OPINION: Is the Dragon Starting to Fall? Why China’s Rise is not as inevitable as you think
“The Empire, long divided, must unite! Long united, must divide. Thus it has ever been.” So opens the Romance of the Three Kingdoms, one of the great classics of Chinese literature. The saying refers to the tendency of the Middle Kingdom to remain united under Imperial governance for centuries before falling into chaos until a new dynasty emerges. For over seven decades, since 1949, China has been united under the stewardship of the Communist Party. For the first thirty years, China suffered from purges, famine, and repression. But, after the death of Mao Zedong, his successor Deng Xiaoping began a series of reforms designed to liberalise and open up Chinese society, ushering in an era of unprecedented progress, growth, and expansion. In recent years, under the, as I argue, incapable leadership of President Xi Jinping, many of these reforms are being rolled back. The Chinese government, once wishing to build bridges with the West and foster cooperation, is now burning them, aggravating tensions and discrediting itself in the eyes of the international community. The West views China as an existential threat. I argue that while a threat, China has already sown the seeds of its own decline, and its assault on the democratic, free world will be ephemeral.
There are three main arguments to back this somewhat unpopular claim. First, demographics, second, economics, and third, foreign policy. I argue that the one-child policy has permanently damaged China’s ability to maintain a stable working population and combined with a lack of immigration, China’s future as a superpower may be in doubt. China’s economy is built upon some of the greatest public debt found in any large nation around the world, vulnerable to interest rate hikes by the other major economies. China’s economic policies are increasingly driving away foreign investment and causing major slowdowns domestically. Finally, China’s foreign policy is uniting the neighbouring states against them and causing the West to be far more cautious and wary of Chinese encroachment.
A Demographic Crisis
In 1979, the Chinese government introduced a new policy to combat a rapidly-rising population: the one-child policy. This policy was designed to slow China’s population explosion, and it worked like a charm: China’s birth rate plummeted from 2.75 children per woman to 1.62 children per woman in 2016, when the policy was changed to a two-child policy. In 2021, the limit was lifted to three children. A clear issue had emerged: China’s population was ageing rapidly. Population growth had slowed, and by 2021 when China conducted its most recent census, the growth rate was down to a snail’s pace of 0.53 per cent. This presents numerous challenges. In other developed nations, such as Germany and Japan, who are experiencing similar issues, the workforce has begun to shrink while the costs relating to the elderly like healthcare and pensions have steadily ticked upwards. Economic growth has slowed dramatically, and many of these ageing economies are lethargic and stagnant, burdened by low tax revenues and high social spending costs.
China’s recent changes to the policy of limiting childbirth have not improved the situation. High living costs, a highly competitive and time-consuming work culture, and a lack of desire among families to have more children have resulted in a very low rate of population growth. This demographic crisis is further exacerbated by the fact that China is losing over 1.7 million people a year to emigration, according to the World Bank.
All this endangers China’s future economic prosperity and progress, especially considering China has not been able to enter the ranks of high-income economies such as those found in the West. The Chinese government has promised to improve social services to incentivize childbirth, but some academics, such as Yi Fuxian of the University of Wisconsin, a researcher of obstetrics and gynaecology and longtime critic of family-planning policies say that it is too late.
It’s the Economy, Stupid
A second problem China is facing is its mountain of debt that has funded its rapid economic expansion over the past decades. According to Reuters, China’s national public debt currently sits at over 250 per cent of GDP, a very worrying figure. Generally, the “raw” amount of debt is not as significant as the debt-to-GDP ratio, which is more indicative of the health of the economy. Examine private debt, and it looks just as concerning, with the figure worth over 210 per cent of GDP. Should interest rates rise, as the U.S. Federal Reserve, Bank of Canada, Bank of England, and other central banks have indicated they might, China could be in trouble debt-wise, burdened by payments on their loans, both at the level of households and businesses and at the level of governments. At the World Economic Forum in Davos in late 2021, President Xi Jinping pleaded with the Federal Reserve, the U.S.’s central bank, saying, “If major economies slam on the brakes or take a U-turn in their monetary policies, there would be serious negative spillovers.”
China’s economy is also slowing down, regardless of the public debt. Rising expenses and weak revenues for businesses, caused by inflation and reduced consumption, has resulted in the fall of millions of small businesses. This is a pressing concern, as China’s economy is highly dependent on the private sector for employment and economic output. The costs of starting a business in China were already quite high, and so this large-scale closure of businesses could be detrimental to the future economic health of China.
Real-estate development and construction, a major industry representing approximately 25 per cent of China’s economic output, has slowed down drastically as the burden of heavy borrowing and speculation come to bear. China’s government is effectively stuck, as attempting to break the bubble to reduce the cost of housing in China could be detrimental for the industry, while doing nothing could result in an increasingly unaffordable housing market. Many development companies, such as the real-estate giant Evergrande, have run into financial difficulties, further exacerbating the problems in the sector.
Historically speaking, when dictatorial regimes lose the ability to improve the standard of living for their citizens, the people become dissatisfied and more prone to unrest and rebellion. China runs the risk of allowing its economic slowdown to bring about damaging political and social implications. This plays a role in inhibiting China’s ability to look at a future of assured stability and peace.
A Failure of Statecraft
The third major problem facing China is the increasingly broad diplomatic coalition that is rallying against her, due primarily to a highly abrasive and aggressive foreign policy style sometimes referred to as “wolf-warrior diplomacy.”
Wolf-warrior diplomacy is a new and highly aggressive form of diplomacy, with the Chinese Foreign Ministry often making use of social media to “defend” China’s honour against Western powers. Chinese diplomats will make controversial statements, insult foreign leaders, and aggressively assert China’s moral superiority over other states. China has also been aggressively expanding in areas such as the South China Sea and encroaching on Taiwanese sovereignty, and assaulting those who call them out.
China’s new diplomatic stance is best exemplified by Zhao Lijian, the spokesperson for the Chinese Foreign Ministry. He, for example, suggested that the United States may have planted COVID-19 in Wuhan, a statement insulting to the U.S. government. He has been perceived by much of the foreign-policy establishment as spearheading the shift to the wolf-warrior style. The aggressive actions of the Chinese government have often accompanied the new rhetorical tactic, such as when Vietnam protested after a Chinese maritime surveillance vessel allegedly rammed one of their fishing boats in the South China Sea, and China stated that Vietnam’s claims were “illegal” and then promptly renamed over 80 islands and other bodies in the Sea. While not a direct violation of international law, it was a major assertion of China’s power and deeply insulting to the nations impacted.
A significant consequence of China’s new diplomatic strategy is that it has ushered further cooperation among those who stand against it. The United States, European Union, India, Canada, and the United Kingdom, among others, have stood together on the issue of the People’s Republic’s actions on the international stage, resulting in China becoming broadly diplomatically isolated and lacking in powerful allies. The Quadrilateral Security Dialogue (the “Quad”), an alliance of the United States, Japan, Australia, and India, is a good example of Chinese statecraft gone wrong. The informal coalition aims to promote security in the Indo-Pacific and combat China’s rising influence in the region, and has become increasingly significant as China has pushed these nations away, whether it be through trade conflicts with Australia, skirmishes with India, and aggressive rhetoric with America.
China is a nation that has been dealt an excellent hand. A massive population, a vast economy, and enormous potential, it could be a great power in the world for decades to come. However, through its own poor policy choices, it is throwing that all away, destroying its potential for population expansion, establishing a large, but fragile economy, and angering and driving away much of the world. It could have been great, but now, it would seem, the Empire, long united, must divide.