China becomes a super-power (geopolitical analysis need not be war-mongering)

If Vice Admiral Winnefeld’s article illustrates modern war-mongering, an unnecessarily hostile view of our fellow great powers, what would be a more balanced view? Just in time Albert Keidel gives us an example. {Please do not critique his analysis without first reading it. This is #7 in a series about grand strategy. }

China’s Economic Rise – Fact and Fiction“, ALBERT KEIDEL, Carnegie Endowment for International Peace, July 2008, 16 pages.

Keidel was deputy for the Office of East Asian Nations in the U.S. Treasury. Before that he was senior economist in the World Bank’s Beijing office. He has taught at Johns Hopkins, George Washington, and Georgetown Universities. Keidel’s recent writings include China’s Economic Fluctuations: Implications for Its Rural Economy and The Causes and Impact of Chinese Regional Inequalities in Income and Well-Being.

Summary

  1. China’s domestically driven economic expansion is not limited by export markets and can sustain high single-digit growth rates for decades.
  2. Beijing now seems likely to overcome potential stumbling blocks such as economic instability, pollution, inequality, corruption, and a slow pace of political reform.
  3. China’s economic size will match America’s by 2035 and double it by midcentury, with unclear but potentially wrenching strategic implications that demand U.S. economic and military reassessment.
  4. American policy makers should take this opportunity to enact wide-ranging domestic reforms and rethink their inherited concepts of global order.

Excerpts

Exports: Not China’s Engine of Growth

Skeptics about China’s growth prospects most frequently question the sustainability of its export performance. In recent years, its exports and trade surplus have ballooned, leading to the common assumption that its growth is export-led and that limited global markets will curtail its expansion sooner rather than later. But this assumption is not supported by the data on the sources of Chinese growth, which are overwhelmingly domestic.

In fact, a detailed study of each of China’s five macroeconomic booms and slowdowns since 1978 reveals that domestic shifts in investment and consumption have been responsible for China’s growth (table 1). Even in recent years, the contributions to growth from the country’s trade surplus have had secondary importance. …

How Big Is China Now, and How Big Could It Become?

… Despite this low starting point, if China’s expansion is anywhere near as fast as the earlier expansion of other East Asian modernizers at a comparable stage of development, the power of compound growth rates means that China’s economy will be larger than America’s by midcentury—no matter how it is converted to dollars. …

China’s Future Military Potential

The military repercussions of China’s rapid economic expansion are more difficult to gauge, but should it want to, China by later in the century could become a major—and possibly the leading—global military power. Whether it chooses to pursue this goal depends in part on the international environment thirty or more years from now. Today, while China’s military resources are still a small fraction of America’s, the United States has time to lead the development of a system of international institutions and coalitions in which America can prosper when it is no longer the world’s largest economy.

China’s relative military capabilities today are even weaker than indicated by estimates of its annual military budgets like those in the Pentagon’s recent report to Congress on Chinese military power. Conservative estimates show the U.S. 2005 military budget was at least eight times China’s. But another indicator of China’s global military strength is not annual budgets but rather the dollar value of accumulated stocks of sophisticated weapons. …

Maximizing the Benefits of China’s Rise

(1) Reforms in the United States:

China’s rapid economic emergence in the coming decade will increasingly reveal America’s need for broad reforms, especially in its public investment systems. China’s legitimate challenge can motivate U.S. reform initiatives that would otherwise be difficult to achieve—such as for infrastructure, primary and secondary education, health care finance, and pensions.

(2) The benefits of broad-based engagement:

China’s meteoric growth over the last three decades and its likely continuation argue for intensified U.S. engagement with China over as broad a spectrum as possible. …

(3) An “SED Club” Combining China’s Strategic Economic Dialogue relationships:

China has developed three additional SED relationships, with Japan, the European Union, and the United Kingdom. The United States should propose that Chinese and foreign counterparts in all four SED relationships meet together to discuss global economic and financial developments of common interest. …

(4) The payoff from engagement with autocratic regimes:

Contrary to popular understanding, China did not “open itself ” to reforms and global commerce in the 1970s. Rather, the United States, which had “closed” China during the Korean War, decided under President Richard Nixon to engage the highly autocratic authorities in Beijing. It might thus be more accurate to say that the United States and China both contributed to “opening” China. The subsequent benefits are obvious, including the evolution of China’s more sophisticated and decreasingly autocratic economic and political structures. This experience argues for considering the replacement of blanket U.S. sanctions against other countries. with broad-based engagement, keeping an eye on potential benefits several decades hence.

(5) Modes for promoting poor-country development:

China’s remarkable economic achievements since 1978 suggest new alternatives for reversing the economic failure of many poor countries around the world. Policy makers and social scientists should focus on exploring the potential lessons of China’s development success. At a minimum such lessons could form an essential supplement, not necessarily an alternative, to the “Washington consensus” on economic development. {FM note: the “Washington Consensus” has proved itself to be a reliable formula for proverty and instability}

(6) Adjustments to long-term plans for global security cooperation:

China’s military capacity is now relatively quite weak and will remain so for some time. The United States therefore still has time to prepare for the longer term, when China’s potentially much-enhanced military capabilities could make China globally competitive and eventually even the world’s leader. The United States should not wait until it is too late to shape the character of broad-based security arrangements around the world that can best serve its national interests in what will likely be very different circumstances after 2050.

We can argue about the details, but with geopolitical analysis like this America could find a path to peace and prosperity in the 21st century. As opposted to what Vice Admiral Winnefeld’s article illustrates, a path to mutual hostility, ruinous military spending, and possible wars.

Please share your comments by posting below (brief and relevant, please), or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).

Grand Strategy and our national security

Does America need a grand strategy? If so, what should it be? Answers to these questions illuminate many of the questions hotly debated about foreign policy and national security.

  1. The Myth of Grand Strategy (31 January 2006)
  2. America’s Most Dangerous Enemy (1 March 2006)
  3. The Fate of Israel (28 July 2006)
  4. Why We Lose at 4GW (4 January 2007)
  5. America takes another step towards the “Long War” (24 July 2007)
  6. One step beyond Lind: What is America’s geopolitical strategy? (28 October 2007)
  7. ABCDs for today: About Blitzkrieg, COIN, and Diplomacy (21 February 2008)
  8. One telling similarity between the the Wehrmacht and the US Military (10 March 2008)
  9. America needs a Foreign Legion (18 April 2008)
  10. Militia – the ultimate defense against 4GW (original September 2005; revised 30 May 2008)
  11. How America can survive and even prosper in the 21st Century – part I (19 March 2007; revised 7 June 2008)
  12. How America can survive and even prosper in the 21st Century – part II (14 June 2008)
  13. America’s grand strategy: lessons from our past (30 June 2008)
  14. President Grant warns us about the dangers of national hubris (1 July 2008)
  15. America’s grand strategy, now in shambles (2 July 2008)
  16. A lesson in war-mongering: “Maritime Strategy in an Age of Blood and Belief” (8 July 2008)

Originally published at Fabius Maximus and reproduced here with the author’s permission.Related RGE Content:

1) China Not Immune to Global Slowing in 2008?

2) Coordination and Competition in the Management of Chinese Foreign Assets

3)On Top of the World: Chindia’s Contribution to Global Growth

8 Responses to "China becomes a super-power (geopolitical analysis need not be war-mongering)"

  1. heilperin1   July 11, 2008 at 12:21 pm

    Keidel…Who is he, again? Same old thing was said about Japan prior to its humilliating (and foretold by some) bubble collapse in the late 80s. Now comes China, and this guy reads from the same script. What explains China’s "rise"? A massive monetary and credit boom (courtesy of the PBoC) that is about to implode (crack-up boom). The darkness of Keidel’s (k)eynesian economics precludes him from seeing the light. Good luck.

  2. chinacomment   July 15, 2008 at 9:29 am

    Heliperin1, it’s true that all economies have flaws; it’s also true that Japan’s growth eventually ground to a crawl in the 1990s, and it’s true China has certain problems and contradictions in its economy and educational system. * However, Keidel is right that China is developing a domestic-based economy, which will lend it long-term strength.* The main economic fear, it appears, is if China runs out of energy… Because if China needs to ration energy, that will distort markets and inhibit entrepreneurialship as factories shut for, at times, hours on end. *Innovation is also an area that should be addressed; and there have been efforts (such as the 2006? Science and Technology plan) and the trend toward increasing IPR protection, to encourage said indigenous development.* Unlike Japan, and even the United States (imports around 40%+), China has benefitted from importing less than 25% of its energy imports (however; 47% of oil is imported), so the country has a lot of wealth. * I will agree that China is in a boom. However, its stock market bubble has already, for the most part, burst and many stocks appear to have returned to reasonable P/E levels. Real Estate is another matter, and I think we’ll see that post-Beijing Olympics there might be some contractions due to a variety of factors. * But barring massive instability, it does not appear that China will be "crashing" in its developmental path during the next 1-3 years.* ~http://chinacomment.wordpress.com

  3. laobaiqing   July 18, 2008 at 5:02 am

    An eloquent and balanced piece. showing insight and realism. It is unlikely that China will stop developing suddenly (possibly slow down under resource constraints), dump its regime (all virtually all East Asian countries are well governed with little rotation intermediated by political parties. However, there is very strong competition for positions of authority, and responsiveness to popular demands. The principle of Minsheng seems to be alive!. However, it is unlikely that a collision between this simple "unzipping" of economic potential, and an incumbent superpower whose western border is sometimes perceived to be in the Taiwan Strait, can be avoided. The US faces the same problem Imperial Germany was facing with Russia, before WWII, given time, it would be overshadowed by sheer quantity. It will be very difficult for political system tht wastes so much energy on internal competition, to act in a nimble and surprising fashion. Perhaps the younger members of the US armed forces are finally learning to play the game the guerilla way. Superiority is not maintained in the laboratories of Lockheed, but in the minds of warriors.

  4. chinacomment   July 18, 2008 at 1:22 pm

    RE: "It will be very difficult for political system tht wastes so much energy on internal competition, to act in a nimble and surprising fashion. Perhaps the younger members of the US armed forces are finally learning to play the game the guerilla way. Superiority is not maintained in the laboratories of Lockheed, but in the minds of warriors."Mr. Common Person, I will strongly disagree. One of the benefits of a political system that "wastes energy on internal competition" is that such a system of competition allows for multiple viewpoints and new solutions to arise.The "minds of warriors" can be developed most nimbly when they have freedom to plan and choose new ideas.Now, this is not saying that china does not allow multiple viewpoints; in fact, a simple survey of public-access Chinese military statements reveals that members of the CCP and the Military have often discussed China’s future military development– which goes to prove that "new thinking" and alternative views are very necessary.The internal competition of current Western political systems makes it easier to invent innovative solutions. It may be a little difficult in initially shifting positions, but after shifting, innovative cultures are more likely to hit on the right solutions.

  5. Kangxi   July 19, 2008 at 9:48 pm

    Chinacomment, you may be right, but also wrong. Some democracies do very well at innovation as well as implementation. Some autocracies do well at reform and uniting patriottic foces. Democracies can only be heroic in a pedestrian way and have no regard for the needs of what you call the common people. Is there anything amusing that the West could offer. Look at what my successors let happen..

  6. laobaiqing   July 19, 2008 at 10:05 pm

    Chinacomment, why do you confuse laobaixing with laobaiqing. Nothing common about 100 old nobles..

  7. chinacomment   July 20, 2008 at 5:42 pm

    Oh sorry, I misread. I thought you meant 老百姓。Out of curiosity, what are the characters for laobaiqing?Kangxi; Of course I understand different countries need different policies at different times. A blind allegiance to Democracy isn’t necessarily going to lead to stability unless there is law and order first. But although autocracies might be nimbler about reforming, the ideas aren’t necessarily vetted by many or actually good. For example, Mao Zedong’s Great Leap Forward was amazing, but it was also tragic.How would you argue that democracies have no regard for the common people, though?

  8. Guest   July 20, 2008 at 9:00 pm

    Chinacomment: full marks for your ability to produce characters on this barbaric keyboard, although they are somewhat crude.. must have been my successors again. However, democracies do not care for the common man in general because they cannot afford to. What they do is satisfy voter expectations (in s far as these cannot be managed) by transferring the burden overseas, where laobaixing in Zhonghua gets to work like a donkey for increasingly uncertain future USD denominated cashflows…Kangxi became a cynic after learning from one of his great great great grandsons who studied political science with someone called Pzreworski that Democracy is pretty weird and aims at the median voter (whoever that may be) who is of course hardly literate. So I told my successors to let this hitherto barbaric fashion rest before adopting it, which all of them enthousiastically and sometimes heroically did. Even the renegade inhabitants of our province in the Eastern Sea have now returned to the Three Principles, about as far as I myself would be prepared to go. However, I vigorously support the other barbaric innovation, Capitalism, which, as my ggreat etc grandson also learned from said Pzreworski is incompatible with the maximum efficiency Capitalist allocation can provide. Well, these are all ungentlemanly terms, and I apologize for my lack of proper phraseology. Keep up the good work, Chinacomment!