China the Startup Nation: 5 Future Trends to Watch

China's recent currency devaluation and financial controls are part of an immense leap forward in accelerating the adaptation of China to a changing world economy. We shall see if their leadership works out the growing pains. I am betting they will.
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When I first started going to China twenty plus years ago it was mysterious and even felt ancient. I was in China to review the business climate for investment. There were more bikes and horses than autos and trains. It was a nation becoming, emerging, and figuring out what role it wanted to take on the world stage and what kind of nation it wanted to be at home. This narrative is still in play.

I have to admit I have respect for the Chinese leadership given their embrace of the market economy where there has been a mixed bag of prosperity and decline. The market economy embraced by the Chinese government was a bold strategic step and their economy proved to be quite resilient and future-ready -- ready to embrace the challenges of a complex and uncertain future. This was and is today, a reality not without risks and challenges as we have seen recently.

China's recent currency devaluation and financial controls are part of an immense leap forward in accelerating the adaptation of China to a changing world economy. We shall see if their leadership works out the growing pains. I am betting they will. This is not easy to manage, to say the least. I do not think anyone, including the Chinese leadership, that thinks managing the second largest economy is a sure thing or predictable. The sheer complexity of the Chinese economy is hard to even explain. And as with the U.S. or Eurozone, the global market factors that are in play defy government controls more often than not. This was painful in the financial crisis of 2008.

I think China is a Startup Nation. In fact, it's the biggest startup the world has ever seen. This means the economic model, the management, the laws, the customers/citizens are all part of an exciting new economy, society, and culture that has never existed before. China is inventing China. The sheer size of this Startup Nation and the challenges they face will mean many more ups and downs. China as a Startup Nation is what startup companies tend to be -- disruptive, bold and unpredictable. Nations -- like startup companies -- face great risk as well, learn much on the job, embrace innovation and have to deal with large and drastic changes in the marketplace. I think the analogy fits.

Over the past weeks we have seen billions of dollars of wealth disappear and new government controls be put in place. This is to be expected. This is part of the China Startup Nation Scenario. They are looking for balance between government controls and market realities. But perhaps more interesting, the Chinese are engaged in a narrative about what the future of China could be. Do they let the market forces prevail? Should they lessen government controls?

There are other risks that may derail the future of China such as increased security tensions, cyber-hacking, energy, and climate. Also, China's growing pains affect the world's connected economy, where trade, peace, and security are all linked. Currency, equities, commodities, and supply chains are all now part of the connected global economy where no nation is an island. Uncertainty is not a preferred state for growth and stability.

China is attempting to accomplish in a generation what the United States accomplished in five generations. They are still in startup mode. This is the stage of China's evolution. The complete transformation of China from a mostly agrarian society to embrace industrialism has in less than twenty years been remarkable. The budding of the Innovation Economy is now emerging next. But there are headwinds coming that we should all prepare for.

There are five key trends that if embraced by China or if led by China, could make the transformation into the near term quite spectacular for a prosperous future. China could be moving from the Startup Nation stage to something more innovative, mature, and stable. This would be in the interest of all nations but especially between China the U.S. This important and intimate relationship, given the deep trade and sovereign connections between the Chinese and U.S., is the foundation of global peace and prosperity.

These trends could bode well for China and the world.

Trend 1: Build Confidence in the Global Investment Community
China should increase its relationships with the global business community and cure outstanding issues that impede investment in China.

Trend 2: Resolving Peacefully Regional Security Future Risks
It does little to attract investment and increase growth and trade in the Asia region, when uncertainty and security disputes increase tensions between China and its neighbors.

Trend 3: Phase Out Cyber-Hacking
China has to decide if it actually makes any sense to continue the large-scale, government-sponsored hacking programs. It needs to respect intellectual property. It's illogical to steal commercial patents and state secrets from its U.S., EU and Asian allies where the Chinese hold the largest foreign currencies, sovereign debt, and who are their largest customers in global trade.

Trend 4: Embrace the Clean Energy Cities of the Future
China will be building the next 100 megacities over the next decades. Essential to this task is for China to embrace a non-polluting future for China. China has an opportunity to invent a new energy and climate-aware nation, which could lead the world.

Trend 5: Create an Innovation Economy and an Entrepreneur Culture
New technologies will transform economies, create jobs, create digital education, and reinvent health care. Entirely new business creation can accelerate China's growth from investing in innovation. China can increase collaboration with global partners and talent if issues of trust and confidence, respect of intellectual property are addressed. From digital networks, robots, biotech to eCommerce -- innovation will create a prosperous future.

As a global futurist who has watched China emerge, I think we need to send clear signals to the Chinese which are in the interests of all nations. The era of hegemonic nations battling out for dwindling resources is one historic model that too often dominates foreign policy even trade.

Encouraging global sustainability and cooperation in the light of the massive challenges facing our planet -- security, energy, climate and health would be smarter future for our children. Let's work towards that future.

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