China's S-Shaped Threat (Page 2 of 3)

We can divide China’s challenges into the following categories: political, demographic, structural, economic, and security. However, a key point is that these problems don’t occur in isolation. Rather, they interact and have real potential to be mutually reinforcing – for example, if high local government debts eventually require central government intervention that would effectively remove funds that could otherwise have been used to address chronic diseases or be invested in education, research and development, or the Chinese military.

Political Struggles

As China’s leaders struggle to balance growth and social stability, at the national level, many will quietly welcome a shift to a slower, but still robust growth path that emphasizes quality of development as opposed to sheer quantity of GDP. For a central government with a long-term development strategy, 20 years of steady and slower economic growth may represent a more attractive path than five years of above-target annual growth followed by 15 years of diminished growth as unchecked pollution, chronic health issues, and other sustainability challenges exact a toll. Stable, medium-paced growth potentially offers a brighter future for China.

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While the Communist Party retains an absolute hold on political power, there’s a rising probability that the coming years could see a transition to a leadership that remains authoritarian in many respects, but which more explicitly bases its legitimacy on a mix of technical competence and nationalism and allows for more pluralistic expression and consideration of policy suggestions, at least within government channels. It therefore seems likely that a broader range of political movements and viewpoints will find their expression in Chinese politics over time. A more diverse political system will have arguably a greater chance of being stable, predictable, and ‘responsible’ in its policies.

Demographic Issues

Population trends are typically decades in the making and take equally long to reverse, particularly in a country like China that doesn’t have, and likely can’t accept, significant immigration to help rebuild the population. By 2030-35 in even the most optimistic estimates, China will start aging to such a degree as to hinder its economic growth and other national power trends. China’s population of young male manpower (ages 15 to 24) has already begun to decline and the proportion of older, sicker, and less educated workers is starting to rise.

While China’s technological capabilities have improved in many respects, it hasn’t yet succeeded in moving far up the added value chain. These trends threaten the core of China’s current labour-intensive growth model, which is built on manufacturing conducted by large numbers of extremely low-salaried workers.

China’s one child policy combined with the financial and social implications of rapid urbanization is creating an increasing population of ‘kinless families’ of single children of single children with little or no extended family. In Chinese cities, fertility is extraordinarily low and the countryside is greying even more rapidly. With sole responsibility for the care of four parents, couples in this position may increasingly look to the government for assistance for pension and health care programs. These will take significant effort to establish as China lacks them almost completely now, and will detract from future economic growth and defence spending.

Structural Issues

China faces growing internal challenges from regional income disparities and rising incidences of chronic health problems such as cancer and diabetes that will require very significant financial resources to address while still trying to maintain economic growth. These health challenges are exacerbated by the rapid aging of Chinese society. Water pollution, meanwhile, is also a serious problem.  In China, fresh water represents perhaps the most pressing resource shortage, since it directly impacts local and global food security. Local experts such as Zheng Chunmiao, director of Peking University’s Water Research Center, say that China needs to begin reducing water consumption or it will face dire consequences within 30 years.

All this means that pollution has likely kept China from producing at its full economic potential, yet policymakers will be loathe to make the short-term economic sacrifices necessary to avoid further environmental degradation.

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