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The last time two super powers with different political values and systems faced each other, they did so from behind the barricades of two virtually separate economic systems. Western countries designed, made, sold and bought goods and services within a western sphere of influence. Communist countries bought and sold within their own political world of generally inferior products. Raw materials and energy bridged the divide to some extent but that was about all. Typewriters were not designed in New York and made in Siberia. Chairman Mao’s politburo didn’t wear Saville Row suits. Premier Brezhnev was driven around in a Zil limousine, not a Mercedes.
The world now is different. There is one global economy and largely one global consumer who has grown to recognise similar things as the mark of success and wealth. IPhones, at least for the moment, are designed in Cupertino and made in China, before being exported to global markets. The West is flooded with Chinese steel. China owns a large chunk of American government debt. British telecoms infrastructure rests on Chinese-made routers. A trade war is raging but China’s own progress, for all the efforts to build an internal market, rests on prosperous and vibrant western consumers. And those western consumers, for all the rejection of what is foreign, have become accustomed to buying things made in China at prices they can afford and of sufficiently good quality. In China, although the growth in the sale of luxury goods has slowed, there is no sign that the underlying taste amongst the wealthy for western luxury and fashion has changed. Western manufacturers continue to see the Chinese market as crucial to the growth of their brands.
One Belt, One Road (OBOR; also known as the Belt and Road Initiative, BRI) aims to open up new markets for China through infrastructure investment but it will be a long time before all those markets added together can rival the European Union as a place to do business. In the financial markets, it will be an equally long time before the renminbi rivals the dollar or the euro as a reserve currency. In real estate, buying property in rule of law driven London remains a safer long-term bet than in a centrally controlled state where your status could change overnight.
In the digital and technological economy, China succeeded in keeping western companies out whilst it built its indigenous versions of the major services and platforms. But those western companies, in search of growth, are now looking for ways back in and Chinese digital giants are investing heavily abroad and looking for ways out to the wider world. Both China and the West want to lead the world in the development and adoption of AI driven services. As an authoritarian state, China has a big data aggregation advantage which drives the deep learning underpinning the AI revolution. The West, arguably, still has the best liberty and venture capital driven model for innovation across a broad front. China has acquired a lot of intellectual property via dubious routes in the recent past but is now starting to build up intellectual property itself that it wants to protect and its interest in rules for the digital world is perhaps growing.
This Ditchley conference will bring together policymakers, officials, opinion formers, business leaders and technology innovators to examine how we can best navigate the strange economic symbiosis between two systems that diverge on many values but have converging interests. How can we avoid the current trade war getting out of hand? How can we build international institutions and rules of the game that work for all? How can we achieve mutual respect for intellectual property and for data privacy? How do we avoid AI nationalism, where both sides seek to dominate future technologies with the obvious risk of an AI arms race? What does a mutually respectful approach to One Belt, One Road and the development of the rest of the world look like? How can we help the one global economy grow to the benefit of all? What do we do about our different political and value systems? How can we avoid them coming into conflict as the Internet and other technologies override geographical separation of jurisdictions and create – no matter what the firewalls in place – an effectively shared space? Can we deepen our superficial agreement on universal human rights to make it a basis for international cooperation and an effectively functioning system? Can we develop shared interests when it comes to confronting those who have more interest in disrupting global systems than developing them?
This Note reflects the Director’s personal impressions of the conference. No participant is in any way committed to its content or expression.