The Illusion of Chinese Power

June 25, 2014 Topic: Grand StrategySecurityEconomics Region: China

The Illusion of Chinese Power

The belief that China is a global power is widespread, understandable, and wrong. 

As a result, in the realm of diplomacy—bilateral, multilateral and global governance—Beijing still demonstrates a distinct passivity and reluctance to get involved. It is far from being the “responsible stakeholder” that Robert Zoellick called for in 2005. Chinese diplomacy remains narrowly self-interested, and Beijing’s involvement in global governance is minimalist and tactical, not normative or strategic. The real business of Chinese diplomacy is, in fact, business. Examine the composition of the Chinese president’s or premier’s delegations abroad and one finds large numbers of corporate CEOs—in search of energy supplies, natural resources, trade and investment opportunities. Such mercantilist diplomacy does not earn Beijing international respect—and is, in fact, beginning to generate increasing criticisms and blowback around the world (most notably in Africa and Latin America).


CHINA’S MILITARY capabilities are another area where it is a partial power: increasingly a regional power, but by no means a global power. China is not able to project power outside of its Asian neighborhood (other than through its intercontinental ballistic missiles, space program and cyberwarfare capacities), and even within Asia its power-projection capacities remain limited (although growing). It is not at all certain that China could project military power on its periphery out to five hundred nautical miles (such as in its East or South China Sea disputes) and sustain it long enough to prevail in a conflict. Its military forces are not battle-tested, having not fought a war since 1979.

To be sure, China’s military modernization has been advancing steadily for twenty-five years. It now has the world’s second-largest military budget ($131.6 billion in the 2014 official budget), largest standing armed forces, scores of new advanced weapons, a navy that is sailing further and further out into the western Pacific Ocean and occasionally into the Indian Ocean, and a modest aircraft carrier. So China’s military is no pushover. It is certainly capable of defending its homeland, and could likely now wage a successful conflict over Taiwan (absent a fast and full American intervention). China is also perceived to be a regional military power in Asia and thus is altering the balance of power in the region, but Chinese military forces still possess no conventional global power-projection capabilities. China has no bases abroad, no long-range logistics or communications lines, and rudimentary global satellite coverage. The navy is still primarily a coastal littoral force, the air force has no long-range strike ability or proven stealth capacity, and the ground forces are not configured for rapid deployment.

Moreover, strategically, China can be described as a “lonely power”—lacking close friends and possessing no allies. Even in China’s closest relationship (with Russia), elements of distrust and historical suspicions percolate beneath the surface of seemingly harmonious state-to-state relations. Not a single other nation looks to Beijing for its security and protection (except perhaps Pakistan)—thus demonstrating a distinct lack of strategic influence as a major power. Quite to the contrary, other countries in Asia are seeking to bolster their defense ties with the United States and improve their coordination with each other—precisely because of the uncertainty and possible threat they perceive from China.


TURNING FROM hard power to soft power, how does China stack up as a global cultural power? Not well. No other societies are taking their cultural cues from China, no other countries are seeking to copy the Chinese political system, and its economic system is not replicable elsewhere. Despite the enormous efforts and resources the Chinese government has poured into trying to build its soft power and improve its international image since 2008, China continues to have a mixed-to-negative global reputation. Surveys of public opinion reveal that everywhere in the world perceptions of China are mixed, declining and increasingly fraught with problems.

China is not a magnet for others to emulate—culturally, socially, economically or politically. The problem for China in all four realms is that it is sui generis. China lacks universal appeal beyond its borders or ethnic Chinese communities. Largely because of China’s cultural, economic, social and political uniqueness, its global soft-power appeal remains weak to nonexistent.

China’s cultural products—art, film, literature, music, education—are still relatively unknown outside of China and do not set global cultural trends. As admirable as China’s economic development is, it is the product of a unique combination of features that cannot be replicated in other countries (competitive economies of scale, Soviet-style state planning, individual entrepreneurship, a large and disciplined workforce, a large research-and-development establishment and massive foreign investment). Even if a “China model” exists (which is debatable), it is not exportable, as this combination of growth factors exists nowhere else. China’s political system is similarly an eclectic amalgam of Leninist Communism, Asian authoritarianism, Confucian traditionalism and a strong internal-security state. Its distinctiveness cannot be replicated—there are no other states trying to do so, nor does one find foreigners seeking political asylum or citizenship in the PRC.


WHAT ABOUT China’s economic power? This is the one area where one would expect China to be a global power and trendsetter—yet China’s impact is much more shallow than anticipated. As in other areas, it is quantitatively impressive but qualitatively weak. China is the world’s largest trading nation, but its exports are generally low-end consumer goods; its products have poor international brand recognition; only a handful of its multinational corporations are operating successfully abroad; the total stock of its overseas direct investment (ODI) ranks only seventeenth internationally; and China’s overseas aid programs are a fraction of the size of those of the United States, European Union, Japan or the World Bank.

When evaluated qualitatively instead of quantitatively, China’s global economic profile is not very impressive. It remains a processing-and-assembly economy—not a creative and inventive one. Most of the goods that are assembled or produced in China for export are intellectually created elsewhere. China’s rampant theft of intellectual property and its government programs to spur “indigenous innovation” (which pour billions into domestic research and development every year) are clear admissions of its failure to create. This may, and likely will, change over time—but to date China is not setting global standards in hardly any technology or product line (or in the natural sciences, medical sciences, social sciences or humanities). Similarly, China only has two universities in the top hundred worldwide, according to the Times Higher Education World University Rankings for 2013–2014.

If China is to spur innovation, it will, of course, have to invest more in research-and-development funding. According to the National Science Foundation, in 2009 China spent only 1.7 percent of its GDP on research and development, compared with 2.9 percent in the United States, 2.8 percent in Germany and over 3.3 percent in Japan. The “research intensity” of China’s research-and-development spending does not even rank it in the top twenty nations globally, as an estimated 80 percent is spent on product development and only 5 percent on basic research. China’s lack of Nobel Prizes is also a telling indication. Between 1949 and 2010, 584 Nobel Prizes were awarded. Ethnic Chinese won ten of these (eight in the sciences), but eight of the ten worked outside of China. The two exceptions were the Liu Xiaobo’s 2010 Nobel Peace Prize and Mo Yan’s 2011 prize for literature. Citations in professional journals are another indicator. In the world’s most cited articles (across all academic disciplines), Chinese scholars account for only 4 percent—whereas Americans account for 49 percent.

As a result of China’s chronic “innovation deficit,” the nation is now mired in the infamous “middle-income trap.” The only way out of the trap is through innovation—as Japan, South Korea, Singapore and Taiwan previously proved. And this requires much more than government investment in research and development—it requires an educational system premised on critical thinking and freedom of exploration. This, in turn, requires a political system that is relatively open and democratic and does not permit censorship or “no-go zones” in research. Students and intellectuals must be rewarded—not persecuted or penalized—for challenging conventional wisdom and making mistakes. Until this occurs, China will be forever caught in the middle-income trap—assembling and producing but not creating and inventing.

Seen in this light, China’s trade juggernaut is much weaker than it appears on the surface. Similar weaknesses are evident in China’s ODI. Despite the high government priority for Chinese firms to “go out” into the world, so far China’s foreign investment remains quite small. As noted above, its total stock of ODI barely places China in the top twenty globally, although its annual outflows are growing rapidly and now rank third in the world ($88.2 billion in 2012). Yet this remains only one-fourth of American ODI in the same year.

More significantly, as in other areas of China’s global profile, one needs to delve beyond the quantitative statistics to ask qualitative questions: Where does it go, and is it real investment? The overseas destinations and composition of Chinese ODI have been shifting rapidly since 2011, but a large percentage remains portfolio funds flowing into locales like the British Virgin Islands and Grand Cayman Islands (which ranked as the second and third leading recipient destinations in 2011). Thus, some of this is not foreign investment per se—it is really money being parked abroad in safe havens. This is not only true for China’s government and companies, but also for individual assets. The 2014 annual Blue Book on Chinese International Migration, compiled by the Center for China & Globalization, recently reported that since 1990 a total of 9.3 million Chinese had emigrated abroad, taking 2.8 trillion renminbi ($46 billion in U.S. dollars) with them. This is not a new development, but has been a growing trend over the past decade. When a nation’s economic elites leave in such large numbers and are so anxious to secure their personal financial savings abroad, it speaks volumes about their (lack of) confidence in their own domestic political and economic systems.