Is China the “Inevitable Superpower”?

By S.P. SETH

There is much talk these days about China’s emergence as the next superpower in a decade or two. Indeed, Arvind Subramanian, a Senior Fellow at the Peterson Institute for International Economics, has predicted that China is the inevitable superpower. In an article in a recent issue of the Foreign Affairs Magazine titled, The Inevitable Superpower, (extracted from his forthcoming book), he argues why China’s dominance is a sure thing.

“The upshot of my analysis”, according to Subramanian, “is that by 2030, relative U.S. decline will have yielded not a multipolar world but a near-unipolar one dominated by China. China will account for close to 20 per cent of the global GDP (measured half in dollars and half in terms of real purchasing power), compared with just under 15 per cent of the United States.”

He adds: “At that point, China’s per capita GDP will be about $33,000, or about half of U.S. GDP. In other words, China will not be dirt poor, as is commonly believed. Moreover, it will generate 15 per cent of world trade---twice as much as will the United States.”

Therefore: “By 2030, China will be dominant whether one thinks GDP is more important than trade or the other way around; it will be ahead on both counts.” Case closed---as far as Subramanian is concerned.

It is a pretty confident thesis, with the author willing to stand by it like a proven mathematical formulation. Indeed, the subtitle of his article is: “Why China’s Dominance Is a Sure Thing.”

And he poses the question: Can the United States reverse this trend? His answer obviously is not likely.

He writes: “Its [US] economic future inspires angst: the country has a fiscal problem, a growth problem, and, perhaps intractable of all, a middle-class problem…. High public and private debt and long-term unemployment will depress long-term growth….”

He adds, “The middle class is feeling beleaguered: it does not want to have to move down the skill ladder, but its upward prospects are increasingly limited by competition from China and India.”

Subramanian even conjures up a horrible scenario in the future when China might be able hold US to ransom “by selling some of its currency reserves (by then likely to amount to $4trillion).”---Requiring the US to withdraw its naval presence from the Pacific Ocean as a condition of financial bail out, replicating the situation faced today by Greece and other vulnerable European countries.

In other words, China’s will use its economic dominance as a political tool to change the global strategic balance in its favor.

Against this backdrop of his racy and predictive account of China’s “sure” rise to preeminence, he does concede in passing, though, that: “China can radically mess up, for example, if it allows asset bubbles to build or if it fails to stave off political upheaval.”

Undoubtedly, the United States has serious economic problems of debt and sluggish growth. But to project that China will have a virtually smooth run to become the world’s new superpower is a gross simplification.

Subramanian’s thesis is too neat and predictive on a subject that doesn’t lend itself to such simple formulation. Generally speaking, economic forecasts are qualified to indicate that a certain outcome is likely if ‘other things remain equal.’

Even though the author believes that China might still mess up things, he says it in a throwaway line passing without any serious discussion of other variables. And these variables will eventually determine where China goes.

For instance, China’s rise is subject to two important qualifications. First is social and political stability. And this doesn’t seem very encouraging from the growing popular unrest in different parts of the country.

Indeed, the government has been so nervous about the ripple effect of the Arab Spring that it went on a hurried round up of political dissidents and human rights activists, as well as further tightening of internet censorship, to preempt any spontaneous uprising.

It doesn’t say much about China’s oligarchs’ capacity to manage political transition/change that is overdue. Beijing cannot pretend that the country will keep growing economically in the medium term without a corresponding political change toward greater political openness and popular participation.

At present, there is a serious disconnect between China’s partially capitalist economy and authoritarian/Leninist polity. The recent history shows that after a point political authoritarianism becomes counter-productive and destructive without the necessary transition to democracy. South Korea and Taiwan come to mind.

Political oxygen is imperative to continued economic growth. Otherwise, the entire edifice might collapse.

Second: Politics apart, even as an economy, China is facing serious problems. The statistical economic growth is not the true indicator of economic health. There are other important factors. China’s growth is lopsided, creating and widening income disparities, urban-rural divide and regional imbalances.

Economic growth, at any cost, has elevated greed into an overriding compulsion, creating an endemic culture of corruption at all levels; with the Party functionaries and bureaucrats riding roughshod over people, acquiring their land and property in the name of development.

The obsession with statistical growth has created terrible environmental problems, with polluted rivers and degraded landscape. In a word, economic growth has become an end in itself, and not a tool for social uplift.

This is untenable and unsustainable, as even Premier Wen Jiabao admitted recently. For instance, asset bubbles are already developing in the economy, particularly in the property and stock markets as happened in Japan during the nineties and is continuing to plague its economy to this day.

The difference between China and Japan, though, is that Japan’s stagnation started from a much higher base, and its democratic polity allows necessary safety valve for the system.

With inflation rearing its head, China’s political system is a closed shop with little or no safety valve. And if too much steam builds up in China’s pressure cooker society from wider social unrest, there is a danger of spontaneous combustion tearing down the entire edifice.

Therefore, whether or not China is the “inevitable superpower” is subject to a lot of variables than just its high economic growth.

China and the US arms sales for Taiwan

By S.P.SETH

The recent announcement of a US arms sales package of $5.8 billion to Taiwan drew a predictably angry response from China. The official Chinese news agency, Xinhua, called it a “despicable breach of faith in international relations.” And the Chinese foreign affairs ministry warned of serious harm to relations.

Will it? Considering that the US decision, for the time being at least, is for upgrades of the existing fleet of F-16’s, Beijing shouldn’t feel too bad. It could have been worse because Taipei had asked for new F-16’s to face up to China’s military threat. That request from Taipei has reportedly has been deferred for possible reconsideration at a later time.

But in the light of China’s past angry responses to every US arms sales to Taiwan, its protest over this one is part of a pattern. Beijing, though, might signal its displeasure in some concrete way.

And the most dramatic would be the cancellation of Vice President Xi Jinping’s (likely to take over as the country’s president and party chief next year) country’s president next year) forthcoming US visit; though such strong reaction is considered unlikely.

The point is that China is not happy. It doesn’t reflect well on the government and the party that the US should get away with it at a time when China is feeling increasingly confident of its international standing; and nationalism is its one strong card with the people.

It would need to show people that the country’s communist rulers are determined to uphold national dignity. The US arms supplies to Taiwan, regarded by China as its territory, are considered an “affront” to its sovereignty.

However, any dramatic response will have to be carefully balanced to convey a strong message but without rocking US-China bilateral relationship. These are difficult political and economic times for both the countries requiring careful management.

Beijing also needs to consider the impact its response might have on the political fortunes of the Ma Ying-jeou’s administration, which has so far been their best bet in Taiwan’s fractious political landscape.

China certainly wouldn’t like the opposition Democratic Progressive Party to stage a come back. Therefore, don’t expect any hard response from China, but it has to dramatize its strong displeasure. And what it will be remains to be seen.

Over many years now China has felt bitter and angry at the United States over Taiwan. Under its 1979 Taiwan Relations Act, the United States has committed to provide weapons to Taiwan against any armed threat from China. Washington has no problem with peaceful unification, if people of Taiwan were so inclined. But the use of force by China is another matter.

In 1996, then President Clinton moved an aircraft carrier toward the Taiwan Strait when China looked like attacking Taiwan, and the crisis was averted. In other words, Taiwan was saved.

Starting with the premise that Taiwan is a part of China, Beijing has sought to achieve this in a number of ways. It has tried to internationally delegitimize Taiwan as a sovereign entity.

To this end, any country maintaining normal diplomatic relations with Taiwan has been subjected to Chinese pressure and coercion and/or inducements. And as China has become more powerful economically and politically, it has managed to isolate Taiwan internationally.

But all through this Taipei has maintained its nerve. Two things have helped Taiwan. First, of course, is that the US has stood against its annexation.

Second: Taiwan’s transition to democracy in the eighties has given it a certain moral edge over China. Why would Taiwan, for instance, willingly agree to be incorporated by a totalitarian/authoritarian state, and lose its democratic freedoms?

China has also sought to foster and cultivate groups and constituencies within Taiwan sympathetic to and supportive of the mainland.

The business community was and has been its foremost target, keen to invest and manufacture in China to avail of its low production costs and marketing advantages.

And in this, China did a pretty good job. The mesmerizing image of China’s low production costs and a huge market, made the business community critical of the then-ruling DPP that seemed to “provoke” China.

The perception that Chen Shui-bian was unduly provoking China, without going anywhere ahead, also had a negative effect on the populace at large. In other words, China made some political gains in Taiwan that translated into Ma’s election as President.

Ma, of course, claimed during his election campaign that he would do wonders in improving relations with the China for Taiwan’s economic advantage. There hasn’t much of that. He also talked of negotiating a peace treaty with China that, not surprisingly, hasn’t happened.

A peace treaty is generally contracted between sovereign states. Since China regards Taiwan as its territory, that was obviously a non-starter.

China, therefore, continues to target more than 1,000 missiles at Taiwan to keep its people on notice that it means business if it doesn’t get its way. Indeed, Beijing has kept the military option open to prevent Taiwan from formally declaring independence.

In its dealings with the US regarding Taiwan, Beijing has maintained a two-fold strategy. In the first place, it has sought to persuade/pressure Washington to ditch Taiwan and thus create a new cooperative and friendly relationship between their two countries.

As part of this, the US is required to stop selling arms to Taiwan (as part of its 1979 Taiwan Relations Act) thus encouraging it to become part of China. Which hasn’t succeeded.

In the second place, China is building up its military power strength and use it to turn Taiwan Strait into its territorial lake. This, Beijing believes, will deter the US from coming to Taiwan’s help by making it a costly affair.

But if China were to raise the stakes that high by daring the US, it will then cease to be a matter involving just Taiwan. Indeed, it will look like China’s bid to openly declare its domination of the Asia-Pacific region.

They are already doing it with the South China Sea by declaring it their territorial waters. And they tried unsuccessfully to bar the US from joint naval exercises in the Yellow Sea.

And if they try to raise the stakes on Taiwan, it might not just stop there. Because it will signal to the US and other regional countries that China is a threat to most of them.

China is unlikely to go that far in the short term. It will bide its time. But there are quite a few hotheads in China’s military and political establishments that are itching to make it the ultimate power.

In that sense, US’ decision to supply arms to Taiwan is an important deterrent, as well as an assurance to Taiwan that it will not be alone.