Can Vietnam liberate China

Asia - not in spite of everything, but especially now

We were just living in the Asian century. Now many see a lost continent because an authoritarian China is turning away from the West, Japan is fighting against wasted decades and India is blocking everything. We think that's wrong: Asia deserves more attention. That is why we are launching “NZZ Asia”.

The young man next door in the chair at the hair salon in Xi'an, China is obviously very busy. With his cell phone. While he has his hair washed and cut, he doesn't just send voice messages and watch videos. In between, a courier comes to bring him some dumplings that he has obviously just ordered online and is now satisfied with eating while he has his shoulders and head massaged. Whether at the hairdresser's, in the metro or in a restaurant: the mobile phone has become an omnipresent companion for young and old in China. With him the food in the restaurant is pre-ordered, the taxi is ordered and almost everything is paid for. Like many Asians, most Chinese are curious. Above all, the young, rapidly growing middle class wants to try out new things with their money and use the most modern technology. When automatic facial recognition locates the customer in a hip café and suggests her favorite latte with a brownie to buy, she doesn't find it scary, she thinks it is cool. For the time being, there are few reservations about data misuse, cell phone radiation and loss of privacy. The new possibilities are too practical.

Liberated in Hanoi

As in China, Vietnam is still a communist one-party state with an iron hand. But the Vietnamese deliberately keep their distance from the Chinese; the rivalries are too great. Vietnam War or not, the Americans are again much more popular in Hanoi. In the country with almost one hundred million inhabitants, where almost a quarter of the population is still less than 15 years old, more and more western companies are settling in, which are looking for an alternative to China. The Swiss architecture firm g8a has had its own large office in Hanoi since 2007. Fascinated by the contrasts between East and West and freed from the strict Swiss building regulations that hinder creativity, the architects, who originally came from Geneva, are planning climate-adapted, consciously environmentally and family-friendly settlements for the rapidly growing cities of Asia from Ho Chi Minh City to Singapore . A leading partner is enthusiastic about working in Hanoi: Young architects are extremely capable and willing to work here. They wanted to move forward together and great things could be achieved with them. The communist regime hardly interferes.

Similar to Vietnam, India would undoubtedly also have the potential to become an alternative to China. However, it is not only the very inefficient bureaucracy that stands in the way of a larger role in world trade, but also the protectionist import substitution policy, which is still strongly socialist. India has just refused to join the planned Asia-Pacific Free Trade Area (Regional Comprehensive Economic Partnership). But what could happen if politicians were to bring about a more courageous opening can be seen in the service sector, which is not hindered by tariffs. A completely new city has emerged in Pune, where agriculture was still practiced a few years ago, in which UBS has had its own operations center since last year. Credit Suisse, Allianz and other financial service providers are also represented on site. Tens of thousands of young, well-educated Indians find attractive jobs here that they used to have to look for abroad. In India, too, an increasingly affluent middle class is slowly emerging.

Aging like in Japan

And Japan with its lost decades, the supposedly chilling example of an emerging economic and technological power, where the bursting of a bubble led to deflation, which, according to the mantra of European and American central bankers, must be prevented? It is true that despite the highly unorthodox central bank policy and the Abenomics debt economy, the level of consumer prices is still around one percentage point below that of twenty years ago. It is also the case that Japanese society is now the “oldest” of the larger Asian countries. Due to the demographic development, the proportion of the 15 to 64 year old population has decreased from 68 to a low 59 percent (in China it is still 71, in Switzerland 66 percent). But are the 126 million people in what is still the third largest economy in the world after the USA and China doing badly as a result? Since the turn of the millennium, economic output per capita, adjusted for purchasing power, has increased by almost two thirds in this ultra-modern economy. The increase in productivity is enormous. Aging like in Japan while preserving the value of your savings - you should be able to do that!

"NZZ Asia"

With “NZZ Asia”, the NZZ is launching a completely new newsletter with specially written analyzes, comments, graphics and background reports. Week after week, the Asia team in Zurich and correspondents in Beijing, Tokyo, Singapore and Mumbai analyze current economic and political developments in the Far East. You can register here. You can find the website here.

Ultimately, unique in the world is how China, with its reform and opening-up policy, has succeeded in increasing its economic output per capita and thus also the prosperity of its almost 1.4 billion inhabitants approximately sixfold after adjusting for purchasing power over the past twenty years. According to the calculations of the World Bank, the Chinese gross domestic product adjusted for purchasing power is now around two fifths of that in Japan. Of course, the differences within the Middle Kingdom are enormous. There are still many very poor rice farmers, but at the same time there is a growing young middle class in the cities, whose level of prosperity has already overtaken that of the middle class in some European countries.

Disturbing Chinese dreams

Has the man with his cell phone in the hairdressing salon in Xi'an become a challenge for the West, as the current trade war suggests? The fact is that China is no longer just the workbench of the world. In the technologies of the digital platforms, from mobile communications (5G) to artificial intelligence and big data to face recognition, China - also supported by an intensive industrial policy - has meanwhile become an innovator who competes with the champions in the West (and whose labor costs are have increased significantly).

The fact that the regime is making targeted use of the Chinese openness to these technologies in order to monitor and control its citizens in an increasingly sophisticated manner contradicts a liberal understanding of freedom and human dignity. At the same time, the former chairman of the Communist Party Schools, Xi Jinping, as head of the party and state, seems anxious to turn back the clock. He relies again on the cult of personality and relentlessly preaches the superiority of Marxism. It must be disturbing how he is increasingly unrestricted and uses the new technologies to monitor the Muslim north-west Chinese province of Xinjiang and put hundreds of thousands in closed re-education camps "to maintain security and stability". With the “Chinese dream” propagated by Xi, uncompromisingly concerned with maintaining power, China is openly entering into a systemic competition with the democracies in the West, which is characterized by a free market economy.

Watch the "pressure cooker"

But does that mean that China is "lost" and should be turned away from it in a new variant of the Cold War? Not at all. Competition, including system competition, is positive. But it should go hand in hand with a certain amount of cooperation and common rules of the game. It becomes dangerous when the systems completely disentangle each other. But that would run counter to any economic logic. And maybe the man in the hairdressing salon will even become an ally. Because not only in the West, but also in China itself, many are alienated by Xi Jinping's course.

Most of the younger Chinese have nothing to do with Marxism and do not want to be constantly patronized by old party cadres. The soft power of the USA and Western branded products is largely unbroken (despite Trump) and beats that of Chinese hard power across Asia. Those who can send their children to study in the West. And so it remains unclear from the outside at what stage the “pressure cooker model” is currently in China: Under authoritarian supervision and in the absence of “checks and balances” that could ensure automatic corrections, things remain calm, but the pressure rises until it does at some point - controlled or not - discharges. Seen in this way, China's development remains only partially predictable and in any case breathtakingly interesting and relevant.

Whether China, Japan, Korea, India, Indonesia with 270 million inhabitants or the 33 million Uzbeks in Central Asia, which are opening up to the West: In its diversity, which is alien to us in many ways and with its huge future potential, Asia remains highly relevant for our economy and politics and interesting. More than half of the world's population lives in the 25 most important countries in Asia and generates a third of the world's economic output - and the trend is growing rapidly. Anyone who wants to face international competition should deal with it. Not even a fifth of all Swiss goods exports go to the region; the potential is definitely not yet exhausted.

"NZZ Asia" - a new offer

We are therefore launching the digital newsletter “NZZ Asia” for everyone who shares this point of view and wants to know more. From now on, every Tuesday we offer an independent and journalistic overview of the most important developments in the region and specially written, in-depth reports and analyzes by our correspondents. The newsletter, for which interested parties can register here, is supplemented by events on the topic. Because we are convinced: Asia is not in spite of everything, it is now even more a worthwhile topic.