Don't Mistake China's Economic Wavering for Weakness. It's Stronger Than Ever.

September 10, 2020 Topic: economy Blog Brand: The Reboot Tags: ChinaChinese DebtChinese Communist PartyEconomyDiplomacy

Don't Mistake China's Economic Wavering for Weakness. It's Stronger Than Ever.

There’s an emerging view that China is weakening, that its economic growth is “unsustainable”; and that it's veering towards collapse. But China isn't going anywhere. 

By contrast with their contemporaries in Eastern Europe and the Soviet Union, Deng Xiaoping and Li Peng demonstrated that they were perfectly relaxed about the idea of shooting, or running over with tanks, large numbers of their own people in order to ensure that they remained in power – and even more competent than Josef Stalin in air-brushing those events out of the collective memory of the people who remained alive.

And I suspect nothing has changed, at least in that regard, since then.

Indeed Xi Jinping has repeatedly shown that he’s prepared to do whatever is required to entrench the Chinese Communist Party as the source of all power in China, to sideline potential rivals and to remain in office for as long as he is capable of drawing breath (not least because he is smart enough to know that he has made a lot of enemies, and that they would take their revenge on him and his family and supporters as soon as he was out of power – as Putin did to Boris Yeltsin’s wealthy supporters).

Far from feeling “weak and insecure”, I think China feels strong and emboldened – not only by its apparent success in stopping the spread of the virus (admittedly after a number of initial serious missteps) but also by the manifest incompetence of the US administration in dealing with COVID-19, and its almost complete abdication of its traditional global leadership role (something that, to be fair, didn’t start under Trump).

Read more: The China-US rivalry is not a new Cold War. It is way more complex and could last much longer

That’s why Xi has explicitly discarded Deng Xiaoping’s dictum that China should “hide your capacities and bide your time” – much as, Woodrow Wilson and, more forcefully, Roosevelt and his successors all the way to George W Bush – were prepared to discard George Washington’s advice, in his 1796 farewell address (which was actually written by Alexander Hamilton) to “avoid foreign entanglements”.

Xi (and, as far as one can tell, most of the Chinese population) think that “now” is China’s “time”. That’s what he means by phrases like “the great rejuvenation of the Chinese nation” and the “Chinese dream”.

And of course China’s economy, notwithstanding its burden of debt, is much stronger than the Soviet Union’s ever was.

The closest the Soviet economy ever got to matching the United States’ was between 1974 and 1976 when it reached 44% of US gross domestic product. By the time Gorbachev took office in 1985 it was down to 38%, and in 1991, when the Soviet Union collapsed, its GDP was less than a third of the United States.

By contrast, measured in the same way, China’s economy surpassed the US economy in 2017, and this year is likely to be at least 10% bigger than the US (when compared using actual buying power – “purchasing power parity” – rather than the official exchange rate which shows the Chinese economy only about two-thirds of the US economy which is still a lot closer than the Soviet Union got).

…and its least-dependent in decades

It’s perhaps also worth noting that China isn’t really all that dependent on exports any more – in 2019 exports accounted for only 18.4% of China’s economy, down from a peak of 36% in 2006 and less than at any time since 1991.

Big economies, like China’s now is, tend to be relatively “closed”, which is why exports only represent 12% of the US GDP and 18.5% of Japan’s compared to 24% of Australia’s.

So, to summarise, I can’t agree with the proposition that China’s growth model is unsustainable and its leadership weak and insecure.

Of course, in the long run (when, as the economist John Maynard Keynes famously said, we’re all dead), it might turn out to be right. China’s government and its growth model might collapse.

But I’m not going to lie awake at night wondering whether it’s happened.

The Conversation

Saul Eslake, Vice-Chancellor’s Fellow, University of Tasmania

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Image: Reuters