It could get rough.
As China begins to move toward a consumer-based economy, foreigners may have an even harder time breaking into the country.
That comes from a Thursday Council on Foreign Relations report authored by Robert Blackwill and Kurt Campbell.
“Because China’s economy is now slowing, (China’s President Xi Jinping’s) fear of political instability may push him to adopt even sterner measures, and new violations of human rights and the emerging challenges that Western NGOs and businesses face will likely cause renewed friction in China’s relationships with the West,” the authors wrote.
China’s spectacular growth over the past decade has kept spirits in the country high and political power stable, the authors said. But now that GDP growth is forecasted to slowdown to 6.3% in 2016, the country’s elites and citizens may find the economy’s shift dissatisfying, creating social unrest.
According to the authors, Xi has already worked hard to consolidate his own power by beginning several anti-grafting campaigns, and he will likely go even further, and “intensify his personality cult, crack down even harder on dissent, and grow bolder in using the anticorruption campaign against elites who oppose him.”
To protect his position, Xi will “most probably stimulate and intensify Chinese nationalism—long a pillar of the state’s legitimacy—to compensate for the political harm of a slower economy, to distract the public, to halt rivals who might use nationalist criticisms against him, and to burnish his own image.”
The government’s credibility has already been damaged by the sudden declines in the Chinese stock market in 2015 and January 2016. That, combined with the widespread distrust of official statistics (with some economist reporting China’s GDP at 3%), will raise questions about how Xi plans to move from China’s growth-based economy into a slower, consumer-based one.
“The real risk to China’s economy, and to Xi’s fortunes, comes not from the stock market’s raw economic impact but from the damage done to the government’s credibility,” the authors continued. “The reputational challenges and economic obstacles Xi faces will not abate in the next few years.”