Chinese net purchases of U.S. commercial real estate last year dwindled to their lowest level since 2012, as Beijing kept up the pressure on Chinese investors to
Will China be the world’s sole superpower?
(I’ve answered this question previously here:
Chinese leadership seems to move from strength to strength. Its economy is still growing, its military is gaining strength, and its deep pockets are winning it influence. To many, therefore, the question is not how or why China will replace the United States, but when. However, as an intellectual exercise, let us try making a modest substitution in the argument that China will surpass the US by swapping China for Europe. Europe, excluding Russia and some other, smaller, countries, has a land area of 3.9 million square miles, which is to say larger than the U.S. at 3.79 million. The European Union GDP is roughly $20 trillion (nominal) while that of the United States perhaps $1 trillion less. Europe had 1,823,000 forces in uniform in 2014, compared with 1,031,000 for the United States today.
Where am I going with this? If we add educational and technical levels as well as standard of living, one might be forgiven for thinking that, by the numbers, Europe, not China, was the leading potential challenger to the United States. That of course is what the late Jean-Jacques Servan-Schrieber argued in his immensely popular and influential bit of futurology Le Défi Américan [“The American Challenge”] in 1967. As we all know, however, things didn’t quite pan out that way.
And yet, where China appears to be filling a leadership vacuum, there is often less than meets the eye. Climate change is one example. The world’s largest emitter has done much to cut back on its discharge of greenhouse gases, installing more renewable capacity than any other country. Yet its own transparency and accountability over pollution and emissions still falls far short of the openness a world leader on climate change would need to adopt. Meanwhile, common cause between Europe and China has severe limits. As James Kynge of the Financial Times says, China’s push to cut emissions is motivated by an environmental crisis at home, combined with hopes of conquering world markets for renewable energy. Europe wants to save the planet. As for economic leadership, the EU-China relationship again reveals the limits. Mr. Xi pries open markets, but many of China’s own remain closed—and where foreigners may operate, the fear is of technology being stolen. That has led to European frustrations. Anger is growing over China’s divide-and-rule tactics in separately wooing 16 poorer central and eastern European countries, using belt-and-road enticements.
Indeed, China’s signature geopolitical foreign policy deserves close scrutiny. In terms of scale, the Belt and Road (BRI) also known as One Belt, One Road (OBOR) has no parallel in modern history. It is more than 12 times the size of the Marshall Plan, America’s post-World War II initiative to aid the reconstruction of Western Europe’s devastated economies. Even if China cannot implement its entire plan, OBOR will have a significant and lasting impact. And OBOR is not the only challenge Xi has mounted against an aging Western-dominated international order. He has also spearheaded the creation of the Asian Infrastructure Investment Bank, and turned to China’s advantage the two institutions associated with the BRICS grouping of emerging economies (the Shanghai-based New Development Bank and the $100 billion Contingent Reserve Arrangement). At the same time, he has asserted Chinese territorial claims in the South China Sea more aggressively, while seeking to project Chinese power in the western Pacific.
But OBOR takes China’s ambitions a large step further. With it, Xi is attempting to remake globalization on China’s terms, by creating new markets for Chinese firms, which face a growth slowdown and overcapacity at home. So, repeating a mantra of connectivity, China dangles low-interest loans in front of countries in urgent need of infrastructure, thereby pulling those countries into its economic and security sphere. China stunned the world by buying the Greek port of Piraeus for $420 million. From there to the Seychelles, Djibouti, and Pakistan, port projects that China insisted were purely commercial have acquired military dimensions.
There is a logic at the core of the Belt and Road—Asia needs more infrastructure—but thanks to jumbled strategic thinking and a suffocating amount of PR fluff, Xi’s flagship initiative looks set to disappoint. Asian and European countries lining up to attract Chinese investment in new roads and bridges will receive less money than the headline figures suggest. China itself will discover that lending money to its more poorly governed neighbors is not always a profitable business. And foreign policy analysts who see the Belt and Road as a Chinese-style Marshall Plan will be disappointed as the bubble of sky-high expectations pops. For the United States, there is little to fear in the Belt and Road. Asia may get some useful new roads, but the region will also see the limits of Chinese power projection, even in a sphere such as infrastructure where China has a comparative advantage.
The headline numbers associated with the Belt and Road are impressive, and purposefully so. Asia needs lots of infrastructure and an economic vision. China has an impressive track record building highways and high-speed trains across its own vast territory. With Washington distracted by domestic politics, Beijing rightly sees a chance to set the agenda in Asia. Hence the initiative, which was first launched in 2015, has been repeatedly expanded But the gap between China’s promises and commitments are already being noticed. By some estimates, Chinese construction contracts with Belt and Road-related countries may decline in 2017. Already, officials in some neighboring countries are grumbling about not receiving money. Russia, for example, is miffed that that despite applying for funding for 40 different projects, it has yet to receive a dollar. This is despite the purported partnership between the two countries.
And Beijing’s mechanism for spending the money appears as likely to generate enemies as friends. For one thing, though small and medium-sized countries are lining up for cash, the region’s great powers are responding with counter initiatives. India, for example, boycotted the Belt and Road Forum and accused China’s lending program of benefitting Beijing more than its neighbors. Japan is pushing its own “quality infrastructure” initiative, emphasizing inadequacies in Chinese construction. Tokyo is also pushing to finalize the Trans-Pacific Partnership trade deal without the United States, which would give Japan a major role in writing Asia’s trade rules. And Russia, which itself hopes to participate in the Belt and Road, is eying Central Asia nervously. The Kremlin had long hoped it could divide the region, with Russia managing the politics and security, while China helped develop these countries’ economy. But as China’s role grows, that division of labor is looking more difficult to sustain.
Even in places where China’s influence is not being countered by other powers, Beijing’s massive cash infusions may still lead to headaches. Consider the over $20 billion Beijing has committed for the China-Pakistan Economic Corridor, much of it on projects in the transport and energy spheres that are already underway. For Pakistan, this is a big opportunity. The country needs investment, and even though the financing terms and thus the ultimate cost to Pakistan are not clear, Islamabad is desperate for cash today. For China, the payoff is primarily geopolitical. Thanks to the project, Beijing is deepening Pakistan’s dependence, while increasing China’s access to the Indian Ocean and its energy trade routes via Pakistan’s port of Gwadar.
But will China’s loans to countries such as Pakistan ever get repaid? The history of development lending to countries such as Pakistan is full of disasters, conflicts, and painful defaults. Decades of experience from Western countries and institutions such as the IMF show that making loans is the easy part. It is far harder to ensure that money is used effectively, and more difficult still to guarantee that loans are paid back. Many of the countries receiving Belt and Road financing are not known for performing well on these metrics. Sri Lanka is already struggling to deal with debt from Chinese-backed infrastructure projects. And in a worrisome irony, former Pakistani Prime Minister Shaukat Aziz spoke at the Belt and Road forum emphasizing his experience in office restructuring his country’s foreign debt. That default is unlikely to be Pakistan’s last.
Beijing’s foreign policy credibility now depends on extending as many loans as possible. But the more money it lends now, the larger the future cost will be. China already has had to deal with spendthrift client states, for example by repeatedly extending its loans to Venezuela, which is on the brink of bankruptcy. But as external lending expands, the likelihood that China swallows the cost of defaults, as it has done with Venezuela, will decline.
If China tries to force repayment, however, it will lose friends quickly (which would rather defeat the point of the entire project). Consider the IMF, which is reviled in many developing countries for demanding austerity measures to enforce loan repayment. Whenever lenders try to force repayment, relations sour. When they forgive the loans, they incur a large cost. With Belt and Road-related promises reaching around $1 trillion, the sums are substantial. The losses—Chinese officials privately estimate that certain projects will lose 80% of the money invested—may be large, too. Thus China is setting itself up either for significant losses or for painful battles with its neighbors over debt repayments. Notably, only 1% of Belt and Road funding has been extended via institutions such as the Asian Infrastructure Investment Bank, which have credible lending criteria. The bulk of Belt and Road loans have come through the China Development Bank and the country’s big-four state-owned banks, which at times act as slush funds for Beijing’s foreign policy. The financial viability of much of this lending is dubious at best.
The risk of non-performing loans at state-owned banks is already clouding China’s future economic prospects. Since reaching a peak of $4 trillion in 2014, the country’s foreign-exchange reserves have fallen by about a quarter. The ratings agency Fitch has warned that many OBOR projects – most of which are being pursued in vulnerable countries with speculative-grade credit ratings – face high execution risks, and could prove unprofitable. Xi’s approach is not helping China’s international reputation, either. OBOR projects lack transparency and entail no commitment to social or environmental sustainability. They are increasingly viewed as advancing China’s interests – including access to key commodities or strategic maritime and overland passages – at the expense of others.
In a sense, OBOR seems to represent the dawn of a new colonial era – the twenty-first-century equivalent of the East India Company, which paved the way for British imperialism in the East. But, if China is building an empire, it seems already to have succumbed to what the historian Paul Kennedy famously called “imperial overstretch.” And, indeed, countries are already pushing back. Sri Lanka, despite having slipped into debt servitude to China, recently turned away a Chinese submarine attempting to dock at the Chinese-owned Colombo container terminal. And popular opposition to a 15,000-acre industrial zone in the country has held up China’s move to purchase an 80% stake in the loss-making Hambantota port that it built nearby. The stalled Myitsone Dam project in Myanmar also illustrates the challenges China will face in converting its One Belt, One Road spending into tangible benefits for China. Conceived well before One Belt, One Road, the Myitsone Dam on the Irrawaddy River would have been Myanmar’s largest infrastructure project. When the controversy over the dam was “just” a matter of environmental devastation and massive human dislocation, it looked likely to go forward. But once it became clear that most of the electricity produced by the dam would be bound for China, nationalist outrage exploded.
The already underwhelming implementation and the likelihood of unpaid debts is not the only reason to expect that the Belt and Road will disappoint Beijing’s geopolitical goals. China is using the Belt and Road to export its excess capacity in heavy industries and construction. Yet what the world outside of China needs is not more supply of Chinese industries, but more demand from Chinese consumers. If China were to spend more on its consumers, they would buy more from abroad, increasing demand—and thus employment—in other countries. Instead, China is looking to build roads and bridges that will increase demand for Chinese concrete and steel—and which will in many cases be built by Chinese workers. The Belt and Road is as much a welfare program for Chinese industry as for the country’s poorer neighbors.
Already, however, other countries are beginning to realize this. President Trump is not the only world leader complaining about Chinese trade practices, even if he wrongly focuses on the bilateral trade deficit rather than more relevant multilateral dynamics. Kenya’s President was only the most recent world leader to demand that China buy his country’s products in addition to its raw materials. The more that the Belt and Road succeeds in its current form, the bigger this problem—and, likely, the political backlash—will become. Already, neighbors such as Kazakhstan are imposing restrictions on Chinese laborers and investment in their countries to ensure they benefit, too.
But the flaws in the OBOR plan pale in comparison to one of China’s biggest and least-known domestic crisis: its rapidly aging population. The frightening scope of this decline is best expressed in numbers. China today boasts roughly five workers for every retiree. By 2040, this highly desirable ratio will have collapsed to about 1.6 to one. From the start of this century to its midway point, the median age in China will go from under 30 to about 46, making China one of the older societies in the world. At the same time, the number of Chinese older than 65 is expected to rise from roughly 100 million in 2005 to more than 329 million in 2050 – more than the combined populations of Germany, Japan, France and Britain.
The consequences for China’s finances are profound. With more people now exiting the workforce than entering it, many Chinese economists say that demographics are already becoming a drag on growth. More immediately alarming are the fiscal costs of having far more elderly people and far fewer young people, starting with the expense of creating the country’s first modern national pension system.
Unlike residents of China’s prosperous eastern cities, hundreds of millions of peasants and migrant labourers have scant personal savings and rudimentary retirement coverage, if any.
When Xi announced last year that he was slashing China’s armed forces by 300,000 troops, Beijing span the news as proof of its peaceful intentions. Demographics provide a more compelling explanation. With the number of working-age Chinese men already declining – China’s working-age population shrank by 4.87 million people last year – labor is in short supply. As wages go up, maintaining the world’s largest standing army is becoming prohibitively expensive. Nor is the situation likely to improve: after wages, rising pension costs are the second-biggest cause of increased military spending.
Awakening belatedly to its demographic emergency, China has relaxed its one-child policy, allowing parents to have two children. Demographers expect this reform to make little difference, however. In China, as around the world, various forces, including increasing wages and rising female workforce participation, have, over several decades, left women disinclined to have large families.
China has ended the one-child policy, true, but that was too little, too late. In fact, China’s fertility rate began declining well before the coercive one-child restrictions were introduced in 1978. By hastening and amplifying the effects of this decline, the one-child policy is likely to go down as one of history’s great blunders. Single-child households are now the norm in China, and few parents, particularly in urban areas, believe they can afford a second child. Moreover, many men won’t become fathers at all: under the one-child policy, a preference for sons led to widespread abortion of female fetuses. As a result, by 2020, China is projected to have 30 million more bachelors than single women of a similar age, and I don’t think I need to tell you how much trouble 30 million sexually frustrated young men can cause.
I personally believe that in another decade or two, the social and fiscal pressures created by ageing in China will force what many Chinese find inconceivable for the world’s most populous nation: a mounting need to attract immigrants. And that’s going to be hard if the CCP keeps cracking down as it has been doing ever since Xi came to power. And that’s not even counting the long-standing deep-rooted xenophobia in Chinese society.
With American baby boomers entering retirement, the US has its own pressing social-safety-net costs. What is often neglected in debates about swelling entitlement spending, however, is how much better America’s position is than those of other countries. Once again, numbers tell the story best: by the end of the century, China’s population is projected to dip below one billion for the first time since 1980. At the same time, America’s population is expected to hit 450 million. Which is to say, China’s population will go from roughly four and a half times as large as America’s to scarcely more than twice its size.
Even as China’s workforce shrinks, America’s is expected to increase by 31 per cent from 2010 to 2050. This growing labor supply will boost economic growth, strengthen the tax base and relieve pressure on the social security system. At the same time, Americans will continue to enjoy a substantial advantage over the Chinese in terms of per capita income. This advantage in wealth will continue to underwrite US security commitments and capabilities around the world.
And that the US is not facing similar population shrinkage is due largely to immigration. America’s fertility rate, while higher than that of China and many European countries, is still below the threshold required to avoid shrinkage; about 2.1 children per woman. By keeping its doors relatively open to newcomers, America is able to replenish itself. If the country were to shut its doors, its population would plateau and its median age would climb more steeply. According to the Pew Research Center, immigrants and their children and grandchildren will account for 88 per cent of US population growth over the next 50 years. The problem of China’s rapidly aging population is further exacerbated by a “brain drain,” by which I mean that many Chinese intellectuals and skilled laborers are leaving the country in large numbers as the CCP seeks ever-greater control over artistic and intellectual expression. And then there’s the problem of capital flight, which has cost China trillion of dollars. The old saying goes that money is a coward, and so it is. All the rich people who can leave are leaving China. In cities across America, thousands of Chinese buyers are flocking to buy homes in cash. Even Xi Jinping sent his daughter to Harvard. Does that imply a high-profile political career for her in China? Probably not. It rather implies a quiet retirement with Xi’s grandchildren over here. American private secondary schools are inundated by Chinese applicants, and American real estate remains the number one choice for Chinese buyers looking to get out of Dodge.
I don’t think it’s a coincidence that China’s increasingly aggressive stance in the South China Sea comes at a time when its economy, once lauded worldwide, is coming under increasing strain and the nation is grappling with a demographic crisis as well as a wide swathe of other problems. Howard French, in his book Everything Under the Heavens, also makes this case, arguing that Xi Jinping is acting so aggressively because he knows that China has only a narrow window of time—15 or 20 years at most—to lock in as many geopolitical gains as it can before China’s demographic crises knock it sideways and restrict its ability to project power. Aside from aging and gender imbalances, China also has a number of other internal issues that inhibit its becoming a superpower on par with the United States, issues that continually demand a vast amount of money and resources. Its air is so polluted that it has become hazardous to breathe, as illustrated by the fact that in late December, Beijing issued the second red-level alert warning for smog in its history. China’s aggressive industrialization has come at a staggering cost in human health and lives, and unregulated emissions have led to environmental catastrophe and a decline in the overall health of the Chinese people. China has a shrinking water supply similar to Sudan’s, which means it doesn’t have anywhere near enough. The capital intensity of production is very high too: In China, one standard energy unit used fully produces 33 cents of product. In India, the figure is 77 cents. Gradually climb and you get to $3 in Europe and then— in Japan—$5.55. China is poor not only because it wastes energy but water, too, while destroying her ecology in a way perhaps lacking any precedent. China’s toxic air and water are well-known—smog alone is estimated to kill anywhere from 500,000 to 1.5 million Chinese every year–but even more insidious is the pollution of its soil. No less than one-fifth of China’s arable soil is believed to be polluted. While it’s possible to reduce air or water pollution with enough effort, toxins remain in the soil for centuries and are hugely expensive to eradicate, and China is unusual in that it not only has many brownfield sites (contaminated areas near cities that were once used for industry) but vast swathes of polluted farmland, too. In 2014 the government published a national soil survey which showed that 16.1% of all soil and 19.4% of farmland was contaminated by organic and inorganic chemical pollutants and by metals such as lead, cadmium and arsenic. That amounts to roughly 250,000 square kilometers of contaminated soil, equivalent to the arable farmland of Mexico. Cadmium and arsenic were found in 40% of the affected land. Officials say that 35,000 square kilometers of farmland is so polluted that no agriculture should be allowed on it at all.
And then of course there are other issues, such as rampant drug problems and internal ethnic and religious strife such as that between the Han Chinese and the Sunni Islamic Uighurs of Xinjian province, and the ongoing, longstanding persecution and discrimination against Chinese Christians. Such strife is, of course, the foreseeable result of China’s repressive domestic policies, and it is only made worse by the even more heavy-handed way in which the Chinese government tries to suppress it. In the U.S. and many Western nations, those who feel victimized or discontented have the ability to voice that discontent publicly and make themselves heard. Even if nothing is done to actually solve the problem, the discontented still have a way to vent their rage and make themselves heard without fear of reprisal. It is a way to relieve pressure and excess steam, like taking a boiling kettle off the stove. China, however, leaves the kettle on the stove even when the water is boiling hot, leading to deep-seated and simmering resentment among many ethnic minorities within its borders, and these tensions have grown so severe that they make similar tensions in Western countries seem almost amicable by comparison. In a few years, perhaps a decade, it will find itself facing the same problem of Japan: an aging population with not enough young people to take the place of older generations.
Additionally, Chinese corruption in high places is as strong as ever. Xi Jinping’s vaunted anti-corruption campaigns have been nothing but a sham, a way to remove his political opponents from power and solidify his own power base while looking good doing it. Not to mention that China’s military, while large, is still untested, It has never seen real battle and thus lacks combat experience, and despite China’s modernization program, the U.S. still enjoys a huge technological advantage. The modernization of the Chinese military may have Western governments wringing their hands, but that modernization ultimately comes at the expense of its own people. Indeed, one could argue–and in fact I do argue–that the amount of energy, money and publicity that China has devoted to its military program serves a more subtle purpose: by keeping the attention of the public focused on an issue that has become synonymous with Chinese national pride, by directing the people’s attention outward toward real, perceived or exaggerated threats, and by finding a scapegoat on which to blame all its problems–in this case, the United States–the Chinese government is able to distract the people from the more pressing and dire issues closer to home that it has not been able to fix, and solidify support for its rule thereby. It is a tried-and-true method that has been used many times before. Nicolas Maduro, the President of Venezuela, used the same tactic throughout his term of office. Due to his disastrous policies, his country’s economy is going down in flames, the standard of living is plummeting and there are critical shortages of fuel, electricity and food. But right up until the recent Venezuelan elections–elections which saw Maduro and his party ousted from power–he vehemently and consistently blamed vague U.S. conspiracies and plots for the miserable state of the nation. Putin’s Russia has been doing the same thing. Iran has been doing it for decades. Indeed, it has become somewhat fashionable to blame America when something goes wrong, no matter how ludicrous or how far-fetched the reasons for doing so may be. And China is no exception.
For that matter, China’s behavior on the world stage has already begun to backfire. Despite propaganda efforts to the country, instead of garnering the respect of the world China has gained the reputation of an international bully in the eyes of the global community–a role that, for many, was previously held by the United States. For all its talk of cooperation, China’s saber-rattling and aggressiveness has pushed many of its neighbors, including those such as Thailand who might have proven allies under other circumstances, not only into the arms of the United States but also fostered greater, broader cooperation against China, which now finds itself more and more hemmed in by a growing number of economic and military treaties and alliances. Relations between the U.S. and Vietnam, for example, have never been this warm, and the U.S. and India are deepening a defense partnership that would have seemed unthinkable even ten years ago. Even Asian nations with historical enmity have begun to put aside their differences in the face of what they see as the greater threat.
And why? Because China has proven time and again that it is duplicitous and cannot be trusted to uphold any accord it agrees or signs on to. Case in point: Xi Jinping promised not to militarize the islands China currently holds in the South China Sea during his visit to Washington, and yet, after an American bomber plane accidentally flew too close, China tripped all over itself to militarize the islands and conveniently forgot about its promise.
Furthermore, China has antagonized its neighbors in ways that go even beyond the South China Sea issue. It infuriated Vietnam by towing an oil rig into Vietnamese waters, and just recently Chinese armed destroyers were spotted near the Japanese Senkaku islands in the East China Sea—islands which, like those further south, China also claims as its own, though it has not pressed the issue nearly so hard as it has in the South China Sea. The U.S. and many of the Southeast Asian nations are waking up to this fact: Australia, Taiwan, Vietnam, Thailand, Japan, South Korea, the Philippines, the list goes on and on. Because of its aggressiveness, China now finds itself the object of increasing hostility and suspicion both abroad and in its own neighborhood, a situation made worse by the fact that it doesn’t have the vast web of treaty alliances that America does, a web which–as I have already stated–is growing steadily larger as a result of China’s actions. Beijing’s only real military and political ally is North Korea, and even that is coming under increasing strain because North Korea under Kim Jong-Un has proven less and less willing to dance to Beijing’s tune, leaving China’s leadership increasingly exasperated at Kim’s recklessness and stubbornness. For example, in early December, a North Korean girl band called Moranbong was sent to China in an attempt to show solidarity with the Chinese and foster greater friendship between North Korea and China. The band was scheduled to perform for a solid week in the Chinese capital, but its tour was abruptly cancelled due to “communication issues,” according to a Chinese press release by Xinhua, the state media outlet. And in 2013, when North Korean jets flew over the Korean peninsula in a show of force, China’s response was actually more alarmed than that of the United States. Not only that, but when the U.S. sent its own jets over the peninsula not long afterward as a demonstration of its own, the response from Beijing was surprisingly muted. Both of these incidents are part of a larger pattern that shows how relations between Pyongyang and Beijing have become more and more frayed—now more so than ever in light of North Korea’s nuclear ICBM tests, which have put China in an extremely uncomfortable position on the world stage as it comes under increasing scrutiny for its indulgence of the Kim regime. And while China’s tarnished global image does little to deter other nations from trading with China, it also means that even many of those who loathe the United States see the U.S.-led world order as preferable to a world order dominated by the Chinese.
As for military strength, well, China has undoubtedly made impressive strides in modernizing its armed forces. But it will be decades, if ever, before it achieves the level of dominance that the United States enjoys today. Take defense spending, for example. In 2016, China’s official military spending rose 7.6 percent. Adjusted for inflation, that’s barely 5 percent. In U.S. dollar terms, it’s barely 3 percent. In real U.S. dollar terms, it’s hardly any increase at all. Put simply, China’s defense spending is essentially flat. Real spending increases of anywhere from 0–5 percent are a far cry from the “insider” estimates of just one year ago, when security experts were confidently predicting double-digit spending increases for 2016 and beyond. Figures as high as 30 percent were mooted as tensions rose in the South China Sea. It is well-known that China’s official budget numbers don’t capture all of its military spending. But then, neither do America’s, or any other country’s. The best analysis from the Center for Strategic and International Studies concludes that China’s figures are close to real and getting closer. Even if the true total is unknown, the year-on-year increases seem credible. Since the turn of the century, China’s defense spending has bounced up and down between 1.9 percent and 2.1 percent of GDP, according to estimates from the Stockholm International Peace Research Institute (SIPRI). SIPRI estimates are the highest in the league; the U.S. Department of Defense, the British International Institute for Strategic Studies, and the Chinese government itself all give lower figures.
To put China’s 2 percent in context, SIPRI’s method gives 3.3 percent for the United States, down from a high of 4.7 percent in 2010 and the UK comes in at 2.3 percent. China may throw around its growing power in a very aggressive manner, but in comparative terms it does not seem to be spending very much on its military. China does have the world’s second-largest military budget, but this seems only natural considering that it also has the world’s second-largest economy, largest population, third largest territory, longest land borders, the largest number of neighbors (many of them hostile or politically unstable) and it has to worry about internal rebellion as well. It must be tough being a Chinese military planner, but unfortunately for those planners, life is about to get a lot tougher. China’s official economic growth has fallen to 6.7 percent, with a target of 6.5 percent for 2017. These are supposedly real rates, adjusted for inflation. But the nominal growth rate for 2016 was 8 percent while China’s inflation rates ranged from 2.1 percent for consumer prices to 5.5 percent for producer prices. Try squaring that circle.
But defense spending is not the only way to gauge military power, nor is it the most accurate. In order to be a global power (that is, to wield military influence in places around the world) you need to have the military hardware necessary to deploy in different regions. That means things like aircraft carriers, military satellites, and advanced warplanes, and in every case, the US owns the majority of these weapons, while nations like China or Russia own only a relatively small percentage. For example, the US has more than 70 percent of all aircraft carriers, and its air fleet, with over 6,000 planes, is larger than China’s and Russia’s combined. The United States has more than twice as much tonnage of warship in the water than China and Russia put together, and a list of America’s allies read like a who’s who of the world’s most developed and powerful nations. It has both China and Russia encircled by a vast network of military bases that allow it to deploy military force anywhere in the world at any time. Neither China nor Russia nor Germany have anything that can rival America’s capacity for power projection. In terms of quality and quantity of weapons, the United States is also in a league of its own. Nothing fielded by any of our rivals compares to weapons like the Virginia-class submarine, the F-35 fighter jet or the new Ford-class nuclear-powered aircraft carrier.
By contrast, of the 1,321 fighter jets in China’s air fleet, only 502 can be called modern. These are 296 variants of the Russian Su-27 (India has a more advanced SU-30 MKi) and 206 indigenously built J-10s that even Pakistan has refused to buy. The remaining 819 fighter planes are mostly J-7s, J-8s and Q-5s, all antiquated models that were designed decades ago. Only about 30 of China’s 54 submarines are less than 20 years old. These submarines are subdivided into 4 classes–Shang, Han, Yuan, and Song–all of which are unanimously considered inferior to American vessels. China also has the 1960s-vintage Mings (Class 035), which are completely unreliable and prone to regular engine failure. Even China’s newest class of submarine, the Type 095, is estimated by American military experts to be as quiet as the Los Angeles-class submarines that were built in the 1980s. In other words, China is about thirty years behind the United States in submarine quieting technology. To be sure, China has made impressive gains in its efforts to modernize its military, but it still has a long, long way to go. For the foreseeable future, America’s military superiority is not going anywhere, nor is the globe-spanning alliance structure that constitutes the core of the existing liberal international order (unless Washington unwisely decides to throw it away).
In terms of economic power, China also lags significantly behind the United States. Last year, economists at the International Monetary Fund estimated that the Chinese economy was larger than America’s. That statement made front-page headlines but was somewhat misleading because it used purchasing power parity (PPP), a measure of welfare that is somewhat dubious as an index of power. After all, a country imports oil or engines at the exchange rate, not purchasing power parity. However, even when the Chinese and American economies are equal in size as measured by exchange rates, they will not be equal in economic power. Per capita income provides a much better guage of the sophistication of an economy, and China’s per capita income is only a quarter of America’s: $8,261 to $57,294 in the United States.
As such, any forecast of future Chinese parity with the United States depends on heroic estimates of China’s continued GDP growth. Of course, total size matters. Having a large attractive market and being the largest trading partner for a large number of countries is an important source of Chinese power, but that is not the same as equality. For example, although China surpassed Germany and the U.S. as the world’s largest trading nation in 2013, Chinese trade in services is lackluster, many exports have low added value. Moreover, China lacks many global brands. Coca-Cola is universally recognized, but how many people can name a Chinese soda brand? And China’s claims that its GDP grew exactly 6.7 percent in each of the first three quarters of this year came just after Beijing fired the head of its National Bureau of Statistics in January, seemingly for reporting unsatisfactory growth rates. China’s new chief statistician is also the vice chairman of National Development and Reform Commission, the organization responsible for setting China’s GDP growth targets. Needless to say, this casts doubt on the official growth figures put forward by the Chinese government.
But there’s more to being a superpower than just military prowess. We cannot neglect the importance of cultural power, or “soft” power. Soft power, as defined by Harvard professor Joseph Nye, is just as important as hard power, and in many ways more so. Heck, it helped us win the Cold War. Long before the Berlin Wall fell in 1989, it had been pierced by American television and movies. Yet few people in those developing nations have fallen in love with China the way they might fall in love with the United States. According to Dr. Nye, whom Chinese officials acknowledge as a guru on the topic, there are three main ways that a country can gain soft power: through its political values, its culture and its foreign policies. But winning on all fronts is not easy. The party knows that its ideology has little chance these days of attracting others. Arguably China’s soft power was stronger in the 1950s and 1960s when Mao, a brutal but charismatic dictator, espoused a socialist Utopia that inspired many people around the world. Nowadays some Chinese academics speak of a “China model”—the winning combination, in their view, of authoritarian politics and somewhat liberal economics (with a big role for the state). But Chinese leaders prefer to gloss over the politics when describing their country to foreigners. In 2008 the opening ceremony of the Olympics Games in Beijing barely hinted at the party or its principles.
Instead, China’s soft-power strategy focuses mainly on promoting its culture and trying to give the impression that its foreign policy is, for such a big country, unusually benign. The culture that the party has chosen for foreign consumption is mainly one that was formed long before communism. Confucius, condemned by Mao as a peddler of feudal thought, is now being proffered as a sage with a message of harmony. Since 2004 China has established some 500 government-funded “Confucius Institutes” in 140 countries. These offer language classes, host dance troupes and teach Chinese cooking. China has also set up more than 1,000 “Confucius Classroom” arrangements with foreign schools, providing them with teachers, materials and funding to help children learn Mandarin.
But there’s an old maxim that trying too hard to be cool backfires, and this is as true for the Chinese Communist Party as it is for anyone else. China’s top-down efforts to expand soft power gained momentum in 2007, when the Party’s then-General Secretary Hu Jintao announced that China needed to “vigorously develop the cultural industry” and to “enhance the industry’s international competitiveness. In June 2016, Hu’s successor, Xi Jinping, criticized the nation’s propaganda bureau for failing to reach younger audiences and called on them to be more innovative. The Party’s soft power failures are especially visible in the music industry. One of China’s most cringe-worthy efforts is a hip-hop music video aimed at millennials abroad, entitled This is China, produced by China’s Communist Youth League and the rap group Chengdu Revolution. The video promotes China with rambling lyrics such as, “First things first, we all know that China is a developing country. It has large population and it is really hard to manage,” and the gem, “As for scientific achievement, we have [Nobel prize winner] Tu Youyou, who discovered Artemisinin.” The only way Chinese state media could outdo itself on this one is if it were to, say, promote a rap song praising Karl Marx. When Mr. Nye wrote about soft power, he suggested that governments could not manufacture it. He argued that much of America’s had sprung from its civil society: “everything from universities and foundations to Hollywood and pop culture”. The party is distrustful of civil society; its soft-power building has been almost entirely state-led. China has tried to combine elements of soft power with the hard power of its illiberal politics. Far from enhancing China’s global image, this approach has often served to undermine it.
Take the Confucius Institutes mentioned earlier, for example. In 2007 a senior party leader described these as “an important part of China’s overseas propaganda set-up.” But many cash-strapped universities have gratefully supplanted their own language courses with ones led (even funded) by Confucius Institutes. In some places Confucius Institutes have replaced or started up entirely new China-studies programs. Most of them do not actively push the party line, but Confucius Institutes usually skate over sensitive political topics such as the crushing of pro-democracy protests in 1989. As a result, they have attracted controversy. In 2013, McMaster University in Canada severed ties with its on-campus Confucius Institute after one of the institute’s employees was forbidden to follow Falun Gong, a spiritual sect that is banned in China (the institute subsequently closed down). At a European Chinese-studies conference in 2014, the Chinese head of Confucius Institutes worldwide ordered pages referring to a Taiwanese educational foundation to be ripped from each program. Such attempts at censorship only help to reinforce Western misgivings about China’s politics and undermine its soft power.
China’s efforts to use its global media to paint a rosier picture of the country also face a tough challenge. Its television networks employ foreign anchors (and plenty of panda footage) to try to win audiences abroad. But foreigners can also see the Chinese state’s heavy hand, such as when it mobilizes pro-China crowds to drown out protesters during visits by Chinese leaders, or when it arm-twists foreign politicians not to complain about China’s human-rights record (Liu Xiaobo, a Chinese human-rights activist who was awarded the Nobel Peace prize in 2010, languishes in a Chinese jail, rarely mentioned in public by Western leaders). In February an official at the Chinese embassy in London warned Durham University not to host a vocal critic of the party: a former Miss World contestant who was born in China and raised in Canada. And as for China’s message of peace to other countries, many in Asia are far from convinced. Its grabs for territory in the East and South China Seas have fueled widespread resentment. The rapid expansion of its navy and air force, and its build-up of missiles, have sown anxiety in America, too. Put simply, money has not bought China anything like the love it would like. A year before Mr. Xi took over, just over half of Americans had positive impressions of China, according to the Pew Research Centre. By the end of 2016 that share had fallen to 38% (see chart). Pew found a similar trend in other countries. In 14 out of 19 nations it polled between 2011 and 2013, views of China became less friendly.
Thus, it is highly doubtful that China can present a system more workable and universal than democracy and a market economy of the kind you see in Britain and America. For all Trump’s perceived buffoonery, America still has broad appeal because of its enforcement of the rule of law, a free constitutional system with elections, individual freedoms, free speech, checks and balances and the separation of powers. Until these are present in China, Chinese values won’t find a place in the world the way Western values have. Turning the screws on Hong Kong and Taiwan, territorial disputes in the South China Sea, and its economic retaliations against South Korea for its decision to install a U.S. Terminal High Altitude Area Defense missile system have not endeared China to its neighbors. China defends its moves as being in the national interest, but it can’t be denied they hurt its reputation and image. Soft power cannot be manufactured at will or forced down someone else’s throat; it must be voluntarily accepted.
In innovation, too, China is encountering difficulties. The major components that enable a country to lead in cutting-edge technology depend on intangible assets, most notably what economists call the forces of agglomeration: systems of property rights and a sophisticated industrial base, full labor markets, an efficient judicial system and flexible organizations, presence of specialized service providers, knowledge spillover and trust embedded within society. Many authors have contended that open societies, like the US, benefit from these trends vis-à-vis their authoritarian counterparts.
As noted international relations scholar Ian Bremmer states, “openness is a measure of the extent to which a nation is in harmony with the crosscurrents of globalization—the processes by which people, ideas, information, goods, and services cross international borders at unprecedented speed.” As far as innovation is concerned, this means that it is not what a country can produce, and at what pace, but the underlying ecosystem that tie physical goods to networks, research clusters and command centers. Such ingredients—property rights, social networks, capital markets—constitute the supporting infrastructure and the capacity to absorb that are needed to integrate innovation into an effective and coherent entity.
China has clearly been exceptionally gifted at managing low-and medium-cost technologies ever since globalization has contributed to the spread of technology. It is, in fact, leading the world in patent filings. But patent filings are not, in and of themselves, an accurate indicator of a nation’s level of innovation. Closer examination of these figures reveals that about 43% of patent filings in China are for non-inventive patents. Called Utility Models, Petty Patents, or Design Patents, these cover only appearances or structural features. many patent filings in China are by foreign inventors seeking protection within China. Since China is such a large market, many foreigners want patent protection there. And even when a patent filing is for an invention, it’s difficult to classify the value of the invention. Some inventions are trivial (like a slight tweak to making a screw thread), some are important (like cold fusion). Ergot, the large number of filings doesn’t prove anything one way or the other about creativity and innovation in China. And alongside poor infrastructure, heavy reliance on foreign technology and lack of top-notch R&D capabilities, China also falls short in human capital, investments, as well as bloated bureaucracy and ossified organizations. Therefore, the prospect of narrowing the gap is slim—more so now that China is considering a crackdown on VPNs, which might very will trigger a massive brain drain. It will be hard for China to lead in science and innovation, or attract foreign talent, when its scientists and scholars do not have access to the World Wide Web.
By contrast, the United States could not have achieved the level of pre-eminence it enjoys today without the pervasiveness of its ideas, products, and image abroad. American popular media and TV stars are everywhere. So are American products, American cars, American fast food chains, and so on and so forth. Even with Trump in the Oval Office, the U.S. is still near the very top of the list when it comes to soft power. This is because the United States, for all its flaws, is quite good at–to use the vernacular–selling its story: a disorganized group of colonies join together in common cause, overthrow the rule of the mightiest empire of the day and go on to enjoy unparalleled success. Whether the U.S. actually lives up to its ideas of freedom and equality is not the point here; the point is that the vast majority of people around the world like those ideas too, and even the most cynical of America’s critics still find the idea of America inspiring.
The same cannot be said for China. China has values and ideals that are fundamentally incompatible with those of the United States and the world at large, and the global image China has been painting of itself is not a pretty one. It values the collective, not the individual, and for all its talk of reform, continues to suppress expression and the free exchange of ideas in the name of maintaining peace and order. It jails journalists, censors the press and the Internet, stifles innovation and isn’t shy about using lethal force, intimidation or prison sentences to silence its domestic critics. It is therefore almost impossible for it to export its ideas abroad in the way the United States has been able to do, because its global audience–barring a few notable exceptions–is not, as it were, interested in buying. No matter how hard Xi Jinping’s administration may try, the so-called “Chinese Dream” does not and never will have the same allure and positive connotations of the “American Dream” as long as China remains an authoritarian, non-democratic state. For China’s ideas to be accepted by the world at large would require the very ideological fabric of the modern world to be turned on its ear, and that is not likely to happen if history is any indication. The Soviet Union tried to do the same thing for decades during the Cold War. It put out countless pieces of propaganda and made countless efforts to sell its ideology and image, and while it did have some successes, such as in Vietnam, its efforts mostly fell short. I am not at all certain that China will avoid the same outcome.
The United States, on the other hand, enjoys a number of strengths across a broad spectrum. Unlike China, it is not facing population shrinkage, and this is due largely to immigration. America’s fertility rate, while higher than that of China and many European countries, is still below the threshold required to avoid shrinkage; about 2.1 children per woman. By keeping its doors relatively open to newcomers even in the age of Trump, America is able to replenish itself. If the country were to shut its doors, its population would plateau and its median age would climb more steeply. According to the Pew Research Center, immigrants and their children and grandchildren will account for 88 per cent of US population growth over the next 50 years. Moreover, the United States has built up a massive scientific and industrial base. China is rapidly enhancing its technological inputs, increasing its R&D spending and its numbers of graduates with degrees in science and engineering. But there are limits to how fast any country can leap forward in such matters, and there are various obstacles in China’s way—such as a lack of effective intellectual property protections and inefficient methods of allocating capital—that will be extremely hard to change given its rigid political system. Adding to the difficulty, China is chasing a moving target. In 2012, the United States spent $79 billion on military R & D, more than 13 times as much as China’s estimated amount, so even rapid Chinese advances might be insufficient to close the gap.
America is also blessed with abundant natural resources. When we discuss American power vis-à-vis China, a few key points are often trotted out—and indeed, they will be trotted out here as well. The U.S. economy accounts for just under a quarter of global domestic product, it has a military force without peer in human history, and its economy is not dependent on exports. However, we can now add another item to this list: the United States is now the third largest oil producer in the world, it is less dependent on oil imports than at any point in the past forty years, and it is stealing customers out from under the noses of Russia and OPEC by selling oil at rock-bottom prices. Even a few years ago, U.S. shale producers would have found it hard to make a profit at fifty dollars a gallon, but they are doing it now. In 2013, America exported more oil than it imported for the first time, and it has not looked back since. Crude oil production in the United States has doubled since 2010 and is well on track to beat estimates for 2017. In late 2016, for example, the U.S. Energy Information Administration predicted that America would produce 8.7 million barrels of oil a day in 2017. New estimates, however, show that America will probably produce somewhere around 9.2 million barrels a day for 2017 and as many as 10 million a day in 2018. American oil is cornering the market, and the ramifications will be global.
All of this leads us to one inevitable conclusion: that China is in no position to become a superpower, and America, far from in decline, is in a rather comfortable position at the head of the pack. To be sure, there is a frantic, almost panicked desire in certain circles to see U.S. power and prestige take a nose-dive because the American people chose Donald Trump as their president. But those pushing this narrative are out of touch. Geopolitical reality remains unchanged, and America remains a hegemonic force: It has the largest and best equipped military that secures peace and prosperity from Europe to the South China Sea, the most prestigious university system, the largest consumer market, the largest economy, and it remains the source of much innovation. It still has a commanding lead in many scientific fields and leads the world in many cutting-edge technologies, such as space exploration and artificial intelligence. Nor has Trump diminished America’s broad appeal, if the most recent numbers are anything to go by. Contrary to many post-election fears, as of this writing both tourism and international student applications to the United States have increased, according to the most recent figures in April and May of 2017, and a recent Gallup poll showed that America continues to be the most favored destination for immigrants around the world. According to the survey, 147 million people worldwide would move to America if given the chance. So take the alarmism and hyperbole with a grain of salt. America is not in decline, and China is not the juggernaut it appears to be.
A. Print Sources:
Is the American Century Over? by Joseph S. Nye, Ph.D.
A Geriatric Peace? by Mark L. Haas
Will China Dominate the 21st Century? by Jonathan Fenby.
Everything Under the Heavens: How the Past Helps Shape China’s Future by Howard W. French.
America Abroad: The United States’ Role in the 21st Century by Stephen G. Brooks and Richard Wohlforth.
American Economic Power Hasn’t Declined—It Globalized! Summoning the Data and Taking Globalization Seriously by Sean Starrs.
China’s Crony Capitalism by Minxin Pei.
Human Capital and China’s Future Growth by Hongbin Li, Prashant Loyalka, Scott Rozelle and Binzhen Wu.
American Tianxia: Chinese Money, American Power and the End of History by Salvatore Babones.
B. Web Sources: