Balancing economic growth with demographic decline, calibrating brewing social expectations, tempting anti-politics of nationalism, all with the security dilemmas remains a fundamental issue for Beijing, but also for the most of Eurasia. Former Chairman of Morgan Stanley Asia, distinguished Yale University professor and friend of MD, Stephen S. Roach gives his highly interesting account on the topic.
It has taken nearly seven years of internal debate, but China now seems set to embark on a new economic course. Its long awaited pro-consumption rebalancing is finally at hand, or at least that seems the verdict to be taken from last November’s Third Plenum of the Central Committee of China’s 18th Party Congress.
The debate over China’s growth strategy began in earnest in March 2007, when former Premier Wen Jiabao pondered the fate of an economy that looked strong on the surface, but which in his own words was beneath the surface increasingly “unbalanced, unstable, un-coordinated, and ultimately unsustainable.” These “Four Uns” underscored the realisation that China’s highly successful “Producer Model” powered by exports and fixed investment had outlived its usefulness. That left the option of a rebalancing towards more of a consumer society, a strategy that was formally endorsed in March 2011 in the 12th Five-Year Plan.
But that plan was always more of a broad framework than a detailed transformational blueprint. It was up to China’s newly installed fifth generation of leaders headed by Xi Jinping to put the plan into action. The Third Plenum provided that opportunity, and by focusing on social reforms it filled in an important missing piece of the 12th Five-Year Plan. Committing 30% of the profits of China’s state-owned enterprises to funding woefully under-funded safety-net programmes like retirement and healthcare will make Chinese families’ futures much more secure. Other reforms to the one-child family planning policies, the residential permit (hukou) system, and a likely shift to market-based deposit interest rates also featured prominently in the Third Plenum.
China now has a well-articulated strategy (the 12th Five-Year Plan) as well as a comprehensive implementation framework (Third Plenum), both of which complement each other in the transition to a new economic model. The plan established new opportunities for emerging middle class consumers – more job creation via the development of an embryonic services sector and higher wages that come with aggressive urbanisation. Together, they will provide an important impetus for higher incomes and more consumer purchasing power. The social reforms of the Third Plenum complete the circle by prompting shifts in behavioural norms that should provide incentives for Chinese families to reduce their fear-driven precautionary saving and allocate more income toward discretionary spending.
With China on the cusp of a major structural transformation, there’s enormous opportunity for its major trading partners to participate in what could well be the most spectacular consumption bonanza of the 21st century. Unlike Japan, which was modern Asia’s first growth miracle, although a relatively closed economy, there is good reason to believe that China will be much more effective at spreading the wealth. China’s imports have averaged 28% of its GDP since 2002 – triple Japan’s historical ratio – and its neighbours in Asia are specially well positioned to benefit from the coming upsurge in Chinese consumption – not just because of their proximity but also because they have long provided critical supply chain inputs to Chinese producers and assemblers.
A simple extrapolation helps convey the dimension of this coming opportunity. It is based on three key assumptions: One, that average Chinese GDP growth will tail off to about to about 7% between now and 2025. Two, that the growth rate in U.S. dollar terms will be about 1.5 percentage points faster per annum due to the steady appreciation of China’s currency, the renminbi. Three, that the consumption share of Chinese GDP increases by about 1 percentage point a year, starting in 2014, from its current rock-bottom portion of 35%. Under those conditions, Chinese consumption would increase between now and 2025 by about $10 trillion in U.S. dollar terms. If the import share of its GDP holds at the historical norm of 28%, that would translate into incremental growth of nearly $3 trillion that would be available to China’s trading partners.
The coming structural transformation of the Chinese economy will only deepen China’s now well-established role as the dominant economic engine in Asia
Export-led Asia will be first in line to benefit from this rebalancing bonanza, because China is now many Asian countries’ largest export market. It wasn’t always that way; throughout the 1990s, the United States and Europe were the largest export markets for most Asian economies other than China. Then, around the turn of the century, Asian exporters started to draw greater support from China, and that’s especially true of Japan, South Korea and Taiwan. The World Trade Organisation says their exports to China account for an average 23% of their total export earnings. For ASEAN countries like Indonesia, Malaysia, the Philippines, Thailand and Singapore, shipments to China generally rank in the top three export destinations and account for around 12% of their total exports.
So as an increasingly open Chinese economy shifts from export-led to consumer-led growth, the rest of Asia will be well positioned to capitalise on this latest shift in China’s development. The China-centric character of Asia’s export-led growth dynamic offers the region a new and potentially powerful source of economic growth at just the point in time when many are questioning the dynamism of the developing world.
The coming structural transformation of the Chinese economy will only deepen China’s now well-established role as the dominant economic engine in Asia. Data from the International Monetary Fund underscores recent dramatic shifts in China’s economic leadership position. In 2012, the Chinese share of world output was estimated at 14.7% when measured on a purchasing-power parity basis which adjusts for international disparities in pricing structures. In other words, China accounted for nearly 43% of total Asian output in 2012, up from about 36% of the Asian total in 2000. China’s export impetus was even more powerful, its one-third share of all Asian exports in 2012 was 2.3 times the 14% share in 2000.
The rebalancing from the producer model towards a consumer society will undoubtedly change the character of China’s economic leadership in Asia. It will become an economy that relies increasingly on its trading partners – not just in Asia but even in the developed economies of Europe and America – as sources for its emerging internal demand of both goods and services. That stands in contrast with the first phase of the Chinese development miracle from 1980 to 2007, where the producer model squeezed out others for market share. In that vein, the rebalancing of China’s economy should be viewed as an opportunity for its major trading partners, especially in Asia.
But the opening up of a rebalanced Chinese economy to Asian partners comes with a possible offsetting wildcard – mounting pan-regional strategic frictions between China and its neighbors. This would be, to say the least, a disconcerting development. That’s especially true of the deep-rooted animosity between China and Japan now being exacerbated by the territorial dispute over the Diaoyu/Senkaku Islands in the East China Sea. It will be especially difficult for two nationalistic leaders, Xi Jinping and Shinzo Abe, to defuse these tensions without damaging their carefully cultivated public support for the “China Dream” or the rejuvenation of Japan after two lost decades. The establishment of overlapping air defense identification zones over the disputed islands is already heightening the risk of a military accident that could then escalate.
There isn’t as much geopolitical tranquility as might be wished elsewhere on China’s borders. Tensions over maritime security lanes in the South China Sea have been mounting, leading to frictions with the Philippines, Vietnam, Malaysia, Indonesia and India. Add Washington’s “Asian pivot” to the equation, with its shift in American naval strategy back towards Asia, and there’s little mistaking China’s growing sense of geo-strategic isolation. Acutely sensitive to these risks, the Third Plenum’s establishment of a new State Security Council, rumored to be headed by Xi Jinping and apparently modelled after the U.S. National Security Council, looks set to elevate geostrategic security concerns as a major consideration for China.
This is a precarious balancing act. The pan-Asian economic opportunities that will stem from China’s pro-consumption rebalancing could go for naught if regional security tensions were to boil over. Historians have long warned of the risks of its rising power, and the record-breaking speed of China’s economic ascendancy only accentuates these risks.
Modern China’s leaders have long spoken of the “peaceful rise” of their nation, and its focus on internal stability and rising prosperity, with an absence of territorial ambitions. The rest of Asia has benefitted greatly from the economic rise of China, and is likely to realize even greater benefits from the coming consumer-led transformation of the Chinese economy. The risk that escalating geostrategic security considerations might compromise those benefits remains a worrisome wildcard for Asia and the world at large.
(First published by the Europe’s World, article re-posted per author’s permission)
BRI to Health Silk Route: How COVID-19 is Changing Global Strategic Equations?
The beginning of 2020 brought a wild card entry into global strategic equations in the form of Coronavirus Pandemic, with Wuhan being the initial epicentre in December 2019. China will continue to be accused to have done global damage by hiding crucial timely information from rest of the world to be able to respond to COVID-19. China has gone through full cycle of initially hiding it, being late in quarantining affected people, not being able to prevent community transfers causing exponential rise in affected cases in the beginning, taking harsh measures to control it after peaking, bringing down the affected cases, declaring victory over pandemic, reopening lockdowns and boosting ‘COVID-19 Economy’ over ‘Health Silk Route’. The trends in January and February suggested a sheer drop in Comprehensive National Power (CNP) of China with combined effect of US-China trade war, failing BRI and COVID-19. The last week of March 2020 saw the epicenters of COVID-19 shifting westwards with US, Europe and UK emerging to be worst affected, entering stage three of the pandemic cycle and China posing itself to be helping the world to combat the pandemic, trending a comparative steep rise in its CNP, by pushing down everyone else. Rest of the world continues to be engaged in protecting its citizens in their critical phase of their pandemic cycle, rightly looking at saving its citizens with every possible means as first priority, even if it amounts to taking Chinese help, leaving out the blame game for later occasion.
What does Global shift in Epicenters of COVID-19 Indicate?
By March 30, 2020, 22:07 GMT, the coronavirus COVID-19 has affected200 countries and territories around the world and two international conveyances. The worldometer indicates over 7.8 lakh cases of coronavirus with over 37,000 deaths and over 1.6 lakh recoveries. The WHO puts the death rate continues to be low but the biggest danger being faced by the mankind is its exponential rise due to community transfers. USA has emerged to be the largest epicenter of COVID-19 having more than 19 percent of global confirmed cases with nearing three thousand deaths, earmarking $2.2trillion allocation for combating the pandemic. Europe led by Italy (with over one lakh cases and 11,500 deaths overtaking China in number of cases) closely followed by Spain, Germany, France, Iran and UK. The biggest jolt suffered is the number of deaths on March 30, 2020 counting 913, 812, 418, 385, 247 in Spain, Italy, France US and UK respectively. All these are cases of taking the pandemic lightly initially resulting into quick entry into third stage of community transfer. Now most countries in the world are struggling for capacity building to take the challenge of peak period, which is yet to come. This lock down/quarantining patients/suspects has brought global economic/commercial productivity to almost a grinding halt.
China was quick to declare that it has conquered the disease with reporting 75,700 recovered cases, only31 fresh cases, four fresh deaths and only 2466 active cases.(March 30, 2020, 22:07 GMT)as reported by the National Health Commission (NHC) of China. Considering Chinese credibility, these figures cannot be taken at its face value, because some media reports of sudden silencing of much more mobiles connections, restrictions on reporting COVID-19 cases do create a doubt as to what exactly is happening in China. The community lock downs, and stringent measures of social distancing helped China in flattening the trend. If we add the unreported cases the potential of second cycle of pandemic in China cannot be ruled out. Chinese effort of shifting soft power balance is also evident from alleged effective use of its influence and media to propagate conspiracy theory against US and later trying to shift the blame to Italy using paid media, think tanks and institutions. The world however will continue to accuse China for this pandemic, with many legal notices already filed against it globally.
China cannot deny that by its own admission, the coronavirus broke out in China late last year whereas Wuhan was locked down on January 23.The US efforts to evacuate its people at that point of time were seen as ‘triggering panic reaction’ by Beijing, which had already over-delayed global response by then. China tried to shift the narrative to the belligerent superpower wrangling between Beijing and Washington great power competition, viewing each other through a lens of conspiracy theories, hostility, trading stinging barbs on everything from the origin of the virus, permitting medical experts to visit Wuhan to who should be blamed for the pandemic. China and US were already at lowest trust level over issues, such as the trade war, South China Sea, Taiwan, Xinjiang, Hong Kong and Chinese telecoms giant Huawei, hence the same narrative was used by China to confuse the world and shift global anger away from it. With evidences destroyed, denying access to global bodies, the script of global pandemic was already written. China has a reason to be keen to repair its damaged global reputation caused due to mishandling of the crisis in the initial stage, with exploding infections around the world in last two months, possible loss of face, ensuing disrespect of other countries; hence it behaved so assertively in the diplomatic repairs including ‘Mask Diplomacy’. The slow reaction and reluctance to lock down by US might show that the US-China competition is moving China’s way, but the Chinese follies of making the world suffer by their late reporting may not put Xi Jinping in comfortable position either, although it’s too early to predict.
Trade War to Mask diplomacy and Health Silk Route
The CNP of a country is a combination of hard and soft power and includes sum of economic, military, technological, human resource, diplomatic and other levers of power. China claiming to have successfully encountered COVID-19, has kickstarted its industry after being the cause of paralysis of industrial power of everyone else, with focus on largest emerging demand of medical equipment related to combating COVID-19. After IMF Chief’s revelation that the global economy has entered recession, which could possibly be worst of its kind, China got a new lifeline to its economic revival with a competitive advantage in comparison to others.Chinese economy seems to be benefitting from others peril, with factories commencing work at 66 percent efficiency including foreign companies like Apple, domestic flights commencing in most areas, life limping back to normal and upsurge in demand with more people in markets. China after exporting the pandemic globally, is now making best of COVID19 economic model by switching from failing BRI to COVID19 related production. It is also disposing COVID related equipment surplus to mute expected accusations of risking humanity.China has thus tried to benefit itself not only in comparative economic terms, but also shift the equation in soft power, by projecting itself as better resource provider in this crisis.China is also trying to economically benefit from the monopolistic opportunity from the crisis by focusing its manufacturing base on production of testing kits, personal protection kits, ventilators and other crucial medical equipment. China, therefore leads the global supply chain with other major manufacturers paralyzed due to the pandemic, although like BRI, its reliability is suspected, due to the fact that five countries have reported supply of defective equipment.
Why is the World Silent?
The fact that Coronavirus was detected, and it spread exponentially in Wuhan, China may find difficult to prevent the accusations from the world, angered by sufferings caused due to pandemic. It is however understandable that not many have started blaming China, due to their domestic compulsion and priorities to check the exponential rise in COVID-19 cases, instead of involving in blame game for the time being. Most countries are also expecting Chinese assistance in their fight against the pandemic, as China is seen to have controlled the same, having gone through the peak of infection and successfully controlled it. Most countries also hope that a suspected creator of the virus is in best position to find antidote and help in combating it. Countries also do not want to disturb the supply chain of medical equipment from China at this juncture. The outcome of G20 virtual Summit was also on the same lines, wherein the G20 leaders issued a statement at the end of the summit calling for a coordinated global response to fight the coronavirus pandemic and adopting measures to protect the global economy, minimize disruptions in trade and take steps to enhance global coordination. The G20 leaders pledged to inject $5 trillion into the global economy to reduce the economic impact of the coronavirus pandemic. I do feel that this issue of holding China accountable will not be dead, but re-appear sometime in future. There are already few lawsuits already filed against China for the same and some more may be in the offing.
On a practical note, it is understandable that the world cannot fight this pandemic without global cooperation, which includes China. It owes responsibility to act first and help others with capacity to fight the Coronavirus, after letting the genie out of bottle, more so when the US has to focus inwards due to looming domestic crisis of COVID-19. It’s also in China’s interests to act to repair and restore its global image. Curbing media will not suppress global criticism. If technologically advanced countries canutilize their capacities, especially on joint research and development of vaccine, and strengthening the global value chain of supplies of medical equipment, it will help the humanity.
Credibility of UN Organizations?
The pandemic has also exposed the Chinese influence in global bodies claiming to be neutral and serving for humanity. WHO knew about the outbreak of coronavirus in January 2020 and declared it as pandemic only on March11,2020, losing precious time for the world to respond, presumably under pressure from China? In an interview on the question of helping Taiwan, the WHO officer fumbled and did not reply, under pressure of ‘One China Policy’. How can WHO claim to serve humanity leaving out Taiwanese population? In recent G20 virtual Summit chaired by Saudi Arabia, the group has been too generous to WHO in agreeing to extend support to strengthen its mandate in the fight against pandemic including delivery of diagnostic tools, treatments, medical supplies and vaccines, because their services are urgently needed at this juncture, but it needs to be held accountable once the crisis is over.
United Nation Security Council (UNSC) has not found it relevant to discuss about it and even have virtual consultation on this pandemic, because China is a P5 country, chairs UNSC for March 2020 and the monthly Chair decides the agenda. It never felt the need to investigate when Wuhan was under lock down and writings of the potential pandemic were on the wall even earlier. UNSC certainly requires restructuring because in the current system China or any P5 country in its place, with its veto power can get away easily, even after putting humanity to risk. The suspicion over COVID-19 being a product of Chinese biological weapon research in Wuhan, could have been settled if China would have allowed investigation by world bodies.It is too late to put the trust back now, after accusations of China having destroyed the evidences and continuing to change the narrative besides other diversionary tactics.
Will it lead to Changed World Order?
Thinking positively, even if the world is able to fight this pandemic successfully, the global strategic equation will never remain the same. Coronavirus pandemic has exposed weaknesses of China, US and world organizations to the humanity. While China can be accused of lack of transparency in handling the COVID-19 initially, the US can be accused of taking it lightly and reacting late enough, not to be able to help countries, which do not have requisite capacities to fight it. The idea of putting national interest over survival of humanity, and appearing to be inward looking, will lower the confidence of world community in US as well as China. The western countries led by US have been used to fighting the strategic competition by controlling trade and financial system as well as power of alliance, but unpredictable events like this pandemic, climate change, elements of non-contact warfare can change the entire equation. US may also realize that it was a mistake to propagate China as global manufacturing hub, and it now faces a grave challenge from this manufacturing giant with key digital technologies. China can also not be on a comfortable ground, because the autocratic model cannot work for eternity, as the magnitude of external and internal dissent/public anger cannot be estimated now. While China may feel to be recovering and compliment itself to have fought it better than democratic countries, but the success of South Korea, Taiwan, Japan, Singapore and Hong Kong nullifies that claim. It also remains to be seen in future that China has pushed many countries against itself or otherwise. The world will also realize its mistake of putting all eggs in Chinese basket and hopefully a reverse flow may occur post pandemic. The credibility of UN is at stake, which is increasingly been seen as political tool of P5. In my opinion unless it undergoes a drastic reformation, especially the UNSC, there will be many countries ignoring its relevance and resolutions. With a threat of second cycle of COVID-19, no one can be sure that who is better placed in the future strategic equation.
What is the role of India?
India has the second largest population in the world next to China, which claims to have got over its peak period of pandemic. Indian efforts have been appreciated so far. WHO and the global community feels that densely populated countries like India will determine “the future of this pandemic”?The latest epicenters are US and Europe, yet the world is anxious about Indian fight against COVID-19, because of extremely high population density, possible administrative difficulties in tackling the pandemic and logistics attached with the lockdown. India, as a developing country, besides combating pandemic, faces a bigger challenge feeding, administering, managing migrating population, implementing social distancing and healthcare for a large number of people including unorganized sector workers, in view of its limited infrastructure. While there is no need to panic with over 1250 cases identified and 32 deaths so far, but its capacity to isolate communities is the biggest challenge in the world, which cannot be combatted without public participation. The low figures of reported cases so far, are subject to testing rate and India is yet to improve its recovery cases which are relatively low (Below 10% against global average of 20%). The death rate is low so far, but the main challenge lies ahead, as the curve has not flattened as yet. India needs to ensure not to enter into community spread (next stage) of COVID19outbreak.Indians need to follow all instructions from the Government and health specialists to ensure that it remains low. Although a lot is being done by the government and other agencies, the public and private sectors have to jointly boost its handling capacity in the golden period of two weeks, otherwise speed of infection will overtake speed of capacity building of the country to handle it. Each person has to play his/her role, as COVID-19 cannot be combated without people’s participation.
China is doing. Are you?
It is certain now that the COVID-19 pandemic has winded the whole globe. What started from just one city, has now shadowed the whole world. As the words penned down the cases increase in the world. However, there is a country whose defiance against the Covid-19 pandemic has been successful.
Despite the fact that the virus’s epicenter was Wuhan, China still managed to control it while the rest of the world still crippling to get hold of the loosen cords of the Covid-19.Thoughthe rest of the world is still in a quarrel with the pandemic, life in China is cautiously returning to normalcy. Even in Wuhan, the city worst hit by the pandemic, infection-free zones are feeling the resurgence of life. All of this has not been achieved overnight for this whole of the country faced excruciating measures including a major blow to its economy. Whole country unified against the pandemic. Purchasing managers index (PMI) which measures the economic activity based on orders company place to suppliers in a country. For the Chinese industry, the index reported 35.7 for the month of February which is the lowest since the index was created. To clarify further, the figures below 50 imply a recession.
China is not only combating Covid-19at home but abroad as well in the form of sending aid even though it has faced a fall in its economy. Italy, Iran, Serbia, Pakistan and many more are on the list that is getting direct assistance from Beijing.
While China is playing a responsible global role in the fight against this pandemic, Washington seems to be gambling with the lives of people of its own. Lately, Washington post revealed that intel reports from January and February clearly warned about the pandemic. While deaths in the US are nearing to 500, Trump administration seems to be engaged in playing its political cards on the deck of the corona. Blaming China and tightening the sanctions seems to the top priority rather than engaging resources on fighting the pandemic. Recently CNN reported that Trump rolled out 33 false claims in the first two weeks of the month of March regarding the corona crisis. It reported that overall trump made 71 false claims in past two weeks. Out of these 71, 33 were related to coronavirus. This clearly shows the gravity regarding the situation of the pandemic, in the Oval.
World is face to face with global non-traditional threat while Donald Trump seems to be solidifying his election campaign as cost of blaming China. Trump calling Covid-19 as China’s virus seems to be true because what the evolving scenario depicts seems that Washington has withdrawn from its global role and China is the only one concerned globally with this pandemic. Despite taking global initiatives for cure, Oval seems to be doing parochial politics over the global pandemic which clearly shows how ignorant is the Trump administration towards the global health crisis. Furthermore, Trump even tried to buy exclusive rights from a medical company in Germany on the antidote of Covid-19 in order to capitalize on the remedy. By tightening sanctions on Tehran and not letting It to do the due course to save lives what oval seems to be doing is bringing more agony to global misery.
As the xenophobic and racist attitude of Washington continues globe is being driven into more dark realms. Furthermore, Oval’s mouthpieces at Fox News and other media outlets have adopted the same manner as their masters are doing and repeatedly have claimed that China should apologize. On the other hand, the world is all praise for China, including the President of European Commission Ursula von der Leyen, on how has China fought the novel virus and has successfully reduced the number of new cases of the disease to zero.
It is high time to appreciate China by putting political difference aside and learn from their experiences as they are the one with most experienced and have successfully battled. Whatever has caused this pandemic China has been successful in curtailing it and countries which are finding themselves paralyzed by this disease shall use assistance from China to overcome this global malady.
The Thucydides’ Trap: the Avoidable Destiny Between the US and China
The controversial “Thucydides trap” argument has sparked a heated debate since 2013, when President Xi Jinping of China told a cluster of western guests: “We must all work together to avoid Thucydides’ trap.” Later, this concept was elucidated by Professor Graham Allison in his articles, talks and famous book Destined for War: Can America and China Escape Thucydides’ Trap. So, what exactly is this Thucydides ’trap?
The phrase originates from the ancient Greek historian Thucydides who had observed that the Peloponnesian war (431BC-404BC) was caused by the growth of Athens, the rising power, and the corresponding fear of Sparta, the ruling power. Currently, this historical scenario is applied to discuss the relations between China, the emerging power, and the United States (US), the established power. The rise of China and the relative decline of the US allude that a gradual power imbalance may repeat history and lead to war. In fact, 12 of the 16 historical power shifts have resulted in catastrophe. More importantly, this narrative, to some extent, suggests the current dominant power is taking preemptive measures against the rising one. In reality, the US-initiated Sino-American trade war reflects this precautionary attitude.
The world may argue that although China has become more assertive than before, this war is the consequence of President Donald Trump’s radical foreign policy. Consequently, Trump started this war even though it may harm the Sino-American economic ties, leading to a negative economic impact on both sides. As a matter of fact, the Sinophobic turn in Washington is essentially a bipartisan consensus that realistically considers the economic facts thanks to strategic thinking. Based on the research of Alyssa Leng and Roland Rajah, the US had been at the helm of world trade until 2000, trading with over 80% of countries worldwide. However, in 2018, this number has plummeted to just 30%, as China has replaced the position of the US in 128 of 190 countries. Thus, “this bipartisan shift may have coincided with Trump’s arrival but the very fact that it is bipartisan demonstrates that it was not Trump who created it. Like a rooster at dawn, his crowing simply called forth the inevitably rising sun”. This situation raises the following questions: which side suffers the least? If the US achieves its goal of putting down China, who will win? According to Bruno Macaes, “in the end, the question of whether a new world order will be born, or the status quo preserved is less important than the question of whether the outcome will be determined peacefully or whether China and America are destined for war”.
This does look like the inevitable Thucydides’ trap, but where is the solution? It is conceivable that the trade war is just a sign that might follow more fierce disputes militarily. As historical determinists, Professor Graham Allison and Professor Jonathan Holslag both believe that the strategic transformation of structural forces between China and the US are doomed to conflict that has already emerged and will transpire more dramatically, ineluctably reshaping the global geopolitical landscape. Currently, China is not strong enough to compete with the US in general and “the balance of power could continue to be in America’s favor for quite a long time into the future.” It is then justifiable for the US to want to suppress China’s growth right now. However, I argue that the reality is far more complex than the aforementioned circumstance and there indeed exists some way to avoid this “inevitable” trap.
First, diplomacy and leadership in the US and China play pivotal roles in avoiding this dilemma. Former Australian Prime Minister Kevin Rudd argues that political leaders and elites are not “simply some kind of puppet of anonymous structural forces”, but can change the historical tendency, to some extent. He proposes “constructive realism” as a solution by saying, “agency—what leaders decide, and those elites who advise them shape— actually determines the future course of history”. By suggesting that based on reality, the leaders of both sides should differentiate between the non-negotiable and negotiable national interests, thus managing the Sino-American strategic competition. In this context, the China-represented authoritarian capitalism versus the US-led liberal capitalism, is able to compete without one devastating the other and finally let the winner prevail.
Similarly, Chinese prominent scholar Jin Canrong suggests that when drawing on the wisdom of the Chinese and American leaders and diplomats, the two countries should neither have a “Hot War” nor a “Cold War”. The first may result in total planetary destruction with the example of the two World Wars during which great losses were suffered due to militaristic action worldwide. The later might bring about a deconstruction of the entire international trade system. Because of today’s economic globalization, a “Cold War” would devastate our internationally integrated economy, specifically, the existing Sino-American interdependent economic connections.
Nevertheless, Professor Jin proposes that the two sides should have a “Chess War”, as a metaphor of playing chess, which denotes that the two sides should be more transparent, reveal their strategic capabilities and intentions and reasonably bargain with each other. This is analogous to Rudd’s approach of distinguishing clearly between the non-negotiable and negotiable national interests of both parties. Furthermore, Jin argues that when China develops to a certain level, it will comprehensively compete with the US in all aspects. The US, as a commercial and pragmatism-centered empire, will compromise and accept China’s position, thus forming the global bi-core leadership and co-governing the world. He argues that the new global system is akin to the Concert of Europe/Age of Metternich, the balance of European powers between the Napoleonic War and World War One. The notion is to forgive France, the war initiator, and invite it to be part of European leadership, maintaining peace in Europe for a whole century.
The second plausible approach to this dilemma can be taken from the angle of a third party. Facing the increasingly Sino-American tension and the potential outbreak of a proxy war, Professor T. V. Paul advocates for “Soft Balancing”, meaning small-scale countries relying on “international institutions, limited ententes” to unite and enhance their strength. Uniting smaller countries thwarts the threatening behavior of the rising or ruling powers through economic instruments or moral and legal condemnation, thereby avoiding the Thucydides’ Trap. By comparison, the military capabilities or “Hard Balancing” of a country, remain important, but are clearly not as cost-effective as the institutionally driven “soft” method. Taking the ASEAN states’ soft balancing strategy toward China as an example, in addition to aligning with the American navy as hard balancing tactics, the ASEAN has involved diverse institutional engagements such as the ASEAN Regional Forum, the ASEAN Plus Three (China, Japan, and South Korea), the Chiang Mai Initiative and Regional Comprehensive Economic Partnership. These measures not only benefit the ASEAN countries from the economic rise of China, but simultaneously limit China’s territorial claim in the South China Sea by the united voice of ASEAN. To some extent, this strategy alleviates the Sino-American hostility and competition for leadership in this area, allowing the countries involved to have a fighting chance in the race for power.
To summarize, both approaches are aimed at constructing the scarce asset through frequent diplomatic communication: trust. In the anarchical international system, due to the fact there is no central authority to enforce laws, international actors, in the course of interactions, are always suspicious of each other’s real intentions. Indeed, human beings are distrustful and forgetful, repeating 12 identical mistakes throughout history. As the Western philosopher George Santayana said, “those who cannot remember the past are condemned to repeat it.” Similarly, the Chinese poet Du Mu wrote about how a destroyed dynasty vanished before it could reflect on its mistakes. Du details that the later generations of the dynasty felt the impact of this failure, yet did not learn from the past, continuing the cycle of collapse. While Graham Allison believes that the US and China may be destined to a violent collision, his relevant Ted Talk leads one to believe that the last two power shifts of the world were peaceful. Between the US and Soviet Union power shift from the 1940s to the 1980s, and the UK, France and Germany power shift from the 1990s until now, demonstrated how we are able to break the cycle of destruction. Especially, the European power shift proved the importance of diplomatic leadership. Hopefully, as time progresses, mankind may learn to draw lessons from a series of historical tragedies. When the political leaders of the world face irreconcilable conflicts of interest, they will look into the dark and bottomless chasm in front of them and say, “that is indeed a very deep hole which we should not fall into.”
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