Google and Facebook pulled out years ago, and this November, Yahoo also called it quits, blaming China’s “increasingly challenging business and legal environment”. This followed closely on the heels of Microsoft’s decision to remove LinkedIn from China, which it said was owing to “a significantly more challenging operating environment and greater compliance requirements”.

Xi has not left the country since January 2020. While other world leaders recently attended the G20 summit in Rome and the COP26 meeting in Glasgow, Xi stayed away. At the same time, the central committee of the Chinese Communist Party was meeting to pave the way to extend Xi next year for a third five-year term.

For nearly 50 years, China has opened up. Will the world now need to come to terms with a China that is turning inward? And if so, what are the repercussions for the rest of the world?

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Robert Wihtol
Adjunct faculty at the Asian Institute of Management

Robert Wihtol has worked on development issues in Asia and the Pacific for nearly four decades, as both an international civil servant and an academic. He worked for the Asian Development Bank for 20 years, including as Country Director for China and Director General for East Asia. He currently teaches at the Asian Institute of Management in Manila and the Asia-Pacific Finance and Development Institute in Shanghai, and runs staff training programs at the ADB. He also chairs the board of Finland's development fund, Finnfund.

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