Commentary | 17 March 2017

Will China rule the world? Asian superpower faces uncertain future

Originally published in the Australian on 8 October 2016. 

Originally published in the Australian on 8 October 2016. 

Given China’s emergence from a century of relative weakness and “national humiliation” at the hands of foreigners in an otherwise extended period of pre-eminence in Asia going back millennia, it is understandable a lot of Chinese may be thinking that their nation’s time has come. Will China rule the world?

For these Chinese, the natural order is being restored. More surprising, perhaps, is how many non-Chinese agree and either welcome, or are resigned to, the seeming inevitability that an emerging China-centric order will soon supplant a visibly crumbling West.

Seven years ago, British scholar and journalist Martin Jacques wrote a book with the provocative title When China Rules the World. Jacques says China’s remarkable economic transformation will provide the platform for political, military and cultural influence that would rival and surpass that of the US and provide an alternative path to modernity as well as a very different world order.

Echoes of this thinking can be found in Australia’s intensifying debate about whether it is possible to accommodate China’s re-emergence as a great power without an unacceptable loss of independence, sovereignty and a dilution of the values that define Australia’s liberal democracy.

This is not solely an Australian dilemma but one we share with the rest of the world. Sentiment, however, is firmly shifting towards acceptance of the Jacques thesis.

Before falling on his own Brexian sword, former British prime minister David Cameron flung open the doors of what remains of the British Empire to the new emperor from the East. He royally feted his Chinese counterpart in a glittering display of British soft power designed to position Britain as China’s best friend in Europe, a policy critics derided as a servile kowtow to a country it once lorded over.

Independently minded southeast Asians, once proud of the leading role ASEAN had secured for itself in the region during the heady, benign 1990s and noughties, seem powerless to resist China’s will in the South China Sea, fearful of Beijing’s military clout and seduced by its economic and financial blandishments.

Only last month, Philippines President Rodrigo Duterte ­directly challenged the notion that the US is still the dominant Pacific power. Announcing the end of joint naval patrols with his erstwhile ally, Duterte asserted that “China is now in power and they have military superiority in the region.”

Is it time for Australia to bow to the inevitable and get on board the Chinese train, whatever our reservations about its ultimate destination or the likelihood that the keys to the first-class coach will be given only to those who sign up to Beijing’s loyalty program?

It’s hard to think of a more important question for Australia. Answering it, however, requires a close examination of the common assumption that China is on the fast track to becoming the pre-eminent global power by 2030. If this assumption is false, then it substantially weakens the argument for a more intimate and uncritical relationship with China as the best way of ensuring Australia’s future prosperity and security.

It’s not difficult to understand why so many people believe that China’s rise to the top is preordained. Everything about China is big — its geography, reach, population, buildings and, above all, vaulting ambition. This unique combination of size, ambition and focused capability is the key to China’s success, along with a strategy that harmonises the country’s formidable hard and soft power ­assets in a way that no other state can match.

The story of modern China’s meteoric rise from underdeveloped backwater to emerging superpower has been well chronicled. Undeniably the most impressive national socio-economic transformation in history, the Chinese surge shows few visible signs of abating. In many areas, it seems to be accelerating.

China Inc is a leading, or aspiring, player in just about every sphere imaginable, from the economic and geopolitical to the technological and educational. Thirsty for knowledge and wanting to improve their lot in life, Chinese students dominate foreign student intakes in just about every developed country, including Australia, and their own universities are rapidly moving up international league tables of excellence.

In contrast to its complacent, energy-rich neighbour — Russia — China has invested enormous resources in the enabling technologies of the 21st century in an audacious bid to seize the commanding heights of the future economy.

And it’s not fussy about how it gets there, empowering the military and contracted netizens to hoover up intellectual property from around the world in what amounts to the greatest secret heist of all time. At the top of the list are information and communications technology, healthcare, pharmaceuticals, military technologies, robotics, agricultural and renewable energy technologies, natural resources and advanced materials and manufacturing techniques. Strategic milestones are clicking over. China recently secured bragging rights to owning the most powerful computer in the world. In August, it launched the world’s first quantum satellite in an effort to leap ahead in the high stakes competition to develop unhackable encryption technology. What was once a yawning military capability gap with the US is closing fast as the modernising People’s Liberation Army shows the benefits of more than two decades of double-digit increases in defence spending. Arms exports have increased 143 per cent over the past five years and China is poised to become the world leader in unmanned military aircraft by 2023.

Chinese workers, entrepreneurs, diplomats and technicians are ubiquitously present in every corner of the globe promoting China Inc.

Nonagenarian Zimbabwean dictator Robert Mugabe might be a pariah in the West but his regime has been sustained by regular infusions of Chinese cash as part of a wider strategy to cement Beijing’s position in Africa that is beginning to pay handsome dividends. Trade has increased 150 per cent in just over a decade to make China Africa’s largest trading partner.

The Chinese military also seems to be everywhere. During the past 18 months, the navy has sailed through the Bering Straits for the first time, held joint exercises with Russia in the Mediterranean, sent submarines to Sri Lanka and accessed new military support facilities at the strategically located former French colony of Djibouti, adjacent to the mouth of the Red Sea.

A secret space facility in Argentina, ostensibly for civilian purposes but with potential military application, underlines just how intertwined China’s commercial and national security objectives have become in the country’s quest for superpower status.

Soft power strategies are also deployed to increasing effect, reinforcing China’s desired image that it is a nation of standing and influence in world affairs and the heir apparent to a declining US.

The Dastyari affair was a salutary lesson for Australia in how China uses institutional and diaspora soft power to buy influence and curry favour with politicians and opinion leaders, but it was merely a chapter in a larger, grand narrative to convince the world that China’s rise to the top is unstoppable.

There is much more to come. Only last week, China’s richest man, Wang Jianlin, bought into an icon of Hollywood soft power by taking a stake in Sony Pictures, declaring that he wants to change the rules “set by foreigners”.

The undoubted centrepiece of President Xi Jinping’s quest to position China at the centre of global affairs is his visionary new silk road concept, officially dubbed “One Belt One Road”. OBOR’s aim is simple but bold. Its central purpose is the extension and consolidation of China’s economic and geopolitical influence across Central Asia to Europe by land, and within the countries that border the Indian and Pacific oceans by sea. Xi sees Australia as an integral part of OBOR, which is linked to the Coalition’s northern development plan and partly explains the current enthusiasm for acquiring Australian ports, infrastructure and land.

Given the nearly $3 trillion in capital at China’s disposal, dwarfing the $120 billion (in today’s dollars) spent by the US in the Marshall Plan’s reconstruction of war-torn Europe, OBOR is a serious — if not unprecedented — undertaking by a nation state. Should OBOR succeed, China may well rule the world. But there are many reasons to think that it won’t.

The first is economic. It is increasingly obvious that China will be unable to reach its annual growth target of 6.5 to 7 per cent and there is no guarantee the country will be able to seamlessly transition from an export-oriented economy to one fuelled by domestic consumption. Many experienced economists believe real GDP growth this year may be only half that of the official projections. Debt is rising twice as fast as economic growth, raising the prospect that China’s overexposed banking sector could be forced to write off bad debts four times larger than those of US banks during the devastating 2008 financial crisis.

The Australian’s China correspondent, Rowan Callick, belled the cat on the health of the Chinese economy in July, writing that the unanimous verdict of top China economists is that a debt crisis is approaching, “there are no signs of policy renewal and a ­recession is almost inevitable — either sharp and possibly calamitous, or drawn out”. Although this may not occur in the next few years, some kind of financial crisis appears unavoidable in the ­medium term.

As for OBOR, there is widespread scepticism that the initiative’s more ambitious goals can be met and OBOR’s soft power gains could be reversed by negative international reaction to China’s assertive nationalism in the South China Sea.

Geopolitical risk could compound Beijing’s economic problems in other ways, should the ability to protect its far-flung investments and expanding diaspora exceed the nation’s resources, which is a distinct possibility. Aside from established Chinese communities in more than 30 countries, there are an estimated 5 million Chinese nationals working internationally, including up to 2 million in Africa, who need to be protected from terrorism, kidnappings and potential anti-Chinese pogroms of the kind witnessed in Indonesia during the mid-1960s.

A second challenge is resisting hubris and avoiding the imperial overstretch which eventually brings all empires down. China is especially vulnerable to external shocks because of the rapidity of its expansion and mounting challenges on its periphery from a ­nuclear-armed North Korea, pro-independence sentiment in Taiwan and Hong Kong and the hedging activities of anxious neighbours who worry about their potential loss of freedom and autonomy in a China-dominated Asia. The leadership is also acutely aware that a Donald Trump or Hillary Clinton administration in Washington next year will be far less accepting of China’s interests than Barack Obama’s.

A third challenge is demographic. Demography might not always be destiny, but demographic decline has eliminated the once seemingly inexhaustible supply of cheap labour that turbocharged China’s growth after 1980. By 2012, this demographic dividend had reversed with fertility rates in free fall due to the one child policy. As a result, China has aged more rapidly than any other country and more than three times the rate of Germany, Russia and Italy in the past century.

By 2020, there will be nearly 170 million Chinese over the age of 65, a majority of whom don’t have pensions, underlining the fact that China is still a developing country for all its impressive advances. Whether China grows old before it gets rich depends on one’s definition of rich. But as their people’s aspirations grow, Chinese leaders will have to divert more of the ­national budget towards aged care, putting added pressure on revenue just as the labour pool shrinks, a problem with which developed Australia is only too familiar. China has the highest take-up of industrial robots in the world so robots may be able to fill some of the labour gap and stimulate productivity. But you wouldn’t want to bet your house on it.

The fourth great challenge, domestic political instability, is the most difficult to assess because of the opacity of Chinese politics. Some broad trends are identifiable, however, and none of them augur well for the country’s long-term stability or its relations with the wider world. After a period of relative openness and collective leadership under the presidencies of Jiang Zemin and Hu Jintao, Xi Jinping has ruthlessly suppressed internal dissent, prioritised the military, centralised bureaucratic power in his hands, strengthened the government’s control over the media and the internet and fostered a prickly nationalism which has done little to ease concerns China’s rise may not be peaceful.

Fordham University academic Carl Minzner says Xi has broken with the post-1978 past in other important ways, principally in his revival of an ethno-nationalist ideology rooted in imperial history and tradition and the Maoist era tactics of rule by fear. The risk is that in seeking to emulate Mao, Xi will succeed only in cannabilising the Chinese political system, visiting upon his country the anarchy and internal chaos that would destroy not only Xi’s dream of a great China, but the more humble aspirations of millions of his fellow citizens. This bleaker, alternative future is no less plausible than Jacques’s prognosis.

Midway between these two polar opposites is a third credible alternative — that China has already peaked. Although the country will continue to be among the group of leading nations for the next two decades because of economic momentum, it will not become more powerful than the US and it certainly won’t rule the world.

Given the uncertainty surrounding China’s future, a smart Australia would hedge its bets and not be seduced by questionable assertions that China’s ascendancy is irreversible.

We should also be alive to the self-serving role of the Chinese communist “party-state” which uses its soft power to exaggerate and amplify the country’s achievements, influence and power, inducing a kind of fatalistic acceptance among targeted audiences that China’s momentum is unstoppable and resistance futile.

Hedging our bets does not preclude us from having a constructive, profitable relationship with China. But it does mean we need options and choices should things go wrong or our core interests and values are threatened as they are in the South China Sea and by unacceptable interference in our domestic affairs. These options include trade diversification to prevent overreliance on China; enhancing our strategic relationships with other states, especially Japan, India and Indonesia; and strengthening the US alliance and our independent defence and intelligence capabilities.

The China challenge is as much about values as it is interests. If Xi takes China further down an authoritarian, expansionist path, the differences between our two countries will multiply and eventually overwhelm centripetal impulses, creating a trust deficit that could prove insurmountable.

Nobody expects China to become a Jeffersonian democracy. But unless the current leadership learns to tolerate more pluralism at home, open up to criticism and accommodate smaller countries’ legitimate concerns, there will be trouble ahead and hardening resistance to the idea of a China-centric world.