Over the last decade or so, the tendency among China watchers has been to see China’s rise as an endless upward progression. Just as happened during the Cold War when the Soviet Union was viewed as a colossus that in fact had feet of clay, China’s economic and diplomatic successes are significant but often have been exaggerated, while its weaknesses have been ignored or underestimated. Only now, amidst bad news for China’s economy, have observers awakened to certain Chinese realities.
Chinese Realities
The first reality is that China’s post-COVID economy is sputtering. It faces deflation—falling prices amidst stagnant domestic demand for goods, a collapsing real estate market, declining exports and imports, and very high government debt. For a regime that relies on domestic strength as the foundation of foreign policy success, this economic weakness has to be troubling. Xi Jinping has made internal security the hallmark of his administration, and if the economy isn’t delivering growth with equity, political trouble may lie ahead—which helps explain efforts to reinforce communist party discipline in the military, double down on repression in Xinjiang, Hong Kong, and Tibet, and deal harshly with dissidence among lawyers and human-rights activists. In short, there’s considerable unrest and uncertainty in the empire.
The second reality is abroad. China’s principal partners, Russia and North Korea, are liabilities as well as assets. Putin’s war on Ukraine undermines Chinese diplomacy in Europe and adds to China’s America problems, while North Korea’s nuclear and missile threats bring a dangerous instability to the Korean peninsula. In Central Asia, China is competing with, and actually out-competing, Russia in relations with the former Soviet republics: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. In South and Southeast Asia, China inspires both fear and awe. Most countries accept the need to accommodate China, which is their dominant trade partner. But while China has predominant political influence in Laos, Cambodia, and Myanmar (Burma), other governments, including India, Vietnam, Indonesia, and Thailand, look to the US as a balancing power against China. Polling of citizens and elites in Southeast Asia points to more positive feelings toward the US than toward China.
Before the Ukraine war, even the closest US allies, Japan, South Korea, and Australia, were willing to accommodate China: Japan, by refusing to commit to defending Taiwan in case of war and by restraining its military capabilities; South Korea, by forging a close trade relationship and not fully embracing THAAD, a missile defense system aimed at both North Korea and China. But now, all three have re-committed to tight security ties with the US and with each other. Japan and South Korea concluded their first summit in twelve years in March, and this weekend at Camp David, they joined the first summit hosted by a US president, where the three countries agreed to respond as one to regional threats—meaning, of course, from North Korea and China. Korea and Japan are also imposing export controls on high-end computer chips normally sent to China. Japan has also embarked on a military buildup aimed directly at China. Australia and India have followed suit, becoming part of the Quad security dialogue and the AUKUS group.
Money Doesn’t Always Talk
China’s chief calling card is money, specifically, its Belt and Road Initiative (BRI) loan program that has spent hundreds of billions of dollars globally, mainly to developing countries. Most Asia-Pacific countries have joined the BRI. Some analysts think the BRI is a very successful effort to meet developing countries’ needs without imposing onerous conditions (in contrast with loans from the World Bank and IMF). Others see BRI as a debt trap that creates dependence on China, leading to sacrifices of sovereignty such as control of ports. Serious studies of the BRI show that it is neither all one nor all the other. But one thing is clear: the BRI has become a Chinese debt burden, and given China’s economic woes, chances are good that Beijing will not be nearly as generous as in the past.
Some Chinese actions are undermining the BRI’s appeal. Take the Southeast Asian neighbors that rely on the Mekong River for fishing. Chinese dams are taking a large bite out of their fishing industry, arousing anger. Mongolia, long economically dependent on China, is now reaching out to the US for trade and has just struck a major deal with Google for computer assistance. Competing territorial claims in the South China Sea have put China at odds with Vietnam and the Philippines. Vietnam and the US have just agreed to a strategic partnership, and President Biden will visit Vietnam September 9. The Philippines, which under Rodrigo Duterte had accommodated China, now, under Ferdinand Marcos Jr., has reverted to a strategic partnership with the US in response to Chinese pressure in the South China Sea. Most recently, a heavily armed Chinese coast guard vessel tried to block a Philippines supply boat from reaching a beached ship that marks its claimed territory in Mischief Reef. The Philippines is opening four additional military bases to the US, and is restarting joint naval patrols with the US. But it has rejected a Chinese invitation to conduct joint patrols—a strange request considering that China still uses its nine-dash line to claim a vast swatch of the South China Sea.
In sum, if you’re looking at the world through the eyes of Chinese leaders, you see obstacles on the home front that demand attention and resources at the very time a new Cold War looms over Asia, with the US massing its allies to contain the presumed China threat. What Xi Jinping has found, just as Chairman Mao did, is that domestic weaknesses constrain Chinese actions abroad. Chinese leaders will always give priority to security at home over priorities abroad. Xi Jinping’s concept of “comprehensive security” makes that plain. That perspective should inform the analysis of China hawks in Washington.
In the Human Interest - Mel Gurtov 
Mel, this is the best analysis of the situation I have seen, and it’s timely. I hope it gains attention in both Washington and the media. We’re getting a stream of anti-Chinese propaganda from the TV networks, it seems, with no voice countering the calls for heightened U.S. Defense readiness. So it’s important to spread this analysis as widely as you can. Keep up the good work.
(Oh, but on the other hand, why the harsh criticism of EVs? That one could have been a little more balanced and fair, IMHO. The facts you amassed are accurate, says I, proud owner of a none-year-old Chevy Spark EV, but they could be balanced by acknowledging that EVs rarely, if ever, need repairs and save many resources on that account alone, over their lifetimes. Plus the work going in seeking to recycle the raw materials is so promising that this phase of the natural resources problem could fairly be seen as a passing phase. Even if I’m wrong, the whole issue is so important that I suggest it deserves a deeper consideration.
To learn more, come out to the Electrify LO Fair that our group, Lake Oswego Sustainability Network, is presenting September 23 at the LO Methodist Church. Lots of information, owners and our cars, dealers offering test drives, and lectures and exhibits of home electrification equipment and ways to finance them.)
Jim
Good piece. Clever title. ________________________________
Now here’s an idea. Is it at all possible that Xi Jinping might consider adopting a technique from Texas governor Greg Abbott in order to bolster China’s “comprehensive security” and stimulate its flagging economy? How rad is that? The idea is “foreign direct investment” and it’s on display right now in Austin, Texas. There, 1,400 acres of land leased to Samsung has triggered tens of billions of direct investment in new advanced chip manufacturing plant and equipment. As important, the investment will lead to modernization of the state’s decrepit electricity and water infrastructure–public investments that would never be imaginable without the Samsung multiplier. Of course there would have to be important variations suitable to the Chinese environment. But there could be interest on the part of various semiconductor manufacturers–some of whom are already in China, operating under a 1-year waiver from new U.S. restrictions.
You’ll need to sell the idea to the US Congress and the administration, not to the Chinese. All are busy pushing legislation to limit precisely the kind of advanced technology investments that you (and I) advocate. And for good measure, the administration has also succeeded at persuading the Dutch, the Koreans, and the Japanese to follow the US lead.
A couple of days ago, the U.S. Commerce Department did extend the 1-year waiver from the restrictions granted to Samsung, SK Hynix, and Taiwan Semiconductor Manufacturing Co. And there are reports of additional extensions underway.
As to China, the obvious point to note is that foreign direct investments have been falling. It’s not clear what combination of factors account for the trend reversal. Pandemic? U.S. policy? China’s economic policy.
I have a different interpretation. The waivers are for foreign companies, intended to ease the pain of suddenly having their chips businesses cut off by having to follow the US lead. The waiver also is somewhat self-interested. As reported in Asia Times, the waivers allow these companies “to ship US tools to their mainland labs without having to apply for a license. . . . The waiver can [also] help prevent widespread disruption in the global semiconductor supply chain.” It’s the US policy, which is becoming more stringent, rather than the 1-year waivers, that seem most important to me.
As for China’s policy on FDI, I think all 3 factors you mention are at play. These days, Xi Jinping is looking at greater Chinese self-reliance, recognizing that China’s reputation (which I’ve blogged about recently) is taking hits in the US, EU, and elsewhere.
Recent posts on Iran, China, and Vietnam are superb. tho the first two add to my despair.