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China: Instability on the horizon

A detailed analysis of the state of affairs in China – a nation with the second largest economy at the disposal of a dictator for life in a state of self-induced atrophy is an international problem.

China: Instability on the horizon
In China, three facets are in flux  – Demography, Leadership and Economy. By itself any one can create a macro instability in China. (Photo Courtesy: IE)

By Lt Gen P R Shankar (R)

The 20thParty Congress signalled the end of Deng’s reform and opening whose constituents were stable consensual politics, private enterprise, foreign investment, greater freedoms and improved international relations. It was a period of ‘strategic opportunity’ in which China rose to be the second largest economy. It guaranteed security in an interconnected and globalised world.

In the new post 20th Party Congress era,China has ‘two establishes’ with Xi as ‘the core leader’ and ‘Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era’ as ‘the core ideology’. The ‘two safeguards’ protect the ‘ two establishes’. Xi Jinping’s thought intends to correct societal and political ‘imbalances’ with ideology driving policy and security trumping the economy. This a world where risks and challenges are concurrent, uncertainties and unforeseen factors are rising. ‘Black swan’ and ‘gray rhino’ are predicted to hound China. External attempts in a severe and complex international situation are expected to blackmail and contain an unprepared China and threaten national security. The `Xi Thought’calls‘national security’ the ‘foundation of national rejuvenation’ while seeking to establish a Sino centric world through assertive foreign and security policies.

In this lofty visage Xi Jinping and his rising China are set to dominate the world. However,how this ‘Chinese Dream’ is to be achieved is less than hazy and not even outlined. A month later, the news and assessment coming out of China indicates while changes are afoot, the Chinese Dream is darker than we imagined. The paradox of a falling trajectory of a rising China is stark.

Against this background, one has to understand that all changes create instability in any system. In China, three facets are in flux  – Demography, Leadership and Economy. By itself any one can create a macro instability in China.However, when these changes are synchronic and armed with a growing military, they portend a larger instability which will cast its shadow on a global scale. It also needs to be understood that the changes must be seen against the canvas of the debilitating effect of the Ukrainian War on international relations and global economies, the adverse global effect of the pandemic and the prevalent effect of Zero-Covid on China.

People

The hard working and largely homogenous population are the core strength of China. After all it is a Peoples Republic! The demography of the core and its behaviour is morphing and declining. The population was expected to peak in 2030 but the decline has advanced to commence this year. As per Chinese sources, out of China’s 31 provinces, 13 reported more deaths than births last year. In six provinces, the population declines were first time occurrences. All this is due to constantly decreasing fertility rates.This is compounded by declining marriage rates. Currently, 18.9 per cent of the population is aged above 60. This will keep increasing with time. It will affect the supply and demand in China’s economy. It will also have societal effects. Qualitatively, in one generation China will lose approximately 50% of its educated class. The days of China’s youth working from 9am to 9pm, 6 days a week is receding. The trend is towards a minimalistic lifestyle represented by ‘Tang Ping’ (lying flat) and ‘Bailan’ (let it rot). There are indications that Chinese youth may not be motivated by nationalism as before. The issue is that this change was expected. Nothing much was done about it. Whatever was done was grossly inadequate. Now, the pace at which things are moving is totally unexpected. Last year, when I wrote about thisphenomenon, it was estimated to be far over the horizon. However, it has advanced at an unprecedented pace quite unexpectedly. The demographic decline is here and now, irreversible and the fastest in human history. The change apart from being unexpected is taking place at a pace where the outcomes are unknown. This coincides with Xi Jinping’s third term. He will do his best to offset the negative effects of this decline. However there are limits to it. Till recently the thought was that China will get old before it becomes rich. If the policy of security being placed above economy is any guide, Xi could aim for China becoming a superpower before it gets old and prepone all timelines. That is trouble. There are also assessments that China’s population has already started to decline and it is no more the most populous nation in the world. That is bigger trouble. Population and demographic instability in China will be endemic till it ages and becomes peaceful like Japan.

Political System and Leadership

Minxin Pei in his article Xi Jinping and the Paradox of Power has beautifully explained ‘the power paradox.’ It explains the inverse relationship between the amount of power amassed by a strongman and his sense of security: the more power he gets, the less secure he feels. The comparison between Mao and Xi Jinping in the article is revealing.By side-lining all opposition and filling the Politburo and its Standing Committee with loyalists, he has built an ivory tower for himself. Another important factor is that, his handpicked loyalists are bound directly to him and might not be on same page with each other. It is more of a hub and spoke structure. The Xi team could degenerate into competing power centres as is the legacy in China. The unwritten rules and customs on age and terms of Chinese leaders were established after the Cultural Revolution when purges, infighting and concentration of power threatened to derail the Party. That has been broken and China in a ‘back to the future’ scenario.Against this backdrop, Xi has started his is third term with absolute power, great ambitions and no concrete plans to solve China’s issues.There is no clarity that he will be able to revive the economy, save the BRI, achieve technological self-sufficiency or head off the demographic bomb. The track record of Xiconomics and the Xi Jinping rate of growth indicates exactly the opposite. The alternate vison he offers to the world only inspires failed countries like Pakistan and North Korea and coerces those in China’s debt trap. Importantly every great communist leader in China’s recent history has left behind a sorry legacy for the next to inherit and Chinese people to suffer. Mao’s legacy was the Great Leap Forward and the Cultural Revolution. Deng’s was the ‘One Child Policy’. Xi Jinping has already made the mark by losing the trust of the wealthy nations with his hard turn to the left and a politically motivated Zero Covid. Both ideas have ruined a once prosperous economy. China under Xi Jinping has been on a high steroidal dose of ideology and nationalism. His assertive and ambitious ‘Rejuvenation’ and ‘Chinese Dream’ projects portend greater instability as also another sorry legacy for the future. That is as destabilising as it gets.

Economy
China’s economy was set for a slow down even before Xi Jinping came on line. His hard turn to the left, emasculation of the private sector and promotion of the public sector have been tectonic shocks to the Chinese economy. Xi Jinping’s policies have crippled the real estate and tech sectors. They are continuing to clock losses a year down the line. That is almost 40-45% of the Chinese GDP. Further when big private players start slashing salaries of their top executives so as to sustain their lower level staff, one realises that the common prosperity program is going to be the spicy wrecker of the economy. This is being compounded by the Zero Covid which has led to factory closures, supply chain disruptions, export slowdowns, unemployment et al. While indications are to exit Zero Covid as per the national government, the responsibility to curb cases is of the provincial governments. In a clear case of conflict of political interest and passing the buck, the politically loaded policy will continue to hold down the Chinese economy for long. It is a trap, set and sprung by the Chinese for themselves. It gets stickier if one heeds to Michael Pettis’s view that China’s economy is locked into low domestic demand and is it is difficult for it to get out of the ‘export-orientation trap’.When seen holistically, the Chinese economy seems mothballed. This is reinforced by headlines like ‘China urged to hand out consumption vouchers to help local governments, boost spending ‘and ‘China urged to ensure stable economy, fix ‘fragile’ wealth accumulation before seeking common prosperity’which have started appearing in Chinese media written by Chinese experts. The fat is in fire. The Xi Jinping fix to this situation is more debt fuelled investment in risky infrastructure, which is part of the problem in the first place! Simply put there is too much analysis and news of the Chinese economy in all kinds of media. All this points to the fact that there are no easy fixes for the tangle in which the economy is in. The international response to this has been ‘offshoring’ or ‘friendshoring’. That in simpler terms is long term instability.

The Gun

The PLA is being developed into the strongest and the most modern military on earth as per well-defined time lines – full mechanisation by 2027, modernised military by 2035 and a world class military by 2049. It is the instrument to achieve ‘national rejuvenation’. It also has been tasked to ‘shape [China’s] security posture, deter and manage crises and conflicts, and win local wars.’ There is no expense being spared to build a informatized and intelligentized instrument of war.  Xi has also emphasised on intensification of troop training and enhancing combat preparedness across the board, strengthen all-around military governance, and consolidate and enhance integrated national strategies and strategic capabilities. This is a hammer in search of nails.

Prognosis
Look at it anyway. What I have outlined are facts as they have appeared in authentic sources. These facts will induce instability in China and keep it so for a long time. Look at it another way. A nation with the second largest economy at the disposal of a dictator for life in a state of self-induced atrophy is an international problem. The problem compounds itself when the dictators aspirations of heading a superpower are receding into the horizon. He can not let go of his dream. So he turns to his gun from whose barrel, power flows. That is the history of China. Mao invaded India at the height of the great famine he manufactured through his great leap. Xi has attempted to emulate Mao – once at Doklam and the second time in Eastern Ladakh when his internal situation was far more stable. As Xi Jinping attempts his own unstable leap, any guesses where he is heading with his outsized gun? Just look at history – past and recent. Xi might talk Taiwan but he is looking constantly at India.

The author is PVSM, AVSM, VSM, and a retired Director General of Artillery. He is currently a Professor in the Aerospace Department of IIT Madras. He writes extensively on defence and strategic affairs @ http://www.gunnersshot.com.

Disclaimer: Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.

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