China And The Rest

The ever-provocative Harvard historian Niall Ferguson writes in the Wall Street Journal that we are not just living in the departing days of the U.S. as the world’s superpower, but in the end time of five centuries of Western predominance. As a 2,500-word trailer for a forthcoming book, Civilization: The West and the Rest, his argument tends to skip from peak to peak without much by way of slogging though the valleys of supporting evidence. We’d be the last to disagree that geopolitical power is tilting eastwards, but we’ll reserve judgement on whether it will do so as completely as Ferguson posits until we’ve seen the book.

He is correct in noting the self-confidence of the country’s younger generation of policymaking elite, and their telepathic ability, Ferguson would have you believe, to conjure up the phrase “We are the masters now” in and above the minds of their Western counterparts. China as No. 1 and the eclipse of the American century is as fashionable handwringing in the West as Japan as No. 1 was three decades ago (and China’s self-confident policymakers could teach nothing on that score to the young blades of the MoF, MITI as it then was, and the Gaimusho of the 1980s). Japan’s global strutting was fired up by fast economic growth and huge export-driven current-account surpluses, neither of which were sustainable for demographic reasons as much as anything. China finds itself in a similar position to Ichiban Japan in those regards, but we think its fast growth rates and current account surpluses will last longer and diminish slower.

However, we are also struck by Ferguson’s suggestion that China is pursing “a strategy not so much for world domination on the model of Western imperialism as for reestablishing China as the Middle Kingdom—the dominant tributary state in the Asia-Pacific region”. China’s leaders are nothing if not students of history. That may be a strategy to avoid both Japan’s decline and stagnation and the imperial overreach that ended European colonialism and may do the same for America. Yet that world of suzerainty imploded once before when China suddenly turned in on itself (as America seems to be doing politically now).

Whether it does so again may well depend on how the established ruling elite handles the demands for political participation from the parvenu wealthy classes that get created by industrial revolutions. Ferguson identifies the rule of law and representative government as one of six factors critical to the West’s predominance over the past 500 years. He says it is the “optimal system of social and political order…based on property rights and the representation of property owners in elected legislatures”. China will be the test of that thesis, and that the test of Ferguson’s.

China and America: The Usual Head-To-Heads Or Something New?

One whose judgment we trust took us to task for assuming that the escalation of tensions between China and the U.S. embodied in the row over yuan revaluation, and now President Barak Obama’s call for the release of the new Nobel peace laureate, was a temporary creation of election season.

The counter argument goes like this: After three decades of economic reform and opening to the world, China has been transformed by its economic growth. That has made Beijing more self-confident when it comes to its role in matters of global economics, trade and security. With that has come self-assertiveness, be it not always skillfully deployed. What has not come from those 30 years is China turning into anything that looks like a democratic Western country, or even a variant of the modern-day former Soviet Union or any of its old Communist Eastern European satellites. Nor has it joined the club of the international community, for want of a better phrase, playing the international game by the established rules and respecting international norms.

That was what many Washington policymakers had expected China’s rise to be accompanied by; instead it has become a self-centric rival that expects to rewrite the international rules for its own ends (not that self-interest is ever far from any nation). Thus, our critic argued, as this interpretation gains currency in Washington, the China-engagers there are losing ground to the China critics, and that that is a fundamental change, not a transitory shift prompted by the U.S. mid-term elections next month. The upshot of this change will be a consistently sharper confrontational tone to the bilateral relationship: to see this already happening, witness how Beijing has handled issues such as North Korea, the trawler dispute with Japan, territorial claims in the South China Sea and Iran, let alone trade and the currency issues.

Like Keynes, we would like to think that our opinions change when the facts change. We remain unconvinced that the facts have changed that much, at least yet, though we are open to the notion that they may be slowly starting to. We certainly acknowledge that there is a rivalry between China and the U.S. and that Beijing is systematically testing the boundaries of its new-found power. But we don’t think it would have pushed the U.S. in the way it pushed, say, Japan over the recent fishing trawler incident. The relationship with the U.S. is its most important bilateral one and the two countries are economically so intertwined that both have more to loose than to gain from it breaking down. China’s leaders have repeatedly shown themselves ready to go to the brink before backing down if it appears they risk doing themselves harm, but they will continue to give themselves a large margin of error when it comes to brinkmanship with the U.S.

There is also the unchanged if often overlooked fact that there are two not one election seasons in play. As China approaches a leadership transition in 2012, the nationalists, who see the economy as an instrument of national security, and the economic reformers, who see a more open economy as the only way to ensure the long-term growth that will underpin the Party’s continued legitimacy to rule, are jostling for position. Both the diplomatic and military aspects of China’a foreign policy often reflect domestic politics, so the recent more self-assertive strain in its foreign policy, we believe, reflects the current balance of the internal leadership succession battle.

So we still expect to see episodic confrontation between Beijing and Washington on specific issues over the next couple of years, probably recurring more frequently and some of it quite sharp, but we don’t expect it to degenerate into anything much worse.

That has to be set against a longer-term context. Economies are growing larger, more complex and more divorced from domestic political constituencies thanks to globalization, technology change and sharpening competition that are dissolving and reforming the borders of business and societies faster and more chaotically than politics and political institutions can keep up with. Tomorrow’s global powers will look different from today’s, more shared leadership in some areas, more competitive in others, just as modern management theory tells us that tomorrow’s corporate  leaders will have to be less controlling and more willing to share authority and decision making. Perhaps what we are starting to see in the China-U.S. relationship is the first outlines of that, uncomfortable as the thought may be for both sets of incumbent political leaders.

Are we right, are we wrong? Let us know your thoughts.

China Rules (Beneath) The Waves

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What catches this Bystander’s eye in the U.S. Defense Dept’s newly published assessment of China’s military capabilities is the expansion of the navy, particularly its submarine fleet. The People’s Liberation Army-Navy can now deploy the world’s largest number of conventionally powered submarines, the result of a decade-and-a-half long program of building and modernizing the fleet which has been putting three new boats a year into the water.

China’s newest Song-class submarines, of which it has at least 13, are capable of launching anti-ship cruise missiles with a range of 100 nautical miles while beneath the waves. It also has a dozen Russian Kilo-class subs with similar capabilities. The PLA-N has also being developing its newer Yang subs, capable of staying submerged for up to a fortnight, more than three times longer than its older subs.

It is also building a new generation of nuclear powered subs, including the new Jin-class, some of which will carry ballistic missiles with a range of 4,000 nautical miles, sufficient to reach western U.S. states, though the program is not going altogether smoothly by all accounts (more detail — and a more sanguine view of all this — a the FAS Strategic Security Blog) . If the problems can be ironed out, the Jin-class subs, which will be based at Hainan Island facing the strategically sensitive South China Sea, will give China a sea-going nuclear deterrent for the first time.

This all amounts to a clear challenge to America’s traditional naval dominance of the Western Pacific, and most immediately Washington’s ability to go to the aid of Taipei in the event of an armed conflict. But the capability of the navy being built by Beijing could support the conduct of military operations in Asia well beyond Taiwan. It potentially changes the regional security balance significantly. America’s Defense Dept. policymakers are rightly concerned by China’s military build-up, of which the submarine fleet is a leading edge.

It is conventionally held that to be considered a superpower, a nation needs to have economic, diplomatic and military power and the ability and appetite to project it around the world. Piece by piece, sub by sub, China is getting there.