China is not as strong as some think

China plays a large role in the political discourse of the United States.  Much of the discussion centers on the threat China poses to the U.S. as a growing rival and often the rhetoric is alarmist.  While China’s rise does pose challenges to U.S. interests (and more seriously to many of the people in China) the future power of China is often overstated...here’s my case.

#1-China’s economy has been declining for about a decade.  The main threat posed by China, for many in the U.S., is as an economic rival.  The concern draws from China’s many years of double digit growth rates in the 1990s and 2000s while the U.S. and the rest of the world struggled to reach 4%.  However, the growth rate disparity had more to do with China’s starting point as a poorer country with greater room to grow.  China’s growth is not that different than what the four “Asian Tigers” (Hong Kong, Singapore, South Korea, Taiwan) experienced in their early economic development.  Chinese growth occurred, in large part, through investments in new infrastructure and construction, which is also an area that was not as easy for the U.S. to invest in because of its prior development.  The Chinese national government has taken on a great deal of debt, approximately $5.6 trillion, to finance the infrastructure and construction boom.  This does not include a large amount of debt for local governments as well as increased private debt.  Including these brought the total close to $34 trillion in 2018 and close to 335% of domestic GDP in 2020.  Chinese debt is increasing at a higher rate than U.S. and U.K. debt prior to the financial crisis in 2008.  The debt, along with increased labor costs, lower productivity and a more developed economy leading to growth rates more similar to developed countries result in a weakening Chinese economy.  The view that China will continue to grow at a double-digit rate for the foreseeable future is simply false.  China’s role in the international economic system is also not as large as the alarmist view suggests.  A simple measure is to look at what currencies governments hold as part of their foreign currency reserves.  Countries hold currencies they feel are valuable and stable.  In 2019, the largest reserve currency was the U.S. dollar with 61% of all foreign currency reserves in the world.  China was fifth, with 1.95%, behind the Euro, Japan and the UK.  

#2-China faces a demographic problem in the near future.  As countries develop their population tends to decline as birth rates decline.  In the short term this provides some economic benefits but over time this can create economic problems as the population ages and there are fewer workers.  Japan is experiencing this issue right now.  China, even though it is the world’s most populous country, is facing a similar challenge brought about more quickly in their economic development due to the “one child” policy.  The disastrous results of the “one child” policy are evident in the government’s push for families to have more children, represented by the new “two child” policy.  The “one child” policy has resulted in fewer women of child-bearing age and not enough to sustain the current population.  The UN projects that by 2050 35 million women in China will be over the age of 85 while the number of women between the ages of 20-50 will drop by 30%.  China will face a problem similar to Japan and many countries in Europe.  An aging population that will require greater resources from the government and fewer workers to boost economic productivity and government revenue.  This challenge added to the economic challenges described above make China’s economic future anything but certain.

#3-The Chinese Communist Party could also face a legitimacy crisis in the near future.  All governments need to be perceived as legitimate by the people they govern in order to stay in power.  In democracies, legitimacy is often provided through the electoral process.  Authoritarian governments must seek legitimacy in other places.  For the Chinese Communist Party legitimacy under Mao was related to the ideology of Communism and the early successes of the Chinese Communist Party at local levels.  However, since the economic reforms beginning in 1979 the Party’s connection to a strong Communist ideology has been waning.  The disconnect from an economic Communist ideology was underscored when leader Deng Xiaoping stated “Let some people get rich first”.   This is not a sentiment one would associate with Marxist economic thought.  China has since relied on gaining legitimacy from its economic performance and increasing nationalism under Xi.  In fact, I would venture to suggest that Xi’s turn to nationalism and more aggressive foreign policy is related to the decreased legitimacy resulting from poorer economic performance.  The problem for the Party and Xi is that they are not the only ones in society who can take on the nationalist mantle and as they rely more on this for legitimacy it opens them up for more challenges.  

#4-Chinese “soft power” is not nearly as extensive as the United States.  Soft power essentially refers to the persuasive power countries have due to their cultural influence.  Or to put it more simply, the popularity of the country.  There are many metrics to examine, all of which point to the still dominant cultural, and thus political, influence of the U.S.  First, English is by the far the largest “second language” for people.  English and Mandarin appear close when simply looking at the total number of speakers.  However, this is the result of the large population of China.  When only focused on those who speak each as a second language, English has 898 million speakers while Mandarin has 198 million.  This allows the U.S. (with some help from the UK) to reach a larger audience with its cultural products but also makes the U.S. an easier destination for economic activity.  In addition, it allows American intellectual thought and research to play a more prominent role.  Second, the U.S. has a much stronger network of allies, both economically and politically.  China’s relationships are mostly transactional in nature and it lacks close allies.  China’s increased aggressive behavior in the region only exacerbates this problem by alienating countries who would most likely develop into close allies over time.  Third, the data suggests that international attitudes toward China are relatively poor.  A 2019 Pew study of 34 countries showed that attitudes toward China were mixed, however among west European and Asian countries the view of China was largely unfavorable.  A 2020 Pew study shows that these ratings have only gotten worse as a result of China’s mishandling of the beginning of the COVID-19 outbreak.  Perhaps most damaging for China, there is some evidence that as China increases economic interactions with countries the view of China decreases.  China has invested a great deal of money in building up the infrastructure of a number of Central Asian countries as part of China’s “Belt and Road” initiative.  However, China’s favorability among Central Asian countries has decreased as a result of this, not increased.  This does not bode well for China’s ability to win friends and influence people.

Based on the evidence it appears clear that China’s threat to the U.S. is often overstated.  None of this suggests that the U.S. should not work to check Chinese power in Asia or Africa or take a tougher stance on trade.  Those are separate issues with separate considerations.  I did not discuss China’s military growth but there is convincing research showing that this is also not as dire as some like to state.  This is also not to suggest that the U.S. should not worry about what China is doing inside its own country.  China’s human rights abuses, especially its horrendous actions toward the Uighur population, deserve international condemnation and international efforts to stop it.  The above points do suggest that U.S. politicians who overstate the threat from China as a scare tactic are either misinformed or are cynically attempting to manipulate the public.  Either way, we should be wary of what they have to say.

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