China's Innovation Economy

Artificial Intelligence and the New Silk Road

Jon-Arild Johannessen

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000454826
• Edition: 1
• Topic: Economics
• Subtopic: Comparative Economics
• Index: Economics

Two trends will have more influence than anything else on the world's future political and economic situation: the development of artificial intelligence and the emergence of China as a competitor to the United States on the international stage.

This book is about the emerging innovation economy. It uses systems theory and evolutionary economics as a theoretical point of departure and explains why the focal point of the geopolitical stage is moving away from the alliance between the United States and Europe, and towards an alliance between China, the 14 Regional Comprehensive Economic Partnership countries, the countries along the new silk road, and Europe.

The book argues that the globalization strategy of neoliberalism laid the foundation for the Chinese economic engine. Whereas the old globalization was driven by cost differences generally, and wage costs specifically, the new globalization is driven by divergence in competence in general, and technological competence in particular, and China's primary goal is to develop artificial intelligence and intelligent robots. Further, the book posits that the interactions between the climate crisis and the new technology will change production, distribution and the creation of profits, both in China and more widely in the global innovation economy. The book develops a structure to describe, analyze and explain the Chinese innovation economy and contributes to the discussion regarding technological developments in China.

The book is written for readers who are oriented towards the new globalization that is emerging in the innovation economy and the factors driving China's economic growth.

1A theory that explains Chinese actions in the innovation economy

Key points in this chapter

• A theory (system of propositions) that describes and explains China’s actions in the innovation economy based on three pillars:
  • A sense of recognition will lead to a more responsible attitude on the part of the Chinese leadership.
  • A sense of being respected will lead to more rational actions on the part of the Chinese leadership.
  • A sense of being treated in a non-threatening and dignified manner will bring about a more balanced regime of behaviour on the part of the Chinese authorities.

Introduction

Powerful interest groups that influence leading institutions do not feature only in the United States and other Western countries. They also exist in China (Cremer, 2021). The Central Committee of the Chinese Communist Party, the Politburo and its Standing Committee, the Central Military Commission and the People’s Liberation Army (PLA) are some of the institutions that have decisive strategic power in China (Bell, 2015).

One could say that President Donald Trump with his slogan ‘America First’¹ was responsible for introducing economic nationalism in the United States in recent years. Economic nationalism and a ‘China First’ policy have existed in China, however, at least since Deng Xiaoping came to power on 22 December 1978 (Heilmann, 2017). As China gradually gained greater economic power, a higher degree of economic responsibility entered into Chinese policy (Gore & Loon, 2020). If one takes on greater responsibility, there is an associated psychological mechanism that makes one more concerned about gaining recognition for the responsibility that one is taking on (Boon Tiang, 2018: xiii). Recognition is emphasized by Fukujama (2018) as an important social mechanism in narratives of national identity. From the time of Deng Xiaoping, and particularly in the era of Xi Jinping, the Chinese Communist Party has endeavoured to show that China is taking responsibility in the global economy (Lampton, 2014). Greater responsibility commands recognition and respect from the global community (Fukujama, 2018). As early as the 18th National Congress of the Chinese Communist Party,² the Chinese leader Hu Jintao stated that China wanted to take on global economic responsibility and be a “Responsible Great Power” (RGP) (Boon Tiang, 2018: xiii). As far as we are aware, no one, apart from Boon Tiang, has investigated how China has developed its national identity around the concept of being an RGP. Accordingly, we take Boon Tiang as our primary source for the development of parts of China’s national identity narrative in order to develop the structure of this book.

Our contribution here, which goes beyond Boon Tiang’s analysis, is that China’s RGP policy has a psychology and knowledge-related counterweight in China’s national identity narrative. This counterweight corresponds to the concept of recognition, respect and dignity. We base this on Fukujama’s national identity narrative (Fukujama, 2018). It seems reasonable, however, to assume that these three concepts, which are put together in our model in Figure 1.1, can explain much of what has occurred in the political system over the last 20 years in China’s domestic and foreign policy.

We can understand Brexit as the result of a British sentiment that, within the European Union, the country lacked the recognition, respect and dignity that was due to it, given its historical role as a great power. We could say the same about the election of Trump. Americans demanded greater recognition and respect for the role they had played after World War II. For Putin’s Russia, it seems completely clear that Russians felt they lacked recognition and respect – and in fact were being sidelined – despite the transition Russia had made from Communism to being a participant in the Western economy. On the other side of the model in Figure 1.1, we see the emergence of national populism and economic nationalism. We see this in Putin’s Russia, in Trump’s United States, in the British Brexit, in Viktor Orbán’s Hungary, in Erdogan’s Turkey and in Kaczyński’s Poland, to name just some countries. There are many such national populist parties in most of the European countries.

In the case of China, however, neither economic nationalism nor national populism is prominent. China is characterized by its RGP policy. This policy was triggered by a craving for recognition, respect and dignity. We do not argue, however, that China is a power that simply wants the best for its neighbours and the global community. We argue that China is responsible, as the United States has been, and that China is conducting a responsible policy, based on China First, in the same way as Trump argued for America First.

So why is it important to examine China’s national identity narrative when our aim in this book is to examine the behaviour of the Chinese leadership in the Fourth Industrial Revolution? The answer seems to be illuminating: China’s leaders are directly influenced by the national identity narrative that forms their historical assumptions, their strategy and the technology that is cutting edge in the Fourth Industrial Revolution. There is a longer answer to this question, however, which can be divided into the following points.

It is important to examine China’s identity policy, because:

• Many authors believe that Chinese policy is revisionist compared to what they consider to be the correct Communist policy. In this book, we will show that this is a fallacious assumption. On the contrary, China does not follow a revisionist policy, but rather a type of Communism that is normalized in terms of Chinese history and Chinese understanding, in short, a type of Communism based on a Chinese model of socialism. However, the Chinese expect to be accorded recognition and respect for their way of interpreting Communism, without being unfairly described as revisionists by writers and critics throughout history.
• Several politicians and intellectuals view China’s actions, especially under Xi Jinping, as posing an increasing challenge to the predominance of the United States in global economic, political, military and technological arena. This is to be expected. Throughout history, emerging great powers have come into conflict with the ruling power (Acemoglu & Robinson, 2013). For instance, this occurred between Persia and Athens, Carthage and the Roman Empire, Britain and the United States, etc. The question is how to deal with this so-called tension and conflict between ‘alpha males’. If the emerging alpha male is given attention and shown respect, then he may not need to bark so loudly or demonstrate his power over the other strong alpha male.
• The OBOR Initiative may be viewed as an expansionist and empire-building project. Understood in another way, it can be interpreted as a project that will provide China and its institutions with recognition and respect.
• The Chinese leadership’s view of itself as an RGP is something qualitatively different from a mere propaganda ploy. The strategy is aimed at establishing the type of role in the world community that Chinese leaders believe China should have, due to its power and influence.
• China’s rising dominance in relation to the West is a new phenomenon, and therefore also subject to uncertainty and unrest within the Chinese leadership. If the Chinese leadership commits any strategic errors, this position may easily be lost, and China may end up back as a country that supplies cheap labour to Western capitalism.
• “Rising powers threaten to displace ruling ones” (Thucydides’ Trap³).
• The Chinese leadership focuses much of its efforts on shaping Chinese identity, i.e. its identity policy. This consists of formulating principles of action, and worldviews.
• The basis of Chinese identity policy may be understood in terms of the question: How do we differentiate China from the outside world? The answer to this question provides premises for action for the Chinese leadership in the global arena in those areas in which they wish to take responsibility as a rising superpower.

We have illustrated in Figure 1.1 the framework for what we will examine in the pages that follow, and around which this book is organized for answering the principal question: How will the Chinese leadership develop in the Fourth Industrial Revolution?

Figure 1.1A framework for understanding and explaining the actions of the Chinese leadership.

Recognition

The question we will examine here is: How can the concept of recognition be used to describe, analyse and explain the actions of the Chinese leadership in the Fourth Industrial Revolution?

Recognition and the desire to be valued is not just something we find at the individual level. Organizations and nations also need to be recognized and valued. The need for recognition shows itself when people point back to eras in their history of which they feel proud (Bauman, 2011). “We were the Vikings!” say the Scandinavians. “We used to rule a world empire!” say the Italians. “We ruled a world empire on which the sun never set!” say the British. No doubt, one can find many similar examples of nations pointing back to illustrious pasts. Similarly, the Chinese can point back to their history and refer to the great dynasties and their inventions, such as gunpowder, the compass and the stirrup. However, this should not be confused with nationalism. It is rather the case that being recognized and valued is something that is a fundamental need in relation to national identity (Huntington, 2002). The reason may be that each of us identifies with the nation we were born and raised in, and this is also further linked to our self-identity.

Narratives

Case letter: ‘Eras of greatness’ and identity

National histories, almost without exception, give a special emphasis to what is considered as their ‘era of greatness’, even though this may be far back in history.

For instance, Scandinavian national histories give a special focus to the Viking Age (roughly 800–1050). Similarly, Greek history gives special emphasis to the Golden Age of Athens and Sparta (500–300 bc).

The same goes for China. Here it is not only the Long March of Mao Zedong that is given focus in national history and the formation of current national identity, but also the Chinese imperial dynasties of the distant past, such as the Xia dynasty (c. 2070–c. 1600 bc).

It is often the case today that when Chinese leaders are talking about China as a responsible superpower, they reach back thousands of years into the historic past to the era of China’s great dynasties in order to create a continuous identity (Boon Tiang, 2018: 1).

The Middle Kingdom, China from the various imperial times, is portrayed by the Chinese elite as a powerful civilization everyone in the world respected and recognized (Boon Tiang, 2018: 2). If one manages to construct the notion that China has historically been recognized by its surrounding countries, then one has managed to create a Chinese identity where the Chinese people view China as a respected and recognized nation throughout history. This is also something important to the self-esteem of the individual Chinese (Fukuyama, 2018: 37).

One can make a distinction between the inner and the outer self-understanding. People’s perception of China as a respected and recognized nation throughout history is in a way contagious fo...