Is China a colossus, and will the 21st
century belong to the Chinese, as many think? Or is China a paper
dragon? Let's see.
The impressive economic growth China has experienced
in the last 40 years started in 1972 with President Nixon's rapprochement
meeting with Chairman Mao.
From that point, China's growth went into warp drive when
President Bill Clinton signed a China Trade Bill in
2001, which gave China a permanent most favored trade
status. Also under Bill Clinton, the U.S. approved China's entry as
a member into the World Trade Organization (WTO) in 2001.
The thought behind granting China these trade privileges –
and they are privileges – was that the totalitarian communist regime would
mellow and move toward a more open, liberal type of democracy. That
did not prove to be the case. As Steven Mosher, Asian expert and
author of Bully of Asia: Why China's Dream is a Threat to World
Order, says, instead, the U.S. "created a monster" in building
up China. To
quote him: "I think allowing China into the World Trade Organization
must rank as one of the greatest strategic blunders by any great power in human
history." This may be an overstatement, but not by much.
Looking at these events in retrospect, the Wall Street
Journal called
them a "transformational moment in the global economy – the
beginning of a new era in globalization."
And indeed it was, for no sooner was the ink dry on these moves
than companies began relocating factories (i.e., jobs) and capital to
China. What Bill Clinton considered the last greatest
legislative victory of his presidency was in fact the beginning of the
hollowing out of much of America's industrial base and
an explosion in U.S. trade deficits.
That's the history. Today, China is the second largest
economy in the world behind the U.S. Some
polls show that even Americans think China is already number
one. On top of that, China is building a modern military
and seems anxious to replace the U.S. as the country that sets the
norms for international trade.
As formidable as China may appear, some see it as a paper
dragon. Each step in China's rise was aided and abetted, and in some
cases actually engineered, by the United States. This happened by
several means. First, China's trade with the U.S., which was
key to its growth, has been asymmetric from the
start. China got far more from the agreements than it ever
gave. Not only were the formalities skewed to China's
favor, but U.S. leadership steadfastly turned a blind eye to copyright and
patent infringements and blatant theft by China of American
technology and trade secrets. Bully of Asia cites our
own FBI's accounting of these thefts to be worth $600 billion per year.
It is undeniable that for their own reasons, the U.S. financial,
political, and foreign affairs elite each wanted China to succeed by means fair
and foul, even if it was at America's expense.
America also contributed to China's rise in other
ways. As Peter Zeihan points out in The Accidental Superpower,
the China we see on maps today is an anomaly. Geographically
and historically, China is divided into three distinct regions – the north of
the militaristic Han, the central part of the traders, and the southern
area of secessionists. These parts do not naturally hold
together. The different regions want different things and access
to the world on different terms.
In addition to the wealth that came with trade,
there were other American factors that have allowed these regions to coalesce
into a coherent whole. It was America's victory in the Pacific
in WWII that eliminated the main threat to China, which was Japan. Prior
to the war, Japan took whatever in wanted in China and left the hinterland
scraps to the Chinese. China gained true sovereignty only with
Japan's unconditional surrender in 1945. And it was not only the
Japanese navy that historically hamstrung China, but
also European ones as well. These too were eliminated from
the Pacific, directly by the Japanese in the war and indirectly by
U.S. actions in Europe afterward.
As Zeihan puts it, America "crafted the best of all worlds
for the Chinese. It eliminated the only significant military and
economic rivals in East Asia. It all but banned European influence
east of India. And it provided both the strategic freedom and
economic means to attempt true Chinese unification."
But that's all water under the bridge. What about
today? The unvarnished fact is that China is still greatly dependent
on America for its economic stability and even cohesion. In the
Brenton Woods world, which America implemented, the Chinese, like others, took
advantage and designed their economy to be export-driven, basically aiming at
the open U.S. markets. The result: Ten to 15 percent of China's GDP
depends on exports to the U.S. And because much of this trade is
unfair, China enjoyed a continual trade surplus with America – some $275
billion in 2017 alone. Should the U.S. decide to play
hardball on trade or just merely demand that cross country-trade be fair,
China's internal stability would be shaken. And the Chinese know it.
Also, to feed its massive export machine, China has become the
world's largest importer of a wide variety of basic materials like high-tech
components, plastics, wood, food, etc., with oil being the most
prominent. The problem here is that China is hemmed
in. Its maritime routes run beside countries like Japan, the
Philippines, Indonesia, and Singapore. If any one of these countries
should become hostile, China's shipping could be disrupted. What
prevents this from happening is not the Chinese navy, not now or in the
foreseeable future. It's the U.S. Navy and the willingness of
America to keep the sea lanes open for all.
The thing is this. America does not have to do anything
directly to harm China. All that has to happen to shake China is for
the U.S. not to become isolationist, but just to 1) adopt a diminished, a more
traditional, interest in the world and 2) insist on fair trade.
Some fear that if the U.S. demanded fair trade with China and an
end to its technology theft, this would start a trade war. But as
President Trump recently said, when America is constantly running trade
deficits of hundreds of billions of dollars each year, a trade war is "good
and easy to win." Although the globalists and Chinese
apologists will dispute that point, the president's logic is hard to
refute.
And even if for some reason the U.S. continues to accommodate
China indefinitely, the Chinese still face a combination of nearly
insurmountable problems, ranging from China's enormous debt to its inherent
corruption and polluted environment to its unsolvable upside-down
demographics. Given all this, it is disputable that China will still
exist as a recognizable entity in 30 years.
China is much more fragile than commonly believed. It
may indeed be a paper dragon.