Nobody benefits from a China downturn

For decades after the end of the Mao Zedong regime, China embarked on an economic revolution led by Deng Xiaoping. In the 1990s and the early part of the 21st century, China’s comparatively technocratic leadership promoted private enterprise. There were even hopeful signs that China would allow Chinese society to gradually open up to the rest of the world.

In the year 2001, the United States supported China’s desire to join the World Trade Organization. There was an emerging assumption about world geopolitics that the power of economics would transcend geopolitics. The US and the rest of the world at that time believed that the establishment of a global trading regime would allow goods and services to move across borders without regard for political differences or geopolitical competition.

The western world believed that if China takes an active party in global organizations, it would become more dependent on rules-based trading system and that economic engagement would serve eventually as a moderating force on the Chinese government and ultimately spur political change.

During the early part of this century, it seemed as if China was becoming successfully integrated into the world economy and was experiencing extraordinary economic growth. It was during this time that China’s technological leadership promoted private enterprise and there were hopeful signs that Chinese society was beginning to open up.

By the early 2010s, this faith in a new Chinese revolution had apparently stalled. Beijing began to reassert state control of Chinese society and even adopted a more confrontational policy internationally. Under the leadership of its new president Xi Jinping, China’s rivalry with the United States and the rest of the western world has intensified. It is clear that America’s economic and political approach to Beijing does not work. This has given rise to a new debate: whether the United States and the western world can accept the reality that the world is divided into an economic model that prevailed during the Cold War.

During the early part of this century, the world saw the rise of middle power countries that played a significant part in global economic growth but were not interested in formally aligning with either China or the United States.

The increasing confrontational approach of China towards geopolitics has made neutrality an increasingly difficult position for most Third World countries. I know for a fact that an American company that has been operating in Shanghai for several decades has decided to downsize its China operations and relocate to Canada. The reason given is that this company was highly concerned about the deteriorating relations between China and the United States.

The Philippines is on the frontline of this confrontational approach to geopolitics. China has falsely claimed ownership of almost the entire South China Sea, including the West Philippine Sea. While it is China that keeps threatening Philippine vessels including fishing boats, it has the gall to claim that the Philippines is using threatening language on the issue.

Washington is trying to maintain open lines of communication with Beijing. However, it is increasingly evident that amidst this intensifying geopolitical rivalry, economics can no longer be the cornerstone of any US-Chinese relationship.

Any US trade policy must also address the issue of climate change. China is the world’s largest greenhouse gas emitter, generating twice the quantity the United States does. China and the United States must set aside geopolitical rivalries and address the greater problem of a looming climate disaster.

Washington and Beijing are embarking on what could be years of geopolitical competition. The prospect of a Xi Jinping government going back to the days of Deng Xiaoping may be what the world hopes for. This is a prospect that can be considered as negligible.

On top of this impending superpower rivalry is the possible end of China’s economic miracle. In his article in a Foreign Affairs quarterly magazine last year, Adam Posen wrote that over the last 45 years, China has transformed from one of the world’s poorest and most isolated countries into the heart of the global supply chain.

According to Posen, Xi Jinping focused on projects that prioritized state-led investments and diverted resources from supporting households. Xi greatly expanded the role of state-planned industrial policies. He emphasized the role of the Chinese Communist Party in capital management and diminished the role of consumer-oriented private entrepreneurs.

China has also stepped up military activity around Taiwan and the West Philippine Sea. This has increased a gloomy perception that armed conflict is inevitable.

For some geopolitical observers, the West might benefit from a Chinese decline. However, given the size and importance of China’s economy, a financial crisis in China would have serious consequences around the world. Instead of looking for opportunities in China’s economic struggles, the United States and European Union leaders should communicate their interests in preventing a Chinese economic crisis.

China must not be allowed to believe that economic containment is the aim of the western world. If this happens, China will blame the rest of the world for its economic woes and Xi Jinping might resort to further isolation as the only antidote.

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