By
Javid Husain[*]
China’s phenomenal economic growth over the past three decades has catapulted it to the position of the second biggest economy in the world, surpassing Japan in 2010. With the current estimated GDP of $9,233 billion in nominal terms, according to the Economist, China is likely to overtake the US economy within the next decade and a half and emerge as the biggest economy in the world, if the current trends are projected into the future. In purchasing power parity terms, China may overtake the US economy even before the end of the current decade. It is true , however, that due to its much bigger population (1.34 billion) as against 317 million for the United States, it will take China much longer, perhaps four to five decades, to catch up with the US in terms of GDP per head.
These estimates are based on the brave assumption that China is able to maintain its high economic growth rates in the next few decades which, of course, is not guaranteed. Historically, as countries reach high levels of economic development, their economic growth rate generally slows down. This may happen to China as well. In such an eventuality, it would take China a longer time frame to overtake the US in terms of GDP or GDP per head. But it is almost certain that as the 21st century progresses, the centre of gravity of the world economy will gradually shift towards China. By the time China overtakes the US gross domestic product per head, which may be some time in the second half of the current century, China’s economy, because of its much bigger population, would be about four times the size of the US economy.
Just to give some idea of the kind of change we are talking about, if China had the same GDP per head as the US has now, that is about $ 51,525, its GDP in nominal terms would be $ 69 trillion as against the current US GDP of $ 16 trillion. Of course, China is nowhere near catching up with the US in terms of GDP per head in the near future. But the possibility of this momentous development taking place in the second half of the 21st century is very much there. This possibility must be taken into account by leaders and policy makers of the countries of the world engaged in long term foreign policy calculations and planning.
China’s rise will, in a way, restore it to the pre-eminent position that it used to enjoy in the world economy in the past before the industrial revolution and the onset of the colonial era lowered its position in world rankings. Henry Kissinger in his latest book, “On China”, has noted:
“Not only was the scale of China traditionally far beyond that of the European countries in population and in territory; until the Industrial Revolution, China was far richer. United by a vast system of canals connecting the great rivers and population centers, China was for centuries the world’s most productive economy and most populous trading area…..In fact, China produced a greater share of total world GDP than any other Western Society in the eighteen of the last twenty centuries. As late as 1820, it produced over 30 percent of the world GDP—an amount exceeding the GDP of Western Europe, Eastern Europe, and the United States combined.” (p. 11-12)
China’s decline and later humiliation at the hands of Western powers started in the 19th century as these powers, strengthened economically and militarily through the industrial revolution and advances in science and technology, embarked upon the expansion of maritime trade and a world-wide campaign of subjugation and conquest of distant lands. China could not remain immune from the expanding power and influence of the Western states which were bent upon exploiting the resources of the rest of the world to their advantage, as historically most powerful empires and states have done, through trade, subjugation or outright conquest.
The Opium War (1840-42) imposed by the British on China to force it to allow the import of opium was the beginning of the series of humiliations that China suffered in the next century or so at the hands of the West European powers, the Americans and Japan in the form of unequal treaties and the cession of the Chinese territory. The success of the Mao-led communist movement and the establishment of the People’s Republic of China in 1949 brought a definite end to the reverses that China had suffered during the preceding century. Deng Xiaoping’s reforms initiated in 1979 put China on the road to rapid economic progress.
This brief reference to an unhappy part of China’s relatively recent history is necessary to understand the feelings of self-satisfaction and justified pride of the Chinese people and leaders now when China is rapidly closing the gap in economic prosperity between it and the states which subjected it to humiliations in the past. It gives the Chinese people the hope that China would in the foreseeable future regain its rightful place in the comity of nations. China’s new President Xi Jinping reflects these hopes when he says that the “greatest Chinese dream” is the “great revival of the Chinese nation.”
The secret of China’s rapid economic growth lies in the policies of economic reforms and opening to the outside world approved by the Third Plenum of the Eleventh Central Committee of the Chinese Communist Party in December 1978 at the behest of Deng Xiaoping and initiated in right earnest in1979. Henceforth, rapid economic development was to be the supreme national goal of China and all of China’s policies were to be geared to its realization.
Internally, the policy of “iron rice bowl” was to be replaced by the policy of “to each according to his effort”, thus, providing an incentive for hard effort and innovation instead of rewarding lethargy and monotonous repetition of age-old practices. In pursuance of the new policy, the economy was gradually liberalized by allowing the market forces to play an increasingly important role in different sectors. The process of reforms was initially introduced in the rural sector and, after its success, was extended to the urban sector in middle of 1980’s.
To support its single-minded pursuit of the objective of rapid economic
growth, China also decided to pursue “a low-risk foreign policy” for a long time to come to reduce the risk of its involvement in a major armed conflict and limit the diversion of its resources to the military. In pursuance of this policy, China under Deng entered into negotiations with the Soviet Union and India on border disputes to defuse tensions in its relations with those countries. Deng Xiaoping also told his generals that for quite some time they would get no more than 1.5 percent of the GDP for meeting the essential security requirements of the country. More recently, however, China has been spending about 2% of its GDP on defence.
The policy of opening to the outside world was meant to expose China to the modernizing influences at play in the developed countries of the world, particularly advances in sciences, technology and management techniques, so as to benefit from them in the race for economic growth and modernization on which China was embarking. When some of Deng Xiaoping’s colleagues expressed the apprehension that the policy of opening to the outside world might allow some undesirable foreign influences to penetrate the Chinese society, Deng famously stated that one has to open the window to get fresh air even if there is the danger that some flies might also get in.
These policies have produced astonishing results. As noted by Fareed Zakaria in his widely acclaimed book, “The Post-American World”, the “size of the (Chinese) economy has doubled every eight years for three decades” (p. 89). Between 1978 and 1998, the size of China’s GDP increased five times as against the target of four-fold increase. Even after 1998, the Chinese economy has been growing at high growth rates of 8 to 10 percent in most of the years. There has been some slowing down of the Chinese economy more recently because of the severe recession in most of the developed world but even then China has been able to maintain a GDP growth rate of over 7 percent.
China’s growing economic strength is allowing it to increase its military expenditure rapidly to safeguard its essential national security interests. China’s latest budget has allocated a sum of $ 115.7 billion for defence. According to SIPRI, however, China’s military spending would be close to $160 billion. This, of course, is still far below the US annual military budget estimated to be about $650 billion. But the situation is likely to change to the disadvantage of the US as China increases its military budget over the next two decades and the US is forced to apply brakes because of its economic woes. According to a forecast by the Economist, China’s military spending may overtake America’s after 2035.
As part of its programme to modernize the PLA and to deter US military intervention in areas falling within the First Island Chain, which links Japan with Taiwan and includes most of the South China Sea, China has focused on affordable asymmetric weapons. According to Pentagon planners, China wants to acquire A2/AD or anti-access/area-denial capabilities. In pursuance of this strategy, China has created an active land-based ballistic- and cruise-missile programme. Secondly, China has strengthened and enlarged its submarine fleet. China has also been working on anti-satellite weapons.
In 1993, China gave the task of winning “local wars under high-tech conditions” to PLA. The emphasis of PLA now is on “informatisation” or what is called “unified C4ISR” in the West, where C4 stands for command, control, communications, and computers, and ISR stands for intelligence, surveillance and reconnaissance. The objective is to ensure that the armed forces operate as a closely knit network. However, in terms of the quality of its military equipment and military technology, China is still far behind the US which is likely to maintain its military superiority over China during the next two to three decades.
Historically, the rise of a great power like China has been generally accompanied by a period of international strife and conflict in which the rising power tried to force itself to what it thought was its rightful position in the comity of nations in the face of resistance by the status quo or declining power or powers. One notable exception to this trend was the peaceful manner in which Great Britain vacated the top position in the rankings of great powers in favour of the US at the beginning of the 20th century as the latter overtook it in economic and military power. It is, however, unlikely that the US would easily vacate the top position in the comity of nations for China. In fact, the US economic and military power is far ahead of that of China currently and is likely to remain so for quite some time to come.
The normal expectation would be that the US would use all the levers of power at its disposal to resist expansion of China’s power and influence. It is not surprising, therefore, that taking note of China’s growing economic and military power, the US has decided to rebalance its forces in the Asia-Pacific region to reassure its allies and to safeguard what it considers its essential security interests in the region. It is also in the process of strengthening a string of alliances around China to contain the latter. Its efforts to help build up India as a great power of the 21st century are also an essential element of its policy of containment of China.
Perhaps the most important issue of the 21st century would be the manner in which China’s rise is accommodated in the existing global order by the US and other Western Powers which have crafted its basic rules. These rules give an inherent advantage to the US and other Western Powers in the conduct of inter-state relations. One of the advantages of being a powerful state like the US is that it plays an important role in determining the agenda of inter-state discourse and conduct besides deciding the rules governing international relations. So powerful states decide not only which game will be played in the arena of international politics but also the rules of that game.
A group of distinguished American scholars including Stephen G. Brooks, G. John Ikenberry and William C. Wohlforth point out advantages that the existing global order offers to the US in an article entitled “Lean Forward” in the Foreign Affairs issue of January-February, 2013.
To start with, the authors point out, “After all, today’s rules and institutions came about under its (the US) auspices and largely reflect its interests, and so they are in fact tailor-made for soft balancing by the United States itself. In 2011, for example, Washington coordinated action with several Southeast Asian states to oppose Beijing’s claims in the South China Sea by pointing to established international law and norms.” The existing global order and the US broader leadership “make it easier for Washington to launch joint initiatives (on such issues as terrorism) and shape them in ways that reflect US interests.”
They further point out that the United States has also used its global dominance “to structure the world economy in ways that serve its particular economic interests….More broadly, the United States wields its security leverage to shape the overall structure of the global economy. Much of what the United States wants from the economic order is more of the same: for instance, it likes the current structure of the World Trade Organization and the International Monetary Fund….The United States’ political dominance also helps keep the US dollar in place as the world’s reserve currency, which confers enormous benefits on the country (the US), such as the ability to borrow money.”
The essential point is that the existing global political and economic order is heavily tilted in favour of the US and other Western powers, which helped establish it in the first place. It is inevitable, therefore, that as China’s economic and military power grows, it will seek to modify the rules of the existing world order so as to make them more even-handed and to provide a fair opportunity for China’s rise in the comity of nations. On the other hand, since these rules were laid down precisely to give an advantage to the Western Powers led by the US, they are likely to resist the Chinese attempts to modify them.
This explains the constant refrain of the Western leaders that China should conform to the rules of the existing global order as its economic and military power increases. China, in the long run, is unlikely to oblige the US and its allies by complying with this demand. One of the main objectives of China gaining greater economic and military power would be to reshape the world order with a view to making it even handed and more favourable from China’s point of view. The prospect of growing international tensions is, therefore, built in the current international scenario because of the emerging US-China rivalry.
The main issue of international politics in the 21st century would be the manner in which the US and its allies manage China’s rise. They can either resist China’s legitimate demand for modifications in the existing global political and economic order to make it fair and even handed. Or they can peacefully agree to such modifications as would be necessary to remove its bias in favour of the West. Such modifications in many cases would be painful and might be resisted by domestic pressure groups, making it difficult for the Western governments to agree to them. This explains why the recent summit in California between Presidents Obama and Xi Jinping did not produce any breakthrough on issues of vital importance to their relationship. It would require extra-ordinary sagacity on the part of the US and its allies in the West to agree peacefully to the modification of the existing global order to make it fair and to accommodate China’s rise.
The use of the dollar as the international currency will be questioned increasingly in the years to come as the US external debt grows because of its huge deficits in balance of trade and as China piles up massive reserves of foreign exchange, estimated to be over three trillion dollars currently, due to its recurring favourable balance of trade. It is inevitable that as this trend continues and as China liberalizes its external capital account, there would be growing demand for the Chinese currency as a reserve currency and less reliance on the dollar for this purpose. Further, as China’s economic power increases, it would be well placed to demand modifications of international financial institutions like the World Bank and the IMF which currently give overwhelming clout to the US in their management and operations. At the regional level, China will extend its economic influence through trade and investment in far flung regions like Africa and Latin America. In fact, judging by the latest reports about the activities of Chinese economic entities, this process is already taking place.
On the political and security side, China will increasingly challenge the hitherto unquestioned dominance of the West in various regions of the world, especially those around its periphery in the East China Sea and the South China Sea. It will also pose a growingly potent challenge to the system of alliances through which the US maintains its presence and influence in different regions of the world. As China’s economic linkages with the rest of the world increase, countries sitting on the fence and those with less than total commitment to the US and other Western powers may be tempted to reconsider the nature of their external links to lessen their dependence on the West in economic and security fields.
Based on these considerations, noted American scholar, John J. Mearsheimer, concludes in his book ,“The Tragedy of Great Power Politics”, that if China’s economic growth continues at a robust pace, it would emerge as a potential hegemon in Northeast Asia. He adds, “In that circumstance, it is hard to see how the United States could prevent China from becoming a peer competitor…..Although it is certainly in China’s interest to be the hegemon in Northeast Asia, it is clearly not in America’s interest to have that happen.” (p. 399-400)
It is advantageous to be powerful in the existing anarchic world where power is the ultimate arbiter of issues of peace and security. Thus, national power, over and above international law and morality, is the only sure guarantee for a nation’s security. National power also enables a state to safeguard its interests in the selection and deliberation of major international security, economic and commercial issues in international forums. China has learnt the bitter lesson from its own history that nations have to pay a heavy price for their weakness. It is, therefore, likely to continue its pursuit of economic and military power in a single-minded fashion in the years and decades to come for safeguarding what it considers its legitimate national interests and making the existing world order fair and even handed. As it does so, it is likely to be opposed by the West which is the main architect and the beneficiary of the existing global order.
The growing tensions between China and the West led by the US can be resolved through conflict as was mostly the case in the past in the case of the emergence of new great powers or through peaceful means which would involve painful compromises mostly by the beneficiaries of the existing global order. It remains to be seen whether the US and its Western allies would have the sagacity, far-sightedness and the courage to accommodate China’s rise peacefully through appropriate modifications of the existing global order.
[*] The writer is a former ambassador and the President of the Lahore Council for World Affairs.
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