Southeast Asia’s Uncertain Global Outlook

Recent Features

ASEAN Beat | Diplomacy | Southeast Asia

Southeast Asia’s Uncertain Global Outlook

What would be more worrying for the region: a retreating United States, or an economically stagnant China?

Southeast Asia’s Uncertain Global Outlook
Credit: Depositphotos

When I studied history at university, a lecturer instructed us to read the diaries and memoirs and newspaper articles written a few weeks before a global disaster. How did the ordinary Frenchman regard the state of the world in June 1914? What was the average Pole thinking in August 1939? Then we were instructed to compare this to what had been written decades earlier. Some writers were predicting a war between Britain and Germany as early as the 1890s. Some who read “Mein Kampf” in its first edition could foresee the Holocaust.

The apparent lesson we were being taught was that immediacy doesn’t necessarily improve one’s prognosis. One can be confident of the persistence of peace on the night before war, and one could predict a conflict and wait decades for it to happen. Most people, in fact, are bad at predicting the future and prophecy is one of life’s less profitable professions, but it’s equally foolhardy not to consider what might come – or, rather, to think that the good times will never end.

With that in mind, consider a bleak prophecy of world politics in the coming years, one that is actually based on information we know today. America has been long overdue for an answer to the debate about its global ambitions. Does it continue what it has pursued since 1945? Does it continue to police the world (mainly the seas) in order for other countries to trade peacefully and cheaply, in return for them entering its alliances and joining its side against the Soviet Union and (to a much lesser extent now) China? In other words, does globalization continue or not?

Or does America retreat from the world, say it’s not its business to police international waters, and curl up with economic nationalism and isolationism? Does it pursue all-out Darwinian competition with every other country, including its former allies? Does it throw up its hands and declare that it really doesn’t matter to the American electorate whether parts of the South China Sea are controlled by China or by the Philippines and Vietnam so long as cheap imports keep arriving in American ports; or that it’s not even in the interests of ordinary Americans to continue sourcing from Cambodian or Vietnamese factories? Indeed, America can retreat and do just fine. It has the population, geography, and economy to survive and flourish between its two oceans. Domestic consumption is high in America and it produces enough of its own energy, helpful if global trade plummets (which it surely would without an American security guarantee).

It’s almost certain that Donald Trump will be the Republican candidate in November’s election. Nikki Haley, his only challenger, dropped out of the race last week. If it’s Trump against Joe Biden come November, the opinion polls suggest it’s 50-50, although the independent voters are a massive unknown right now. The globalization debate, while beginning among experts in the 1990s, was brought into the mainstream by Trump during his presidency. Biden has maintained some of his arguments for nationalism and populism. Indeed, it’s difficult not to look around the world and notice deglobalization, from Washington to Jakarta and Brussels. Perhaps a second Trump presidency will seek a final answer to the question. Maybe his nationalism will succeed, or maybe it will be an utter failure. Either way, we might be a step closer to an answer to this debate.

Another question is being asked: How long can China’s rise continue?  For some, Beijing is only getting started. But, according to one estimate, China’s annual economic growth will slow to around 3.5 percent by 2030 and just 1 percent by 2050. It’s likely to suffer one of the worst demographic crises of any country in known history. The United Nations’ “middle-of-the-road” forecasts contend that China’s population will decline from 1.4 billion to 1.3 billion by 2050 and below 800 million by 2100. In the U.N.’s “low variant” scenario, the population will be just 488 million by 2100. To state that again, the U.N. reckons that China’s population could fall by a third in less than 80 years. And what one has to really look at is the size of its workforce, those aged between 15 and 64. By one conservative estimate, it will decrease by 217 million between now and 2050, so by about a quarter. Yet, if the starker population forecasts are true, it will contract even more.

Beijing’s last-ditch efforts to increase childbirth aren’t working – and most likely won’t. It refuses to accept immigration because of its racist policies. And a dwindling workforce will drive even more rural folk into the cities in the coming years and decades, bringing down fertility rates even more. China could double its “dependency ratio,” the proportion of the population of non-working age (0-14 and 65-plus) compared with the proportion of working age, by 2100. The U.N.’s middle-of-the-road estimate contends the dependency ratio will be 101:1 by 2079, meaning that every 100 working people will have 1 dependent.

That will drain Beijing’s state coffers and most likely increase internal unrest since so few Chinese currently enjoy welfare protection from the state. Against this backdrop, its banking sector is decaying. Its property sector, so important for the hundreds of millions of aging people without pensions, is crumbling. China remains dependent on imports of food because it has tarmacked over its prime agricultural land for the past 30 years. A shrinking workforce means hundreds of millions more farmers will soon be pushed into the cities. And China will go through this demographic crisis while relatively poor. By one estimate, China became an “aged” society in 2022, when GDP per capita was around $12,500. When Japan became “aged” in 1993, its per capita was $35,000.

The isolation of one superpower and the economic collapse of the other may seem too doom-laden, too apocalyptic. But Southeast Asian governments pride themselves on their steely realism, not naive optimism or dreamy morality. What would be Southeast Asia’s future if, from now until 2050, America gradually retreats from the world and China’s economy gradually collapses? Which is worse? By far a retreating America. Globalization – the safe and cheap transport of goods mainly by sea, which accounts for 90 percent of world trade – doesn’t survive without an American security guarantee. (We’re already seeing that today in the Red Sea!)

To believe globalization could survive without the Americans, you’d have to think that all Asian states would accede to the most powerful country in the region (China), that China wouldn’t use its power to dominate its neighbors militarily or by threatening their ability to trade internationally, and that there wouldn’t be conflict between China and others. If you’re wrong, say goodbye to safe waters for trade and economic growth. Even if there was a limited conflict in an America-free Indo-Pacific, even the simple cost of insuring freight shipping (if you could get insurance) would rise so high that it would make low-cost goods from Southeast Asia unattractive to foreign buyers (worse, if those foreign buyers become autarkic, too). What happens to Southeast Asia’s export-driven countries if they cannot cheaply or safely get finished goods out and intermediary goods in? Collapse.

A declining China could be survivable, though, if American Order globalization doesn’t disappear. Unless China implodes all of a sudden (such as by a major financial bust that sparks major internal unrest), China’s fall will be gradual. That could give Southeast Asians time to diversify. In fact, they might gain at first. One imagines that this scenario would see far more capital flight from China, far more emigration (net emigration is expected to increase from around 200,000 people annually in 2021 to around 310,000 people annually between 2030 and 2100), and more Western decoupling from China.

However, if both scenarios occur at the same time, it’s autumn for Southeast Asia. Maybe this is all too pessimistic, but it’s useful to at least consider that the best of times might already be behind us. Like for the Frenchman in June 1914 or the Pole in August 1939, it’s important to remember that the status quo rarely endures.