From 'polycrisis' to 'polytunity' - the future of geopolitics with Prof Yuen Yuen Ang

Robin Pomeroy: Welcome to Radio Davos, the podcast from the World Economic Forum that looks at the biggest challenges and how we might solve them. I'm Robin Pomeroy.

Olivia Siong: And I'm Olivia Siong, Senior China Editor and Senior Correspondent with CNA. We are based out of Singapore, an Asia news network, but with a global footprint with correspondents in major cities all around Asia and in key Western ones as well. I'm really hoping to tell stories to help our audience understand Asia.

Robin Pomeroy: Great, it's wonderful to be co-hosting this conversation with you, Olivia.

Olivia Siong: That's right. We have a fantastic guest.

Robin Pomeroy: Tell us who it is.

Olivia Siong: Well, before we get to that, I just want to mention that this is a special CNA Correspondent podcast that we're doing together with you, Robin, here at the World Economic Forum in Dalian. And yes, we should introduce our guest.

Robin Pomeroy: Please do.

Olivia Siong: We have with us Professor Yuen Yuen Ang, who is the Alfred Chandler Chair Professor of Political Economy at Johns Hopkins University. And you are also she's also the author of several books. How China Escaped the Poverty Trap named one of the best books of 2017 by Foreign Affairs. And China's Gilded Age. Welcome to this special episode.

Yuen Yuen Ang: Thank you very much for having me. It's a real pleasure to be here with you and with Robin and Olivia.

Robin Pomeroy: We're recording this at the World Economic Forum's Annual Meeting of the New Champions, sometimes called the Summer Davos, in Dalian, China. And you just came straight here from a session where you were speaking, and we'd like to cover some of those issues you were talking about there.

I was researching some of the things you've said in the past, and you've adopted this word. We used to talk about the poly-crisis, and if you're able to remind us what that was, But you've said you've kind of evolve that into the polytunity. Tell us what those two words mean.

Yuen Yuen Ang: Sure, the term polycrisis was actually popularised at this very forum. It was by Adam Tooze at the World Economic Forum in 2023. That was a time when world leaders felt a great deal of anxiety about world affairs.

So the term, polycrisis, which means that we have this entanglement of global threats around us resonated with world leaders and it took off and it stuck.

And I am proposing that we should flip that term because the idea of a polycrisis is frankly, fear-driven, paralysing. So yes, you have a name for fear. That's a good start, but you need to go beyond that.

But more importantly, the idea of a polytunity comes from a certain realism, and maybe because I'm a Singaporean, Singaporeans are sort of proud to be realist and practical. And the realist in me tells me that at a time of global breakdown, it can be scary for some, but it actually is also a rare opportunity.

For deep reflexion and transformation. And if you think about this, in normal times, we don't like to make big changes. It's hard. It's risky. So we'll continue with business as usual, no matter how broken things are. And sometimes we actually need to be forced to change.

So this moment where multiple things seem to be breaking down at once, from the Western-led global order, to de-globalisation, to climate change, that gives us an opportunity to actually carry out deep transformation. And that deep transformation, in particular, is going to come from the global majority, the rest of the world.

In the past, solutions, memes, agendas were set by a small number of countries who ruled in the last two centuries. And one of the realities of our times is that that has drastically changed. Power has shifted, not only to China, but to Africa, Asia, Latin America. We have more voices, which is a good thing.

And so in many ways, I think the term polycrisis is more of a polycrisis of Western decline. Not a critique of the West, just a statement of observation.

But for the rest of the world, yes, there's a great deal of uncertainty about where we are going, but the time of global breakdown is also a time for radical shifts. And we can see that in the context of China itself.

For China, the breakdown of the globalisation order that has allowed China to do export-led manufacturing and prosper, that was a great thing for China. In a sense, it also trapped China, because it became so good at making consumer goods, the shoes, the toys, the toasters, that it kind of got stuck playing that role. And despite state efforts to compel, pressure Chinese companies to climb up the value added chain, to do joint ventures, to do fundamental R&D, those efforts never really worked. Because why would you work, why would you really do the hard thing when you make so much profit from doing consumer manufacturing?

So in a sense when China and the U.S. had this head-on competition starting around 2016, it was, from China's perspective, must have felt quite dangerous, threatening. But it was also a polytunity for China to say, you know what, maybe it's time to fundamentally rethink our world, our China's role in the global economy.

And that's where you began to see many of the changes that I just discussed at the last panel, the 14, 15, five year plan, Where China thinks, okay, we are good at making shoes, toys, toasters, but we really would also like to make advanced materials, aeroplanes, quantum computers, and given that the state of the world is in disorder, anyway, let's take advantage of that and do the hard thing.

Olivia Siong: You're speaking of this change that we're seeing from China, also its approach, and we heard from the Chinese premier, the opening plenary, in his speech, in which he pushed against that characterisation.

Yuen Yuen Ang: Mm-hmm.

Olivia Siong: The western narrative specifically of the china shock 2.0 instead recasting it as china opportunity 2.0. What do you make of that reframing from the country's second highest ranking official

Yuen Yuen Ang: Um, you know, like I said, we tend to see sort of production and consumption as two separate buckets. The point that I was trying to make at the panel is that they are completely intertwined together.

The real challenge of China today is not just a growth slowdown, it's not just geopolitical tensions. It's in particular what I call China's economic paradox, which is that the high-tech advances are real and they are impressive, but they are coexisting with a broad economic slowdown.

And so China is making these EVs, advanced materials, and if you don't have a domestic consumption power, then they have to go out. They have to go to Southeast Asia. They go to South Africa, as one of the audiences asked a question about these very high quality and cheap Chinese EVs in South Africa.

For other countries around the world, it's legitimate for them to ask, well, if your products are so good, good for you, what are we going to make? And other countries also want to manufacture. They want to have some measure of self-sufficiency. They want the climb the value added chain. But China is just so good at manufacturing. Used to be just consumer manufacturing. Now it's all parts of the supply chain. So that is the shock. And the shock is real. It has to be acknowledged.

And so how do you turn the China shock into a China opportunity? Then the key to that is consumption. That's why boosting Chinese domestic consumption is no longer a domestic issue. It actually is an international issue because without Chinese domestic consumption, then all of the things being made in China just has to go out to the rest of the world.

And for us, on the one hand, I love to buy high quality, affordable Chinese products. But on the other hand, from the perspective of each nation's interest, what are we going to make?

Olivia Siong: Could I just pick up on that because you mentioned that there is a real need to boost domestic consumption but the statistic we saw last year, last month rather, was that retail sales fell by 0.6% and that was for the first time in more than three years. That being an indicator of consumption but at the same time we also saw a CCTV report saying that the Chinese eight central government departments are talking about accelerating the development of AI plus consumption.

Is that going to work? Because the numbers don't seem to paint a picture of the current measures actually working.

Yuen Yuen Ang: Yeah, you know, one of the panellists, Minister Guo, he made a point in Chinese that why is it really difficult for the Chinese central government to boost consumption? Because consumption is slow. It's not something like I press a button, I introduce a new policy, and then boom, you see results three months later. With investments. The government can say, I'm going to pump X, you know, gazillion, billions, and then you will see an effect in GDP in the economy.

With consumption, it's really hard. It's almost like dealing with AI. You know, you thought you put in all the right inputs, why am I not getting the right outputs, right? So he made that point.

So why has consumption been persistently weak in China? Because of the fundamentals.

China is rapidly trying to pull off this structural transformation that I spoke about from the old growth model to the new growth model.

The new growth models impressive advances, AI, quantum, EVs, aeronautics, but these are not employment producing industries. If anything in the short term, they might even cut employment. So when I go to one of these impressive automated factories in China, I'm like, wow, this is so sleek. There is nobody in this factory. They're all robots. So where are the jobs?

And in China you have hundreds of millions of people who need jobs. Not to mention every year China keeps crunching out more college graduates who need good jobs.

So the fundamental issue with consumption is that you have a weak old growth model that is no longer producing these jobs for a large number of people, whereas the new growth model is impressive, but it's not mass employment producing. That's the fundamental issue.

Robin Pomeroy: It's any solution to that, though. I mean, if that's the problem, what's the solution?

Yuen Yuen Ang: The solution will not be a quick fix.

The Chinese government has tried some quick fixes, so periodically they would have these programmes to, if you switch to an EV, you have a grant, right? So that's a temporary boost, but it doesn't fundamentally fix the consumption problem because the fundamental fix of consumption is employment. I have a good job, I feel safe in my job. I feel confident, I spend.

So I think that one of the key solutions is that too much emphasis is being placed on the cutting-edge technologies right now. They are impressive, they're marketable, and too little emphasis is being placed on everything else, the traditional industries, even things like e-commerce, which is more applicational innovation but not cutting-edge innovation because those are the sectors of the economy ultimately that produces mass employment and that is relatively easy for people from all walks of life to participate in that innovation.

I mean if you think about things like quantum computing is not just how many people can participate in not not even me right not even most PhDs, you know, can participate in those kinds of industries.

So they are geopolitically very important. You know, they are dazzling, glamorous. But in the end, the real solution to boosting consumption in China has to be in the non-glamorous parts of the economy. Things like modular manufacturing. You see? Nobody talks about that, right? Like most people would react with, what is that? Right?

Robin Pomeroy: What is it?

Yuen Yuen Ang: Exactly, exactly.

Robin Pomeroy: What is modular manufacturing?

Yuen Yuen Ang: Yeah, China is very good at modular manufacturing, which means that in the past, manufacturing had to be done on a gigantic scale. You have MNCs [multinational corporations], they build gigantic factories, and you produce one thing, you know, in millions of parts. Now, because China has such a comprehensive supply chain, and it's so nimble, an entrepreneur from any part of the world, Switzerland, Singapore, can go to Shenzhen and say, I want to prototype a new product, and can I make a small batch of it? And in China, you can do that. It's relatively fast, it's cheap, and it allows a lot of people to participate in that manufacturing activity.

But you see, we don't talk about that, right? Because it's not fancy, it not glamorous, it doesn't win China geopolitical chips, right. We much prefer the headline AI, quantum, dancing robots.

So that's the divide, you know. In the end, the real solution to consumption in China has to come from humble innovation, humble. Humble in the sense that everyone can participate, the barriers of entry are low, we can integrate that easily into our lives. Glamorous innovation, also important, but only for a very particular context.

Robin Pomeroy: I wonder if that's the case in the West as well, though. Everyone's very excited. .

Olivia Siong: No I agree.

Robin Pomeroy: There's so much money being poured into AI without potentially knowing exactly what the applications for some of these things are. Maybe governments and companies are neglecting some of the more humble.

Yuen Yuen Ang: I cannot agree more. You know, coming from Washington D.C., a lot of people talk about the K-shaped economy in the U.S., K in the sense that it's increasingly divided. The rich are richer and the poor are feeling more desperate with inflation, employment pressures, and so on.

And in the US, you see the tech companies are becoming ever more powerful, while ordinary Americans are fed up with data centres being built around them and using up their water. And so you have this polarisation within the U.S.

Coming here over to Summer Davos, I was surprised that the Chinese are also using the language of the K-shaped economy. So despite seeming to be rivals, this is one of the themes I've always stressed, China and America have a lot more in common than most people realise.

Olivia Siong: I wonder though, what I'm hearing is that you're saying that this consumption drive is going to take time for us to see the result.

Yuen Yuen Ang: Yes.

Olivia Siong: So then I want to ask you about China's new 15th five-year plan that begins from this year. Are you seeing signals that it is preparing for this long-term transformation when you compare it with previous five- year plans?

Yuen Yuen Ang: Yes, as I said, if you look at the 14 five-year plan, the focus was singular. I'm going to do cutting-edge technology. It's called new productive forces, at the time. So that was the singular goal.

If you look the 15 five- year plan, consumption has been added on top of it. And as I tried to explain, it's not a trivial add-on. It's a necessary add-on.

And if you look at more recently, the central government's economic work conference, again, these two themes are brought together again.

So at the highest level, I believe there is a recognition that production and consumption are not separate. And if China continues to dominate in manufacturing, then other countries will feel the shock. And when they feel the shock then then China then then the Chinese production cannot be sustained. So this is where the consumption part becomes necessary for enabling the production to continue.

Olivia Siong: I think you had an interesting analogy of the biggest shift this is for China. Could you help us put that into?

Yuen Yuen Ang: Sure. The analogy that I used was that five-year plans have always been, of course, a key policy guiding document in China, but in the past 13th five-year plan and before, it was as if you were driving straight ahead, autopilot, with some adjustments every five years, of course, right?

And the reason for that was because those five-year plans were operating under the old growth model where the paradigms have already been defined, right? Global integration, FDI, exports, real estate, construction, so within these parameters, you know, you tweak every now and then, but you know the destination, just keep going ahead.

Now why is it that from the 14 and 15 Five-Year Plan onward, all of a sudden it's getting a lot more attention? And in fact, the central party leadership is now personally supervising, drafting the five-year Plan. It has, in China's political system, been elevated as a signalling tool.

And the reason for that, to use the analogy of driving, is because from the The 14th 5 year plan onward is as if China put his hand firmly on the steering wheel, it's a very heavy steering wheel because we are not talking about, we're not talking about a light sedan, not even an SUV, it's gigantic tanker and China is trying to make a right turn. It's a structural transformation of the growth drivers. Not just GDP in terms of quantity, but GDP coming from the most high value add innovation sectors, which China has put off for many years because it was, it had benefited from the old game of globalisation.

So that is why we all of a sudden, everyone is talking like the five-year plan is cool again. Everyone's talking about it, right? And that's, and because it captures, right, it captures this right turn that China has been trying to make since the 14th Five-Year Plan.

Robin Pomeroy: Just explain what that right turn involves and it's this more high value, super high tech thing. Is it also the concentration on domestic consumption as well? Is that part of the right turn?

Yuen Yuen Ang: There are two levels.

The first transformation is from quantity of GDP to quality of GDP, hence the term new quality productive forces. So in the past China had, and it was normal for China to have 7, even 12% GDP growth, but a lot of it just came from low-hanging fruits, right, just low-end manufacturing. Over capacity in real estate, you know, build and then demolish again, a lot of environmental pollution as a result. So there was little regard for the quality of growth.

From the 14th five-year plan onwards, there was a very clear signal from the central party leadership, we don't want that kind of growth anymore, we want to have high quality growth. So that's level one.

The level two is in addition to that, we want to have a structural transformation in the kinds of innovation we are good at. And like I said, China used to be really good at two kinds of innovations. One to 10, which means application of innovation. Somebody invents AI and China applies it. Or China's also very good at 10 to 100. In fact, China is singularly good at that because of its massive market.

So green energy, China can massively scale it. And make it cheap.

From the 14-5 year plan onward China had a new ambition which is in addition to being good at 1 to 10 and 10 to 100, we want to do 0 to 1. So if you look at the social media and the WeChat, now the popular term is 0 to 1.

And if you don't know the context it might feel a little strange like why is everyone now you know talking in sort of binary digits. And what they mean by that is that from 2000 onward, no actually maybe a bit earlier than that, starting from when trade tensions with the U.S. intensified, China realised that we are good at manufacturing everything except everything that's upstream. And so when the U S cuts off supply to chips, China finds that it was helpless. And so it realised that it has to move upstream.

So zero to one is really that sort of upstream innovation. That's where the new ambitions lie.

Olivia Siong: I know this is a bit of crystal ball gazing. Okay. Sharp right turn for the 14th and 15th five-year plan. 16th five year plan. What's the direction?

Yuen Yuen Ang: Hmm. All right. That's just a good point. My own, my own, you know, I hate to say recommendation because it feels like so arrogant. But the point I was trying to make is that you can only solve the consumption problem by making sure that you are doing all kinds of innovation and not just pouring every cent you have into zero to one innovation, because that doesn't produce jobs.

And that means having to also alter bureaucratic incentives in China, which is very important. Right now, try to imagine being a Chinese official. You read the five-year plan, and it's pretty clear to you what's important. So why would you try to revive real estate? Or some traditional economy? That's not going to make yourself look particularly marketable, right? You want to stand out by saying, I have a flying taxi. Or I have dancing robots, right.

And so you have this issue of, you also have to deal with this issue, particularly in China, because the implementation is done at the local levels. That there has to be incentives for the local officials to balance the economy across all types of innovation and in particular focus on employment boosting innovation.

Robin Pomeroy: Coming to the end of our time, Olivia.

There's so much I wanted to ask you. I wanted you to ask about trade clashes potentially with the Europeans. I wanted to ask your about development, you know, maybe I will

Olivia Siong: I think we should do it.

Robin Pomeroy: Okay, we know there's going to be trade tensions, I'll leave that one to one side. Let me ask you about development. And we've really only got a minute left, I think.

You know, it might be hoped that some of that lower quality mass-produced manufacturing might migrate from China to less developed countries. There's not much indication that will happen, particularly as it's automated, particularly because you've got a lot of unemployment here. We'd still need these jobs in China. How do you see China's role, either good or bad, in developing countries that need manufacturing, need jobs, need new technologies?

Yuen Yuen Ang: You know, in fact that migration is happening. There are many Chinese companies moving overseas. Just spoke to one entrepreneur who specialises in connecting Chinese companies who want to move to Southeast Asia. So that migration is happening, it's also an essential part of diversification and risk management for Chinese companies.

But, for countries in Southeast Asia, perhaps certain countries might be content taking over the low-end consumer manufacturing, but you have countries like Malaysia has aspirations in doing some semiconductor manufacturing, right? Other economies also want to make their own cars. Even Vietnam wants to make its own EVs.

And so the question for them is the one being asked by the audience from South Africa in the previous session. He's like, with all of these high quality, affordable Chinese cars, you know, why, why and or how can our country make our own cars or other high value desirable products?

Robin Pomeroy: Is there an answer to that? Maybe it's the joint ventures or Chinese investment in those places.

Yuen Yuen Ang: I think that the ideal answer would be that Chinese consumers also buy from them

Olivia Siong: I also can't let Professor Ang go, given her unique position in researching China, but being based in the U.S. China-U.S relations always comes up, the two superpower, that rivalry, but the relationship has stabilised following President Trump's visit to Beijing. And we're expecting more meetings in the year ahead. How do you expect that to play out in relation to China's trajectory, its 15th five-year plan? How much of that relationship is weighing on how China is navigating its next chapter?

Yuen Yuen Ang: It's a very encouraging sign. I think the last visit that at least the relationship feels much more amiable. But the competition will go on and on, right? Everyone knows that.

I think that the trap that often happens, particularly in Washington D.C. is the Cold War mindset. And as my American colleagues often remind me, that the people making decisions in America today, they live through the Cold War. So that's the mindset that they're familiar with, right?

So they think in terms of zero-sum competition, they also have this expectation that like in the Cold War, the end game is that one side will fall. And then you have complete victory, you have a big party, and then yay, right? It's like a sports competition.

But that's just not the reality anymore. The two big powers are in a competition where I think it's possible that there will be no end game, no clear victor for a long time to come.

It's also a new world where the rest of the world is no longer just passive and weak and sort of pressured into picking sides.

So every single, Singapore in particular, but also everyone else is saying, we're not going to pick sides. We're going to do business with both great powers, however it fits our interests.

And for the U.S., that's also a new reality to adapt to.

So this is a very different international context in which in which US-China competition is playing out.

At Johns Hopkins, I run a forum called the Multi-Polar World and US-China Forum, where we invite experts from across sectors to discuss US-China relations, but I deliberately put the Multi Polar World in front because I think too often, when we have discussions about US-China, it's so centred on Washington and Beijing.

And we need to step back and realise we're kind of in a different world where everyone else matters as well. Everyone else wants to have a voice and they have more agency today than they ever did in the 20th century.

So that's the new world that we are living in. And so that's why if you sit here and moan about the polycrisis, it doesn't resonate with the rest of the world. For the rest the world, the reality is mixed. Risks, dangers, but also tremendous opportunity that they never had in the last century.

Robin Pomeroy: Professor Yuen Yuen Aing, thanks very much for joining us.

Yuen Yuen Ang: Thank you very much.

Robin Pomeroy: Radio Davos is available wherever you get podcasts or at wef.ch/podcasts. Also on the World Economic Forum's website, you can see all the sessions from the AMNC 26, including the one with Professor Ang that we've talked about. I'll put a link to that in the show notes to his episode.

Olivia Siong: And this has also been a special episode of the CNA Correspondent Podcast, where you can get it on wherever you find your podcast on, whichever forum that may be. This was fun!

Robin Pomeroy: Great, thanks from Olivia and from me. Thank you, Professor Ang.

Yuen Yuen Ang: Thank you very much.

Robin Pomeroy: Thank you for listening and watching and we'll see you next time.