Is China’s emergence as the next economic superpower imminent?

“The 21st century is China’s century” declared Xi Jiping, the Chinese President, to a raucous audience in Beijing. ” China will emerge as a responsible power, which will finally bring peace throughout the world.”

It seems ironic therefore that just two days after this famous declaration, the Wall Street Journal reported that China’s economic activity has significantly slowed down. This was also the day the Permanent Court of Arbitration handed out a humiliating verdict for China, declaring that China does not have sovereignty over the South China Sea and therefore does not have the right to construct artificial islands there. Surely these are not favourable signs for a rising superpower. This has led to confusion and widespread speculation among the public that will China really be the next superpower?  Americans themselves are divided over the issue with a poll conducted by the Pew Research Center finding that 46% of Americans think that China either already has or will someday replace the United States as the top global power, while 48% say that this will never happen.So who is right? Is China’s rise as a superpower imminent or not? Let’s analyse…

Napoleon Bonaparte once said of China, “Let her sleep, for when she wakes, she will shake the world.” This certainly appears to be true. A once dormant nation, China today has a GDP (nominal) of a mind-boggling $12 trillion and forex reserves of over 3 trillion USD. Its massive economy and military has made China virtually the sole candidate for the tag of global superpower.

nominalgdp.gif

Still some doubt popular projections of China’s growth. Here are some reasons why:

The economic boom China experienced is fading. This is due to the fact  China’s rise is credit-fuelled. During the 1970s, China borrowed hordes of money from banks to fuel its growth. China spent most of this money in funding infrastructure and manufacturing projects. Perhaps, China borrowed more than it needed, because by the start of the 2000s, China was left with large constructed cities, popularly known as “Ghost Towns” where no one lived and other loss making  under-utilised assets such as factories. The fact is, China is loosing its often touted sheen. Here’s an interesting fact: China adds 6 dollars to its debt to fuel its economy by one dollar! A McKinsey report states that China’s debt has nearly quadrupled, reaching a peak of $28 trillion by mid-2014, from $7 trillion in 2007. That’s more than twice of its economy!  Just take a look at the graph.

China-nonfinancial-debt-to-gdp.png

 All of this means that China’s growth is unsustainable. In the short-term, such rapid growth might be seen as a miracle, however in the long-term it will undoubtedly harm the economy.

The second reason which will be a hurdle to China’s lofty ambitions, is its relations with its neighbours. For a rising power, good relations with other powers – especially its neighbours  –  assume paramount importance. The U.S. has had friendly relations with both Canada and Mexico (except a few cases of small-scale conflicts). However, this is not the case with China. Out of its 14 neighbours, China has friendly relations with only two: Pakistan, and to some extent North Korea. Nations including, but not limited to, South Korea, India, Russia, Australia, the U.S., and,  Japan are all ill-disposed towards China. They view as China’s meteoric rise as threatening. And no doubt, as China’s influence becomes increasingly assertive in the geo-political arena, these countries will stand united, trying to curb China’s influence. The fact is: China’s rise is not peaceful, but threatening.

The last and perhaps the most important factor that might hinder China’s growth is its system of Government. China is a Communist nation – this means that most important sectors and industries of the nation are state controlled. This creates a lack of drive, incentive and competition in key areas such as infrastructure and the railways. In addition to that, China does not guarantee the right to free speech to its citizens. Curbing the free opinion and will of the People results in widespread resentment. And in an increasingly globalised world, this resentment spreads like wildfire.

This is not to say however, that China will not become a great Power. It can, but for that the Government will have to take certain difficult, but important measures to put China on the path for sustainable growth.

Remember, slow and steady wins the race.

Note:- All the opinions stated in the above article are the author’s own.

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