The biggest misconception about China (2) – Its historical place in the world

The Chinese have studied the West more diligently than the West has studied China.

The cadres of the Chinese Communist Party know both the positive and destructive forces of the capitalist market better than many politicians and CEOs in the West. And they apply this knowledge consistently and persistently with long-term implementation perspectives.

The decentralized mayor economy follows the framework of a well-thought-out, revolving five-year plan with fixed north stars.

Coordination through a plan in the west and east

To achieve this, the Chinese make very successful use of a method that is successful but frowned upon in liberal democracies: the five-year plan.

The five-year plan is comparable to a planning round at Volkswagen.

Volkswagen (as an example of a volume OEM) plans the sales of its vehicles, the capacity utilization of its plants, and the orders placed with suppliers each year based on sales forecasts provided by external researchers. Volkswagen repeats this process five years in advance. The planning is initiated by the sales forecast for vehicles worldwide: how many mid-size SUVS, for example, will be sold in Germany and Spain, but also in China, Korea, or Brazil? How large will the market share of Volkswagen, Audi, Škoda, or SEAT/Cupra be in the local markets and segments?

On this basis, the capacity utilization of the production lines is planned, investments in equipment are approved, supplier contracts are signed, and staff capacities are planned. All departments and foreign branches are involved in this planning. And every fall, the consolidated plan for safeguarding Volkswagen sales of more than €300 billion worldwide (including JVs) with the corresponding investments and costs is submitted to the Supervisory Board for approval.

While Volkswagen has carried out 74 of these planning rounds, the 15th five-year plan is currently being prepared in China—i.e., roughly the same time span of experience. The striking difference is this: The VW planning round is triggered by an objective sales plan, but the Chinese five-year plan is initiated by a small group around President Xi.

The Chinese place significant importance on long-term perspectives, yet even this group does not create the plan on a blank piece of "dictator" paper. It is equally unlikely that this group will gather around a flipchart to engage in "brainstorming." Even for this group, the initial writing of this first document follows a very structured procedure.

Just as the CEO of Volkswagen would be overwhelmed with planning for such a mega-corporation, there is no group in the world who has the intelligence to organize a highly complex society of 1.4 billion people with a high degree of division of labor and allow it to grow over decades. And to consolidate the planning for cities, industries, logistics networks, foreign trade, education, health, and security, as well as science and culture, into a comprehensive plan.

Therefore, how can the Chinese create a sophisticated plan for a complex economy and nation with positive GDP growth over the past 40 years?

"You have the watches; we have the time."

This development of the five-year plan in such complex organizations obviously follows a finely balanced process to collect, filter, and consolidate relevant information, analyze it, and draw the right conclusions.

This planning is complex and takes a lot of time and discipline.

Every well-thought-out plan is the result of in-depth analysis and a profound understanding of interrelationships. The leadership around Xi can therefore only compile, condense, and authorize the conclusions of preliminary work from the entire country in the form of decisions.

The plan is not just about the next five years.

The result of the planning process in China is a strategic development of the mega-nation with 1.4 billion people over decades—long-term, coordinated, balanced, and continuous. The Chinese are coordinating. One could get the impression that the Chinese are the largest group of people and the most important culture of the present day, following common principles and a comprehensive, fine-tuned plan. This is fueled by the idea of significantly improving personal wealth and status, as well as the family lifestyle. This is precisely what Deng had pledged to achieve.

This approach is the secret behind China's tremendous rise as an economic nation and a global superpower: it involves shackling the individualistic drive to improve one's own lifestyle and social position with the achievement of overarching societal development.

China is returning to its place in the world.

The Chinese are applying a fundamental principle of societal development: through coordinated action, China is regaining its lost position in the world, which it had held before the onset of Western colonization.

Its historical gross domestic product was the largest globally until the first Opium War (1839 to 1842), during which Great Britain forced its way into the Chinese market, marking the beginning of the "century of humiliation" for China. It was only through the opening-up policy of Deng Xiaoping (邓小平) that a market economy became possible in China at the end of the 1980s.

But Deng was also chairman of the Chinese Communist Party—and so a market economy was crossed with a planned economy. Deng's approach was akin to that of Volkswagen. The result was a fantastic economic, technical, and power-political rise over the past 35 years. As a result, 800 to 900 million Chinese have been lifted out of poverty, and the country has already become the largest economy (in terms of purchasing power parity). In addition, with BRICS, China can organize and dominate the economic and political coordination in the Global South.

China's economic substance has therefore always existed historically: China possesses a wealth of land, a diverse and vast population, a rich culture, abundant natural resources, and much more. What was missing for a century was development in education, research, and infrastructure—which hampered nationwide coordinated action for a century.

And it is only now that China's economic potential is coming to fruition again. External influence had caused China to lose its course and structure for almost a century. The external powers had taken away China's direction, strategy, and plan. This situation resulted in lost wars, severe poverty, and violent uprisings, which ultimately allowed China to regain control of its destiny.

Strategic North Stars are the backbone of planning.

Do you know Li Qiang (李强)?

He is the Prime Minister of the State Council. He is effectively the chancellor, i.e. he heads the cabinet and all ministries and represents the country to the outside world. He reports to the National Congress. The National Congress is China's constitutional body, i.e., the parliament. Of course, this organization works differently than in a parliamentary democracy. This should only be noted for the sake of completeness.

On March 5, 2025, it presented the government's activity report to the National Congress. The paper is freely available on the internet. There are 53 pages in German. At normal presentation speed, that's 2 hours of speech. Imagine the officials nodding off. But only if they had studied the report beforehand.

Because the report has it all.

Li Qiang reports on the industries of the future. These industries will reap the benefits of investment and serve as the foundation for legislation. These goals serve as the guiding principles for this plan and the subsequent five-year plans. Of course, AI and quantum computing are among them. But what are the implications of deep-sea exploration and low flying for China's five-year plan?

We will report on this in an upcoming newsletter.