Chinese President Xi Jinping seems to be in shock. He sent a rocket to the dark side of the moon, built artificial islands on disputed reefs in the South China Sea and recently seduced Italy into parting ways with its European partners and joining China's Belt and Road Initiative. At the same time, the simple position of US President Donald Trump neutralized America's soft power and influence.
China's economic performance over the past four decades has been truly impressive. It is currently a major trading partner for more than a hundred countries, compared to about half that number for the US. Its economic growth has slowed, but its official annual growth rate of 6% is more than twice that of the US. According to generally accepted forecasts, in the next decade the Chinese economy will overtake the US economy in terms of volume. But it is also possible that Si stands on glass legs. No one knows what the future holds for China, and there is a long history of wrongly predicting systemic collapse or stagnation. While I don't think one or the other is possible, there is a prevailing opinion that exaggerates China's strengths.
To Westerners, the divisions and polarization in their democracies are visible, but China's successful efforts to hide its problems cannot make them disappear. Sinologists, who know much more than I do, describe at least five basic long-term problems facing China.
First is the unfavorable demographic profile of the country. China's labor force reached its peak in 2015. The population is aging and China will face a serious increase in health insurance costs, for which the country is poorly prepared. This will be a significant burden on the economy and will reinforce growing inequality.
Second, China must change its economic model. In 1978, Deng Siao Ping wisely realigned China from Maoist autarchy to the East Asian export-based growth model, which Japan and Taiwan have successfully applied. However, China today has outgrown the model and patience of the foreign governments that made it possible. For example, US Trade Representative Robert Lighthizer focuses on the lack of reciprocity, the subsidization of state-owned firms and the forced transfer of intellectual property, which has allowed China to reorient the playing field in its favor. Europeans complain about these problems. In addition, China's intellectual property policies and deficiencies in the rule of law hinder foreign investment and cost them the international political support that such investments often bring. And China's high level of state investment and subsidies in state-owned enterprises hides the inefficiency of capital allocation.
Third, while China has reaped the benefits of relatively easy reforms for more than three decades, the changes it needs today are much more complex to implement: an independent judicial system, rationalization of state-owned firms, and also system liberalization. hukou - registration by place of residence, which limits mobility and promotes inequality. In addition, Xi reversed Deng's political reforms related to the separation of party and state. This brings us to the fourth problem.
Strange as it may seem, China is a victim of its own success. The Leninist model, imposed by Mao in 1949, built well on China's imperial tradition, but rapid economic development changed China and its political needs. China has become an urban, middle-class society, but its ruling elites remain trapped by the same political reasoning. They believe that only the Communist Party can save China and therefore any reform should strengthen the party's monopoly on power. And that's exactly what China is doing ne should. Party elites, who derive enormous wealth from the existing system, oppose deep structural reforms that could help the country wean itself off existing state investment in state-owned enterprises. Xi's anti-corruption campaign is powerless to deal with that opposition; on the contrary, the initiative is only discouraging.
During a recent visit to Beijing, a Chinese economist told me that Xi's campaign is costing China 1% of GDP annually. The Chinese businessman also said that the real growth would be less than half of the official indicators. It is possible that this can be countered by the dynamics of the private sector, but even there the fear of losing control increases the role of the party. Finally, there is China's soft power deficit. Si announced the "Chinese Dream" of returning to world greatness. As economic growth slows and social problems increase, the party's legitimacy will increasingly depend on similar nationalist appeals. Over the past decade, China has spent billions of dollars to make itself more attractive to other countries, but international opinion polls show that China has not received an adequate return on its investment. The suppression of problematic ethnic minorities, the imprisonment of human rights defenders, the creation of a surveillance state and the rejection of creative representatives of civil society, such as the famous artist Ai Weiwei, have compromised China's appeal in Europe, Australia and the US. In some authoritarian states, China's reputation may not suffer for pursuing such a policy, but modern authoritarianism does not ideologically resist what communism resisted. Decades ago, young revolutionaries around the world were inspired by Mao's teachings. Today, despite the fact that "Xi Jinping Thought on Socialism with Chinese Characteristics" was included in the Party Constitution, few young people in other countries carry that banner.
China is a country that has both strengths and weaknesses. American strategy should not exaggerate either of them. The importance of China is growing and the relationship between the US and China will be a cooperative rivalry. We must not forget a single part of that description. No country, including China, is likely to surpass the US in general power anytime soon, but the US will have to learn to share power as China and other countries grow stronger.
By maintaining its international alliances and domestic institutions, America will gain a relative advantage.
The author is a professor at Harvard University
Copyright: Project Syndicate, 2019.
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