Why you might be wrong about China: Lessons from the World Economic Forum

I had enormous privilege of being hosted by China at the World Economic Forum’s Annual Meeting of the New Champions. Taking place on the heels of a trade war, the conference provided great insight into what China's position is today and what its future will look like, particularly as the forces of fourth industrial revolution unfold.

Here are my top takeaways:

1) China may have built the greatest wall seen to mankind, but when it comes to its trade policy China is all about “open doors”

Chinese Premier Li Keqiang

Openness and inclusion are China’s latest buzzwords and this trend is here to stay.

China is serious, more than any time before, about the need to promote open markets, multi-lateralism and globalization. In nearly every discussion, senior Chinese officials from across government and private sectors sang the same tune: China’s opening up represents a unique competitive advantage for the country, now and in the future

The Mayor of Tianjin, for example, spoke of the need to be open to “learning from others, including developed and developing markets”. Another senior official, this time from the Asian Infrastructure Investment Bank (AIIB) mentioned that a core indicator of success for the organization was bringing prosperity for all and the need to get the contribution (including in decision-making) of all stakeholders involved”.

In that spirit, China addressed openly its plans to act swiftly to address market and currency imbalances through active engagement of their monetary and fiscal policy, marking a major shift from its reputation as a currency manipulator.

On Globalization, China’s most senior government official present at the conference, Premier Li Keqiang, boldly proclaimed: "Customers will decide who will survive".

China is serious about this too. A hallmark of this policy is China's development of its very own 'bay area' to drive innovation, a little known fact in the west. The area which encompasses, Hong Kong, Guangzhou and Shenzhen, produces nearly US$1.36 TR in GDP. What’s more, entrepreneurs from all over the world can set up a business at the bay, gaining direct access to Chinese consumers.

2) On trade wars: China will suffer in the short-term, it is positioned well for the long term

China currently drives 30% of world growth and its economy represents about 50% of Asia's GDP. This is not news, but my next point is.

China looks very different today than it did ten years. China’s economy is much less reliant on exports. Indeed, its current account surplus is quite small at ~1% of GDP and this is in large part a result of increased local private consumption, which now accounts for 40% of its GDP.

And there is more to come. With recovering foreign reserves and improved liquidity, the government is pushing its banking sector to free up capital to SMEs to complement the increasing volumes of VC investments originated by BATs (Baidu, Alibaba, Tencent), China’s tech giants.

How has the Yuan performed in the context of the murky and volatile EM currency markets, you might ask? Despite recent EM currency fluctuations and imposition of trade tariffs, China's currency has held steady against the dollar.

But its not only a matter of internal economic fundamentals, China itself wants a future that promotes “reduced tariffs”.

Here again, Chinese officials including Premier Li spoke of the strong desire to act multilaterally. "We are now standing at a crossroads facing a choice between globalization or deglobalization," Li said, "we want to operate within WTO framework".

3) China sees the force underlying technological innovation as a creator (not destroyer) of opportunity

Playing with virtual reality. Click here to learn more about Tree https://www.youtube.com/watch?v=oEqkLuyKGUk

If you still think China is an imitator…think again.

China is the global leader (read: better than Silicon Valley) in quantum computing, ultra-high-voltage electricity transmission, and AR/VR and its future presents great potential to expand the scope and scale of its capabilities.

How, you might ask. I’ll give you a hint: its got to with China’s very tech savy consumer.

China’s economy is heavily digitized. According to NYU Stern Professor Sundarajan, China is at least “5 years ahead of the US” in the way it has integrated digital components in its economy. According to JP Morgan Chase, China’s e-commerce economy is 2x the size of the US. Moreover, 95% of e-commerce transactions in China are done on mobile phones. If that weren't enough, China is still experiencing rapid urbanization. Hundreds of millions more are expected to reach middle income status as people flock to urban centers.

Moreover, China anticipates that through its Belt & Road program, the country stands to unlock innovation through the collaboration of its many partner states. An example of such innovation included the linking of power and electric grids across national borders. Coupled with technology such as blockchain, this type of connectivity is expected to benefit households and businesses alike and unlock efficiencies at unprecedented levels.

In a private session we held with Jack Ma, Founder of Alibaba, he proudly proclaimed: "We created 3 MM [direct and indirect] jobs at Alibaba”. Technology is seen as creator, rather than destroyer of jobs. Echoing this sentiment is Premier Li: “We believe the new round of industrial revolution has benefited all of mankind”.

4) China must do more to promote greater social welfare & freedom of expression

When it comes to China’s social development, such as in social safety nets, health and rural education, the country falls short of meeting global standards.

Hilary Cottam, Founding Director of Participle, said: "The transition is going to be bloody at best... We need to reinvent new forms of support. Social and labour institutions needs to change radically." Similar views were echoed by Chinese businesspeople who spoke of the need to provide social safety nets.

A Beijing-based Western journalist I spoke to told me about the limited freedoms that people have in expressing their opinion or of being overly critical of the regime.

Moreover, greater attention must be given to urban sprawl.

How will China choose to tackle these critical issues? Time will tell. For now, China seems distracted by another issue that TRUMPs all others.

Do you agree? Please share your comments below.

Note: Views in the article represent my own and in no way represent the views, opinions of other persons or entities unless otherwise stated.