Europe has been rocked by Brexit and the possibility of deeper financial crisis looms. The world continues to lose confidence in America’s global leadership. Even Australia is gridlocked. With the West in such disarray, the argument that revisionist powers will fill the void seems more convincing by the day. An article in the WSJ makes just that case, bringing back the oft-repeated claim that China is taking the reins of global leadership:
Today, with the West turning in on itself, partly in response to what many see as out-of-control immigration on top of the terror threat, the question isn’t so much whether globalization has run its course as where China wants to take it.“What kind of a world order does China want?” asks Jean-Pierre Cabestan, a veteran China-watcher at Hong Kong Baptist University, writing in the publication China Perspectives.
This is, of course, exactly the kind of argument that China itself has made lately: Beijing has been pushing an image of itself as the next great power harder than ever. And at first glance, China does seem to be living up to its own self-conception:
Europe’s economy is in long-term decline; China’s is rising. Europe is shedding jobs; China is adding them—at a faster pace now that it is focused on labor-intensive services. […]Chinese companies, armed with almost limitless credit, are marching overseas. The Rhodium Group calculates that between 2000 and 2014 they invested more than $50 billion in Europe, part of a surge in outbound investment. It forecasts China’s global assets will reach almost $20 trillion by 2020, a tripling in just five years. […]Countries along the way in Central Asia, the Middle East and Africa are competing for Chinese-funded port facilities, nuclear-power stations and high-speed rail lines. Beijing has earmarked some $3 trillion for the “One Belt, One Road” initiative. That compares with the Marshall Plan’s approximately $120 billion, in current dollars.
Yet perhaps more concerning than the fearsome imagery of Chinese firms “armed” with credit, “marching” to invest in the West, is the fact that the foundations of international Chinese expansion could be much shakier than meets the eye. Evidence abounds that China’s economy is not nearly as strong as it boasts. China may be adding jobs “at a faster pace”, but mass unemployment would likely become the reality if Beijing were suddenly to become unable to prop up its ailing heavy industry. Talk of “limitless credit” masks a growing debt bubble and rising expectations that bank bailouts are on the horizon. To what extent the great flow of “outbound investment” is strategic investment rather than capital flight is also murky. Even the People’s Bank of China is warning about complex economic risks.The concern shouldn’t be whether China is about to take over as the world’s hegemon, but rather whether Beijing can continue its growth and avoid a hard landing. China is and continues to be a critical driver of the global economy. If and when China stops growing, it won’t be a cause for celebration in the beleaguered West.