China’s Time Trap and America’s Long Game

The recent meeting between China’s top official  Wang Yi and US National Security Advisor Jake Sullivan  to restart engagements and start a candid talk since the spy balloon saga reflects the realistic atmosphere facing China, where it needed the US more both in economic and hard power considerations in its regional and global manouvres.

For Washington, it remains crucial to demand open lines of communications,and to push back against Beijing’s strategy of  growing strategic silence and ambiguity over Beijing-Washington ties.

Recent actions to limit and halt direct military dialogue and lines, along with the new normal on Taiwan and other measures to consolidate Beijing’s diplomatic standing across the world from the Middle East diplomatic manoeuvre to Ukraine, all are projected to force Washington into a guessing game and to make errors in responses and judgment, which will then be used as a pretext for a potentially more combative and consolidated counter response. The US realises the sense of urgency in Taiwan and in hotspots across the region, especially in the Indo Pacific. It  wanted China to play its part and to stop it in its own game. It will have to push Beijing to have clear lines of communication and to prevent China from using this strategy to trap Washington’s options.

Xi is facing a time trap, knowing well that the path for China’s long term resilience and rivalling power rest on the agility and resilience of the combined weight and unity of the West, and not its own self capacity to  generate self-sustaining global power. Although efforts and trends have been observed in China increasingly being able and wanting to dominate the global order through the Chinese system that is independent of Washington’s role and dependence, realities on the ground and factors of sustainability of power maintenance and balanced distribution of influence, have all pointed to the inability by Beijing to achieve that.

Knowing that it cannot afford to continue this path, a simultaneous strategy of continuing to engage with the US and efforts to divide Western unity and solidify its presence and clout in the other periphery has been playing out, especially at the start of Xi’s new third term. Over the long term discourse calculations, the long game of this inevitable US-China conflict is Washington’s to lose, owing to several major parameters. Beijing will need more than growing global soft power sway and economic capital tools alone in dethroning the long held dominance by the West.

China’s rapid rise is facing an inevitable slowdown. Xi’s promise of a “great rejuvenation” is facing a great maturation. Years of expectations for China to overtake the US as the world’s biggest economy has never materialised, and pushed back repeatedly. It might very well never materialise, as the US is continuously underestimated in its resilience and economic staying power fuelled by its unrivalled fundamental pillars and stability.

With income per person less than half of America’s, China’s population will be keen to improve their living standards, but constrained by the unwillingness of the elites and Xi to embrace economic and political liberalisation, which will signal the end of their grip and consolidation of power.China is growing more dangerous as it seeks to escape this time limitation and a future stall in internal growth, Xi will need a significant legacy in this third time to solidify and justify his fourth and continuous terms.

Scholars including Hal Brands and Michael Beckley have argued on the danger of a Peak China, where Beijing’s clout and power are now reaching their peak with the beginning of the descent to relative weakness. This would however, fuel greater bellicosity from Beijing in trying to salvage its agenda and for Xi to potentially again stoke dangerous nationalism in strengthening his credentials and grip.

 While continuous misperceptions linger on China’s inevitable rise and military might, the US has been dismissed off by the Global South and increasingly a large swath of the Western world itself, engulfed by the onslaught of Beijing’s soft power sway and economic interdependence. One undeniable fact remains that Beijing’s economic power may be peaking, but no other country is so capable of challenging America globally, an argument that is closer to reality and one that is argued also by Brands and Beckley.

Xi’s consolidation of power has driven out innovation and creativity, stifling internal capacity and further driven out external confidence and willingness to increase business and investment capacity in the country.

China wants foreign investment, but on its own terms. Now, the terms are increasingly unclear, with growing drive by the country to mould the model in its own self-driven internal capacity and creation. Various external firms have now come under the target for concerns regarding Chinese national security. Western companies already operating in the country face growing pressure to limit their exposure, and the exodus of these critical firms further squeezed Beijing’s credentials.

Decades of focus on infrastructure now face slowing returns. Xi will need to cement his grip, and has shown no sign of economic or political liberalisations.

The prospects of Trump returning in 2024, also compelled Xi to make full use of the urgency at hand now to increase its hard power bargains, knowing that a new Trump policy approach will eventually close all openings for Beijing and further tighten his timeframe. This provides a new platform for China and for Xi to complete his Taiwan and Indo Pacific  dream sooner.

China’s internal economic capacity and prospects are increasingly dim. Its overinflated property bubble is always at the perpetual risk of bursting. Coupled with the youth employment crisis especially in the urban centres, underpaid and shrinking labour force that eventually shrink consumer demand, and a diminishing demographic capacity with dwindling workforce rate.

China’s obsolete economic strategy and the growing disconnect between the central Beijing core with the local government elites has also compounded the issue of China’s growing futility of its obsolete economic charting and strategy. The declining population growth and rising social discontent with tightening grip on the digital and technological atmosphere have created a perpetual climate of external fear and tanking confidence by external firms and investments.

COVID did not change the Chinese economy seismically  as perceived, it somehow just exacerbated and exposed its underlying problems, which span over the last decade at least.

The property sector remains the primary model of concern and discussion, as a reflection of the overall China growth model. The share of national income that is channelled into its famously high savings is further increased, and thereby reducing the among that goes into the consumption sphere. This also creates the climate of a restricted GDP amount that flows into households and simultaneously increases the volume that is channelled into businesses and investments through the banking system. This model and system is very much needed for the Chinese contextual socio-economic environment for the decades before this, that has been coloured by wars, both against foreign powers and a civil war that have left the country with vast vacuum of underinvestment.

The economist Albert Hirschman argued on this, where  a successful growth model will benefit certain constituencies in a disproportionate way, creating an imbalance of power among constituencies.

This in turn will make it politically difficult to jettison from the ingrained model  after it has become obsolete, forcing the state to follow an outdated economic outline and strategy. This leads to the persistent scramble to keep up with the rapid and investment led growth even after it has exhausted every easy opening for productive investment. The end result is that non-productive investments continue to be funded and debt in turn, will rise. This is the scenario that we have seen in China between 2006 and 2008, where debt continues  rising until it is  decided to make  adjustments by the debt constraints. 

The pandemic exposes the pent up indicators, where the consumption share of GDP got even worse during the COVID period, while debt rose very rapidly. Compounding the problem, the share of growth related to non-productive investments especially the property sector and infrastructure grew. In short, the COVID pandemic merely accelerated all of the systemic and structural shortcomings China already had.The Chinese growth model is one that suppresses consumption in order to channel more resources toward investment in infrastructure and capital-intensive projects.

Beijing has reached the phase where productive investment openings are limited by the trend of weakening consumer demand, and dwindling household share of income. Income redistribution from local governments to the household sector will provide sweet openings for the latter but will be painful for the former. Furthermore, a large-scale redistribution of relative income will not work without an equal depth in redistribution in political power.

The predominant rich Chinese are so primarily  because they were in the property or construction sectors, or other economic activities that have been receiving the lion share of the government spending.

High youth unemployment with nearly one-fifth of young urban workers without a job, trails its origin to the original issues of the Chinese growth model. Demand is plunging, and Beijing is unable to create more demand affiliated policies, instead responding with supply-side approaches.  The centralisation of power under Xi is seen as needed to compel such transformations, but adjustment and realistic changes on the ground have not been seen, more so since he took power.

The speed and scope of China’s rise in the past two decades has been destabilising,game-changing and  forcing structural adjustments in the global economic and geopolitical spheres. While some have argued that China will only be poised to achieve economic parity with the US over the next decade and not to replace it, other power parity calculations  continue to favour the US, where no other power comes close in being able to replace the ingrained presence and dominance it has and will continue to enjoy. The future fate of China’s rise and fall seems not to be in the hands of Beijing alone even as much as it wishes to, but seemingly falls on the fate of the unity and cohesiveness of the West in standing up collectively against China.

By Collins Chong Yew Keat, Foreign Affairs and Strategy Analyst, Universiti Malaya

Previous articleDXN’s Global Presence, Integrated Supply Chain A Boon For Financial Position: Mercury Securities
Next articleRobotic Rehabilitation Aims To Restore Mobility For Individuals With Neurological Conditions

LEAVE A REPLY

Please enter your comment!
Please enter your name here