China is a country like no other. With a history full of ups and downs, it now stands as one of the world’s global powers, a force to be reckoned with. Over the last few decades the most populous country in the world has been building its name as the fastest growing economy in the history, manufacturing powerhouse, place of great organization and home of hard-working, diligent people. In many ways, this brand was, and still is, well-deserved. Naturally, there have always been uncertainty and controversion present in the background, but with all its hiccups, China seemed to be tightening its relations with the western world and growing in strength. However, unfortunately, all good things come to an end, and today it seems like we might get to see it ourselves. Dark clouds are gathering over the Asian superpower and if the storm hits, no one will be left unaffected. Whether we like it or not, the troubles of China are now our troubles and we should stay awake to their existence. In this article we will first provide you with the necessary background of how China came to be, what it is today. Afterwards, we will consider a number of current issues, ranging from demographic crisis, and changes in political institutions to deterring relations with the US and conflict with Taiwan.
China’s miracle run began in the late 70’. After years of mismanagement under Mao’s communist rule, catastrophic policies, with the “Great Leap Forward” and consequent greatest famine in the history of humanity as a primary example, the necessity of a narrative shift was undeniable. With Deng Xiaoping taking over after Mao’s death, China was ready to surprise the whole world and come into the spotlight as the fastest growing economy ever. The new leader began the process of breaking away from the rigid communist ideology that has polluted China’s policies for years, and adopted a more pragmatic attitude. The economic reforms were broadly successful. Introducing individual property rapidly increased productivity and instead of famines, the Chinese agriculture sector was now producing food surpluses. Privatization gradually led to increase in production efficiency and the open door policy with introduction of multiple special economic zones attracted inflows of foreign capital. The free market model proved extremely successful, lifting up 800 million people out of poverty. Thanks to low labor costs, progressing globalization and foreign investment, China managed to make its name as a global manufacturing and exporting powerhouse. For a while it looked like China might be following the western path, and we’ll all live happily ever after, but the Chinese officials had a different idea. It became clear after the Tiananmen Square massacre that the economic liberalization was not to be followed by a political one. The democratic aspirations were silenced, but the economy kept growing. The question that arises now is of the sustainability of such a solution. With the totalitarian shift observable in Chinese politics over the last years and a number of serious threats looming over the horizon we ought to investigate this carefully, starting with the inconspicuous, but fatal issue of demographics.
China’s demography is among the most unique and simultaneously catastrophic in the world. Everyone knows about the one child policy and the news about the first population decline in 60 years has recently got a lot of media attention, but let’s look a bit deeper. According to official data the Chinese population is around 1.4 billion, although even at this point there is uncertainty. According to researcher Yi Fuxian the population might be grossly overestimated, with the real number being below 1.3 billion, over 100 million lower than the official statement. The same research indicates that the population has been falling since 2018. The “mistake”, aside from a deliberate manipulation, could be a result of local authorities overestimating their birth counts for the sake of increasing their government dotations. In any case, sticking with the optimistic data set, the UN predicts the Chinese population to shrink to as little as 488 million by 2100. To put this in context, China’s population over this century will be decreasing at double the rate of Germany's. Even more drastic changes are seen at the working age population, which peaked in 2015 at 998 million and is about to fall by over 20% to 767 million by 2050 and over 60% until the end of the century to “merely” 376 million. There are many unavoidable implications of these changes. Firstly, China can no longer base its economic expansion on the growing population and cheap labor. Moreover, it will need to face the challenges of an aging population on a larger scale than any other country in history. Primarily, a likely fall in their production capacity and an enormous pressure building up on their pension system. Virtually all economic systems around the world are based on growth, for China soon this might not be an option and it will be their unpleasant role of finding new solutions or serving as a warning sign for the rest of the world. Based on this data the picture ahead of China is dark, the officials might try resisting the reality and minimizing losses as they did by giving up the one child policy in 2016 and gradually introducing pronatalist policies, but it is already too late and on the demographic front there is no hope for the miracle run to continue.
Another worrying tendency manifesting itself over the last few years is the totalitarian shift of Chinese authorities. During the first decade of the 21st century, regardless of the Tiannamen incident, the narratives concerning China were relatively optimistic. The economic integration with the west was progressing and continuous spectacular growth was lifting living standards of the population. However, things were about to change after Xi Jingping’s rise to power in 2012. One of his first major strategic policies was the largest ‘anti-corruption” campaign in modern China. With this seemingly honorable effort Xi created a perfect opportunity to consolidate his position, getting rid of potential enemies and risks. As a result, over 120 high-level and 100,000 local political actors got arrested. Gradually, journalists, political commentators, researchers and anyone willing to criticize the regime have been silenced. The surveillance of regular citizens, with special emphasis on social media, became painfully obvious and successfully intimidated millions of people. Imagine the government banning all of your social media accounts and the power associated with this possibility... CCP went on to expand their control of society even further with an ideological war. Wide range of religious beliefs have been repressed over the last years, leaving the ideology of the party as the only alternative. Another dimension of China’s catastrophic policies is the Xinjiang Genocide against the Uyghurs - Turkic muslim minority living in the region. Since 2012, under the pretext of fighting terrorism, the CCP has committed acts that by many are considered crimes against humanity. Unfortunately, the situation hasn't improved since and with the Chinese constitution changed in 2018 enabling Xi to rule as a president for more than 2 terms, the hopes are not high. To see the ridiculousness of the situation let us notice that the vote resulted in 2,958 in favor, 2 opposed and 3 abstaining. There are many markers for states turning into totalitarian regimes, repression of free word, ethnic cleanses and deliberate eradication of religious beliefs are at the top of the list. In many ways China is following the path of the Soviet Union and that is something to be concerned about.
Even the free market, the backbone of China’s development, is under attack. One example of this tendency would be the sudden disappearances of Chinese billionaires, like the founder of Alibaba, Jack Ma, a short while after criticizing Chinese regulations. The business sector is gradually becoming a slave to the CCP’s regime. Historically, oppressive political institutions did not go in pairs with liberal economic ones. There’s a good reason for why that is the case: a free economy enables people to improve their living standards and gather wealth. Consequently the power and influence are diversified throughout society, giving populations the ability to fight against the elites hypothetically abusing their position. On the other hand, if the elites exist they have every incentive to resist economic liberalization in order to prevent the rise of competitors and secure their privileged positions. This pattern can be observed repeatedly throughout history and sooner or later one of the forces dominates the other leading society to a more permanent state with oppressive political institutions and limited economic liberties, or in the more optimistic scenario with economic freedom and inclusive political structures. In the case of China, current tendencies don’t give us much reason for optimism. The authorities in Beijing already have a significant level of control over the society and they have been working intensely on extending it over the last years. Additionally, 21st century technology enables the political elites to hold a much tighter grip over the population. The previously mentioned control of social media is a perfect example. With a full oversight over major information outlets the censorship and propaganda are incredibly efficient, and citizens do not have any safe place to engage in an open, truthful dialogue, or coordinate in common endeavors against the government. Unfortunately, there is more, the Covid epidemic was a perfect justification for drastic limitations of the population’s freedoms. The possibility of imposing strict lockdowns combined with China’s largest surveillance system in the world’s history enhanced the CCP’s control even further. With all this power in the hands of authorities, it is incredibly challenging for individuals and the population as a whole to fight back in defense of their freedoms. Consequently, the political elites are in a strong position to keep their devastating grasp over society and economic activity specifically.
Overview of Chinese economy
We now shall take a deeper look into the Chinese economy. As we have seen, economic freedom, the foundation of Chinese success, might be on a collision course with the interest of its leading party. Unfortunately, the second greatest - or even the greatest by some measures - economy in the world faces many challenges of comparable magnitude which in the current geopolitical environment might begin manifesting themselves with devastating consequences. First element to be considered is the dependence of the Chinese economy on international trade. China has been a huge beneficiary of globalization, access to cheap labor domestically and markets of Europe and US has been one of the main forces enhancing the economic miracle. The times have changed however. After decades of rapid economic growth, the labor is no longer as cheap as it used to, which is causing more and more companies to move their factories to countries like Vietnam, Bangladesh or Mexico. The utopian idea of globalization also had a rough ride, with a culmination in the form of the Covid epidemic. The narrative of shortening supply chains and increasing economic independence from imports has been loud and clear ever since all over the western hemisphere. Additionally, it is not only exports that China relies on. The immense growth would be impossible without massive imports of crucial resources. China is heavily dependent on oil and gas imports to meet its domestic energy needs. According to the International Energy Agency, China was the world's largest crude oil importer in 2020, accounting for approximately 20% of total global imports. In addition, China is also a significant importer of natural gas, with imports accounting for approximately 45% of its total gas consumption in 2020. Additionally, due to poor land quality, China is heavily reliant on imports of food and fertilizers. These import dependencies make the economy extremely vulnerable to supply shocks on the global markets and in case of a conflict could prove fatal to China’s existence. On top of all that, we can add the mess of the domestic housing market and almost 300% debt-to-GDP ratio, with slowing growth, to see that the picture ahead might not be as beautiful as it was and the reasons to worry are quickly stacking up.
China’s geopolitics, international relations
Having this broad overview of the cards that China is playing with we can take a look at the current state of the game. As the most populous country in the world and a global power China’s geopolitical situation is extremely complex and multidimensional and its in-depth analysis would require weeks, months or years of intense study. Nevertheless, we can provide a broad overview of the most relevant issues and current narratives. We will start off with the US-China relationship which has been recently getting a lot of attention. On one hand, the two countries have a highly interdependent economic relationship. However, the relationship has been strained by long-standing issues such as intellectual property theft, unfair trade practices, competition narrative and many more. Under the Trump administration, the US-China relationship became more confrontational. The US imposed tariffs on goods and placed restrictions on a number of Chinese companies like Huawei or Tik Tok due to concerns over their access to data and influence. The Biden administration has maintained a tough stance and under it we have seen a further escalation of the conflicts. Everyone has heard about the alleged Chinese spy balloons being shot down over the US. However, development and execution of Chinese military capacity has been a major concern for the US for a long time. Aside from a threat to the US itself, which still holds a broadly superior army, the main issue is Taiwan. The tiny Island is a major player on the semiconductor manufacturing market, which makes it a valuable asset for any of its allies. China considers Taiwan a renegade province and has not ruled out the use of force to bring the island under its control. On the other hand the US has every interest in keeping Taiwan independent from Beijing’s control, as a strategic ally on the border of a major competitor. The situation is uncertain and highly dynamic, just recently the Chinese foreign minister criticized the US for their involvement in Taiwan and the Chinese policies, saying that: “If the US doesn’t hit the brakes and continues to barrel down the wrong track, no amount of guardrails can prevent the carriage from derailing and crashing, and there will surely be conflict and confrontation,”. Similar accusations were later supported by Xi Jinping himself. Unfortunately, the list of conflicts continues. The US has recently expressed its concern about the possibility of China supplying Russia with lethal aid. This warning was followed by a direct demand for Beijing not to take such actions. The Chinese authorities answered by calling out the hypocrisy of the US for selling weapons to Taiwan, which China considers part of its own territory. On multiple dimensions narratives are becoming increasingly aggressive creating a risk for further escalations and potential direct conflict between the two global powers.
Undoubtedly, China is one of the most influential countries in today’s world and a global power. The success it experienced in the last decades and the scale of its impact is difficult to overstate. Nevertheless, progress is a continuous phenomena, it is never too late to fail and if we step off the right path we might be doomed to do so. The reasons for the economic miracle have been eroding over the years and new challenges have begun manifesting themselves. However difficult, many of them could be managed with proper actions. Unfortunately, the aims of Chinese policies have seemed to be focused elsewhere. The emergence of the totalitarian regime was the poison when the remedy was needed. The future ahead of China is full of concerns. However, as of today, it is still a global power focused on expanding its influence, technology and military. The fight with the US for the title of the most powerful country in the world has been ongoing for a few years already. Now with the population near its peak and the largest army in the world China is in its best position to do so. This fact combined with the power concentrated in the hands of few leads to the situation full of tension and uncertainty about potential developments.