China just celebrated the 72nd anniversary of the People’s Republic of China. One has to be impressed with the accelerated growth of the Chinese economy and military in such a short time frame, from the desperately poor country it was in the mid-1970s when I first visited the PRC, to a country that is both a global economic and military rival in today’s world.
Trying to determine the ambitions of China’s current leadership is a bit like looking into a crystal ball. A clear crystal ball would tell you those ambitions are manifest in President Xi Jinping. He’s demonstrative and overtly easy to read. With Maoist inclinations, he wants China once again to be the world’s “Middle Kingdom.”
But crystal balls can also be murky, especially when one tries to discern the sentiments of other members of the Communist Party’s Politburo, and how they feel about the increasingly suffocating escalation of Xi Jinping’s authoritarianism. The cloudier part is further manifest in the requisite economics and international relationships required to govern, satisfy, and keep healthy a nation of 1.4 billion hungry people and pensioners. It’s an exceedingly complex business.
All that being said, from a global perspective, China is the obvious “elephant in the room,” both militarily and economically. Let me count the ways.
China leads the world so far in the development of hypersonic weapons, virtually undetectable, traveling at speeds in excess of 3,000 mph, and without nuclear warheads can destroy ships or other precision targets with their meteor-like kinetic energy.
China has also amassed a standing army of about one million soldiers, the largest in the world. Its threats to seize control of Taiwan are no longer idle threats. As reported in the New York Times, since last Friday, “Chinese military planes flew into the island’s “air defense identification zone.” The first group of aircraft included two H-6 bombers and 22 fighter jets, according to the Taiwanese ministry.” The U.S. is in a weak position to do much about it.
Economically, China is an essential market for the United States, even though we run regular billion dollar trade deficits ($75.7 billion by June of this year), and that’s despite U.S. tariffs. In short, we are handing China billions in U.S. currency allowing them to stockpile their foreign currency reserves.
China has been overt in its intention to out-tech the U.S. Julian Barnes, a national security writer for the New York Times, wrote this past week that, “Chinese firms are collecting genetic data from around the world, part of an effort by the Chinese government and companies to develop the world’s largest bio-database… (and that) the National Counterintelligence and Security Center reported that the U.S. needed to better secure critical technologies including artificial intelligence, quantum computing, semi-conductors and other technologies related to the so-called bioeconomy…. that officials are now stressing the intersection of technology and genetic and biological research as an area of competition and espionage.”
It’s hard not to be concerned about these evolving circumstances. China and Russia have been assiduous in challenging the global status quo in a new kind of cold war, razor-focused on dominance, while we seem fatuously-focused on culture wars.
But here’s a segue to the other side of the coin. Communist Party leader Xi Jinping has become increasingly focused on developing a consumer economy, letting cheap manufacturing move to the Vietnams of the world, and reverting to greater reliance on state-run industries. As ever was, promises made to western companies trying to benefit from the massive Chinese market require the warning to beware the Siren calls of promised opportunity and operational autonomy. Promises made regarding Hong Kong 25 years ago have been dashed on the rocks of reality, and 25 years is a nano-second in history.
Good defenses understand opponent’s weaknesses, and China has some vulnerabilities. China’s population is aging at one of the fastest rates in the world. That makes it hard to keep pensioners happy and to keep enough young workers in the needed labor force.
China also has a “coal problem,” which some are now calling an energy crisis, affecting industries and consumers with periodic rolling blackouts especially in northern China. Chinese coal production increased by 4.4% this year, but energy use jumped by 14% and imports dropped by 10%.
The benchmark price for coal has increased almost 100% from March of this year to the end of September. It is so coal-dependent for power that it has both a climate-change leadership problem heading into the climate summit in Scotland as well as a stubborn pollution problem with noticeable social fallout, and in China, the buck stops with the Communist Party. What to do? Let the power companies pass the costs on to consumers or continue with consumer price controls at the expense of the industries?
Foreign companies and investors are getting anxious too. China’s economy is rapidly slowing. Aggressive state regulation and emerging economic problems are making them nervous.
China’s real estate problems are massive and pretty straight forward — too much supply and too little demand.
The indebtedness problem of its biggest developer, Evergrande, may be the tip of the iceberg. Developers took on more than five trillion dollars in debt, and that bubble may burst. As reported in Foreign Policy, MIT professor Rudi Dornbusch remarked, “The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.”
Make no mistake, China is a massive elephant in the room of the world. It wants to out compete us. And yet, if it gets a fever, much of the rest of the world can get sick, and I’m not just punning on COVID-19. We are in a 21st century “cold war,” with an imperial China and a lesser-so Russia. As a nation, our focus must be on China’s challenges and how we respond. We can ill-afford ideologues leading us into the abyss of unfocused and wasteful culture wars.
Bill Sims is a Hillsboro resident, retired president of the Denver Council on Foreign Relations, an author and runs a small farm in Berrysville with his wife. He is a former educator, executive and foundation president.
