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.