China faces double
challenge By Benjamin A Shobert
In both China and the United States,
popular culture and policy are beginning to
reflect two dangerous assumptions about each
country's near term future: that America is in a
state of permanent decline, and that China's
ascent to Great Power status is inevitable. While
the challenges America faces to reimagine and
reinvigorate itself are real, they are not
insurmountable.
Similarly, while China's
masterful economic growth story highlights the
country's potential, many structural challenges
remain that could well prevent it from becoming a
Great Power. Both representations - America's
decline and China's ascent - mischaracterize the
path both countries currently find themselves on.
These misrepresentations could well lead to disastrous
miscalculations not
unlike those that led to World War I.
Measured against the period immediately
following the Cold War, when the supremacy of
American ideas, military power, and economic might
were unquestioned, there can be little doubt that
the United States today feels itself to be in
decline. This feeling is more severe because so
much was made of American hegemony during the
1990s, from authors like Francis Fukuyama in his
book The End of History as well as
economists like Alan Greenspan who proposed that
America's finely tuned economy illustrated that
the business cycle, as we knew it, "was dead".
America's misadventures in Afghanistan and
Iraq can be partially understood as the aftermath
of a foreign policy establishment confident in
America's ability to do anything it wanted,
anywhere it felt obligated to act. If today the
ominous fear and frustration over America's
decline seems so overwhelming, it is only because
for too long the unbridled optimism over what
American power could accomplish knew no
boundaries.
9/11, the subsequent invasions
and attempts to rebuild Afghanistan and Iraq, the
2008 financial crisis, and the new heights of
inept political infighting in Washington DC, have
all served to support the narrative that American
power is in decline. That one party in particular
feels its path to power will be best served by
pointing out the inevitability of American decline
unless it is returned to power has only furthered
this anxiety.
Republican constituents
harbor deep fears about what the world would look
like absent America's dominance, a set of concerns
empowered by the great good the United States has
done in moments of global crisis over the last 100
years.
However, fears over American
decline have become a political tool, so much so
that independent voters and political opponents
have themselves had to acknowledge the potential
of American decline. Admittedly, the latter group
would point towards recalcitrant GOP politics as
part of the reason why American decline grows more
likely as each election make compromise less
likely and only further fractures an already
frustrated and angry electorate. The unpleasant
reality is that the idea of American decline is
becoming a given across political parties.
For now, fears over American decline have
resulted in corrosive domestic politics not seen
since the United States' Civil War. Unlike then,
the disagreements reverberating through the
country's political discourse today are not easily
divisible by geography; now, they cross borders,
social classes, family incomes, religious
affiliations, and industries.
If fears
over America's permanent decline make it difficult
to find one enemy within to position against, they
make it that much easier to find an outsider to
blame for problems almost entirely of America's
own making. If the narrative of America's decline
is persuasive to Americans, so too is that of
China's ascent at the cost of America's power.
This logic follows a similar line of
thinking about the ill effects of globalization on
American jobs: that trade with China - or any
other large emerging economy where job losses are
possible due to industry's dislocation - is a net
loss of jobs for American workers. The idea that
the number of jobs, like the measure of American
power, is somehow fixed, and that what China gains
must be coming at America's expense is a dangerous
miscalculation that may soon find itself expressed
in policy changes impacting US-Sino relations.
This is unfortunate, because as illusory
as America's declining power may prove to be
(today's misgivings would not be the first time
America has feared its relevance or power is
irrevocably waning), the narrative that China's
path to ascendancy is assured is even more flawed.
Once the country emerged from its
self-imposed exile, China was destined to be a
giant actor on the world's stage. But being a
forceful presence and being a Great Power are two
very different things, and China has many hurdles
to cross before it can begin to lay claim to Great
Power status.
China has not yet
encountered the first financial crisis of its own
making. While the country has done an admirable
job navigating the dicey moments around the 1997
Asian and 2008 American financial crisis, both of
these were financial crises imposed on China by
the actions of outsiders. Their impacts, while
certainly not immaterial to China's own economy or
banking system, did not emanate from within. This
is unlikely to be forever the case. As the recent
Wenzhou crisis over unofficial lending and debt
failures made clear, the country's banking system
has many gray areas that are poorly understood and
have yet to withstand a structural crisis.
China's banking system is deeply
intertwined with investments into dubious
state-sponsored infrastructure whose economic
rationale is also poorly understood. As strong as
China's state-sponsored capitalism may be, it is
not above misallocating capital in both public
projects and private industrial expansion. Poorly
rationalized investments have a way of presenting
themselves all at once, and in the most
inopportune of times. Few moments could be more
problematic than today, when China's economy
appears to be slowing and its leadership
transition seems tenuous.
Among the many
issues that appear to have made this year's
leadership changes in China more difficult is that
the country's policymakers understand that the
economic and political models they have used to
lift the country from its impoverished past are
quickly resulting in diminishing returns. The
delicate balancing act between the role of the
state and the room granted for free-market actors
to involve themselves in the country's economy
needs further clarification.
Will the
state re-assert itself, arguing that China's
national interests supersede informal expectations
or formal obligations to international rules? Or,
will the Communist Party embrace a series of
additional economic and political reforms that
signal to the world its willingness to take risks
and go the next step in what the West has long
believed was the inevitable march towards an
economically and politically freer China?
Yet, the greatest challenge to China's
ascendancy may be in how the established Great
Powers view China. While there are certainly ways
in which China can work to minimize the
possibility that its intentions are not
misunderstood, a good bit of how China will be
perceived by outsiders depends on what is going on
within the countries these observers call home.
Nowhere is this challenge more obvious than in how
the United States views China.
There are
some things China can do to encourage a more
positive view by Americans: encouraging inbound
investment by Chinese companies into the US as
opposed to purchasing Treasuries changes the type
of Chinese investments being made in the country,
and hopefully creates the potential for individual
Americans to see how China's growth benefits them.
De-escalating naval skirmishes over
disputed territories in the South China Sea and
cracking down on cyber-security intrusions by
Chinese hackers would go a long way towards
convincing American legislators that China
understands how both activities delegitimize its
desire to be seen as a responsible stakeholder in
global matters.
Beijing would also
neutralize many of its US Congressional critics if
it made a handful of symbolically important
adjustments to its human rights' policies. The
goodwill that could come from such changes in how
the country monitors and manages dissent would go
a long way towards placating American critics who
point towards the country's human rights abuses as
further cause to not trust what China will do once
it has ascended to Great Power status.
None of these may be enough to forestall
conflict between China and the United States.
Unless American comes to understand that China's
rise need not pose an existential threat to its
values, or an economic threat to its way of life,
it may be impossible to prevent the same sort of
strategic miscalculation that occurred in Europe
on the eve of World War I, when Germany's fear
over its waning power led it to act imprudently.
While America's choice may not be to go to
war with China, it is entirely possible that the
United States could over-react to its fear of
losing power to China in ways that prove to be
equally destabilizing for the globalized world we
have all come to take for granted.
Benjamin A Shobert is the
Managing Director of Rubicon Strategy Group, a
consulting firm specialized in strategy analysis
for companies looking to enter emerging economies.
He is the author of the upcoming book Blame
China and can be followed at
www.CrossTheRubiconBlog.com.
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