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Lee Jong-Wha assesses the challenges China will have to overcome if it is to become a truly global power

Lee Jong-Wha assesses the challenges China will have to overcome if it is to become a truly global power

For nearly a decade, Chinese President Xi Jinping has been promising to deliver “the great rejuvenation of the Chinese nation.” This promise – which he dubbed the China Dream – took a clearer form with the introduction of the two centenary goals: building a “moderately prosperous society” by 2021 (the centennial of the founding of the Communist Party of China, CPC) and becoming a “modern socialist country” by 2049 (100 years after the founding of the People’s Republic). Now, China is one centennial down – and, according to Xi, it has achieved its first goal. Is the China Dream within reach?

While the second centenary goal specifies goals like strength, prosperity, democracy, harmony, and cultural advancement, it also represents a vision of China as a global economic and political power. Ultimately, Xi seems to want to build a Pax Sinica, which would compete with – and even replace – the Pax Americana that has prevailed since the end of World War II.

These are ambitious goals. But China is no stranger to ambition – or achievement. While the CPC made serious mistakes during the People’s Republic’s early years, it has since led the country in a remarkable economic and social transformation. For more than three decades, China achieved double-digit annual GDP growth. Hundreds of millions of people were lifted out of poverty.

This transformation was made possible by “capitalism with Chinese characteristics” – a system that has proved far more effective and durable than many expected. The Chinese state played a central role in mobilising resources, building national infrastructure, supporting export firms, and facilitating inflows of foreign capital and technology.

China’s record proves that an authoritarian political system does not preclude development and in fact can drive rapid progress. In fact, on the question of which political system – dictatorship or democracy – is better suited to economic development, the evidence is ambiguous.

Daron Acemoglu and James A. Robinson have made the case that “extractive political institutions,” in which political power is concentrated in the hands of a small group of people, lead to “extractive economic institutions,” in which the ruling class exploits the majority. The result, they argue, is weaker incentives for most economic agents to engage in productive economic activities.

Yet China’s extractive political institutions have built inclusive economic institutions. Like authoritarian governments in East Asia – such as Lee Kuan Yew’s regime in Singapore and Park Chung-hee’s government in South Korea – China’s one-party, authoritarian government used its power to implement good economic policies, thereby achieving both political stability and strong economic growth.

This does not, however, guarantee that the China Dream will become reality. As many commentators have pointed out, China faces tremendous internal and external challenges, which could hamper economic development and fuel political instability.

For starters, after decades of strict family-planning policies, China’s working-age population is set to shrink by 170 million over the next 30 years. Meanwhile, rates of return on investment have fallen, productivity growth has stagnated, and China’s underdeveloped financial system does not necessarily allocate resources to the most productive uses, with unprofitable “zombie” enterprises and highly indebted local governments receiving far more than they should.

Today, China’s per capita income – $10,484 in 2020 – remains far below that of advanced economies, such as Japan ($40,146) and the United States ($63,416), and the chances of continued rapid gains are fading. The GDP growth rate in 2012-20 averaged 6.5% per year – far short of the double-digit figures of the past – and it is expected to decline to 3-4% over the next 30 years.

Moreover, China’s fast-growing private sector could pose a challenge to China’s state-capitalist model. Already, large private enterprises are reluctant to follow government directives as they once did.

China’s leaders are cracking down on those that defy them – most notably, Alibaba founder Jack Ma (for publicly criticising government regulation) and ride-hailing platform Didi Chuxing (which flouted the government by going public on the New York Stock Exchange). But, while tech giants do need to be better regulated, this harsh approach could impede entrepreneurship and stifle innovation.

All of this could undermine the CPC’s legitimacy. With GDP growth flagging, widening income and wealth disparities across regions and social groups threaten to fuel popular frustration, and even political unrest. And this comes at a time when the CPC’s capacity to impose its will is dwindling, largely because of the Party’s own success in creating a strong middle class, which now comprises more than 700 million people, and it is growing fast, not least because of rapidly expanding education. Over the last 20 years, the enrollment rate in tertiary education skyrocketed, from 8% to 54%.

According to the sociologist Seymour Martin Lipset’s modernisation theory, the growth of an educated middle class often leads to democratisation, as this group demands the rights, liberties, and political participation they come to realise are possible. That is what happened in Korea in the 1980s, and the same could happen in China, though it is difficult to predict what could catalyze such a shift, and when.

The external environment is not helping. To sustain economic growth – and thus the CPC’s legitimacy – China must retain its position as a major global manufacturer. It needs to continue securing raw materials and intermediate goods, such as semiconductor chips, through a stable global supply chain, and it must continue exporting finished products to the US and other global markets. This will be very difficult to do, unless China can find a painless way out of its ongoing trade and technology war with the US.

Finally, to gain the world’s respect, China will need to start upholding democratic values and norms, and cultivating peaceful relationships with other countries. Pax Americana has survived for so long, because many countries, including China’s neighbors, rely heavily on the US for trade, finance, technology, and security. They will be reluctant to accept Pax Sinica, unless China offers them something better. And that must begin with pax.


Lee Jong-Wha, Professor of Economics at Korea University, was chief economist at the Asian Development Bank and a senior adviser for international economic affairs to former South Korean President Lee Myung-bak. Copyright: Project Syndicate, 2021, published here with permission.

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12 Comments

China’s neighbors, rely heavily on the US for trade, finance, technology, and security.
Security is in doubt.
“It Failed Miserably” – What If the US Lost a War and Nobody Noticed?

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Thats a very dangerous epiphany...it brings the use of strategic nuclear weapons front of mind.

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Indeed: It Is Official And It Is Over.

Sure, let's talk, but we are not putting, say, Kinzhal up for negotiations and the United States has practically nothing to offer in return to start with. Sure, there is the issue of anti-missile "defense" in Europe, but it is not the "defense" part which worries Russia, because the West has no systems which can intercept even meaningful part of Russia's missile salvo. The issue are MK-41s VLS which can accommodate TLAMs. Simple as that, but even if to imagine that the United States will be ready to bargain, neither Kinzhal nor Poseidon are "strategic" weapons in a traditional sense. Neither are Tomahawks, BTW. But let's cut all Bullshit and face the reality. Of course, Kinzhal even when carries a conventional warhead, can shift military balance in any theater of operations as fast as the first half-squadron (6-8) of MiG-31Ks could be deployed there, which is the matter of hours, half-a-day tops. Soon all military districts and fleets will have their own squadrons of those; then, the time is cut to a half-hour before on duty "couple" gets airborne. After that ANY surface fleet of any configuration which is within 3,000 kilometer radius of those MiG-31Ks, forget about TU-22M3(M) (that could be an overkill, with each of them carrying 2-3 Kinzhals), has nothing left to do but disperse and hope not to be near capital ships, such as DDGs and CVNs.

US Air Force Says Second ARRW Hypersonic Missile Test Fails as Rocket Motor Did Not Ignite

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""While the CPC made serious mistakes during the People’s Republic’s early years, it has since led the country in a remarkable economic and social transformation. For more than three decades, China achieved double-digit annual GDP growth. Hundreds of millions of people were lifted out of poverty.""
I would rephrase this as "when the CPC got out of their way the Chinese population bounced back to the economic success they had had for two millennia. They will continue to prosper so so long as the CPC stop interfering." Similar Chinese economic and social achievement can be seen in Singapore, Taiwan and until the CPC began interfering Hong Kong too.

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It relies on us all ignoring the ongoing genocide. No thanks.

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"Finally, to gain the world’s respect, China will need to start upholding democratic values and norms, and cultivating peaceful relationships with other countries."

the reason that countries 'respect' the US is because its 11 fighter carriers and the largest nuclear war heads reserve.

who would truly respect the US nowadays?

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So you define respect as fear. North Korea being more respected than South Korea since the former can aim nuclear missiles at Wellington.

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The fundamental problem is Xi wants to be Mao of the 21st century. Mao brought the Chinese nation together, regained independence and ended the 100 years of humiliation and chaos, he was a hero in that sense. But then he brought the same nation to its knees a few years later. How can you trust an individual who has unlimited power??? Absolute power corrupts absolutely. America is far from perfect, and the West representative democracy is facing a challenge in the digital era. It doesn't mean authoritarian rule is the answer for the 21st century.

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Well said. Even the greatest authoritarian rulers risk chaos as their successor.

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pax cynica,bow down or we will vaporise you?nothing new about appeasing dictators and we all know the outcome,bad luck if you have them as neighbours,

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