By Andrew K.P. Leung (International and Independent China Strategist. Chairman and CEO, Andrew Leung International Consultants and Investments Limited)
While the prevailing “China Threat” rhetoric is China’s rapid ascendancy as a global power, a provocative piece in Foreign Policy dated 24 September, 2021 by Hal Brands and Michael Beckley, two distinguished scholars of the American Enterprise Institute, posits that China may soon reach its peak potential, and like Imperial Germany and Japan, could turn aggressive to seize its diminishing chances for dominance before it’s too late.
Their arguments about China’s coming “decline” are familiar: “China would get old before getting rich” with worsening demographics, in addition to water and food insecurity, dropping productivity, mounting debt, ethnic unrest, plummeting global image, and across-the-board US pushback, including decoupling.
However, the argument suffers from a measure of denialism or blind spots:
(a) As China’s population is four times larger, all it takes is reaching a quarter of America’s per capita productivity to displace the United States as the world’s largest economy. With much earlier economic recovery from the pandemics, China could become the largest economy as early as 2028, according to the UK-based Centre for Economics and Business Research (CEBR). Why should China become more aggressive now or after it has become the world’s largest economy?
(b) All these obstacles mentioned are real but not insurmountable. A host of new initiatives have been introduced, including “common prosperity“, doubling the consumer middle class of 800 million by 2035, lowering the retirement age, digitization, robotics, innovation, and a nation-wide modern rail system connecting all towns, however remote, of 200,000 people and above. This includes doubling the world’s most extensive high-speed rail system to 70,000km over the next 15 years to link all cities of over half a million people. China has pledged reaching carbon emission peak by 2030 and carbon neutrality by 2060. It is also holding party secretaries to account for ecology under their watch.
(c) China is evidently energized to realize the China Dream of becoming a “strong, democratic, civilized, harmonious and modern socialist country” by 2049, the 100th anniversary of the founding of the People’s Republic of China. It doesn’t include world dominance. Why should China become more aggressive before or after it realizes the China Dream?
(d) The likely flashpoint of possible China’s aggression is Taiwan, according to the two authors. The island is very much locked into Mainland China’s supply and value chain. About a million Taiwanese live and work on the Mainland. While safeguarding their separate identity, many Taiwanese are wary of rocking, let alone sinking the boat. Barring Taiwan’s formal declaration of independence, time is on Beijing’s side. Why should Beijing jeopardize its chances of realizing the China Dream by starting a war of uncertain consequences in the meantime?
On the impact of decoupling from China, a Capital Economics report of 17 September 2021 by eminent economists Julian Evans-Pritchard and Mark Williams suggests that if the world is gradually bifurcated into a “US bloc” and a “China bloc”, with supply chains rearranged rather than completely severed, China would stand to fare a lot worse than the US. According to the report, out of 217 global economies including Taiwan, a total of 114 are in the US bloc, while only 90 are in the China bloc.
This somehow contradicts with findings in many quarters that far more countries have China as the largest trading partner, compared with the United States.
As reported in India’s Economic Times of 3 September, 2021, “According to Lowy Institute data, before 2000, the US was at the helm of global trade, as over 80 per cent of countries traded with the US more than they did with China. However, by 2018, the number had seen a steep decline to mere 30 per cent, as China had become the largest trading partner for 128 of 190 countries.”
According to data released on 24 March, 2021 by China’s International Import Expo Bureau hosted by the Ministry of Commerce, China has become a top trading partner of over 120 countries and regions including the United States, the European Union, as well as Japan, US robust decoupling measures notwithstanding.
Moreover, the argument that the world’s trading system could be artificially categorized into two separate blocs appears dubious at best. It ignores the huge complexity of global supply and value chains, of which China has become a central hub. That’s why seven of the world’s top ten container ports are in China, including Hong Kong. Click here.
According to a piece in Foreign Affairs of 3 June, 2020 by Henry Farrell and Abraham Newman, distinguished scholars of Georgetown University, The Folly of Decoupling From China: It Isn’t Just Perilous—It’s Impossible
If anything, China is likely to become even more locked into the global and regional supply and value chain as a central hub of the recently launched Regional and Comprehensive Economic Partnership (RCEP), the world’s largest trading bloc consisting of all ASEAN member countries and their main trading partners, representing a third of the world’s population and GDP.
It therefore appears that the “bifurcated blocs” theory of decoupling is theoretical at best, if not downright unrealistic.
Author: Andrew K.P. Leung (International and Independent China Strategist. Chairman and CEO, Andrew Leung International Consultants and Investments Limited)
(The views expressed in this article belong only to the author and do not necessarily reflect the views of World Geostrategic Insights).
Image Credit: Reuters