1. China rising, but it can’t match up to American power; see why that is

China rising, but it can’t match up to American power; see why that is

China is no doubt going from strength to strength and is the most important rising power, economically and militarily, yet when seen relative to American power, it has a long way to go

By: | Published: November 25, 2017 3:50 AM
China, Xi Jinping, Donald Trump, china, OBOR, BRI, Two Centenary Goals, GDP, People Republic of China, Japanese economy, South Korea In PPP terms, China is the world’s largest economy (IMF, 2014), but viewed by per capita GDP rankings or nominal terms, the picture that emerges is different.

In China, President Xi Jinping is the man of the times, and of the moment. As China Daily beams—Xi is ‘a man who makes things happen,’ one who modestly enough is a ‘servant of the public’; Xi is also the ‘strategist behind China’s reform’ and the ‘architect of modernisation.’ Such epithets evade most other Presidents—including American President Donald Trump, who visited China recently. In fact, the overwhelming narrative of Trump’s China visit went in favour of Xi: How China, not America, is becoming great again. In reality, how does America accused of ‘retreating’ and China measure up? It is hard not to be blinded by China’s economic bling. While Xi’s political report card may be full of hiccups and question marks, even the worst critic will concede that Xi’s economic lead is phenomenal.

At China’s Nineteenth Party Congress, which concluded recently, the passage to Xi’s ‘new era’ includes an eye on significant economic goals. Xi has resolved to eradicate poverty by 2020, be an innovative power by 2035, global power by 2050 and modernise the PLA by 2050. Xi’s ‘One Belt, One Road’ (OBOR or BRI) essaying China’s investment in ‘hard’ and ‘soft’ infrastructure will touch more than 60 countries and is now enshrined in China’s Party constitution. Xi has a clear-cut vision too—to drive the realisation of China’s ‘Two Centenary Goals’ (what the Chinese call as liang ge yibai nian). China’s first centenary refers to 100 years of the Communist Party (1921-2021) and the first centenary goal refers to doubling GDP and per capita income from 2010 and making China a ‘moderately prosperous society’ (xiaokang shehui or simply, xiaokang). In fact, xiaokang is the shiny new catchphrase of China.

The second centenary refers to 100 years of the People’s Republic of China (PRC, 1949-2049) and the second centenary goal refers to boost the GDP per capita to the level of moderately developed countries and realise modernisation. These two goals were enshrined in the Party’s Constitution in 2012 at the Eighteenth Party Congress, that which Xi has committed to. China is no doubt going from strength to strength and is the most important rising power: economically and militarily, given that a militarily strong Russia exporting arms to many countries, including India and China, is nursing its economic woes. America’s ‘enemy’ for long has run out of steam. But is America making yet another one, out of China—hangs the question. As Zheng Bijian told us a decade ago, China’s power has to be seen relative to American power—it may be premature to compare China with America because China’s economy is one-seventh the size of the American economy and one-third the size of the Japanese economy.

In PPP terms, China is the world’s largest economy (IMF, 2014), but viewed by per capita GDP rankings or nominal terms, the picture that emerges is different. As Singaporean economist John Wong (2016) tells us, “China’s per capita GDP in 2015 was about $8,300 (compared to $56,000 for the US or $53,000 for Singapore).” Scholar Michael Auslin who recently noted the China-Japan tangle ‘great game’ in Asia, says that despite a “generation of economic doldrums, Japan remains the third largest economy,” with Japan’s per capita GDP (2016) at $38,000. The figures for the other members of the East Asian ‘tigers’ who escaped the ‘middle income trap’—South Korea, Taiwan and Hong Kong—are equally revelatory. South Korea is ahead at $27,538, Taiwan at $22,384 and Hong Kong at $43,681—significantly higher than China’s. While China is now journeying to ‘xiaokang’ or the first centenary goal, and will reach $10,000 (the World Bank cut-off for a developed economy) in the next few years, as Wong tells us, Japan’s per capita GDP reached $10,000 in 1965 and Taiwan and South Korea in 1992—decades earlier.

In the United Nations Human Development Report 2016 (HDR, 2016), in the overall index, China is placed at number 90.
Again, China’s military budget is the second largest in the world, estimated as anything between $150 billion and $215 billion in 2015—whatever the numbers, in reality, it is significantly lower than the American military budget ($597 billion, 2015). In fact, a large number of experts have said as much that if China tries to compete with America on this front, it might collapse, as the USSR did. When it comes to innovation and R&D, sociologist Zhao Litao has indicated that China’s gross domestic expenditure on R&D has increased from 0.90% in 2000 to 2.05% in 2014, but this is still behind Japan and South Korea characterised by greater expenditure in R&D of 3.49% and 4.36% of GDP.

The UNESCO report ‘How much do countries invest in R&D?’ suggests that the top R&D performers in absolute terms (in terms of R&D expenditure) are all large economies—America, China, Japan and South Korea. But this “ranking changes dramatically according to the data that will be used to monitor SDG 9 (Sustainable Development Goals; where R&D expenditure is seen as a percentage of GDP.” On this count, South Korea leads, followed by Israel, Japan, Finland and Sweden. These were some of the factors that underscored American Sinologist David Shambaugh’s essay on the ‘illusion of Chinese power’. Without negating China’s achievements, Shambaugh indicated that a substantial gap—normative and cultural, social, economic and political—exists between America and China.

Shambaugh refers to citation in professional journals—only 4% Chinese scholars are cited, as against 49% Americans, and the tally at the Nobel Prize stakes, among others. Shambaugh’s understanding that China is rising as a game-changer has great potential but is a ‘partial’ power—this must be common-knowledge amongst policy-makers in America. Perhaps, seen from the American eye, what may be unsettling to America is as Lawrence Summers (Former Secretary of Treasury) once surmised, “There is something odd about the world’s greatest power (America) being the world’s greatest debtor (to China).” A symbiotic relationship between America and China, in many ways, works to American advantage. As the ‘factory of the world,’ China, in fact, makes the life of Americans much easier—enabling access to cheaper goods without paying an enormous environmental tax; the notorious smog that plagues Beijing and Northern China is ample evidence.

Even in recent times, the Barbie doll, the iPad and now the iPhone X more than illustrate that the money that China makes in assembling dolls, iPads and iPhones is nothing in comparison to the money made on the design and other details that go into making these products, which benefit others more than China. For us in Asia, the rise of China may be good news. China’s actions such as articulating the ‘Asia Pacific Dream,’ lead in Regional Comprehensive Economic Partnership (RCEP) to link 10 ASEAN nations with six dialogue partners such as Australia, New Zealand, China, India, Japan and South Korea, support to free trade area in the Asia Pacific Region (FTAAP), supporting Asian Investment Infrastructure Bank, AIIB (2016) are giving Japan a run for its money in Asia.

Japan-backed Asian Development Bank (1966), Comprehensive and Progressive Agreement for TPP (CPTTP) and Quad (Japan, America, Australia and India) will be rubbing shoulders and competing with a China wanting to claw its way through Asian hearts with pandas and pipelines. Unfortunately or fortunately, nobody will be overlooking the artificial islands in the high seas either.‘Making China great again’ may have unintended consequences. Competition between China and Japan brings us a wealth of opportunities from both—and Japan may revise its pacifist constitution. America can anything but disengage from Asia. The times for not getting on any particular bandwagon haven’t been better.

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