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2 November 2021

Minxin Pei on why China will not surpass the United States

MINXIN PEI

AMERICA’S CHAOTIC exit from Afghanistan must be seen by Chinese leaders as the latest proof of its irreversible decline. But their euphoria will be short-lived. As consummate realists, they know that President Joe Biden is taking the United States out of the “grave of empires” so that he can conserve America’s power to prevail against China in the next chapter of their contest for global supremacy.

In its essence, the United States-China “strategic competition” is less a confrontation between duelling ideologies than a familiar clash between a hegemonic power and its challenger. It seems reasonable to bet that although China will continue to narrow the gap in most dimensions of power in the coming two decades, it will ultimately fail to surpass America. This may elicit a sigh of relief in some quarters of Washington. But a China that has reached near-parity will nevertheless be a formidable geopolitical adversary.

America has adopted a strategy to thwart China’s rise. Framed as “economic decoupling”, this has featured a trade war to force global supply chains to relocate out of China and a tech war to choke off the flow of critical technologies and know-how to China. Few should doubt the efficacy of these measures—just witness how quickly American sanctions have crippled Huawei, the Chinese telecom giant that used to be the leader in 5G technology. But on its own this strategy will only slow down, not stop, China’s advance.

China still has relatively strong economic momentum in the coming decade. Its GDP is about 70% of America’s at market exchange rates (and is already larger than America’s at purchasing-power parity). Yet Chinese income per person, at slightly over $10,000 a year, is about one-sixth of Americans’ standard of living. This implies that China has a lot more room to grow, thanks to its huge internal market, its dynamic private sector and its vast pool of workers.

China will also make substantial, albeit slower, progress in the tech sector, despite American restrictions. Beijing has vowed to make huge investments in science and technology to reduce its vulnerability. To be sure, President Xi Jinping is unlikely to realise his ambition of full technological self-sufficiency. However, with millions of well-trained scientists and talented engineers, and trillions of dollars in R&D investment in the coming decade, China should be able to gain greater technological capabilities.

Even if China surpasses the United States as the world’s largest economy at market exchange rates in the next fifteen years (assuming its annual growth averages 4.75% compared with 2% for America) its GDP per person will still be about one-fourth that of America. A country four times as rich as its closest geopolitical foe has, in effect, more spare cash to invest in military forces and R&D. It should have the means to stay ahead of the game, assuming that American leaders can muster the necessary political will and unity.

What is more, China is ageing faster than America. The UN projects that in 2040 the median age in China will be 46.3 years, compared with 41.6 for the United States. As a result, China’s growth is expected to slow down significantly in the 2030s.

In other areas of power, America’s lead will prove insurmountable. It will continue to have the world’s best research universities, most innovative technology firms and most efficient financial markets.

Ironically, the ruling Chinese Communist Party (CCP) will be China’s biggest obstacle in its race with America. The party’s existential fear of losing control will impel it to maintain a tight grip on the economy, making it less efficient. Giant but ossified state-owned enterprises will continue to waste resources. The CCP’s arbitrary exercise of power—as exemplified by its sweeping crackdown on China’s most successful tech companies, such as Didi and Alibaba—will stifle the innovation and growth of its tech sector more effectively than America’s sanctions. Most alarmingly, as China descends further into personalistic rule, it will be less able to correct or reverse the questionable decisions made by its top leadership.

Factor in the capabilities of America’s allies, and the balance of power tilts further in America’s favour. Whereas China has no real allies, America is blessed with many. And whereas the United States has no big rivals in its region, China must contend with several powerful adversaries, notably India and Japan, in its immediate neighbourhood. China is far weaker than most people realise.

A China that fails to reach parity with America, let alone surpass it, should not be a cause for celebration in Washington. In fifteen to twenty years, China will have a much bigger economy, more advanced technology and more capable armed forces. It will also remain America’s most formidable rival, and will be able to constrain the exercise of American power globally. The United States will have to devote most of its attention, energy and resources to contesting Chinese power, at the expense of its interests elsewhere.

In short, China should be able to narrow the gap with America in the 2020s, but its growth will probably slow down in the 2030s, and the prospect of China overtaking America will look increasingly dim. If this is the case, the coming decade might be the most volatile because China’s continuing ascent might make its leaders more reckless and Washington less secure.

In fact, a strategic stalemate seems the likeliest outcome. However unsatisfying, this will be a net improvement upon the status quo. Instead of spiralling dangerously out of control, bilateral relations will probably settle at an equilibrium with lower military tensions and far less diplomatic vitriol. America’s security alliance in Asia will remain largely intact, thus preventing China from achieving regional hegemony or absorbing Taiwan. Through arms control and renewed diplomatic engagement reminiscent of the US-Soviet détente, both countries may be able to agree on a set of rules confining their rivalry to a small number of realms unlikely to trigger a full-fledged conflict.

This is not exactly the scenario hoped for by strategists wishing to repeat America’s victory over the Soviet Union in the cold war. Nor is it the “great rejuvenation” President Xi Jinping has in mind. But even without turning China into the world’s most powerful country, the Chinese Communist Party will still be a winner: unlike its defunct Soviet cousin, the CCP will remain solidly in control of a superpower that the Americans fail to vanquish.

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