CHINA, RUSSIA AND THE NATURE OF FORECASTING / GEOPOLITICAL FUTURES

China, Russia and the Nature of Forecasting

Checking the pulse of our annual predictions, every two weeks.

By Jacob L. Shapiro

Editor’s note: The following report is our second Forecast Tracker, a biweekly checkup on the health of our annual forecast. The format has been modified to reflect some of the feedback we received on the first installment, the improvements on which would not have been possible were it not for the participation of our readers. Please allow us to offer you a heartfelt thank you and to ask that you continue to share your thoughts on how we can improve this new feature.

Before we begin, I’d like to take a moment to talk about forecasting, which means different things to different people. We do not focus on predicting discrete events, but rather on the broad forces that shape events. Weather forecasters predict when a storm will strike. We predict the conditions that create the storm. We care less about individual events – like, for instance, an election – than we do about the political, economic, cultural and martial forces that define a country’s behavior no matter who wins.

Thus is the essence of our long-term forecasts, which serve as both our mission statement and our moral compass. It’s what keeps us objective. Now, objectivity is an easy thing to claim – everyone in today’s media landscape claims it, and maybe some even mean it. Our Forecast Tracker is our attempt to back up our claim. It’s our way of showing that we are motivated by the desire to be accurate, not to be partisan. It’s why we are investing so much time in sharing it with you.

To that end, the past two weeks saw major developments for two of the most important trends we identified in our 2018 Annual Forecast: that Russia would seek compromise abroad to help itself at home, and that economic reform would strain the Chinese government. We also note that one of our mid-shelf forecasts – external competition for influence in Central Asia – has seen a lot of activity in the past two weeks.

Jacob L. Shapiro, director of analysis

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From the Forecast: “Russia has been somewhat isolated from the rest of the world since 2014, when it responded to the Ukrainian revolution by annexing Crimea and supporting uprisings in eastern Ukraine … Russia cannot afford to be isolated any longer. It has almost spent all the money in its Reserve Fund, and it must begin the process of economic transformation now if it is to have a chance of taking root. Put simply, Russia needs to rejoin the world. It is open to compromises as long as the compromises don’t make Russia appear weak. Appearances are more important than ever for Russia as it manages difficult times at home.”

Update: The major event of the past two weeks (related to this forecast, anyway) was the Helsinki summit – an issue we also addressed in our previous Forecast Tracker. The meeting between Russian President Vladimir Putin and U.S. President Donald Trump took place on July 16. Putin said the talks were successful and useful, but almost no important and concrete decisions came from them. In fact, the only agreement that seems to have been reached was a joint decision for their national security teams to continue their discussions at the working level – but even this is contested.

And yet, despite the ambiguity of the agreements that came from Helsinki, that the meeting took place at all was notable, as was the fact that Putin and Trump at least appeared to try to find a more pragmatic basis for bilateral relations. The summit – to say nothing of other indicators, including EU-backed talks with Ukraine over the transit of natural gas – suggests Russia is looking for ways to diffuse its problems with its neighbors and rivals.

Still, this is Russia we’re talking about – and the Russian government cannot afford to be seen as weak, especially as Putin navigates the internal politics of pension reform. While Russia has entered the EU-backed gas transit negotiations, it has also prepared retaliatory sanctions against Ukraine and five other EU countries that signed onto EU-sanctions linked to Russia’s annexation of Crimea.

Russia is looking for an accommodation with the West, but the cost may be too high. The U.S. secretary of state released a statement on Wednesday that left little room for compromise on the Ukraine issue despite the Trump-Putin summit. If that’s the case, it goes against our forecast. For now, the trend line is averaging around a “C” – our measure for when there is no clear movement in one direction or another on a forecast. But that’s less a testament to the forecast’s ambiguity than it is to the vagaries of all involved.

 

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From the Forecast: “For decades, China was an engine of economic growth throughout the world. Those days are gone. Instead of encouraging growth for the sake of growth, Beijing will try to implement structural reform without alienating or angering any segment of its population so much that it would question Beijing’s rule. China should be able to manage this relatively well in 2018. Xi is at the height of his power and has the support of the people. But the thing to watch is how effective Xi’s reforms prove to be and how the consequences of his actions limit his plans – if they do at all.” Update: It has been a busy two weeks for the Chinese government. The rumors of gunfire in Beijing that surfaced July 18 have still not been substantiated, but President Xi Jinping was noticeably absent from state media for a few days, and a number of other oddities – like a Xinhua article about the downfall of Communist Party chairman Hua Guofeng in 1980 – all point toward exactly the types of political instability we predicted in China this year. China appears to have the situation under control for now. Xi has returned to the front pages, evidently confident enough to embark on a multiday trip to the United Arab Emirates, Senegal and South Africa this week. China has censored the media’s coverage on the trade war with the United States. And despite a few exceptions, Xi’s reform plan appears to be in place, and Xi himself appears to be no worse for the wear. At this point, the opposition to Xi is small and scattered, so successful has Xi been at eliminating his rivals and taming China’s vast bureaucracy. Sure, there has been outcry over the government’s handling of a faulty vaccine scandal, and sure, Xi continues his various reshuffles of the bureaucracy. (Most notably, he moved the Communist Party’s disciplinary chief in Beijing to boss of Guangzhou, capital of Guangdong province, one of China’s most important economic centers and historically a bastion of opposition to rule from Beijing.) This is how we expect the rest of 2018 to play out: A series of challenges will emerge, and Xi will deal with them via purges or other restrictions – but at the end, Xi will be the last man standing, stronger than ever before.

 

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From the Forecast: “Historically, Central Asia has been an arena in which greater powers compete for influence and therefore tend to destabilize the region. Things were no different in 2017, and things will be no different in 2018. Central Asia has been Russia’s backyard for almost a century now. But Russia has weakened, and now outside forces are beginning to act accordingly. China sees the region as central to its new Silk Road plans. India sees it as a place to thwart Chinese ambitions. Jihadists from Afghanistan and the Middle East see it as fertile recruiting ground, a place where poor, disillusioned youths might adopt radical political Islamic ideology.” Update: The headlines Russia and China captured the past two weeks have elided important events happening elsewhere in the world, namely Central Asia. Caught between China, Russia and Iran, and a region of interest for Japan, India, the U.S. and Europe, few other places are at the center of so many conflicting forces and agendas. We proudly note that Central Asia is among our most accurate forecasts of the year, though no one event sticks out more than the others in the past two weeks. The thing to note is the sheer number of developments happening that show how Central Asia has become such an arena of competition. Russia has agreed to build a nuclear power plant in Uzbekistan and to dispatch teachers to Kyrgyzstan. China is buying influence in Tajikistan and increasing purchases of natural gas from Turkmenistan. A Saudi delegation visited Tajikistan, and Iran’s president announced a visit next month to Uzbekistan – a country the U.S. has also been attempting to get closer to. EU member states, including Germany, are also active in the region. As foreign powers try to get a foothold here, Central Asian states are contending with deep-rooted economic, political and social challenges. The threat of terrorism and extremism is spreading. Tajikistan has beefed up security forces because of the Taliban and the Islamic State, both of which point to perhaps the most destabilizing element in the region: the deterioration of Afghanistan, which shares a border with Uzbekistan, Turkmenistan and Tajikistan. Its continued decline will put more pressure on a vulnerable part of the world that has so far managed to avoid widespread radicalization because of the draconian security apparatuses its rulers employ. We did not expect 2018 to be the year that these pressures come to a head, but we did expect the pressures to mount, and so far, that is playing out.

 

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