By William Tucker
Contributor, In Homeland Security
This year has been a rough one for China. In 2016, the Asian giant saw its economic growth contract considerably and its nascent stock market go into free fall.
The government has pumped money into the economy to prop up businesses during the past eight years, but many of these loans are not being repaid. In fact, China’s debt has skyrocketed to 270% of its Gross Domestic Product (GDP).
As a result, Beijing cut back on commodity imports while investment capital has fled the country to safer economic locales. However, it’s the domestic impact on labor that will take a toll on China.
China initially planned to lay off 1.8 million state employees this past February. But as the economy declined further, the Chinese government revised the number upward to 5 to 6 million in April. Numbers on a spreadsheet are one thing; unemployed citizens are quite another.
China Needs to Regain Economic Advantage and Ward Off Instability
In 2010, I gave a presentation for American Military University (AMU) on the subject of Chinese Intelligence. Intelligence collection is driven by perceived political need. China needs two things that go hand in hand – an economic edge and social stability.
For years, China offered cheap labor to the world’s major economies, giving the Asian nation its edge. But with increased competition growing from a shrinking marketplace, export economies like China’s are in for difficult times. Falling employment will have a profound effect on internal Chinese politics.
China’s President Facing Potential Power Struggles
Beijing hasn’t exactly been caught unaware. Over the past few years, Chinese President Xi Jinping carried out an anti-corruption drive designed to eliminate potential challengers at both national and local levels. Additionally, Xi took on other leadership positions in the Chinese Communist Party, centralizing the power of the CCP and the state entirely on himself.
Xi has fallen into the strong man’s trap, however. He must centralize power, however forcefully, to maintain regime stability. In doing so, Xi will alienate many people who might then present a challenge to the regime. China doesn’t have much of a choice but to try to consolidate power now before any potential instability.
China Unlikely to Become Economic Superpower, Despite Media Predictions
It seems odd that many headlines over the past month appear to describe China as an ascendant power. With the recent election of Donald Trump as U.S. president, media pundits say it will be up to the Chinese to save globalization.
I’ve stated it before but it bears repeating: China will not be a superpower, nor will it rival the United States. China is heavily dependent on foreign trade and would move mountains if it could maintain the status quo.
Unfortunately for Beijing, the global economy is slowing. Export-dependent economies like China’s will suffer more than most, making social upheaval a very real prospect.
US-China Relationship Needs New Analysis
The phone call between Trump and Taiwan’s President Tsai Ing-wen challenges the long-held U.S. “one China policy.” The United States changed its relations with Taiwan under the Nixon administration, in exchange for normalizing relations with communist China. The U.S. still sells weapons to Taiwan and publicly claims it will defend the island from any attempt by mainland China to invade and reintegrate Taiwan under Beijing’s rule.
That was a deal struck between two nations that needed each other at the time, but the Chinese-U.S. relationship certainly needs to be re-balanced. Speaking directly with Taiwan’s president to send a message to Beijing might seem at odds with Trump’s opposition to the Trans-Pacific Partnership (TPP), yet the economic partnership meant to hem in China wouldn’t work without a defense component.
Furthermore, all members of the proposed TPP actively trade with China, making moot the argument that the TPP would serve to contain Chinese ambitions.
The phone call with Taiwan was prearranged, but there was another component to this drama that involves the current U.S. administration. Henry Kissinger – the former Secretary of State and architect to the current relationship between the U.S. and China – was in Beijing during this time frame.
Upon his return to the U.S., Dr. Kissinger made stops at the White House and then at Trump Tower. President Obama has used Dr. Kissinger recently as an intermediary between Washington and Moscow, so it is no surprise that he would be used in a similar fashion with Beijing as well.
The diplomacy involved in re-balancing such a contentious relationship is risky, so sending Kissinger to lay the groundwork makes sense. This change in relations between the U.S. and China has been in the making for quite some time, and it will still be a challenge for the incoming Trump administration.
Expecting China to take the mantle of global leadership in the wake of a U.S. decline is simply delusional. The U.S. does indeed have many problems, but they pale in comparison to the issues facing China.
The U.S. isn’t in decline and globalization isn’t exactly dead. But the mechanisms created in the post-Cold War environment are in need of re-calibration. The U.S. should target the inefficiencies of trade deals and re-examine larger relationships that were forged in another era.
China and United States cannot continue to abide by a diplomatic deal forged in the 1970s to guide them into the 2020s. The global situation has changed and the sooner that is recognized, the better.