On China's Dichotomous Rise and Fall
- Nikola Ranick
- Mar 15, 2024
- 6 min read
Upon recent announcement of China's ambiguous growth target for the coming year, I figured it time to release the last of my LSE Essays that were remotely shareable.
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In terms of influence, China is indisputably rising. In a finite world like ours, this rise must balance with a corresponding fall, and the US bears much of this cross (some of which through self-sabotage). But as this realignment occurs, so too remain questions on the extent of its shift, the relative push back, and the equilibrium clearing afterward. I argue China’s rise is reputable for both its growing economic might and its increasing soft power influence on the global order. At the same time, these gains make its ultimate status questionable as the very contributors to its growing influence may precisely enable its downfall.
Without a doubt, the core of China’s rise stems from its impeccable economic growth since its economic opening in the late 1970s. It is already the world’s largest economy and could soon eclipse the US in absolute GDP. Its annualized average growth since then of over 6% is an impeccable record leading the world in years of non-recessionary growth (Wade). And though its GDP per capita is relatively low, it is nonetheless meteoric in rise. China is seemingly the place to be, responsible for financing the deficit of the US and thereby holding an overwhelming amount of its debt (Wade). These stats are testament to the success that is modern China.
The Sinosphere also fosters first-class governmental development policy, both in supporting emerging companies through strategic tariffs and generous governmental subsidies to its infant industries (Wade) The absolute ascension of China as the ‘World’s Factory’ and its insane trade surplus speak to an almost fable-like rise of the dragon. Notable to its governmental model, it has used powers only a one-party state could, leveling its own economic playing field via a rigid residency system dictating who and why citizens move from countryside to city (known as Hukou) and an evolving one-child-policy that limited its people from the unsustainable demographic growth inherent to many developing countries. (Wade). These cumulative policies are what allow China’s economic might to blossom, paling even the most efficient East Asian Development State. Indeed, to deny China’s rise is to deny reality.
The Great Dragon’s ascendance is not merely limited to economic authority but also in its growing soft power network. Within the powers that be, China is exploiting its leverage accordingly. It has increased its funding levels, pushed its political agenda on everything from Taiwan to Trade Policy, and even become the sole supporter of previously Western-centric organizations like UNIDO (Wade). Its recent Middle-of-the-Road Approaches to both the Ruso-Ukraine War as well as conflicts ranging in Israel and Palestinian territories are another potent example of negotiating leverage.
As for internal Chinese developments, the notorious Belt and Road Initiative, launched in 2013, is a historic revival of a trading block from centuries prior, offering magnanimous funding for any interested country (Wade). The BRI is arguably a Global Marshall plan intended to muster both economic growth and good favor with the rest of the developing world, and indeed, even some of the developed world. Were it not for its global growth in importance, China would be unwilling and indeed, unable, to hand out such lavishness. Considering the country’s continual economic expansion, its loans are seemingly endless in scope and, as it is offered by an authoritarian regime, its socio-political conditions are notably flimsier than much of the Democratic Wests’ lending conditions. Indeed, observe the usurpation of traditional regions of influence such as the likes of Russia’s Central Asia and India’s compatriots in South Asia, to say nothing of Southeast Asia and pockets in Latin America. Such readjustment to regional hegemons would be unthought of were it not for China’s rising influence and global authority at the expense of the US and its allies. The Sinosphere has already emerged as a prime competitor to the stringently budgeted and Western focused global hallmarks of the IMF and World Bank for its flexibility in both finances and overall fiscal suggestions. Of course, gratuitous, no-strings-attached lending lays open potential repayment failure, but that is a trend which only further ingrains these very countries in a Chinese Orbit of dependency (and it must be said, recent examples of foreign debt restructuring with China has not been as grotesquely leveraged as assumed by many China Hawks). It may not be moral, but neither was much of the West’s.
For as mightily as China’s state-governed economy presents itself, so too do dawning dangers of contraction and stagnation come from its very success. Woe to any economist or historian who does not recall the same claims of dominance surrounding Japan before its crisis in the 1990s.
Like China, its growth too seemed unstoppable with a heavily export-led surplus economy and a booming housing market. Ultimately, it was this optimism that created bubbles, which, upon popping, have hobbled the country to this day. Japan fell victim to the Mynsky Effect, as infatuation with present growth will only lead to a larger bubble of devastating results once that very bubble popped (Wade). China too may suffer a similar fate in its burgeoning housing market and in terms of its global factory house appeal. Indeed, their every export success has led to an increasingly noncompetitive higher-wage labor force, hallmark conditions for the notorious Middle Income Trap. This involves the conundrum of a country whose workforce is too skilled to accept cheap wages though not skilled enough to merit high income developed salaries (Wade). In tandem with the lingering US trade war, many companies, American and otherwise, are looking to offshore from China to either Southeast Asia or even home bases again. The global push back to China’s rises and pressures have only inflamed this so-called ‘Friendshoring’ (Wade).
Property bubble-wise, China needs no prefacing. Ironically, after years of over saturating the likes of Australian and Canadian city property by buying housing for financial speculation, China is now seeing an internal bubble of similar proportions. This conundrum creates internal discontent and externally exacerbates the Middle Income Trap in limiting gains for its workers and further deflating an already doomsday fertility rate. Speaking of the latter, it is China's once advantageous social policy which now most poisons long term success. The fertility rate is already well below the 2.1 rate of replenishment and shrinking further and faster than other more developed neighbors in East Asia (Wade). As such, a huge demographic time bomb provides additional dynamite for a pending economic implosion, further proof to the tenuous nature of China’s rise. And all of these pressures come to fruition without Western push back! Indeed, the West actively seeks to continually corral Sino-influence. Look no further than the US quest to deny China a developed chip industry by both blocking certain chip exports to the mainland and pressuring chip-machine making companies to refuse sale to the Chinese (Wade). Even as a new equilibrium is emerging, the West appears unwilling to have their superiority melt without a fight.
The growth in Chinese soft power influence is perhaps the more impressive show of force, making it an arguably bigger cause for potential downfall. The BRI seems the most obvious insecurity. As China’s financial precariousness grows, both its present lending will stiffen as will its demands for repayment from those already owing. It is certainly the latter which has already initiated dread and doubt from current and future state clients. Just as China’s economic leverage gives it power over developing country’s finances, so too does it create resentment and even possible retreat to the West. For active examples, see Port Seizures in Sri Lanka and Djibouti or even sovereignty questions in ever-chaotic Pakistan as case-in-point to growing skepticism of China’s ‘Good Will’ (Wade).
Sidestepping this large inconvenience, China still must combat a built-in status quo advantage of international organizations present in today’s world. Whether it be the UN, WTO, or IMF, many argue the initial development of the post-WW2 global order was a matter of securing Western interests. As such, the more China tries to leverage its authority, the further push back it will get. See first and foremost the IMF in which the US has veto proof on even changing its power vote share (Vestergaard and Wade). To speak of an unstoppable rise is therefore to ignore the structural preservation of the World Order since World War 2. Conversely, to promote its rise externally, China needs to build its own institutions, a process which it has started but far from mastered in purpose and scope (Wade). Presently, few of these have the infrastructure or staying power to the likes of its senior competitors. Without catastrophe, it is hard for China to rebuild the world in its image, even despite present-day leverage.
As foolish as it is to deny a rising China, so too is it to ignore present realities by the West and China itself that may ultimately handicap it. Perhaps the greatest symbol of China's overzealous success leading to painful corrections is the global shock the world has forgotten about: The full effects of both China’s Zero Covid Policy and its abrupt unraveling. Every aspect of this travesty bears testament to both potential rise and ruin of China: Effective state policy and firm mandates alongside burgeoning social unrest, abrupt reversal, and chaotic adjustments following. Its applicability to other situations is debatable, but as China is predicted to grow below the global average for the first time in decades, such case studies could prove determinative (yes I made that word up).
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