Download The Big Idea: 'China in the 21st Century'

The
IDEA
China in the
21st Century
By Arne Westad
O
n the face of it, China seems to be faring quite well as
European and American economies stumble through
the financial crisis. It appears to be gaining increasing
political and economic clout. But those who believe China
will supplant the US as global hegemon and create a
qualitatively new world order would be well served to
reconsider some of their positions: China’s behaviour does
not suggest it wants that role, while its current economic
policy may not be sustainable in the long term.
China has tried to use its rather peculiar economic system
to insulate itself from the effects of the financial crisis.
Having a currency that is not fully convertible may have
helped, as it did during the 1997-1998 crisis. A high degree
of state intervention has been beneficial as well; while the
Chinese economy grew at 8.7% in 2009, according to
official figures, more than 90% of this growth came from
investments, and especially from state investments. Yet the
hope of some analysts that China will be able to pull the
rest of the world out of recession is probably misplaced.
At the core of the Chinese response to the crisis is a
stimulus package unveiled as the contours of the crisis
became known in 2008. The package was first and
foremost intended to stimulate domestic consumer demand
through a series of measures that may have taken up as
much as 14-15% of China’s GDP. But the stimulus package
has only worked up to a point. There are certain things
you can do in an economy like the Chinese which are more
difficult in a more open market economy: you can increase
state investments, for instance, much more easily than in
Britain or the United States. Stimulating consumer demand
is much harder. Chinese consumers are reluctant to spend
when they lack confidence in demand for China’s exports,
and thus in their own job prospects. As the magnitude of
what it will take for the Chinese state to run the economy
through state investments is becoming clear, there are signs
that the government is shifting away from domestic stimuli
and towards an export-led way out of the crisis, which of
course is what drove Chinese growth during the good
times. This policy assumes that the demand for Chinese
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goods overseas will return towards the end of 2010. This
is a very risky strategy. Rather than driving the recovery
process, China may be making itself dependent on recovery
elsewhere. This brings to mind Japan’s strategy in the early
1990s, which of course failed badly.
No doubt pent-up demand does exists in China. The
country’s nominal GDP per capita has been growing and
is now approaching 4,000 US dollars per year. But for
increased demand to truly kick in Chinese consumers need a
buying power well above what they have currently. Without
a general sense of improvement in the export situation, it is
hard to see how Chinese consumers will move to investing
and spending their money rather than hoarding it.
In terms of international affairs more broadly, the growth
of Chinese influence within East Asia rests largely on
relations with Japan. If China is to be a dominant power in
its region, it will have to build a solid and stable relationship
with what is still the world’s third largest economy, despite
the difficult history between the two. Some policymakers
in Beijing realise this, and are trying to shift the focus of
the relationship from past grievances to economic and
political cooperation, but so far their efforts have been
stymied by a growth in popular nationalism and a lack of
daring initiatives both in Beijing and Tokyo. As long as
this relationship does not improve, the United States
will continue to be the leading power in the region and
the Chinese seas will – in security terms – remain
American lakes.
China faces a difficult situation on the Korean peninsula
as well, made worse by the powerlessness many Chinese
leaders feel with regard to their relationship with North
Korea. Chinese leaders wish for stability in international
relations, but the situation in Korea seems to portend
the opposite. There is an increasing sense that the North
Korean state will collapse rather than going through
any kind of transition. For now China has been trying to
improve the relationship with South Korea while improving
its contacts with the United States on Korean matters. What
it does not want is a German style reunifications that brings
US troops all the way to the Chinese border.
In Mongolia and Central Asia, China has continued to build
economic ties but has not been able to translate trade
into political influence. Partially this is a result of a belief
that political influence would come by itself as a result of
China’s economic weight; partially it is a willingness to
work with whoever is in power. While the US has sought
political influence, China’s approach has been much more
old fashioned, largely de-linking trade and politics. This may
not matter much now, when Tashkent, Almaty, Dushambe
transformation in the relationship with Taipei. As the recent
announcement of US arms sales illustrates, even the most
cooperative government in Taipei has two main priorities
that overshadow its relations with Beijing: security, and the
relationship with the US that underpins that security.
The question on everyone’s lips seems to be: does China
have a grand strategy? The answer, so far, is no. China has
been happy dealing with a world dependent on US power.
Westerners cannot imagine that a transition from a US
dominated world to one where the Chinese play a bigger
role will not also mean a transition to a very different worldsystem. But China does not have a qualitatively new system
to offer. In the medium term, at least, China will be very
happy to fit in to a system that Britain created and which is
now dominated by the US, although a severe regional crisis
might lead Chinese leaders to think differently. Still, China’s
development needs and the structure of its economy mean
that even when China becomes a global power, it will want
to operate in a system not too dissimilar from the one that
exists today.
There are some factors that may pull China away from
participating in a collaborative international system. The
first is the combination of a relatively weak authoritarian
regime in Beijing and the uncertainties this brings about
China’s domestic political developments in the future. The
second is the
rising nationalism
built on profound
suspicion of how
the outside world
treats China and
a deep sense that
it is still not being
treated as an equal. This mixture is unfortunate for China
and for the international system because of the uncertainty
it creates about the country’s long term goals.
‘In the medium term, at least, China will be very happy
to fit in to a system that Britain created and which is now
dominated by the US and, although a severe regional crisis
might lead Chinese leaders to think differently.’
and Ashkabad still look to Russia, but over time the Chinese
leadership may come to regret not doing more to ensure its
influence in those capitals.
The big success story over the last few years has been
China’s relationship to ASEAN. China has become
increasingly involved in terms of trade and political
consultation. But so far ASEAN has been in the driving seat,
and Chinese input has been limited. The Chinese leadership
does not seem to understand that the trend within ASEAN
is towards more integration, cooperation, and political
consultation. If China continues to emphasize bilateral ties
with the countries of ASEAN rather than regional issues,
it risks getting left out.
The other major issue for China is, of course, Taiwan.
Recent years have seen very positive contacts between
the two sides, but true normalisation, not to mention reunification, will take a long time. Some people in Beijing
have been unrealistic about the possibility of a speedy
In this sense, there is a link between making China more
pluralistic in its political system and its ability to work
effectively with others in foreign affairs. A more democratic
China may not be a more peaceful China. But a more
open society and broader political participation will make
it easier for the country to set out a viable foreign policy
strategy and to get acceptance for it within the wider
population. It will also help reduce the fear within other
nations that originates from the fact that the rising power
in international relations has an unrepresentative political
system and does not fully respect the freedom of speech of
its own citizens. ■
***
Professor Arne Westad is the Co-Director of LSE IDEAS
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