Great summary. Over here in HK, there seems to be a rapid frenzy to bring Chinese-style consumption, infrastructure, investment, supply chains and international market expansion to Southeast Asia. Chinese people are moving to Indonesia to teach Indonesians how to sell Chinese goods despite not speaking the local language, for example.
Indonesians do not see this as a national security issue. Meanwhile, my father, who's all set to retire from a factory outside Jakarta, remarks that Chinese companies and engineers are trying hard to get them to share his IP on developing dyes so that they can produce them at scale in an environmentally compliant way for the Chinese and Indonesian market.
Altasia - India is the new growth engine and it will likely be dominated by US and Chinese VCs/PEs.
What blows my mind away is that in 1978, around the time of China's opening to the world, India and China were equal in per capita income terms, and as far as the lives of the average citizen is concerned, the Chinese had it much worse after the horrors of the great leap and cultural revolution. Whatever one's views about China's political system, their exponential dizzying rise is still humanity's greatest achievement!
Seems Xi has done the impossible and united everyone from Sendai to Sydney to Sindh. Joko Wodowi and Anthony Albanese have met 3 times in the past 12 months.
As someone who lives in Altasia, I'm pretty skeptical of The Economist's prediction.
In the short term, we're in the middle of a manufacturing slump. In Q1 150,000 manufacturing workers were laid off in Vietnam alone and another 300,000 were furloughed. Perhaps another 500,000 have had hours cut. It'll take two or three years for orders to recover and staff to rehired and retrained. Most return to their villages (lower cost of living) which exacerbates the skill loss and rehiring latency.
In the longer term, the entire region suffers from the same issues seen in developed countries around the world: poor state capacity, slow roll out of infrastructure projects, and hamstrung by lack of housing.
As examples just look at how long it has taken Ho Chi Minh City to finish its new metro or new international airport. Look at the recent flooding in Vientiane, the poor transport options to the new airport TIA in Phnom Penh, more delays on Bangkok's HSR linking airports, and Manila and Jakarta continue to be among the least livable cities in the world due to traffic. (The Economist rates Manila #136 out of 173 cities in the world.)
I just don't see the sense of urgency needed for Altasia to actually become a thing.
I think this is right. Concerns about China's rapid rise on the geopolitical stage are warranted; any time there's a rising power like that, there's going to be a huge disruption in the status quo. Everything is being rocked today (still), but it is also evident that China isn't going to like take over the world.
I always go back to crusty ole Charlie Munger's viewpoint, that it would be absolutely stupid if the US and China couldn't figure out how to cooperate in some mutually beneficial way. In fact, in some ways, that's what happening, although the jockeying for power is also very real, and in direct tension with the cooperative "better angels."
the bit about greater altasian cooperation and better transit at the end reminded me of this video i saw recently, dhaka is getting a japanese-style metro and it already has massive ridership https://youtu.be/4Hpic8WMvkk
This is a very thought-provoking essay. I think you point out very well that war may be the single most important factor that could throw us all into disaster. More precisely, conflicts between major powers that escalate into larger conflicts.
We don't know yet whether the current Russo-Ukrainian War can remain localized and be defused.
We don't know yet whether the slow-simmering China-Taiwan-US conflict can also be defused, because if it comes to a boil, it will almost certainly not be containable.
Other than that I think your general optimism is realistic and achievable.
Your analysis is characteristically thoughtful in the most data-driven way. What is the significance of recent US trade data showing Mexico-Canada as No.1 share and China seemingly in retreat (for long term or temporary)? Thank you making us think.
Isn't part of Alt-Asia, ASEAN: the association of South East Asian Nations? I think there's more regional cooperation and integration than you think, and will be more planned in the future.
Would the U.S. and China still be friends instead of at each other’s throats?
If you're going to pick a metaphor from the animal kingdom, it would be far more accurate to say that the US and China are in a chronic threat posture toward each other. In terms of dogs, that means heads lowered, eyes locked, hackles starting to rise, nervous pacing, perhaps an occasional low growl.
"How much greater would China’s peak have been if Deng Xiaoping had sided with the Tiananmen Square protesters, and liberalized China’s society in addition to its economy?"
I'm not sure "China" would mean the same thing in this sort of alternative history. Deng was, if I recall, most concerned about the prospect of political fragmentation if the force of central government were weakened through the democracy movement(s) that spread to various parts of China in the spring of 1989. China's structure was in many respect like an empire on multiple levels: not only were geographically large regions like Xinjiang and Tibet dominated by ethnic minorities subdued centuries past, but sharp cultural and linguistic divides competed with common history in core regions like the southwest (centered in Sichuan), the Shanghai-dominated middle coast, and the Guangdong-dominated southeast, all with politically powerful local political actors. Periods of weak central government had led to eras of state fragmentation periodically for two millennia, the most recent being in the early 20th century.
Had Deng "sided" with the Tiananmen Square protesters, local governments would likely have seen the central government as vulnerable and the ideological foundation of the Party's dominance as damaged, and if circumstances had been favorable, they could have formed competing centers of power, as was true when Deng was a young man in the period 1912-27. (I understood this to be Deng's primary concern at the time.)
When the Gorbachev "sided" with perestroika and glasnost, the ethnic regions of the Russian empire broke off, and the tensions leading to that were manifest during the Tiananmen demonstrations (which coincided with Gorbachev's visit to China). While the USSR break-up postdated Tiananmen, Deng had reason to worry about that type of dissolution plus a dissolution of the core Han region as well.
So even if the democracy movement had somehow prevailed in 1989, I think it's unclear whether a unified China would have reaped the rewards, or whether the rewards would have been distributed among successor states, or whether the rewards would have been turned to deficits by the type of political chaos and violence that fragmentation had led to three-quarters of a century earlier.
After living a short while in China and Taiwan, I came out thinking that the most successful policy of the CCP is the Cultural Revolution. On a cultural level, China put a shotgun in its mouth, and pulled the trigger. It is now a nation without a soul, a zombie country. It is absolutely horrifying.
One concern I have about Altasia is that, unless Burma/Myanmar can be politically stabilised enough to run transit links safely through it, India/Bangladesh is effectively an island relative to Thailand/Vietnam/Laos/Cambodia/Malaya/Singapore. Obviously, Indonesia, the Philippines, Taiwan and Japan are island chains anyway, but Japan already has fixed links between the main islands, and I expect one of the great infrastructure projects of the next couple of generations to be to connect the Philippine and Indonesian islands together (and a tunnel under the Strait of Malacca to connect Indonesia to the mainland). The fewer connections that have to be made by sea (for goods) and air (for people) the better, as every transition from one mode to another (ie at a port) is just deadweight loss, and air travel is a terrible environmental idea.
Obviously, no significant numbers of passengers are going to take a train Delhi-Singapore (even a high-speed train running flat out non-stop would take ~20 hours; a more reasonable service stopping in major cities would be more like 30), but that's certainly not going to stop freight moving that way by train (or even by truck). Kolkata-Bangkok would be a very reasonable 8-10 hour overnight trip by high-speed train if it's safe to pass through Myanmar and you can get visas easily.
India (and Bangladesh, Bhutan and Nepal) being trapped between Myanmar to the East, Pakistan/Afghanistan to the West and the Himalayas (and China) to the North means that it lacks the physical links to the rest of Asia that it should have - and which it traditionally did have in early modern times, when it was the connection between the Middle East and South East Asia, when all sorts of goods and ideas flowed through the Mughal Empire in both directions.
Great Article... very poignant question: "How much greater would China’s peak have been if Deng Xiaoping had sided with the Tiananmen Square protesters, and liberalized China’s society in addition to its economy?" I hope you are right about a slow decline, but I fear that you are not.
The thing that kills totalitarian communist societies are self-inflicted wounds. This is bad enough when you are a country like Russia which at least controls food/energy so there is a somewhat stable bottom. However, there is no stable bottom for China.. it really NEEDS the rest of the world to maintain a baseline society.
On that front, as far as I can tell, the growth for China was based on:
1) Large Debt Cycle (Real Estate and related belt/road): This has led to incredible misallocation of resources. It is now about to burst, and the result will not be good (for China and likely the rest of the world).
2) Dominant position in low-value cost sensitive industries aided by currency manipulation: The world was happy to get "below-market" prices, but now the lack of "pricing power" is coming to roost. The great "decoupling" is happening...look to SE Asia and Mexico. Interestingly, it is led by Chinese companies themselves.
3) Technology catchup through IP "capture" This has run its course. Unfortunately, the key ingredients to play in the IP frontier (freedom, talent attraction, crowdsourcing of talent/ideas) are not available to Xi's China.
Yes.. there are some areas where there is world class leadership ... EVs (highly competitive) and others, but will it be enough... it is hard to believe. Further, we have already entered the realm of the lack of transparency on reality (direct government statistic are suspect), so it is likely that the situation is worse than portrayed. There are going to be ample economic/political triggers which can cause sudden, Soviet style, collapse. This will cause a great deal of pain in China and likely to the rest of world.
Yes.. a really poignant question... what if Deng's decision had been different.
Great summary. Over here in HK, there seems to be a rapid frenzy to bring Chinese-style consumption, infrastructure, investment, supply chains and international market expansion to Southeast Asia. Chinese people are moving to Indonesia to teach Indonesians how to sell Chinese goods despite not speaking the local language, for example.
https://www.bloomberg.com/news/articles/2023-07-05/tiktok-shop-emerges-as-amazon-rival-powered-by-indonesian-boom
Indonesians do not see this as a national security issue. Meanwhile, my father, who's all set to retire from a factory outside Jakarta, remarks that Chinese companies and engineers are trying hard to get them to share his IP on developing dyes so that they can produce them at scale in an environmentally compliant way for the Chinese and Indonesian market.
Altasia - India is the new growth engine and it will likely be dominated by US and Chinese VCs/PEs.
What blows my mind away is that in 1978, around the time of China's opening to the world, India and China were equal in per capita income terms, and as far as the lives of the average citizen is concerned, the Chinese had it much worse after the horrors of the great leap and cultural revolution. Whatever one's views about China's political system, their exponential dizzying rise is still humanity's greatest achievement!
Seems Xi has done the impossible and united everyone from Sendai to Sydney to Sindh. Joko Wodowi and Anthony Albanese have met 3 times in the past 12 months.
As someone who lives in Altasia, I'm pretty skeptical of The Economist's prediction.
In the short term, we're in the middle of a manufacturing slump. In Q1 150,000 manufacturing workers were laid off in Vietnam alone and another 300,000 were furloughed. Perhaps another 500,000 have had hours cut. It'll take two or three years for orders to recover and staff to rehired and retrained. Most return to their villages (lower cost of living) which exacerbates the skill loss and rehiring latency.
In the longer term, the entire region suffers from the same issues seen in developed countries around the world: poor state capacity, slow roll out of infrastructure projects, and hamstrung by lack of housing.
As examples just look at how long it has taken Ho Chi Minh City to finish its new metro or new international airport. Look at the recent flooding in Vientiane, the poor transport options to the new airport TIA in Phnom Penh, more delays on Bangkok's HSR linking airports, and Manila and Jakarta continue to be among the least livable cities in the world due to traffic. (The Economist rates Manila #136 out of 173 cities in the world.)
I just don't see the sense of urgency needed for Altasia to actually become a thing.
I think this is right. Concerns about China's rapid rise on the geopolitical stage are warranted; any time there's a rising power like that, there's going to be a huge disruption in the status quo. Everything is being rocked today (still), but it is also evident that China isn't going to like take over the world.
I always go back to crusty ole Charlie Munger's viewpoint, that it would be absolutely stupid if the US and China couldn't figure out how to cooperate in some mutually beneficial way. In fact, in some ways, that's what happening, although the jockeying for power is also very real, and in direct tension with the cooperative "better angels."
Thought provoking and well done, Noah!
the bit about greater altasian cooperation and better transit at the end reminded me of this video i saw recently, dhaka is getting a japanese-style metro and it already has massive ridership https://youtu.be/4Hpic8WMvkk
This is a very thought-provoking essay. I think you point out very well that war may be the single most important factor that could throw us all into disaster. More precisely, conflicts between major powers that escalate into larger conflicts.
We don't know yet whether the current Russo-Ukrainian War can remain localized and be defused.
We don't know yet whether the slow-simmering China-Taiwan-US conflict can also be defused, because if it comes to a boil, it will almost certainly not be containable.
Other than that I think your general optimism is realistic and achievable.
Your analysis is characteristically thoughtful in the most data-driven way. What is the significance of recent US trade data showing Mexico-Canada as No.1 share and China seemingly in retreat (for long term or temporary)? Thank you making us think.
Isn't part of Alt-Asia, ASEAN: the association of South East Asian Nations? I think there's more regional cooperation and integration than you think, and will be more planned in the future.
From what I researched there is increased regional cooperation in alt-Asia. Especially with ASEAN +3 (South Korea, Japan, China) or ASEAN+6 (India, Australia,NZ) https://open.substack.com/pub/yawboadu/p/regionalization-in-global-trade?r=garki&utm_campaign=post&utm_medium=web
Excellent analysis!
Would the U.S. and China still be friends instead of at each other’s throats?
If you're going to pick a metaphor from the animal kingdom, it would be far more accurate to say that the US and China are in a chronic threat posture toward each other. In terms of dogs, that means heads lowered, eyes locked, hackles starting to rise, nervous pacing, perhaps an occasional low growl.
"At each other's throats" means full-out combat.
Let's not let our rhetoric run wild.
"How much greater would China’s peak have been if Deng Xiaoping had sided with the Tiananmen Square protesters, and liberalized China’s society in addition to its economy?"
I'm not sure "China" would mean the same thing in this sort of alternative history. Deng was, if I recall, most concerned about the prospect of political fragmentation if the force of central government were weakened through the democracy movement(s) that spread to various parts of China in the spring of 1989. China's structure was in many respect like an empire on multiple levels: not only were geographically large regions like Xinjiang and Tibet dominated by ethnic minorities subdued centuries past, but sharp cultural and linguistic divides competed with common history in core regions like the southwest (centered in Sichuan), the Shanghai-dominated middle coast, and the Guangdong-dominated southeast, all with politically powerful local political actors. Periods of weak central government had led to eras of state fragmentation periodically for two millennia, the most recent being in the early 20th century.
Had Deng "sided" with the Tiananmen Square protesters, local governments would likely have seen the central government as vulnerable and the ideological foundation of the Party's dominance as damaged, and if circumstances had been favorable, they could have formed competing centers of power, as was true when Deng was a young man in the period 1912-27. (I understood this to be Deng's primary concern at the time.)
When the Gorbachev "sided" with perestroika and glasnost, the ethnic regions of the Russian empire broke off, and the tensions leading to that were manifest during the Tiananmen demonstrations (which coincided with Gorbachev's visit to China). While the USSR break-up postdated Tiananmen, Deng had reason to worry about that type of dissolution plus a dissolution of the core Han region as well.
So even if the democracy movement had somehow prevailed in 1989, I think it's unclear whether a unified China would have reaped the rewards, or whether the rewards would have been distributed among successor states, or whether the rewards would have been turned to deficits by the type of political chaos and violence that fragmentation had led to three-quarters of a century earlier.
After living a short while in China and Taiwan, I came out thinking that the most successful policy of the CCP is the Cultural Revolution. On a cultural level, China put a shotgun in its mouth, and pulled the trigger. It is now a nation without a soul, a zombie country. It is absolutely horrifying.
One concern I have about Altasia is that, unless Burma/Myanmar can be politically stabilised enough to run transit links safely through it, India/Bangladesh is effectively an island relative to Thailand/Vietnam/Laos/Cambodia/Malaya/Singapore. Obviously, Indonesia, the Philippines, Taiwan and Japan are island chains anyway, but Japan already has fixed links between the main islands, and I expect one of the great infrastructure projects of the next couple of generations to be to connect the Philippine and Indonesian islands together (and a tunnel under the Strait of Malacca to connect Indonesia to the mainland). The fewer connections that have to be made by sea (for goods) and air (for people) the better, as every transition from one mode to another (ie at a port) is just deadweight loss, and air travel is a terrible environmental idea.
Obviously, no significant numbers of passengers are going to take a train Delhi-Singapore (even a high-speed train running flat out non-stop would take ~20 hours; a more reasonable service stopping in major cities would be more like 30), but that's certainly not going to stop freight moving that way by train (or even by truck). Kolkata-Bangkok would be a very reasonable 8-10 hour overnight trip by high-speed train if it's safe to pass through Myanmar and you can get visas easily.
India (and Bangladesh, Bhutan and Nepal) being trapped between Myanmar to the East, Pakistan/Afghanistan to the West and the Himalayas (and China) to the North means that it lacks the physical links to the rest of Asia that it should have - and which it traditionally did have in early modern times, when it was the connection between the Middle East and South East Asia, when all sorts of goods and ideas flowed through the Mughal Empire in both directions.
Great Article... very poignant question: "How much greater would China’s peak have been if Deng Xiaoping had sided with the Tiananmen Square protesters, and liberalized China’s society in addition to its economy?" I hope you are right about a slow decline, but I fear that you are not.
The thing that kills totalitarian communist societies are self-inflicted wounds. This is bad enough when you are a country like Russia which at least controls food/energy so there is a somewhat stable bottom. However, there is no stable bottom for China.. it really NEEDS the rest of the world to maintain a baseline society.
On that front, as far as I can tell, the growth for China was based on:
1) Large Debt Cycle (Real Estate and related belt/road): This has led to incredible misallocation of resources. It is now about to burst, and the result will not be good (for China and likely the rest of the world).
2) Dominant position in low-value cost sensitive industries aided by currency manipulation: The world was happy to get "below-market" prices, but now the lack of "pricing power" is coming to roost. The great "decoupling" is happening...look to SE Asia and Mexico. Interestingly, it is led by Chinese companies themselves.
3) Technology catchup through IP "capture" This has run its course. Unfortunately, the key ingredients to play in the IP frontier (freedom, talent attraction, crowdsourcing of talent/ideas) are not available to Xi's China.
Yes.. there are some areas where there is world class leadership ... EVs (highly competitive) and others, but will it be enough... it is hard to believe. Further, we have already entered the realm of the lack of transparency on reality (direct government statistic are suspect), so it is likely that the situation is worse than portrayed. There are going to be ample economic/political triggers which can cause sudden, Soviet style, collapse. This will cause a great deal of pain in China and likely to the rest of world.
Yes.. a really poignant question... what if Deng's decision had been different.
Sorry for going off tangent but I think it's misleading to say that the Roman Empire got poorer as it declines. The indicators Brad de Long lists indeed show the decreased elite consumption and state capacity (hence less long-distance trade and less shipwrecks, less lead to build pipes, less monumental construction). However it doesn't mean that the median (or even average) person was poorer. In fact the average height was greater in the middle ages than in antiquity https://www.semanticscholar.org/paper/Stature-in-archeological-samples-from-central-and-Giannecchini-Moggi-Cecchi/31b02c6e6e758e8d731da56dca305d2ac3724be0/figure/4