While many have feared its rise, a weaker China struggling with economic and political challenges at home may present an even greater challenge.
One of the questions on the minds of most China watchers these days is how Beijing will behave externally when it faces a far more difficult internal environment. Of the well-recognized challenges China will encounter in the coming years are its deteriorating economic dynamism, a structure of decision-making with diffused power and uncertain authority, rising nationalism, growing demand for political reform, and widespread popular disenchantment with the status quo.
In totality, these internal difficulties will reduce the resources available to maintain and expand China's influence around the world, constrain the Chinese military's ability to accelerate its modernization, and make Chinese leaders more reluctant to assume greater international or regional responsibilities. Most worryingly, erratic behavior driven by a mixture of lack of leadership experience and political security will most likely mark Beijing's foreign policy conduct in the coming years.
Given the high profile China has assumed in projecting its economic influence around the world, particularly in resource-rich developing countries, one might dismiss as fanciful the suggestion that looming economic hardships at home may severely limit Chinese capacity for establishing itself as an economic alternative to the West. But a closer look at how China has been funding its investments in Africa, Central Asia, and Latin America would show that such investments are not only expensive, but also very risky. The grants and concessionary loans China has made to various countries to gain their goodwill have totaled at least tens of billions of dollars (these are reported figures; nobody knows the real amount). They were made when China enjoyed double-digit growth and had ample cash to throw around. But as the Chinese economy decelerates and less money flows into Beijing's coffers, the Chinese government will obviously have less funds to sustain such economic and diplomatic offensives. Politically, continuing a lavish foreign aid program when its own people are struggling will surely arouse fierce criticisms from the public. Not too long ago, the Chinese Foreign Ministry was denounced bitterly when it was revealed that China donated safe school buses to Macedonia when its own schoolchildren have to ride in unsafe vehicles.
China's risky foray into developing countries will face another hurdle. Most of the big-ticket projects China has supported in these countries are funded by loans from China's state-owned banks. Based on previous experience, many of these projects are likely to fail. As Chinese banks are themselves expected to struggle to deal with a wave of non-performing loans at home, the last thing they want to do is to keep funding these high-risk, low-return projects abroad. So it is a foregone conclusion that a weaker China at home means a less influential China abroad.
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Andrew K P Leung
Professor Pei is right to say that a weak China should be bad news for the world.
Much of the turn-around in the wake of the global financial crisis was driven by China's growth. As pointed out in Pei's article, China has been a useful contributor to world order in such areas as the six-party talks over North Korea and peace-keeping missions in Africa.
But I beg to differ with him on four counts -
(a) China's global influence is growing by the day, not waning, as China's economy, the world's second largest, is still growing at respectable rates. It is on track to become the world's largest in two decades or so. Moreover, a large part of the world has been embedded in a global production and supply chain centered on China, with the result that the RMB has now eclipsed the dollar as the world's leading "reference currency". ("Eclipse: Living in the Shadow of China’s Economic Dominance", Arvind Subramanian, Senior Fellow at the Peterson Institute for International Economics, Washington D.C, 2012).
http://www.andrewleunginternationalconsultants.com/chinawatch/2012/10/chinas-looming-economic-dominance.html
(b) China does not give a great deal of straightly-defined aid to Africa. Most of China's financial flows to Africa is in the form of commercial loans secured by resource contracts. Rather than being channeled directly to corrupt government officials, these flows are often kept in an escrow account in Beijing to pay for completed infrastructure projects like railways and power plants as well as capacity-building social projects like schools, and hospitals, often carried out by Chinese contractors.
See "A New China-Africa Financial, Investment & Business Partnership: Lessons for the International Aid, Investment and Trade Architecture"
http://www.andrewleunginternationalconsultants.com/files/paper-on-a-new-china-africa-financial-investment-business-partnership-4.pdf
(c) As a percentage of GDP, China's military is bound to grow, commensurate with the growing size of China's economy and the increasingly testing dynamics against the backdrop of America's "Asia Pivot" and increasingly testing waters in China's critical sea lanes. Very few China watchers would agree that China's military is going to contract.
(d) China's influence is such an important part of the world order that Zbigniew Brzezinski, a doyen of American foreign policy, is proposing a Grand Strategy including how to re-balance a ""Complex East" by accommodating China's growing influence in the Pacific. This is outlined in his soon-to-be published book, “Strategic Vision: America and the Crisis of Global Power”
http://www.andrewleunginternationalconsultants.com/new/2012/04/grand-strategy-for-america-or-one-for-the-whole-world-not-least-china.html
In a nutshell, I agree with Professor Pei that one needs to be careful in wishing for a weaker China. But even as China's economy is slowing (like the rest of the world) , I don't see any evidence that China's global influence is on the wane. Quite the contrary is nearer to the truth.
Best regards,
Andrew
http://www.andrewleunginternationalconsultants.com