The great China delusion

Chinese People's Liberation Army soldiers march on parade. But the mighty Chinese economy is headed for trouble
Chinese People's Liberation Army soldiers march on parade. But the mighty Chinese economy is headed for trouble - Thomas Peter/Reuters

China will soon be the world’s economic superpower, we have often been told.  For three decades, China has experienced double-digit annual economic growth. She has gone from being a largely agrarian economy that accounted for less than 2 percent of world output in 1980 to almost a fifth of output now.

China’s rise, it has often been implied, is nothing to worry about. As China took off economically, we were reassured, she would become just like the rest of us.

This, at least, was the thinking twenty years ago, when China was admitted to the World Trade Organisation. Back then, President Clinton talked of China as a ‘strategic partner’.

By letting China join the international system, clever people in London and Washington suggested, China would become part of it.  Think of all those tens of millions of middle class Chinese, they assured us. Soon, like the middle classes in America and Europe, they would be demanding all the trappings of liberal democracy.

But rather than becoming more Western, it is clear that China under President Xi is not just un-Western, but increasing anti-Western. China today is not part of the international order, but agitating to subvert it. Chinese foreign policy seems to be all about creating rival structures and processes. Chinese government agents engage in the kind of espionage activities you might expect from a hostile foe.

Those that perpetuated this China delusion used to tell us that following the British handover of Hong Kong, China would grow to become more like Hong Kong. Instead, the opposite has happened. Hong Kong has been brought into line with the rest of China, and the freedoms her people had have been taken away.

Far from taking her place at the international table, China behaves as if she wants to overturn it. China masses troops, ships, planes and missiles in the western Pacific, bullying Taiwan and making little secret of her plan to invade the island. This would be the moral equivalent of the United States threatening to annex Vancouver Island.

Rather than becoming more Western, China’s government continually seeks new ways to restrict her citizens from accessing the internet. Digital technology has been harnessed to monitor the day to day activities of her own people. The autocrats that preside over China are so thin skinned and morally bankrupt, they actively clamp down on the Falun Gong movement. This is rather like the US government trying to shut down yoga classes.

The assumption that China, under the communist party, is ever going to emulate the West is wrong.  But perhaps the real China fallacy is the notion that the Middle Kingdom is destined to be a great superpower at all.

For decades, highbrow magazines have been publishing articles forecasting that China’s economy will overtake America’s. At one time, we were told this would happen in the 2020s. Then it was the 2030s. Now I read it is supposed to happen before 2050.

I predict that China’s economy will never overtake America’s. Only last year, China ceased to be the most populous country on the planet, as India overtook her. China’s demographic future looks ominous. Today there are 1.4 billion people in China.  By the end of this century, some estimate that China’s population will have fallen about 40 percent to 800 million.

The next few years, I predict, will see a significant fall in China’s economic growth. 

It is relatively easy to produce big gains in economic output when you move farm workers into factories (see Soviet Russia in the 1950s for details). China was able to accelerate economically as a consequence of Deng Xiaoping’s reforms. Deng’s policies were not only market-friendly: Under Deng, decision-making was relatively decentralized. Provinces and regions had lots of autonomy. Beijing did not try to pre-empt every decision. Business had at least some room to operate in a free-market manner.

Under Xi, China has abandoned the Deng reforms, and reverted to what you might call the Ming tradition of top down control. It is not an encouraging precedent, and its effects on business confidence and the economy have been chilling. Meanwhile the once-low cost of labour – one of the factors which powered all that growth – is rising as China’s population stabilises and ages.

An imminent era of Chinese pre-eminence has been predicted by Western observers since at least the eighteenth century. Somehow it never quite materialises. China’s history is often a story of false starts and stifled innovation.

Yes, from the compass and printing to gunpowder, China was home to many of the great inventions that shaped the modern world. But China’s tendency towards top down control prevented her benefiting from those inventions the way Europeans were able to.

As China shuts her citizens off from the world once again, clamps down on all dissent, and introduces stringent, innovation sapping regulations, I wonder if history is repeating itself?

Far from being an economic dynamo, China today is on course to becoming the next Japan. Like China, Japan was once supposed to overtake America. Instead, a previously thriving, export-driven economy has been reduced to stagnation by demographics and debt.

So China may not become the world’s economic superpower, but this does not mean that China is not a threat. Quite the opposite.

Just over a century ago, a recently industrialized power, Germany, started to challenge the international order. Economically and militarily powerful, Germany nonetheless sensed that other powers were not so far behind. Among Germany’s leaders there was a sense that if Germany was serious about rearranging the furniture in Europe, she had a limited window of opportunity to do so.  The consequences of that mindset were catastrophic.

My fear is that China’s leaders today may think themselves to be caught in a similar window of opportunity. China’s demographic calamity, coupled with slow growth, mean that her relative power will only decline.

America is right to be strengthening her fleet in the Pacific.  It is also important that America works with an alliance of countries, including Australia, South Korea and Japan to ensure the security of the Pacific.

China may never be the world’s number one economic power. She will, I suspect, be the world’s biggest geopolitical headache for the foreseeable future.

Douglas Carswell is the President & CEO of the Mississippi Center for Public Policy. He was previously the UK Member of Parliament for Clacton

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