On China and the Pacific Century

China has the second largest economy after the US, and is expected to be the largest economy in a few years.

Meanwhile:

As the 4 Asian Tigers grew, and as China emerged onto the global stage as a global economic player, soothsayers and prophets predicted the inevitable "Asian Century".

Subsequently, this gave way to the "Rise of China".

Deng Xiaoping didn't believe in the Asian Century. He didn't believe it would ever be.

Deng is quoted to have said, 

"Observe calmly; secure our position; cope with affairs calmly; hide our capacities and bide our time; be good at maintaining a low profile; and never claim leadership."

How did China get to this point in history?

The 2008 Financial Crisis disrupted the western (democratic) economies, and exposed their weakness. China stepped up and stepped in. 

Then the 2020 Covid-19 Pandemic and US's initial incompetence in dealing with the pandemic, gave China the space to establish it's leadership. The Trump Presidency also allowed China to lead in other areas (like Climate Change & Green Technology).

However, after China had some success, it wanted recognition. No, it CRAVED recognition. Or the need for recognition was too insistent to be ignored. Or perhaps Xi Jinping wanted China to be seen as great, and himself to be seen as a great leader. Or that he earns his place in history for restoring the greatness of China.

As China became more successful, it became harder for them to restraint themselves, to rein in their pride, to maintain a low profile, or to bide their time, or to be calm, or to keep a low profile. Their pride rode on the wave of their achievements. And they needed, no, craved recognition. 

Maybe.

But it is also insecurity.

China is growing, but that growth may be slowing. Most of the growth over the last few decades are on the back of cheap labour. They have passed that, or are passing that. They cannot continue to grow with cheap labour. They are being overtaken, or rather, they are pricing themselves out of the cheap market, and are being replaced by countries like Vietnam, Laos, and Bangladesh.

They need to move up the value chain. So they have been trying to gain capability in and dominate the chip industry. They have spent billions trying to become a leader in chip manufacture. They have not succeeded. Yet. Maybe they need to invest more. Or maybe it's not about more money. That remains to be seen.

Their cities have grown large, and their rural population have moved into cities. But right now those cities are flooding. Because they can copy what they can see (skyscrapers and city buildings), but they do not know what they need to build (drainage system) to support their cities.

Their population is ageing. Even if they can continue to grow at the pace they need to grow for another 10, 20 years, it is likely that China will grow old before it grows rich.

By 2050, China is forecast to reach an old and young age dependency ratio of 70 per cent.
That will leave just 30 per cent of a population of more than 1.4 billion carrying the tax bill for an economy that will become the world’s largest by the end of the decade.
The International Monetary Fund believes China will have to increase public spending on pensions by an amount equivalent to over 100 per cent of GDP in aggregate over the next 30 years based on current plans.

So there may be unhappiness, and unrest. 

And so insecurity for the CCP.

What to do?

Do a Galtieri.

When there are internal problems, and internal unrest, find an external threat or external problem you can rally the people around. If there are no external threats, make one up.

The CCP doesn't have to try so hard. There's always Taiwan. Or Tibet. And now there's Hong Kong. And the Uighurs in XinJiang. And for a greater challenge, there's the nine-dashed lines in the South China Sea, and if that's not enough of a challenge, there's also India.

So I expect, when China's growth starts to flounder, when natural (and unnatural) disasters strike too frequently, when the middle-class dreams begin to pull away from the reach of the people, when the Chinese people start to question the legitimacy of the CCP, the CCP will shake up one of the external threats so the people can focus on that instead.

So they turned from soft power to "wolf warrior diplomacy". 

"Over the past two years, China has clashed with countries such as the US and Australia over trade, media reports and the expulsion of diplomats and academics, as well as over the origins of Covid-19 and human rights issues in Hong Kong and Xinjiang. The aggressiveness displayed by Chinese diplomats in their rejoinders to criticisms has been coined wolf warrior diplomacy. The clash between Politburo member Yang Jiechi and US Secretary of State Antony Blinken in March this year only served to reinforce this image of China. "

And now it pays lip service to changing it back.

But it is just manipulation (see video "Why China sucks at soft power" below).

The audience for their "Wolf Warrior" antics are the Chinese citizens. Just read the comments in any social media with news. The leaders may say something reasonable and moderate, but the comments online are aggressive, intolerant, and extreme. The "take-no-prisoners" tone is at odds with the tact and diplomacy generally shown by leaders.

Except Trump. 

And his dog whistles that rouse up his base. 

And China takes a page from him. China has learned that if you need popular support, you just need to tap into the visceral emotions of the "patriot" and stir nationalistic fervour.

And that easily passes for popular support.

And this tells us one thing: China is not going to lead the world.

That statement could be True, or it could be Wrong.

And it could be True or Wrong for different reasons.

Let's take the OBJECTIVE approach and define "lead the world" in terms of "largest economy as measured by GDP". The above video suggests that in adjusted GDP (adjusted for China's cost of living), China has already surpassed the US.

But, a simple perspective is that China took 1.3 billion people to exceed the efforts of 330 million people. 

That's not very impressive.

Let's see the next video.

Polymatter's "China's Reckoning" Video Series

1) Demography

China has grown economically. And her growth has been unprecedented, and inexorable, irrepressible, and has brought her to the brink of economic leadership of the world (if one defines "economic leadership" as having the largest economy.

And China may well become the largest economy in the world by 2028.

BUT, China has more than 4 times the population of the US, so even then, average Chinese will only have 1/4 the income of the average American (US citizen). 

And the demographic "bomb" will then go off, leaving China old, but not yet rich.

By 2030, China would probably reach the peak of her population, and then decline in total population, as well as in "productive population" (defined as those between the ages of 15 and 65).

But, objectively, China is Number 1 (economically, at least). 

2) Housing

But if a significant part of GDP growth is due to excessive investment in housing and development projects, then the GDP figures may have been manipulated.

Housing development, and the erection of "ghost cities" may be an indication of this. Or it could be (as some China apologists claim) just China planning very far ahead.

But it is also objectively true that all these housing and development projects have the effect of goosing the GDP. 

If a country could make widgets and get everyone (citizens/residents) to keep buying widgets, the the widget industry will keep growing, widget factory workers will be employed and widget production will contribute to the country's GDP consistently, regardless of the economic situation elsewhere.

But the CCP government probably suspects the housing market is "irrationally exuberant" (bubble), and overly (unhealthily) reliant on debt to grow. So they have instituted measures to try to correct the situation. 

In typical heavy-handed, clumsy centralised government manner. (See below.)

3) Water

Water is an essential need. We do not generally consider China to be water stressed. But that's because we don't know the details.

China is wet south of the Yangtze river, but North of the river it is dry.

And then in summer, there are floods.

With climate change, more extreme floods, earlier floods, and floods of longer duration due to heavier rains and storms will be more frequent. 

But in a way, it will be good. I watched a lot of the videos of floods, storms, and recently, hail, and all these disasters have one thing in common - the toll on automobiles. This means new cars will be needed, which means more car sales, which means more GDP!

But if China were serious about dealing with floods and storms, they will need to work on the drainage infrastructure in their cities.

4) National Insecurity

This fourth part documents China's "Graduation" when she hosted the 2008 Olympics. From that high point of China's soft power and influence, almost 30 years from 1989's Tiananmen, China began the long descent into "Wolf Warrior" diplomacy and how to lose friends and antagonise potential allies.

Their efforts were "cartoonish". Their diplomats hurled insults at other world leaders generally conducted themselves with unprofessional aggression that was calculated to provoke animosity. No professional diplomat would think that was good diplomacy.

But the audience was not the foreigners. 

The audience were the local citizenry. 

The signs are that the CCP/China's political leadership is panicking. Or at least responding irrationally, or instinctively, or just flailing about destructively.

Over the last 12 - 20 months, they have had to deal with a pandemic. They seemed to have succeeded initially - if their reported figures can be believed. They have cracked down on tech giants, the test sector even as the US has initiated trade barriers or restrictions on Chinese tech companies. The CCP has also denounced "celebrity culture", "effeminate male stars", "unpatriotic Chinese" (loosely defined as Chinese with foreign citizenship), billionaires and wealthy Chinese while the CCP pays lip service to "common prosperity" (where prosperity is shared with the masses instead of simply benefiting a few wealthy Chinese. And they have also cracked down on private tuition. One explanation was that private tuition might be offering students a glimpse of life in a free society.

Then the CCP (or Xi Jinping) decided to try to tighten regulations on the property development industry.  Perhaps, their intent was to correct the "bubble". What they managed to so was to cause Evergrande and Fantasia (and Sinic, and who knows what other companies next) to default on their loans. The real estate or property industry accounts for a significant proportion of China's GDP (one conservative estimate is 15%). A cascade of failures or loan defaults could bring the industry crashing down. And this would impact China's overall economic performance, and may well have knock-on effects on the rest of the economy.

[The simplistic explanation goes something like this: Property is a form of wealth. If you feel rich, you will be more likely to spend more freely. Financial security allows you that freedom. However if the property market falters and prices drop, your property will be worth less, and you will feel less rich, if not poorer. So you will be less likely to spend freely. And this causes the economy to slow down.]

It would seem, to a cynic like me, that China is trying to drum up an "external threat". It's "wolf warrior" diplomacy is not going to win it any friends. It has many self-made problems.

In addition, since 2016 (or thereabouts), China has been trying to punish Australia by boycotting Australian coal, and other Australian goods. However, in the last month or so (Sept 2021), China's many provinces have been experiencing power shortages, as their coal-fired power plants have ran out of fuel, or fuel has been more expensive, and power companies lose money by generating power. 

This in turn curtails China's factories and manufacturing, even as chip shortages limit their production of electronic goods, including electric vehicles, and the global shipping industry is experiencing "clogging" in the system that may not resolve itself until March next year (2022).

And then there are the floods.

Now, some of these problems may be temporary. Or seasonal. Or beyond the control of the CCP. 

But many are created by the CCP out of pride, ignorance, or miscalculation.

Or maybe the leaders are just trying to drum up an external enemy. So they can do a Galtieri.

Certainly, they are testing Taiwan with more provocative and intrusive flights.

They do not have the capacity to invade Taiwan, but if Taiwan gives them an pretext to start a shooting war...

In the meantime, there is AUKUS. But that is a longer term issue. While the deal is to sell subs to Australia, Australian subs are not going to prowl the South China Seas tomorrow, or in the near future.

The US is the superpower to best, and they will be the bogeyman for China. But China is not quite ready to take on that Superpower.

And Japan has shown that they may respond more actively (i.e. militarily) to China's aggression.

But all that aside. 

Assuming that China's intent is for a "peaceful rise".

Their "wolf warrior" diplomacy raises doubts about "peaceful".

And all their other problems - population demographics, economy, infrastructural issues, and social issues puts their "rise" in doubt.

China is growing old before they have grown rich. 

And they are unlikely to grow rich and overtake the US within this century.