OCTOBER 11 — The conventional wisdom that China's economic slowdown necessarily signals its strategic decline deserves serious reconsideration.
Indeed, the assumption that India, Vietnam or other emerging economies can readily replace China as the world's manufacturing powerhouse may be one of the most consequential misjudgements in contemporary geopolitics.
This is the central argument of The Next China Is Still China: An Insider's Playbook for Winning in the New Era, co-authored by Joe Ngai and Nick Leung, two senior figures associated with McKinsey's extensive engagement with China's economic transformation.
Their book offers an important corrective to the increasingly fashionable narrative that China has reached the limits of its economic potential.
Rather than treating China as an exhausted growth story, Ngai and Leung contend that the country is entering another phase of economic transformation, one driven less by inexpensive labour and infrastructure expansion than by technological innovation, industrial sophistication and intense domestic competition.
Their argument deserves close attention, especially in Southeast Asia.
For more than four decades, China's economic rise was associated with manufacturing, exports, urbanisation and an extraordinary capacity to mobilise capital and labour.
That model transformed China into the world's second-largest economy and created industrial ecosystems of unprecedented complexity.
Yet the authors suggest that China's next economic chapter cannot be understood through the assumptions of its previous development model.
China is increasingly competing in electric vehicles, advanced batteries, robotics, artificial intelligence and sophisticated manufacturing technologies.
Its companies are no longer merely producing goods designed elsewhere.
They are developing technologies, establishing industrial standards and competing internationally on quality, speed and cost.
One particularly compelling aspect of the book concerns the intensity of domestic competition.
Ngai and Leung portray China as an exceptionally demanding environment in which companies must continuously improve their products and operations simply to survive.
Chinese consumers are increasingly sophisticated, digitally connected and willing to switch brands.
Consequently, domestic competition has become a powerful mechanism for technological adaptation.
Companies that survive such an environment may emerge internationally stronger, more efficient and more innovative.
This argument is persuasive, although it requires qualification.
Intense competition can certainly stimulate innovation.
But excessive competition can also undermine profitability, encourage overcapacity and produce destructive price wars.
China's extraordinary industrial capabilities therefore do not automatically guarantee sustainable economic returns.
The distinction between industrial strength and economic sustainability remains essential.
Another major contribution of the book lies in challenging the proposition that the next China will necessarily emerge somewhere outside China.
India possesses demographic advantages and a growing industrial base.
Vietnam has become an important manufacturing destination. Malaysia, Thailand and Indonesia are attracting investments in semiconductors, electric vehicles and digital infrastructure.
Nevertheless, none individually possesses China's complete combination of industrial scale, supplier networks, infrastructure, engineering capabilities and domestic market depth.
Indeed, much of the manufacturing diversification taking place across Asean remains connected to Chinese intermediate goods, machinery, investment and technological expertise.
This creates an important geopolitical paradox.
Companies seeking to reduce their dependence on China may discover that their new production facilities elsewhere remain dependent on Chinese supply chains.
Diversification does not necessarily amount to decoupling.
For Asean, this distinction is strategically significant.
The region should welcome investments relocating from China while recognising that the resulting economic networks may continue to be deeply integrated with Chinese industrial capabilities.
Asean must therefore avoid the temptation to interpret every new factory established in Southeast Asia as evidence of China's economic retreat.
In many cases, such investments represent the international expansion of China's industrial ecosystem rather than its displacement.
The book is equally valuable for its implications concerning American strategic competition with China.
Washington has increasingly emphasised technological restrictions, industrial policy and supply-chain resilience.
Yet China's economic importance cannot simply be legislated out of existence.
Even as geopolitical tensions intensify, the economic interdependence between China, the United States and Asean remains substantial.
This does not mean that China's rise is irreversible.
The authors' generally optimistic interpretation must be balanced against serious structural difficulties.
China faces demographic ageing, property-sector weaknesses, local government indebtedness, subdued domestic demand and growing resistance to its overseas commercial expansion.
Technological progress alone cannot resolve all these challenges.
Nor can industrial dominance substitute indefinitely for stronger household consumption and sustainable productivity growth.
Nevertheless, the book's essential contribution is to demonstrate why these difficulties should not be confused with an inevitable collapse of Chinese economic power.
For Asean, the appropriate response is neither uncritical enthusiasm nor excessive apprehension.
Instead, Asean must become more strategically sophisticated.
The Asean Outlook on the Indo-Pacific provides a useful foundation for maintaining openness, inclusivity and cooperation amid intensifying major-power competition.
But diplomatic principles must be accompanied by technological investment, stronger regional supply chains and the development of indigenous capabilities.
Asean's circumscribed power means that it cannot individually or collectively match China's industrial scale.
Yet it can strengthen its bargaining position through economic integration, institutional cooperation and strategic diversification.
Malaysia, particularly as an important semiconductor and electrical and electronics manufacturing hub, has much to gain from understanding these transformations.
The challenge is to move beyond assembly and investment attraction towards research, innovation, advanced engineering and technological ownership.
Ultimately, Ngai and Leung have produced a timely and provocative contribution to the debate over China's economic future.
Their central proposition is convincing precisely because it rejects the simplistic assumption that slower growth necessarily means diminishing relevance.
The next China may be older, slower-growing and confronted by formidable geopolitical constraints.
But it may also be more technologically sophisticated, industrially competitive and internationally embedded.
For Asean, the lesson is unmistakable.
China's transformation is not a development to be observed from a distance.
It is a structural change that will directly influence Southeast Asia's economic opportunities, strategic autonomy and geopolitical future.
Understanding the next China is therefore inseparable from understanding the next Asean.
* Phar Kim Beng is professor of Asean Studies, and director at the Institute of International and Asean Studies, International Islamic University Malaysia.
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
