China – the country supposedly going to replace the United States as the global hegemon. The country whose ‘rise’ has been named the top news story of the twenty-first century by the Global Language Monitor. The country that is generally thought to be the superpower of tomorrow. Yet, do not be deceived. China is far from being the superpower of tomorrow. In fact, it is on the constant precipice of collapse. The Chinese economy is a paper tiger with the domestic situation in the People’s Republic being far from stable.
In order to understand this, trends of history must be analysed. Prior to the nineteenth century, China periodically closed itself off to foreigners while only engaging in trade through overland routes like the Silk Road. China remained united, but poor. European colonialism forcibly opened China up to intense international trade which had two effects. There was a massive increase of wealth in the coastal centres of trade while there was a dramatic increase to regional inequalities. The Qing Dynasty’s central control weakened substantially, instability gripped the interior, and the coastal regions preferred outright domination by the Europeans. This chaos lasted until the Communist takeover in 1949. Led by Mao Zedong, the Communist victory in the Chinese Civil War immediately resulted in a return to isolationism. Onward, China had a strong centralised government, but it was isolated and economically under-developed.
After his death in 1976, Mao’s successors gambled and tried to get the historic Chinese dream – wealth from international trade and a strong central government. Deng Xiaoping thought he could open China to international trade with no internal conflicts tearing the country apart. Once again, the coast became rich and prosperous and closely tied to outside powers. Cities like Shanghai became wealthy from inexpensive products and trade. However, the non-coastal regions remained poor and impoverished. Tensions skyrocketed, but Beijing managed to keep control. This has gone on for forty years, which does not seem very long. Yet, the question is whether China can continue to manage the internal forces building within itself.
China’s economy appears healthy and vibrant if you look at its rapid economic growth. But growth is only one factor to consider. The question is if this growth is profitable. While China may appear to be a capitalist country with private property, banks and other capitalist accoutrements, your connections count more than if you have a good business plan. Considering social ties and political relationships, loans have been given out for a range of reasons, none of them relating with the merits of business. This has increased chances of non-performing loans.
These non-performing loans are being managed through very high growth rates driven by low-cost exports. This decreases profit margins. Profitless exports drive a massive economic engine without it actually going anywhere and this is a severe underlying weakness of the Chinese economy.
The problem for China is that it is held together by money. Loyalty to Beijing is either brought or coerced by the People’s Liberation Army. When the economy stops growing, it is likely the entirety of Chinese society will shudder. In a country where poverty is rampant and unemployment is wide spread, the added pressure of an economic downturn will result in severe instability.
Recall how China has trended historically and how it split into coastal and interior regions between the Opium War and the Communist takeover. Wealthy coastal regions tried to break free of the central government as they had more in common with foreign investors. Today’s situation is the same. A Shanghai businessman has more in common with Los Angeles, New York and London rather than with Beijing. In the meantime, poorer areas will still suffer from impoverishment and will challenge Beijing to tax the coast.
There are three outcomes for China. The first is that it undergoes a substantial readjustment of its economy, and Beijing maintains authority which will result in China having to sit as a regional power. The second is a re-centralisation of China, where an economic downturn will result in Beijing clamping down, becoming isolationist again and re-assuming stability at the expense of the economy. This is more probable that the first, but the central government is filled with people whose interests oppose centralisation. Further, the coastal regions have everything to lose in this scenario.
The third possibility is that the stress of an economic downturn will result in the complete collapse of Beijing’s power. The weakening of the central government will result in regional fragmentation. This is the most plausible outcome for China as it fits more closely with Chinese history and benefits the coastal regions the most. Regional competition, perhaps even conflict, will subsequently grip China.
Regardless of the outcome, China is in no position to become the next global hegemon. The economy and internal stresses on society will give it far greater problems than it can handle. It is merely a paper tiger and it is far from dominating the world.
