The Real China Challenge: Managing Its Decline

Posted November 29, 2018 11:09 a.m. EST

In 2009, The Economist wrote about an up-and-coming global power: Brazil. Its economy, the magazine suggested, would soon overtake that of France or the U.K. as the world’s fifth largest. São Paulo would be the world’s fifth-richest city. Vast new reserves of offshore oil would provide an added boost, complemented by the country’s robust and sophisticated manufacturing sector.

To illustrate the point, the magazine’s cover featured a picture of Rio de Janeiro’s “Christ the Redeemer” statue taking off from its mountaintop as if it were a rocket.

The rocket never reached orbit. Brazil’s economy is now limping its way out of the worst recession in its history. The murder rate — 175 people per day in 2017 — is at a record high. One former president is in jail, another was impeached. The incoming president is an admirer of the country’s old military dictatorship, only he thinks it should have killed the people it tortured.

Those whom the gods wish to destroy, they first tout as countries of the future.

I thought about The Economist story while reading a deeply reported and thought-provoking series in The New York Times about another country of the future: China. The phrase “rise of China” has now become so commonplace that we treat it more as a fact of nature than as a prediction of a very familiar sort — one made erroneously about the Soviet Union in the 1950s and ‘60s; about Japan in the ‘70s and ‘80s; and about the European Union in the ‘90s and ‘00s.

Why should current clichés regarding China’s supposed rise be any different?

One answer suggested by The Times’ series is that Beijing has ignored orthodox economic nostrums about the need for ever-greater market liberalization and fewer state controls while still managing to thrive. There’s something to that. Quantity has a quality all its own, goes the saying, and Beijing can supply quantity like no other country save for India.

It can also supply cruelty. The Laogai Research Foundation estimates the number of forced laborers in China to be in the millions. In a superb piece of journalism last month in Vox, Rossalyn Warren traced a desperate message found in a Walmart purse to the Yingshan prison in southern China. The note described 14-hour workdays and beatings.

Tyrannies do not work in the long run. But they do know how to make people work in the short term.

Yet even with the advantages of scale and force, China isn’t working. In 2014, a year in which Beijing posted an official growth rate of 7.3 percent (as compared to 2.6 percent in the U.S.) China lost $324 billion to capital flight, according to a UBS estimate. In 2015, the figure more than doubled, to $676 billion, according to the Institute of International Finance. In 2016: $725 billion.

Yes, some of the money goes toward productive investments abroad, not just apartments in Sydney or bank accounts in Liechtenstein. But then there’s the fact that some 46 percent of wealthy Chinese wish to emigrate, most of them to the United States. If China’s prospects are as bright as China boosters think they are, why do China’s most fortunate sons and daughters see their future elsewhere?

Maybe that’s because individual rights, democratic choices, rule of law, competitive markets, high levels of transparency, low levels of government corruption, independent news sources, and freedoms of thought, conscience and speech are assets beyond price —ones that Westerners tend to value too lightly while foolishly assuming others do as well. If you define power as the power to attract and not simply compel, then Beijing — with its dystopian vision to fully surveil and rate all citizens by 2020 — isn’t a rising power at all. It’s a collapsing one.

Maybe it’s also because the picture China presents the world about its economic strengths is misleading. China’s economy has made its strides atop a pile of public and private debt now $34 trillion high. Beijing claimed 6.9 percent growth in 2017, but Chinese statistics are next to worthless — artifacts of propaganda instead of productivity. The rise of China has also been the rise of Chinese make-believe.

All this may seem an excessively glum take. What about the skyscrapers of Guangzhou? What about the world-beating test scores of students in Shanghai? What about the hundreds of millions brought out of subsistence living and raised to, or above, the middle class?

China’s rise is not some kind of mirage. But what matters is the future, not the past, and whether a nation built on constraining the freedoms granted to ordinary people can outpace, outsmart, and outlast another nation built on defending and broadening those freedoms. On current evidence, that seems utterly doubtful.

U.S. policymakers and pundits often talk about the challenge of managing China’s rise. They had better start thinking instead of the challenge of managing its decline, beginning at the G-20 summit in Buenos Aires this weekend. Japan and Europe went gently into eclipse, and the Soviet Union surrendered without a fight (at least until its current revanchist phase).

Will China’s current leadership accept the possibility of their own decline so philosophically, after having convinced themselves of their rapid rise to primacy? Nobody should bet on it. A wounded tiger is rarely a placid one.

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