The Atlantic’s China-based contributor Michael Schuman is sounding seemingly contradictory alarm bells. In a span of two days, he warns that the PRC is simultaneously imploding and trying to take over the world.
On Thursday, he proclaimed “The China Model Is Dead.“
China’s jobless college graduates have become an embarrassment to Chinese leader Xi Jinping. The unemployment rate among the country’s youth has reached an all-time high, putting the country’s severe economic troubles on display at home and abroad. In August, Xi’s administration decided to act: Its statistics bureau stopped releasing the data.
But Xi can’t hide China’s economic woes—or hide from them. The problems are not just a post-pandemic malaise, or some soon-to-be-forgotten detour in China’s march to superpower stature. The vaunted China model—the mix of liberalization and state control that generated the country’s hypersonic growth—has entered its death throes.
The news should not come as a surprise. Economists and even Chinese policy makers have warned for years that the China model was fundamentally flawed and would inevitably break down. But Xi was too consumed with shoring up his own power to undertake the necessary reforms to fix it. Now the problems run so deep, and the repairs would be so costly, that the time for a turnaround may have passed.
Contrary to the assumptions of many commentators in recent years, China may never overtake the United States as the world’s dominant economy if current trends continue. In fact, it’s already falling behind.
A downward trajectory in China does not necessarily ensure the future of American global power, however. China may turn out to be a less formidable competitor than once imagined and offer a less attractive model of development for the rest of the world. But economic failure could also heighten Xi’s determination to overcome American dominance—if not by becoming richer, then through other, possibly more destabilizing means.
There’s a lot more but that paragraph sets up yesterday’s follow-up piece, “Xi Jinping Is Done With the Established World Order.”
The world’s most powerful leaders gathered in New Delhi for the year’s premier diplomatic event—the G20 summit—but China’s Xi Jinping deemed it not worth his time. His absence sends a stark signal: China is done with the established world order.
Ditching the summit marks a dramatic turn in China’s foreign policy. For the past several years, Xi has apparently sought to make China an alternative to the West. Now Xi is positioning his country as a full-on opponent—ready to align its own bloc against the United States, its partners, and the international institutions they support.
Xi’s break with the establishment has been a long time coming. His predecessors integrated China into the U.S.-led global order by joining its foundational institutions, such as the World Bank and the World Trade Organization. For much of his tenure over the past decade, Xi has kept a foot in the door to that Western order—even as China’s relations with the U.S. have deteriorated. China even participated (though grudgingly) in G20 efforts to help alleviate the debt burden on struggling low-income countries.
But over the course of his rule, Xi has grown hostile to the existing order and intent on altering it. He has focused on developing alternative institutions that Beijing could lead and control. Xi formed the Asian Infrastructure Investment Bank to rival Washington’s World Bank, for instance, and promoted competing international forums, such as the Shanghai Cooperation Organization, whose membership includes Russia and Iran.
Xi is willing to hang on to some established institutions, such as the United Nations, that he thinks he can repurpose to promote his global aims. But apparently, the G20 wasn’t one of those. The Communist regime is sending Premier Li Qiang to the summit in place of Xi—a significant snub for a meeting that is supposed to be composed of top leaders.
Not surprisingly, the Chinese government has provided no explanation for Xi’s absence. But a simple rationale is easy to conjure: By skipping the G20, Xi is attempting to discredit it. The forum is filled with U.S. partners and therefore resistant to Chinese manipulation or control; moreover, it has mounted an effort to make the stewardship of global affairs more inclusive—it welcomed the African Union as a new member—and Xi likely sees it as competition for his own plans to win adherents in the global South.
In place of institutions like the G20, Xi has been pushing rivals that he thinks he can dominate or pack with friendly clients. One such forum is the BRICS group of developing countries, which includes Brazil, Russia, India, China, and South Africa. Xi has been lobbying for a rapid expansion of the BRICS membership, and at the group’s August summit, in Johannesburg, he got what he wanted. Six additional countries were invited to join, including at least three (Egypt, Ethiopia, and Iran) with close political and economic ties to China. Through such expansion, the economist Hung Q. Tran argued in a recent report, China aims to “turn the BRICS group into a support organization for China’s geopolitical agenda” and a “venue for anti-US political activism.”
Trading a major role in the G20 for the leading role in a collection of also-rans seems like a step down. But Schuman is almost certainly right that an economically weaker PRC is potentially a more dangerous and certainly more revisionist one.
A characteristically unsigned Economist analysis from a couple weeks ago (“Why China’s economy won’t be fixed“) argues that the two are very much liked, but reverses the directionality, blaming a changed leadership focus.
Why does the government keep making mistakes? One reason is that short-term growth is no longer the priority of the Chinese Communist Party (ccp). The signs are that Mr Xi believes China must prepare for sustained economic and, potentially, military conflict with America. Today, therefore, he emphasises China’s pursuit of national greatness, security and resilience. He is willing to make material sacrifices to achieve those goals, and to the extent he wants growth, it must be “high quality”.
Yet even by Mr Xi’s criteria, the ccp’s decisions are flawed. The collapse of the zero-covid policy undermined Mr Xi’s prestige. The attack on tech firms has scared off entrepreneurs. Should China fall into persistent deflation because the authorities refuse to boost consumption, debts will rise in real value and weigh more heavily on the economy. Above all, unless the ccp continues to raise living standards, it will weaken its grip on power and limit its ability to match America.
Mounting policy failures therefore look less like a new, self-sacrificing focus on national security, than plain bad decision-making. They have coincided with Mr Xi’s centralisation of power and his replacement of technocrats with loyalists in top jobs. China used to tolerate debate about its economy, but today it cajoles analysts into fake optimism. Recently it has stopped publishing unflattering data on youth unemployment and consumer confidence. The top ranks of government still contain plenty of talent, but it is naive to expect a bureaucracy to produce rational analysis or inventive ideas when the message from the top is that loyalty matters above all. Instead, decisions are increasingly governed by an ideology that fuses a left-wing suspicion of rich entrepreneurs with a right-wing reluctance to hand money to the idle poor.
The fact that China’s problems start at the top means they will persist. They may even worsen, as clumsy policymakers confront the economy’s mounting challenges. The population is ageing rapidly. America is increasingly hostile, and is trying to choke the parts of China’s economy, like chipmaking, that it sees as strategically significant. The more China catches up with America, the harder the gap will be to close further, because centralised economies are better at emulation than at innovation.
Liberals’ predictions about China have often betrayed wishful thinking. In the 2000s Western leaders mistakenly believed that trade, markets and growth would boost democracy and individual liberty. But China is now testing the reverse relationship: whether more autocracy damages the economy. The evidence is mounting that it does—and that after four decades of fast growth China is entering a period of disappointment.
Aside from the obvious human tragedy of the economy of a country of 1.4 billion souls going into a permanent tailspin, it’s hardly unheard of for autocrats to use an aggressive foreign policy as a distraction from such woes.
