What if China Declines?
When China started publishing economic figures in the early- and mid-1990s, the statistics were astounding. Peter Nolan, an economic analyst, wrote that by 2001, the total amount of foreign investment into China was USD $150 billion higher than the amount invested into the entirety of Latin America and the Caribbean combined. It’s no wonder the Chinese Communist Party doesn’t have many internal threats: the GDP per capita in China: in one generation, the average GDP per capita has gone up by almost 18,000% from USD $162 to USD $12,600.
Today’s picture in 2024 is still extremely impressive, with a projected economic growth of 5% (a higher projection than any country in Europe in 2024). And that’s considered to be a slowed down growth rate by Chinese standards - In 2007, it was reportedly as high as 14%. But the world’s second largest economy is beginning to face two issues. I already mentioned the economy slowing down: the other issue is aging demographics which, to be fair, is also happening throughout the developed world.
So what happens if China finds itself in an increasingly disadvantageous position? Only time will tell, but probably one of two, diametrically opposed, things:
Peaceful Withdrawal
The Altynkol rail hub in Kazakhstan was built with Chinese money as part of the Belt and Road. Source: CGTN
Right now, China sends an astonishing amount of money overseas. In one decade since its launch, the country’s foreign investment Belt and Road Initiative has sent over USD $1 trillion abroad. These infrastructure projects exist in every continent, ranging from Latin America, to Europe, to Africa, Central Asia, and Southeast Asia. Chinese state media announced in 2023 that there were nearly 500 Confucius Institute offices in 160 countries promoting Chinese cultural and language exchange, including in the United States. The BRICS (Brazil, Russia, India, China, South Africa) organisation has greatly appealed to the Global South, and organisations like the Asian Infrastructure Investment Bank (AIIB) rival that of its counterpart, the US-led IMF.
But all of these projects cost money - and if the money dries up, their survival is put in serious jeopardy.
China routinely talks about the noble goal of “peaceful coexistence”. Considering the country has not been in a conflict since the late 1970s, it’s definitely something that Beijing appears to sincerely strive for. Thus, it’s entirely possible to believe that this will continue to be true if China is not able to fully overcome its current challenges. The greater global community might struggle - BRICS could lose a keystone founding member, dozens of countries could lose access to vital investment, and world economies may react negatively - but all of it would be better than a non-peaceful outcome. There may still be some assertiveness in Asia-Pacific, particularly in areas like the Taiwan Strait and South China Sea, but the threat of Sino-US conflict would subside.
Violent Distraction
A political cartoon depicts China’s extensive claims in the South China Sea. Source: Paresh Nath
Sometimes, in order to draw attention away from domestic strife, autocratic countries will lash out against their neighbours. A prime example of this occurred in 1982 when Argentina’s junta invaded the Falkland Islands to distract the population away from a poor economic standing and reignite nationalist sentiment amid general civil unrest.
In the West, fears simmer that China could do the same.
It’s impossible to predict where, but we can certainly narrow it down - the two most likely candidates are the South China Sea, and Taiwan Strait. Neither of these should be much of a surprise: the news frequently reports on incidents surrounding both. Considering the astonishing amount of trade and financial flows that come from East Asia, the outcome of either one would be disastrous - especially when compounded with the situations in Ukraine and the Middle East.
Another possible contender would be somewhere along the Belt and Road Initiative, where critical resources are under threat by local conflicts. This could include oil pipelines in Pakistan or Myanmar, or infrastructure investments throughout the Sahel via China’s naval base in Djibouti.
It might not even be direct - it could mean seeking to secure its position via proxy - such as increasing support for Russia in Ukraine, North Korea along the 38th Parallel, or the junta in Myanmar - to guarantee a stance of favourable security.
Whatever happens (assuming anything happens), we should hope for the best, but prepare for the worst by watching, waiting, and adapting to it before it happens. The world should seek the softest possible landing - and probably hope that China doesn’t decline at all.
TAI Score: Degree 4. While there’s no guarantee that China will decline - nor are there signs of it happening anytime soon - even the best case scenario could result in developmental downturn in the Global South, which may lead to a rise in instability and conflict in a much more difficult-to-contain landscape.
