China has a decision to make in 2016, and it's one that matters for the global economy

It’s a rainy, smoggy day here in Shanghai’s Pudong District. The market is down over 3% for the day and over 10% in 2016. The Bulgari and Rolex stores are empty. The bars are full of hard-drinking traders and investors.

People in the United States and Europe checking their portfolio and wondering why their stocks are getting hammered should know that this is all a part of what is happening over here. 

2016 is China’s year of reckoning, as it addresses long-overdue capital market reforms including bringing market reality to the value of its long-inflated currency, the renminbi. 

Behind the macroeconomics is a choice China has to make: does it grow by opening up its country to greater transparency, accountability and playing by global rules, or does it play by its own rules and keep its markets relatively closed and bank on the fact that they can set the conditions for anybody hoping to do business here and access its consumer market of 1.3 billion people.

So far, its response has been schizophrenic. On the positive side, the reforms it announced last year allowing for more truth in the value of its currency and interest rates were responsible steps forward. The crackdown against corruption continues, too. Among those who reportedly have been detained in the last few weeks are the chairman of China’s largest private conglomerate and the head of one of its largest fashion companies, estimated to be China’s 34th and 65th richest citizens respectively (by way of companies, Forbes estimates Elon Musk and Eli Broad to be America’s 34th and 65th richest).

On the negative side, there are abundant other examples that China is reasserting its control-freak impulses. Last week, the Chinese central bank temporarily suspended certain foreign banks from conducting foreign exchange transactions.

The impulse for control continues to reach from central markets to deep into peoples’ personal lives. Grown men and women are constantly experimenting and adjusting VPNs to be able to access censored media and social networks, as though they were teenagers using fake IDs to buy beer.

While I had some downtime at my hotel this morning, I tried to go online to a site so I could make and ship postcards advertising my book The Industries of the Future so that they could be handed out at a speech I’m giving later this week. The site was blacklisted by Chinese censors and I was forbidden from accessing it. 

China prides itself in being the world’s second largest economy. When it blocks the ability to make postcards, though, it seems small. China has the world’s second highest total GDP but its per capital GDP is 88th in the world, squarely mediocre. 

2016 feels like a big year for China. Does it open up or tighten up? If it opens up, it will position itself to better compete in the industries of the future. The devaluation of its currency and unwinding of its old systems will cause short-term economic distress, but it will be worth it. If it tightens up by slowing its reforms and continuing to crack down on free speech and journalism, its growth will slow down further, and there will be more rainy days in Shanghai.

Alec Ross is the author of The Industries of the Future, to be released in February by Simon & Schuster.