The rise of China continues unabated. In a Western world that is constantly seduced by bearish sentiment about China’s economic and political prospects — and ultimately by the idea that its rise is unsustainable — this deserves to be constantly repeated. Otherwise we find ourselves diverted from the most fundamental geopolitical trend of our time, that China is in the process of changing the world as we know it.
This is not to ignore, or brush away, the many problems that China faces. The most important of these during the course of the last year has been the government’s twin struggle to reform the economy while maintaining its target growth rate of 7.5 percent. It is possible that the latter will prove unachievable and that the growth rate might settle down more in the region of 5 to 6 percent, but, especially in the context of what is clearly a major structural shift in the nature of the economy — which may already be rather more advanced than previously thought — this should be regarded as perfectly acceptable. What we should not expect is a hard landing, entailing a much lower growth rate, or some kind of implosion. This remains an extremely unlikely scenario.
2014 saw a key landmark in China’s economic rise: according to the World Bank International Comparison Program, China’s GDP, as measured by purchasing power parity, overtook that of the United States in the latter part of the year. It is anticipated that China’s GDP will now pull rapidly ahead of that of the United States; the World Bank and the IMF both project that its economy will be 20 percent larger by 2019.
Arguably the most dramatic illustration of China’s growing power — and of U.S. decline — is in East Asia. The U.S. pivot to Asia — or “rebalancing” as it is now described — has made little headway. Its central tenet was military — to strengthen and extend its military relationships with its key allies in the region, namely Japan, South Korea and Australia, and, to a much lesser extent, the Philippines. Japan, however, is still facing profound economic problems, while Prime Minister Shinzō Abe’s growing nationalism — together with his denial of Japan’s past — has led to a serious deterioration in relations with South Korea and, at the same time, has served to embarrass the United States.
These, however, are relative side-issues compared with the central problem. The reason for U.S. decline in East Asia has never been military but economic. Similarly, the reason for China’s rise has been economic not military. If the United States is to reverse its decline, it has to find a way of strengthening its economic position in the region. Its preoccupation with military strength is barking up the wrong tree, and represents a fundamental misreading of the reasons for China’s rise. Or, to put it another way, Washington is behaving as if the world is still as it was rather than seeing China as a quite new kind of challenge, which is economic rather than military .
In this context, the most important event in 2014 was the launch of the Chinese-inspired Asian Infrastructure Investment Bank (AIIB), which garnered 21 member countries from East Asia, Central Asia, and South Asia, despite strong U.S. lobbying aimed at dissuading countries from signing up. In the event, only five countries declined, namely Japan, South Korea, Indonesia, Australia, and New Zealand. Indonesia has since decided to join, leaving four rather predictable candidates as refuseniks. The bank will fund a huge infrastructural development program across Asia, which will spur a China-led process of growing economic integration. To understand its huge potential significance, we should think of the role played by the U.S. Marshall Aid program to Europe after World War II.
The purpose of the U.S. pivot to Asia was to forestall China’s growing influence in the region and enhance that of the United States. The widely representative nature of the AIIB, and its vaulting ambition, signals the failure of the pivot. China’s influence in East Asia and beyond continues to grow apace. Meanwhile, the Trans-Pacific Partnership, a U.S. attempt to reset the trade template in the Asia-Pacific and marginalize China in the process, is bogged down in very difficult negotiations with the other participant nations and, equally seriously, is unlikely to receive fast-track approval in Congress.
This brings us, finally, to the domestic situation in China. Apart from the government’s attempt to achieve a major structural shift in the nature of the economy, the two most important themes have been the anti-corruption drive and the idea of the “Chinese Dream.” Both tell us much about the state of China and how the leadership perceives the future.
The extent of the anti-corruption drive surprised virtually all observers. It is hugely more ambitious than anything that has previously been attempted on this issue since the beginning of the reform period in 1978. We can draw two conclusions . Firstly, the problem of corruption in the party and the government is far more serious and widespread than has previously been thought and was seriously undermining the credibility and authority of China’s ruling institutions in the eyes of the people. Secondly, it underlines the determination of President Xi Jinping to boost the popularity and authority of the party and government. The anti-corruption campaign has been hugely popular amongst the people and has greatly boosted Xi’s standing.
The idea of the Chinese Dream was first launched in a speech by Xi Jinping in late 2012. Since then, it has continued to be widely discussed in China. The proposal offers an important insight into the changing nature of the country’s mood, priorities, and perspectives. The idea of the Chinese Dream would have been inconceivable during the Deng Xiaoping and post-Deng era, when the country’s overwhelming priority was economic growth and poverty-reduction. These were hard times. But China is now in a different place. It can afford to dream, to imagine a very different kind of future, both at home and with regard to China’s role in the world.
It underlines the new and burgeoning confidence of the Chinese and also reminds us that China has arrived at a very new moment in its contemporary history following its precipitous decline after 1800. China is remaking itself and will remake the world. It has begun to give very serious thought to these questions.