Policy makers worry about the implications of a rising China, leading some to wonder whether China will own the future. China may well defy gravity and continue on its growth trajectory for a couple more years, but I predict the growth will not last. Technology will accelerate forces that are already at play. This means the more likely scenario—the one that we should worry about—is a falling China. Such a decline will likely create greater nightmares for China’s neighbors and for the United States.
Three factors are at play that will likely shake the Chinese government.
Vivek Wadhwa is Vice President of Innovation and Research at Singularity University and Arthur & Toni Rembe Rock Center for Corporate Governance at Stanford University. His other academic appointments include Harvard, Duke and Emory Universities as well as the University of California Berkeley.
First, there are indications that China has peaked as a manufacturing hub and that manufacturing is returning to the United States. I have written about the advances in robotics, artificial intelligence, and 3D printing that will erode and ultimately eliminate China’s labor-cost advantage. Even before these advances change the manufacturing industry, American companies are realizing that they may have overestimated the cost savings of doing business with China and are increasingly concerned by the intellectual property theft. Now, companies are looking for ways to bring manufacturing back to the United States. General Electric, for example, has again started manufacturing some appliances at Appliance Park, in Louisville, Ky. and is looking to expand its workforce there. Meanwhile, Apple CEO Tim Cook is talking about bringing manufacturing jobs back to the United States. Even Taiwan’s Foxconn says it is looking to expand into the U.S.
Expect this trickle to become a flood over the next 5-to-7 years as key parts of the supply chain move West, automation technologies advance, and as American workers develop the skills needed for running advanced manufacturing plants. This is also likely to wreak havoc on the growing, albeit struggling Chinese economy.
Second, China has spent hundreds of billions of dollars on infrastructure and commercial construction projects. Real-estate bubbles, an ocean of bad debt, inflation, and soaring wages have resulted. The government has also made big bets on last-generation technologies in solar, transportation, and batteries. Imagine a hundred Solyandras in nearly every industry — bad investments that are coming home to roost.
Finally, Chinese society is rapidly changing. Internet connectivity and social media are informing the populace of abuses of power, corruption, a growing wealth gap and the harm being done to the environment. Unrest is building and mass-protests are becoming more common.
It used to be that only the elite had access to Web-connected computers with video capability while the government’s propaganda machine controlled information and told the public what to believe. Over the last few years, the prices of tablet computers in China have dropped significantly, making them affordable for the majority of the population, leading to a dramatic increase in Internet usage. Now, a technologically savvy populace is working around the government’s firewalls and becoming aware of world events. They are also learning what their fellow countrymen really think.