China: Rise or Demise?

36 Pages Posted: 25 May 2021

Date Written: May 18, 2021

Abstract

Policymakers increasingly view China’s rapidly growing wealth as a threat. China currently ranks second, or perhaps even first, in the world in gross domestic product (although 78th in per capita GDP), and the fear is that China will acquire military prowess commensurate with its wealth and feel impelled to carry out undesirable military adventures.

However, even if it continues to rise, China does not present much of a security threat to the United States. China does not harbor Hitler‐​style ambitions of extensive conquest, and the Chinese government depends on the world economy for development and the consequent acquiescence of the Chinese people. Armed conflict would be extremely—even overwhelmingly—costly to the country and, in particular, to the regime in charge. Indeed, there is a danger of making China into a threat by treating it as such and by engaging in so‐​called balancing efforts against it.

Rather than rising to anything that could be conceived to be “dominance,” China could decline into substantial economic stagnation. It faces many problems, including endemic (and perhaps intractable) corruption, environmental devastation, slowing growth, a rapidly aging population, enormous overproduction, increasing debt, and restive minorities in its west and in Hong Kong. At a time when it should be liberalizing its economy, Xi Jinping’s China increasingly restricts speech and privileges control by the antiquated and kleptocratic Communist Party over economic growth. And entrenched elites are well placed to block reform.

That said, China’s standard of living is now the highest in its history, and it’s very easy to envision conditions that are a great deal worse than life under a stable, if increasingly authoritarian, kleptocracy. As a result, the Chinese people may be willing to ride with, and ride out, economic stagnation should that come about—although this might be accompanied by increasing dismay and disgruntlement.

In either case—rise or demise—there is little the United States or other countries can or should do to affect China’s economically foolish authoritarian drive except to issue declarations of disapproval and to deal more warily. As former ambassador Chas Freeman puts it, “There is no military answer to a grand strategy built on a non‐​violent expansion of commerce and navigation.” And Chinese leaders have plenty of problems to consume their attention. They scarcely need war or foreign military adventurism to enhance the mix.

The problem is not so much that China is a threat but that it is deeply insecure. Policies of threat, balance, sanction, boycott, and critique are more likely to reinforce that condition than change it. The alternative is to wait, and to profit from China’s economic size to the degree possible, until someday China feels secure enough to reform itself.

Keywords: foreign policy, china, peoples republic of china, trade, trade policy, foreign trade policy, china threat, trade threat, trade disparity, world economy

JEL Classification: F00, F01, F02, F10, F13, F14, F15, F17, F19, F20, F21, F30, F50, F51, F52, F53, F59

Suggested Citation

Institute, Cato and Mueller, John, China: Rise or Demise? (May 18, 2021). Cato Institute, Policy Analysis No. 917, Available at SSRN: https://ssrn.com/abstract=3852152

Cato Institute (Contact Author)

Cato Institute ( email )

1000 Massachusetts Avenue, N.W.
Washington, DC 20001-5403
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John Mueller

Cato Institute ( email )

1000 Massachusetts Avenue, N.W.
Washington, DC 20001-5403
United States

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