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China’s struggles explain why it won’t supplant US

23 Nov 2019
A protester hurls a brick at a police station in Hong Kong’s Tseung Kwan O district. (Reuters)
A protester hurls a brick at a police station in Hong Kong’s Tseung Kwan O district. (Reuters)

Much has rightly been made over the past decade about the rise of China to genuine superpower status — the only possible long-term peer competitor to the US. Since Deng Xiaoping in December 1978 first put in place the liberalizing economic reforms that have utterly transformed Chinese society, the country has seen an astonishing 20-fold increase in its economic output.

The number of Chinese living in extreme poverty over this period has decreased to 80 million, merely a tenth of what it used to be. Even more recently, between 2007 and 2015, China’s share of global output has impressively increased from 11 percent to 17 percent. Streaking across the geopolitical sky like a meteor, China’s rise is undoubtedly the geopolitical risk story of the past generation.

But, blinded by its out-of-nowhere success, political risk analysts have overcorrected from the sin of ignoring China to overrating it. Student-led protests began in Hong Kong in June, igniting over a proposed extradition bill that would have allowed suspects in the city to be sent to mainland China to be tried.

The provocative bill, which has since been withdrawn, became a lightning rod for a more general dissatisfaction of Hong Kong residents over Beijing’s increasing influence over the territory. The protesters’ demands have become much broader, encompassing calls for genuine democracy in local elections and establishing a neutral commission to look into charges of police brutality. Thus the protests have morphed over the past five months into one of the most serious challenges to Chinese President Xi Jinping’s authority since he took power in 2012. Suffice it to say that internal dissent on such a scale has the potential to inhibit China’s continued rise.

Domestically, China has significant weaknesses too. Indeed, the Chinese economic miracle may be nearing its end. In 2015, each employed Chinese worker generated only 19 percent of the amount of gross domestic product (GDP) an American worker did. It has been estimated that, when the superior productivity of American workers is taken into account, the costs of manufacturing in China and the US are now startlingly the same.

Likewise, the Organization for Economic Co-operation and Development estimates that Chinese corporate debt spiraled from 120 percent of GDP in 2012 to more than 160 percent in June 2017. And, for all its talk of the merits of globalization, China remains the most closed G20 economy, as measured by investment restrictions and ease of doing business.

Further, China has a significant demography problem, as its birth rate starkly declined to 1.2 children per couple in 2017. The International Monetary Fund has estimated that China’s working age population peaked in 2011. In 2013, China had 6.57 workers supporting every person 65 or older — by 2050, it is projected this will be down to only 1.14 workers, with almost half the population then 65 or older. It appears China could get old before it gets rich.

Even with an able ruling elite, these entrenched domestic and demographic problems will take years to overcome. Assuming (and it is a mighty assumption) Beijing is able to master its formidable challenges, the realm of geopolitics also stands in the way of any dreams it has of ousting the US as the pre-eminent country in the world. For the only way for China to supplant Washington as the strongest force in global politics for the foreseeable future would be for it to enter into a rock-solid alliance with one of the fading great powers, either Russia or Europe.

The Hong Kong protests have become one of the most serious challenges to President Xi Jinping’s authority.

Dr. John C. Hulsman

For all the flirting Xi and Russian President Vladimir Putin do with each other, there is a massive psychological barrier to a coherent Sino-Russian alliance emerging: Great Russian nationalism. Putin’s entire basis of rule, and the source of his enduring popularity in his country, is that culturally he is seen “The Good Czar,” strongly cowing the aristocrats (in his case the oligarchs) and reasserting Russia’s place in the world as a respected great power. To play second fiddle to Beijing (as Moscow would assuredly have to do for such an alliance to thrive) doesn’t work for Putin either ideologically or practically. As such, all the talk about a firm Beijing-Moscow axis ought to be taken with a gigantic grain of salt.
Cementing ties with Europe is even more far-fetched. For all Trump’s bellowing, the US and the old continent have marched (often unhappily) together geopolitically for 70-plus years. The glacially moving European elite are not about to dramatically turn on a dime, renouncing all these established ties and coherently deciding to decisively throw in their lot with Beijing.

Given the just-released (to The New York Times) internal communist papers on how the regime has imprisoned an extraordinary 1 million Uighurs in western China, it is safe to say that a Europe that places great emphasis on human rights is not about to go in decisively with the Uighur’s brutal jailers.

For all these reasons, we need to see the world as it truly is. China, while rising to great power status, has myriad problems and geopolitical challenges ahead, which make it highly unlikely it will supplant America as the greatest power in the world any time soon. For at least the next generation, the US will remain the world’s predominant power.

  • Dr. John C. Hulsman is the president and managing partner of John C. Hulsman Enterprises, a prominent global political risk consulting firm. He is also senior columnist for City AM, the newspaper of the City of London. He can be contacted via www.chartwellspeakers.com.
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