Thu, Oct 20, 2011 page8

• China: the inevitable superpower?

  • By Sushil Seth
  • • 
    • 
    • 

  There is much talk that China will emerge in a decade or two as the next superpower. Indeed, Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics, has predicted that China is the inevitable superpower. In an article in a recent issue of Foreign Affairs magazine, titled “The Inevitable Superpower” and extracted from his forthcoming book, he says that China’s dominance is a given.

  “The upshot of my analysis,” Subramanian writes, “is that by 2030, relative US decline will have yielded not a multipolar world but a near-unipolar one dominated by China. China will account for close to 20 percent of the global GDP (measured half in dollars and half in terms of real purchasing power), compared with just under 15 percent of the United States.”

  “At that point, China’s per capita GDP will be about US$33,000, or about half of US GDP. In other words, China will not be dirt poor, as is commonly believed. Moreover, it will generate 15 percent of world trade — twice as much as will the United States,” he adds.

  Therefore, “by 2030, China will be dominant whether one thinks GDP is more important than trade or the other way around; it will be ahead on both counts,” he writes.

  Case closed, as far as Subramanian is concerned.

  It is a pretty confident argument, with the author willing to stand by his thesis like a proven mathematical formulation. Indeed, the subtitle of his article is: “Why China’s dominance is a sure thing.”

  He also asks whether the US will reverse this trend. His answer is, not likely.

  “Its [the US’] economic future inspires angst: The country has a fiscal problem, a growth problem, and, perhaps most intractable of all, a middle-class problem ... High public and private debt and long-term unemployment will depress long-term growth,” he writes.

  “The middle class is feeling beleaguered: It does not want to have to move down the skill ladder, but its upward prospects are increasingly limited by competition from China and India,” he adds.

  Subramanian even conjures up a horrible future scenario in which China might be able to hold the US to ransom “by selling some of its currency reserves (by then likely to amount to US$4 trillion),” requiring the US to withdraw its naval presence from the Pacific Ocean as a condition of financial bailout, similar to the situations faced today by Greece and other vulnerable European countries.

  In other words, China could use its economic dominance as a political tool to change the global strategic balance in its favor.

  Against the backdrop of his racy predictions about China’s “sure” rise to the top, he does concede, in passing though, that “China can radically mess up, for example, if it allows asset bubbles to build or if it fails to stave off political upheaval.”

  Undoubtedly, the US has serious economic problems of debt and sluggish growth, but to project that China will have a virtually smooth run to becoming the world’s new superpower is a gross simplification.

  Subramanian’s thesis is too neat and predictive for a subject that does not lend itself to simple formulations. Generally speaking, economic forecasts are qualified to indicate that a certain outcome is likely if other factors remain equal.

  Even though the author believes that China might still “mess up,” his comment is a throwaway line and is not supported by any serious discussion of other variables. However, it is exactly these variables that will eventually determine China’s path.

  For instance, China’s rise is subject to two important qualifications. First is social and political stability, which does not seem entirely likely considering the growing popular unrest in different parts of the country.

  Indeed, the government has been so nervous about the ripple effect of the Arab Spring that it went on a hurried round up of political dissidents and human rights activists, as well as further tightening Internet censorship, to preempt any spontaneous uprising.

  It does not say much about China’s capacity to manage political transition and change that is overdue. Beijing cannot pretend that the country will keep growing economically in the medium term without a corresponding political change toward greater political openness and popular participation.

  At present, there is a serious disconnect between China’s partially capitalist economy and authoritarian and Leninist polity. Recent history shows that after a point, political authoritarianism becomes counter-productive and destructive if there is no necessary transition to democracy — Taiwan and South Korea illustrate this point. Political oxygen is imperative to continued economic growth. Otherwise, the entire edifice might collapse.

  Second, and putting politics aside, China’s economy is facing serious problems. Statistical economic growth is not the single true indicator of economic health: There are other important factors. China’s growth is lopsided, creating and widening income disparities, the urban-rural divide and regional imbalances.

  Economic growth, at any cost, has elevated greed into an overriding compulsion, creating an endemic culture of corruption at all levels, with the Chinese Communist Party functionaries and bureaucrats riding roughshod over the people, acquiring their land and property in the name of development.

  The obsession with statistical growth has created terrible environmental problems, with polluted rivers and degraded landscape. In a word, economic growth has become an end in itself, not a tool for social uplift.

  This is untenable and unsustainable, as even Chinese Premier Wen Jiabao (溫家寶) admitted recently. For instance, asset bubbles are already developing in the economy, particularly in the property and stock markets, as happened in Japan during the 1990s and is continuing to plague its economy to this day.

  The difference between China and Japan, though, is that Japan’s stagnation started from a much higher base and its democratic polity acts as a necessary safety valve for the system.

  With inflation rearing its head, China’s political system is a closed shop with little or no safety valve. If too much steam, caused by wider social unrest, builds up in China’s pressure cooker-like society, there is a danger of spontaneous combustion destroying the entire edifice.

  So whether China’s status as a superpower really is “inevitable” is subject to far more variables than just the country’s high economic growth.

  Sushil Seth is a commentator based in Australia.
• Most Popular

  • 1

    China preparing for invasion: report

  • 2

    Trump’s picks a rude awakening for China

  • 3

    Rutte’s China ‘bully’ warning hailed

  • 4

    Taipei MRT’s operations for New Year announced

  • 5

    Biden to announce Chinese semiconductor probe