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Jennifer Zhu Scott

By 2030, the top 10 economies are going to be China, India, Indonesia, Türkiye, Egypt, Japan — a lot of those countries where China’s really aligning its strategy.

Parag Khanna

To me, that navigation, that diplomacy between China and its neighbors is the single most interesting thing happening in the world today.

Yassmin Abdel-Magied

Welcome to The Better Question, the EY podcast series that will answer the questions that will help you lead your business through this transformative age.

What will happen when trends that we already know are underway today, start to transform society?

I am Yassmin Abdel-Magied, engineer by trade and writer by vocation. Over the course of six episodes, we are asking some of the most probing minds around the globe about the world-changing issues that are just over the forecast horizon. And we are asking them, What’s after what’s next?

And I have here with me writer, futurist and the curator of What’s after what’s next?, Chris Meyer.

Chris Meyer

Great to be with you, Yassmin. I am Chris Meyer, and I have been researching and writing about how technology and society will evolve together since the 1980s. And my ongoing work with EYQ, the EY global think tank, has focused on the question, What’s after what’s next?

Today, we are looking at not just China, but Asia, and how the global economy is rebalancing itself. So, our better question today will be: As the balance shifts, how heavily will China’s influence weigh?

Abdel-Magied

What I always find fascinating when I hear people talk about China and Asia — it is almost that China is an idea more than it is a place with people and nuance and complexity. Like the rhetoric or the story that we tell about it is that it is this monolithic, quite foreign place.

Meyer

Yes. And the main reason we chose to make an episode about China is just that. I think that can be — that holds us back in seeing the opportunities and being realistic about how the world is changing. And if you just think about a country that has changed as rapidly as China has — for example, raising 800 million of its citizens out of poverty in less than 30 years — it is obvious how hard it is to understand it, let alone its future, because it is changing so fast.

Abdel-Magied

And I do think people, in the US and Europe, anyway, still think the US is the leader in building the infrastructure of the information-based economy in particular. And that was true once, right?

Meyer

Sure. But now, the Chinese tech companies providing social networks, mobile payments, marketplaces, streaming entertainment and all the rest are at least as powerful and technically advanced as the US companies they originally copied. So, they have built the largest and best online infrastructure in the world already.

Abdel-Magied

So, the news on China is actually way beyond today’s trade conversation.

Meyer

Oh, absolutely. Even though we will stick to economics today, there is a much bigger picture. Standards of living in China have increased so much that labor is now expensive, so it is working on creating an ecosystem encompassing nearby economies that still offer lower labor costs, so its companies do not lose the world’s manufacturing opportunity. And that is why we are looking beyond China to Asia as a whole.

Abdel-Magied

I cannot wait to hear what is to come.

Meyer

Today, our guests actually know each other quite well. Parag Khanna is a professor at the University of Singapore and an advisor to corporations on global strategy.

Khanna

My name is Parag Khanna. I am a scholar, I am an author, I am a traveler. It is sort of my methodology of life, to go out and see things on the ground, and then capture it in any way I can.

Meyer

And our second guest, Jennifer Zhu Scott, is a brilliant mathematician and expert in blockchain, but also advisor to both the World Economic Forum and the Aspen Institute about China.

Zhu Scott

Hi. My name is Jennifer Zhu Scott. I am an entrepreneur, investor. I am a writer. I am a thinker. I care about data ownership. I care about AI development, 5G and genetic engineering, because that is determining the fate of our future generation.

Meyer

It is great to have you both today. Jennifer, you are dialing in from Hong Kong. Parag, calling in from Singapore. Today, we will be talking about not just China but Asia, and how the global economy is rebalancing itself, and what will happen as the influence of China grows.

Parag, let me start with you. I would like to talk to you a little about your work and then bring Jennifer in and get a sense of her focus. And we will finish the episode with a lightning round of questions.

Parag, thank you so much for joining us.

Khanna

My pleasure.

Meyer

I want to start with a quote that you gave to Fast Company. And you said, “The most consequential misunderstanding permeating Western thought about Asia is being overly China-centric.” What did you mean by that?

Khanna

Well, I certainly mean exactly that, which is that right now, we do live in the moment. And if we want to look really at What’s after what’s next, we’ll quickly appreciate that what is next is to focus on this broader Asian geography and not just China. What China has done is to kick off an extraordinary process by which the Asian countries are accelerating their convergence, their integration, their complementarities, the resurrection of the new Silk Roads and so forth. China is just the middle stage of Asia’s rise. And the story begins with Japan in the post-war years, and the tiger economy is now China.

And already, we are experiencing a fourth wave of Asian growth, which really brings South and Southeast Asia into the picture. And just very briefly, that is 2.5 billion people from Pakistan to the Philippines whose populations are younger in median age than China’s is. Their growth rates are in many cases faster than China’s and so forth. So, there is a collective Asian story going on.

Meyer

2.5 billion people. So, what are the consequences, and for whom, of making this mistake?

Khanna

Well, that is a very, very big question. But of course, if you just think about the business community, the American multinational community that has had so many eggs in the China basket, they are missing out on kind of distributing their allocation around the region and capitalizing on the super high growth of — and the young populations and the more open political economies of India and Southeast Asia and other regions. So, I am not arguing against China at all. I am arguing for a diversification of one sort of footprint around the region. And that is the basis on which I now evaluate Western companies. You know, sort of not just are they making money in China today, but how well-distributed is their presence? How much effort are they making?

So, there is this sweet spot that countries get in every few decades, depending on their demographics, degree of industrialization, this kind of fiscal investment, and so forth. And right now, this is that moment for Southeast Asia, and it is going to last a couple of decades.

Meyer

And when you travel in the West, do you think Western leaders — I guess I’ll focus on corporate leaders. Do you think they have a good understanding of what you have just described?

Khanna

No. This is obviously part of why I write what I do and why I live in Singapore.

Meyer

What do people say to you that tells you that?

Khanna

Well, I will give you a couple of examples. You know, I mean, with the US position on China’s Belt and Road initiative is that, oh, it will just implode under its own weight. The Europeans have embraced the Asian infrastructure investment bank; Italy is joining the Belt and Road initiative. They have their own connectivity initiatives for Asia. The most important thing to remember, though, is that there is adjustment, right?

Meyer

Yes.

Khanna

It is not a one-way ticket. And to me, that navigation, that diplomacy of —between China and its neighbors is the single most interesting thing happening in the world today.

Meyer

So, let me turn to Jennifer. Jennifer, welcome to What’s after what’s next?.

Zhu Scott

Thank you, Chris. So, as Parag and you were talking, I have been drafting some notes. I have a full page, so. Parag pointed out that the West corporate leaders probably are not very much aware of what is actually happening in Asia. I would like to go a little bit further, that I think what I am seeing from the political, as rather some of the corporate leaders in the West, especially in the US, there are two kind of traps, thinking traps, they are in right now. One is binary thinking. Binary thinking, they think what China is doing is either good or bad. There is only West versus East, and the East often refers to China.

And Belt and Road is either failure or success. And then another thinking trap is zero sum. So, I remember when China — we managed to get to the dark side of the moon. And a lot of my American friends, they got quite depressed. I do not remember any Chinese got depressed when we saw NASA got on Mars, and we celebrate. We think that is a great achievement.

So, I think these two thinking traps are going to be a disadvantage for America to remain in power. If you look at the world’s largest economy, right now in the top 10, Asia only has China and Japan. By 2030, the top 10 economies are going to be China, India, Indonesia, Türkiye, Egypt, Japan — a lot of those countries where China is really aligning its strategy.

Meyer

So Parag, please join us again.

Khanna

Oh, it is thrilling to hear this.

Meyer

We want to start with something you both touched on a bit, and it is the — it seems that the West seems to panic about China becoming the world’s largest economy and becoming the most powerful influence over countries in Asia. Last month, the European Commission labeled China as an economic competitor for the first time and a systemic rival promoting alternative models of governance. To me, this sounds like it preserves a kind of colonial and zero-sum view of the world. I mean, what is it that China and the West both want that they cannot both have?

Khanna

Sure. You know, I think it is a very important question, and it should be viewed in a kind of historical context. It is not that there is some uniform, monolithic set of Asian ideas and practices and rules that diverge drastically from a kind of Western canon. You know, the — Asia has become what it is today as a result in so many ways of copying and adapting the best practices that were learned from hundreds of years of either colonialism, or Cold War alliances, European and American leadership in successive centuries. So, they are — it is not really some kind of alternate model for how to govern countries, the region, or the world. So, we really have to appreciate that there is a lot more syncretism going on. The flashpoints emerge only in areas where you view the pie as shrinking. And therefore, one has to compete over a limited set of remaining spoils that are available. In other areas, that is not the case.

Zhu Scott

I have an interesting anecdote on Parag’s point. So, one of the arguments between US and — I will be wider — the West compared to China is about IP rights. In the US, when you create something useful, you protect it with your IP. You can rest for the rest of your life. In China, you do not declare victory. You declare war, because everybody will try to copy you. You have to keep coming up with more creative, more efficient solution.

Meyer

Let me pick another one of these issues where Singapore in particular focused on eliminating corruption as a key to its growth, Parag?

Khanna

No. You know, corruption is one of those issues that is so much in the eye of the beholder. We cannot accept one standard definition. And you mentioned Singapore. It is a very good example, because there is an orthodox notion out there that companies shy away, and that ultimately, if you are not like Norway, you are not going to receive investment. But that hypothesis has pretty much no place in reality because if you simply back test all of this, you come to a very clear conclusion, which is that companies are willing to stomach corruption in a country so long as there is growth to pay for it. And that is the historical fact.

So, I do not think that we should ever get hung up on one term or one definition or archetype of anything; certainly not democracy either. And this is very much a generational thing, quite frankly. You know, as a sort of youngish person — I guess I am no longer — I am not a millennial. But I like to act like one sometimes. When I spend time in — with sort of grey beards in London or Washington or New York, I see this sort of worldview that obviously is not ready to adapt or evolve.

So, one really just needs to focus on the real world of the here and now, and most definitely on the future and how the future understands its priorities. And that is certainly always the audience that I like to immerse myself in to understand what’s going to happen in the future.

Meyer

Yes.

Zhu Scott

If you look at the history, expand to — we are not talking about hundreds of years; we are talking about thousands of years — every empire rise and fall. And China has gone through that cycle for many times. Until most recent few hundred years, we were the last. And in a thousand years, we were the number one.

Meyer

Right.

Zhu Scott

And now, we start rising again. So, US are still going on your first cycle. So, we do not — if you ask a lot of Chinese, we want to do well. But most of the Chinese also are much more impressed by what US achieved than feel threatened by. So, I think that zero-sum thinking is very short-term.

Meyer

We will close with a lightning round. Questions, 20-second answers max to each one. What do people in the developed world — not just the West, but the developed world — what do people assume will always be true that will not be 10 years from now because of China’s influence, or, we could say, Asia’s influence?

Khanna

You know, the West believes that the Belt and Road initiative is synonymous with Chinese hegemony. And 10 years from now, we will look back and we will realize that what China has done is more or less to accelerate the development and modernization of a whole bunch of countries that have been weak and neglected, and empower them not only to modernize and grow, but in a way, to stand up to China. And so, what the Belt and Road does is not promote Chinese hegemony, but it promotes a multipolar Asia.

Meyer

I wonder if you both heard Dambisa Moyo’s talk from TED Global in 2013, which, for our listeners, basically argued that the West has prioritized political rights over economic rights. And her claim was that China had a much more appealing story for the developing world, which was, we have raised half a billion people out of poverty in 30 years, and we can help you do the same. So, would you look at the — at China for patronage, or would you look at the US?

Khanna

Well, I’ll take this one first.

Meyer

Go ahead.

Khanna

I would say neither, you know? And I have spent now 15 years traveling around emerging markets and looking at how they view their own political evolution. And I have heard lots of leaders of authoritarian countries talk about how the China model will work for them. But I have not seen them do anything in the way of poverty alleviation and widespread economic growth and prosperity. So, when other countries use the phrase “China model” to apply to themselves, it is a sham, and you should always fear it as a sham, because only China has ever done the China model, and only China ever will.

Zhu Scott

And I would like to add a bit of nuance to the so-called China model. I think he got it wrong. I have not listened to the TED talk, but I think he got it wrong, because for people who are successful, people who have made money, who have property, they all have exits. They will send their kids overseas and a spouse overseas. And while this country — stay in the country and make money. Perhaps that simple China model is not really that simple.

Meyer

I have one more important question to ask you both. And that is, what is the one piece of advice you would give to a CEO in the West about how to adapt to the condition that the growth of Asia is creating?

Zhu Scott

I would urge the CEO to spend some time in second-tier cities in West China, in India and in Indonesia, in those countries, and understand the future of market, the future of the fastest-growing market, how people behave and organize their life. And they will see how different that perception is from what they read from the West media.

Meyer

Do you want to mention one difference, one specific?

Zhu Scott

I think, let us assume the CEO’s company is selling consumer products. And what he should do is to go to cities like Chengdu, my hometown in West China, without a credit card, without a wallet, and just with the phone, and experience how people in second, third—tier cities in China already consume completely without cash.

Meyer

And Parag, same question. What one piece of advice would you offer?

Parag

I will add something complementary, which is just, hire more Asians. You know, stop — since we are being very collegial and colloquial here, stop sending white people to Asia to manage and to set policy and to determine corporate strategy when they do not know what is going on.

Zhu Scott

Yes.

Parag

Hire a lot more locals, and they know the markets better, and trust them, and let them grow, and let them drive the strategy.

Meyer

Fantastic.

Parag

That was fun.

Meyer

Until next time. Thanks again.

Parag

Absolutely. Thank you, guys.

Zhu Scott

Bye, Parag.

Parag

Okay, bye.

Meyer

Yassmin, I thought that was quite the conversation. What did you see in it?

Abdel-Magied

Oh gosh, there is so much in it to unpack. I mean, one of the first things that I thought was really interesting was this idea that when the Americans landed on the moon, the Chinese celebrated. And there was this broader question within that, which is, why is there — why does the rise of China and rise — and the rise of Asia more broadly, why does that strike fear as having technical capacity that is beyond anything that we have in the West, rather than seeing that as an exciting thing?

Meyer

I wish I had an answer to that. As we discussed with Parag, the question really should be, I think, what is it that both the East and the West want that they cannot both have? And I think the growth of incomes in China creates more economic activity. The growth of trade creates more value and productivity. Why is that not good for everybody? I think there’s a lot of uncertainty about how China and its companies will compete as their economy becomes more influential. So, leaders are excited about the growth, yes. But they are realizing that they will have to figure out how to compete in a changed world, one that seems to emphasize the national economy more than how any one company performs. And that is unsettling.

Abdel-Magied

Collectivism.

Meyer

Yes.

Abdel-Magied

Also, being a migrant child who grew up in a collectivist household in an individualistic Australian culture, right? They are not value systems that necessarily fit with each other side by side coherently naturally. But I think if we are able to navigate, surely that means we get innovation that does not — that has not existed before, right, Chris?

Meyer

Not only is the world not zero sum: it is even more positive when you allow a broader range of solutions to compete. In reality, the existing economic powers will all benefit from China’s improving the incomes and productivity of 2.5 billion people in Asia.

Abdel-Magied

And when you hire Chinese people, allow them to be Chinese, rather than expect them to fit into another kind of mold Yes.

Meyer

Yes. Yes.

Abdel-Magied

What should our C-suite listener think about in light of what we have discussed today?

Meyer

Okay. Three questions. The first is pretty obvious. Ask yourself how many people in your organization have actually done business in China, or even been there? What is your inventory of expertise and your network assets? In other words, is your organization equipped to think capably about interacting with that market?

Second, if you have relationships with vendors, governments, customers anywhere in the scope of China’s Belt and Road initiative, have you thought about how they would change if China became their dominant trading partner?

And finally, our better question: As the balance shifts, how heavily does China’s influence weigh?

Tune into our next episode, when we speak with Nicola Kleyn and Ajen Sita, both based in Johannesburg, about the growing influence of Africa.

Abdel-Magied

And that concludes today’s episode of The Better Question. For more on this subject, visit ey.com.

If you would like to share your better question with us, leave a review.

I am Yassmin Abdel-Magied. The better the question, the better the answer, the better the world works. Until next time.

Disclaimer: The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made.

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