The Dangers of China’s Decline

THE CHINA ISSUE: This article appears in the Spring 2022 print magazine. Read more stories from the issue, and subscribe to support our journalism.

Xi Jinping’s China is about to give the world an education in the nuances of decline. Since the onset of its economic reforms in the 1970s, China has long defied predictions that it would soon stumble or collapse. Its spectacular growth challenged prevailing views about the sources of national success in the modern world. In some ways, China is still soaring: Its military power grows more formidable every year. When Xi declares that “the East is rising and the West is declining,” he gives voice to this sense that China is a country on the make.

Yet military power is often a lagging indicator of a country’s trajectory: It takes time to turn money into military muscle, and massive buildups often persist even after a country’s economic fortunes begin to flag. And today, for reasons including demographic disaster and the lingering effects of the COVID-19 pandemic, China is facing the end of the stunning economic growth that made it possible for Xi to assert that the “great rejuvenation of the Chinese nation” was at hand. The China of the 2020s will be a country whose coercive capabilities are more intimidating than ever as its economic dynamism fades. That could be the worst possible combination for the world.

In the aftermath of Mao Zedong’s death, some Western observers were skeptical that China—a country that U.S. diplomat George Kennan once called a “vast poorhouse”—could put together the policies necessary for sustained growth. After the Tiananmen Square massacre in 1989, it was common to wonder whether the resulting political crackdown would stifle the country’s prosperity. Through the early 2000s, social scientists and U.S. officials predicted that China could be rich or autocratic—but not both. A few prominent analysts made careers for themselves by heralding China’s collapse.

It hasn’t happened—yet. From 1978 to the onset of the global financial crisis three decades later, China’s constant-dollar GDP grew by a factor of 17, without the Chinese Communist Party (CCP) losing control. That growth enabled the decades-long military buildup and sprawling economic influence that made China a force to be feared on the global stage.

As Tufts University’s Michael Beckley and I argue in our forthcoming book, Danger Zone: The Coming Conflict With China, this economic miracle required good luck and good policy. China seemed to have hit the demographic jackpot in the 1980s and 1990s; the unlikely combination of warfare and famine in the 1930s and 1940s, a regime-sponsored baby boom after the CCP took power, and then the institution of the one-child policy in 1980 left the country with a huge working-age population unencumbered by lots of young or old dependents. China was nearly self-sufficient in food, water, and other resources. And it had the fortuitous timing to start its reforms as globalization went into overdrive, making it easier to integrate the country into complex supply chains and thereby make China the workshop of the world.

Good policies were also crucial. Mao’s one-man rule and economic illiteracy had condemned China to serial, self-created disasters. Once he died, Deng Xiaoping and his successors moved toward a “socialist market economy.” They opened China to trade and investment, overhauled the tax and regulatory systems, shrank bloated state-owned enterprises, and encouraged private business. Accompanying political reforms limited the power of China’s rulers and enlarged the space for nonideological competence within the regime. The CCP relaxed its grip enough to permit economic spontaneity—and reaped the benefits in the form of prosperity that reinforced its political control.

China’s ascendance shook the world intellectually as well as geopolitically: It undermined post-Cold War Western beliefs that prosperity would lead inevitably to political liberalization, that democracies produced higher rates of growth than autocracies, and that tyranny was incompatible with sound economic management. As China became a global heavyweight, a new orthodoxy solidified—that a hegemonic transition was approaching as Beijing surpassed the United States.

One dissenter was the political scientist David Shambaugh. In 2015, Shambaugh argued that China was suffering from a deep internal malaise and that Xi’s increasingly repressive rule was a sign of insecurity, not confidence. “[F]or all the Western views of it as an unstoppable juggernaut,” he wrote, China’s economy “is stuck in a series of systemic traps from which there is no easy exit.”

Shambaugh struck a discordant note at a time when Beijing was tightening its control of the South China Sea and spreading its influence across multiple continents. He also happened to be right. Not least of the oddities surrounding contemporary China is that much of the world deemed its ascent inevitable just as its prospects started to dim.

Security officers direct a line of people at a COVID-19 mass testing site in Beijing on Jan. 24. Waves of lockdowns amid the country’s zero-COVID policy have disrupted life and work in major Chinese cities.Kevin Frayer/Getty Images

It’s true that China does boast many apparent advantages. It has an enormous domestic market and is the leading trade partner of roughly 130 countries around the world. It is making concerted investments in artificial intelligence (AI), semiconductors, and other critical technologies. If the United States doesn’t up its game, a national commission chaired by former Google CEO Eric Schmidt warned in 2021, China could become the premier “AI superpower.” But look closer, and China’s trajectory starts to seem more tenuous.

For one thing, many of China’s technological achievements are narrower and less impressive than they first appear. For example, Beijing has made great strides in AI applications focused on surveillance (no surprise there), but the United States still leads significantly across the wider expanse of AI subfields and uses. Despite vast state subsidies, China’s Semiconductor Manufacturing International Corp. is years behind in the creation of cutting-edge semiconductors that make up the foundation of advanced economies in the information age.

Just this year, Peking University published a candid assessment—which the CCP then predictably censored—of China’s progress in science and technology. The verdict was that China is “following [the United States] in most fields, running side by side in a few, and leading in very few.” And while China’s other strengths are not illusory, neither can they hide a reality that Beckley and I discussed last year: The magic that made China’s economic miracle is unmistakably fizzling.

While China’s other strengths are not illusory, neither can they hide reality: The magic that made China’s economic miracle is unmistakably fizzling.

The country’s resource abundance is old news: Overuse devastated much of China’s arable land; industrialization and pollution left the country with severe water scarcity. More damaging still, China’s abundance of human resources is also a thing of the past.

The one-child policy was a devil’s bargain that is now causing demographic implosion. China’s total population is set to peak by 2028 (or perhaps as soon as this year, by some estimates) and then plummet by as much as half by century’s end. Its working population crested in 2015; it will fall by 70 million between 2020 and 2035 and even faster after that. China will soon combine an enormous geriatric population with a rapidly shrinking workforce. It will experience one of the worst peacetime demographic crunches on record, a formula for stagnation at best and catastrophic economic contraction at worst.

Making matters worse, the era of enlightened economic policy is over. The reform agenda has been stalled for more than a decade because further liberalization—necessary to make the leap to a more innovative, knowledge-based economy—would threaten the privileges of entrenched elites. If anything, Xi has thrown the country into reverse. Politically, he is taking China into neototalitarianism through pervasive repression and indoctrination. And economically, his policies have a decidedly retrograde feel.

Xi’s agenda has featured a preference for state-owned enterprises at the expense of the more vibrant private sector; the imposition of severe, politically motivated restrictions on wide swaths of the economy; attacks on the autonomy of relatively technocratic institutions such as the central bank; and the empowerment of political minders in companies of nearly all sizes. China’s leaders may talk about the need to transition to a high-tech, services-based economy, but Xi’s policies are stifling the competence, creativity, and spontaneity necessary to make that shift. It all constitutes a “great leap backward”—a reversion to pre-Deng-era policies that condemned China to stagnation.

There is also the question of what Xi’s consolidation of power means for the country’s long-term resilience. As the political theorist Francis Fukuyama has written, for nearly 40 years after Mao’s death China avoided the “bad emperor” problem—the worst pathologies that accompany authoritarian rule—by imposing term limits on its rulers and making them more accountable to other CCP elites. Yet Xi has systematically disassembled this system by purging rivals, sidelining potential successors, and entrenching himself in power. By doing so, he is enabling China to move faster and more decisively. But he is also leaving the country vulnerable to impulsive or unwise decision-making—a perpetual problem of one-man rule—and creating the potential for terrible instability when his reign finally ends. Xi’s centralization of authority, while seemingly impressive, is setting the country up for a fall.

Finally, it doesn’t help that a more assertive China is now facing more international resistance. Trade barriers against Chinese companies and products proliferated in the decade after the global financial crisis. Washington has waged a technological cold war against Huawei, seeking to deprive that Chinese firm of high-end semiconductors and keep it out of the world’s 5G networks. Dozens of countries are more carefully scrutinizing their economic, financial, and technological ties with Beijing; the Japanese government is offering to pay companies to reduce their China exposure. China is still central to the global economy, but the days when the United States and other powerful countries eagerly abetted its ascent are over. Indeed, Xi’s effort to cultivate the domestic market is an implicit admission that China, which rose on the strength of an export-focused economy, now confronts a very different world.

People walk past a military propaganda sign that reads “Have spirit! Raise a new generation of spirited, capable, courageous, and morally upright revolutionary soldiers” on a giant screen in Beijing on May 18, 2021.NOEL CELIS/AFP via Getty Images

The pandemic hypercharged global anti-China sentiment, after Beijing concealed the initial outbreak and then exploited the resulting chaos to bully nations from Australia to Germany and the United Kingdom. It thereby encouraged a host of efforts—through multilateral institutions such as the Quadrilateral Security Dialogue, AUKUS, and the G-7, as well as the United States’ bilateral alliances in the Pacific—to counter Chinese power. “A Cold War mentality” had reemerged, a spokesperson for China’s foreign ministry complained, as the United States and its friends pursued “anti-China encirclement.”

Read More

China Is a Declining Power—and That’s the Problem

The United States needs to prepare for a major war, not because its rival is rising but because of the opposite.

Argument

|

Hal Brands, Michael Beckley

COVID-19 also confirmed how patchy China’s rise had been: The country’s biotechnology sector couldn’t produce anything like the revolutionary vaccines that democratic innovation economies in the United States and Europe churned out. Even China’s heavy-handed success in containing COVID-19 at home became a trap: The combination of “zero-COVID” policies, low levels of natural immunity, and vaccines that proved weak or worthless against highly contagious variants condemned the country to recurring lockdowns of major cities, with all the accompanying disruptions.

Even before COVID-19, in fact, China’s economic vital signs were worrying. The government claimed a growth rate of 6 percent, but Chinese insiders and academic research indicate that the true number is considerably lower—and even that growth is inflated by the relentless injection of capital into a less and less efficient economy. As a result, overall debt grew eightfold between 2008 and the end of 2020, reaching 335 percent of GDP. In other countries, this combination of slumping productivity and growing debt usually presages sharp crises that turn into lasting economic quagmires.

Xi’s Chinese dream involves catching up to the United States. In reality, his country is slowing down.

Chinese leaders and propaganda organs now openly tout the country’s designs: In the coming decades, the official state news agency Xinhua proclaimed, China will “re-ascend to the top of the world.” Beijing is creating new international organizations and co-opting others. Its marquee projects, namely the Belt and Road Initiative and the Digital Silk Road, aim to project economic and political influence across Eurasia and beyond. China also fashions itself as an ideological role model for other countries: Its style of governance, Xi has said, offers a “new option for other countries and nations that want to speed up their development while preserving their independence.”

Most notably, China is building and wielding the tools of geopolitical coercion. Countries such as Australia, Lithuania, Norway, and South Korea have felt China’s economic bite after they opposed its policies or criticized its internal practices. Chinese military spending—having already grown tenfold in real terms between 1990 and 2016—continues to rise, funding a dramatic expansion of the capabilities needed to conquer Taiwan, overawe Beijing’s neighbors, and perhaps even take on the United States in the Western Pacific.

What the United States will face in this decade is a China whose ability to batter its enemies and challenge the global order is growing, even as leaner economic times loom ahead.

The statistics are simply astounding: Beijing put as many ships to sea from 2014 to 2018 as were in the navies of Britain, Germany, India, Spain, and Taiwan combined. And having long avoided a nuclear arms race with Washington, Beijing is now sprinting forward and could be the United States’ nuclear peer by the 2030s. Threats to use force against enemies have also become ubiquitous: Anyone who obstructs China’s plans, Xi warned in 2021, will “have their heads bashed bloody against the Great Wall of Steel.”

It is sometimes hard to believe that such a country is running out of gas. But perhaps China’s strategic urgency is increasing because its economic outlook has turned grim.

China’s “hide and bide” strategy—the approach it followed for a generation under Deng and after—was one of patient confidence. If time was on a rising Beijing’s side, then it made sense to gradually build the country’s power and delay confrontation with the United States. Today, China’s strategic mindset is darker and more insistent.

In many areas, Xi acknowledges, “the West is strong, and the East is weak.” China must race to make itself “invincible” so that “nobody can beat us or choke us to death.” What the United States will face in this decade, then, is a China whose ability to batter its enemies and challenge the global order is growing, even as leaner economic times loom ahead.

This China is unlikely to be benign or peaceful. History has seen many once ascendant countries lash out violently rather than accept a disappointing future as a second-tier power. This fear is what led Germany to take the risks that helped ignite World War I. It prompted Japan to undertake the expansionist rampage that helped bring on World War II.

Xi has grand ambitions, from capturing Taiwan to establishing China’s primacy in Asia and, eventually, the world. If he loses faith that the patient accumulation of economic power will bring Beijing these rewards, he may become more inclined to take risks and use China’s coercive tools to secure them instead. This means that the task of dealing with China could prove quite ticklish in the years ahead.

The United States can’t simply rest easy, confident that a peaking China will fade away. Instead, it will have to rapidly firm up its defenses in places where an impatient Beijing might lunge for advantage, such as the Western Pacific. The United States and its allies will have to join forces to prevent China from weaponizing its still considerable economic and technological leverage to fracture the anti-Beijing coalitions now taking shape. And they will have to ensure, through multilateral control measures as well as investments in their own capabilities, that the democratic world maintains its edge in semiconductors and other critical technologies that will shape the future balance of economic and military power. Yet Washington and its friends will also have to do all this while keeping channels of communication open and not unnecessarily provoking an anxious China that may lash out as its predicament worsens.

After all, power and pessimism can make a deadly mix. The hardest sort of China to handle may be one that is strong and weak at the same time.

This article appears in the Spring 2022 print issue. Subscribe now to support our journalism and get unlimited access to our coverage.