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23 March 2023

A fragile decade ahead?

Prof. Shiping Tang

Facing multiple uncertainties and pressures, China needs to strategize for a turbulent period that could last 5 to 10 years

The international system faces enormous uncertainties in the next decade, if not longer, reeling under the triple shocks of the COVID-19 pandemic, the Russia-Ukraine conflict, and the ongoing decoupling between the United States and China. This turbulent period may well last five to 10 years, after which it could take another five to 10 years for the system to stabilize.

The overall distribution of power within the international system will not change drastically in the next decade. The US will remain the largest economy. Europe's core economic status will not be fundamentally shaken, but Ukraine's post-conflict reconstruction will impose considerable pressure on Europe. Since the outbreak of the Russia-Ukraine conflict in 2022, Russia's strength has been greatly weakened and its image tarnished, while its influence in Central Asia and Central and Eastern European countries has drastically dwindled. Although Russia remains an important strategic partner of China, the China-Russia strategic partnership surely faces growing challenges.

The institutional foundation of the entire international order is also under serious stress. Key countries do not share a basic consensus on the core ideas and institutions of the future international order, and the uncertainty of the overall order exacerbates the fragility of the entire system.

The Russia-Ukraine conflict has had a huge impact on transatlantic ties and EU-Russia relations. It will take at least 5 years for the dust to settle. The strategic competition between China and the US may last for 10 years or even longer.

The outlook for global economic growth in the next three to five years is quite negative. Europe, as one of the key economic locomotives, faces increasing uncertainties. China's economic recovery will inevitably be affected by the global economy, and the US economy also faces the risk of falling into recession.

During the height of the Cold War confrontation between the US and the Soviet Union, Deng Xiaoping proposed "peace and development" as a forward-looking theme for international politics and a key foundation for China's subsequent reform and opening-up. This was also in line with the common aspiration of developing nations. China is still pursuing the same goal.

At the regional level, China's most critical partner in the near future is most likely to be Europe, primarily developed countries in Western Europe, followed by Central and Eastern European countries. If China can work together with Europe (especially Germany and France) to play a central role in post-conflict negotiations of the Russia-Ukraine conflict, it may be able to turn this crisis into opportunities, winning Europe's respect and promoting the stabilization of China-EU relations. As long as Europe continues to have close economic ties with China and refrains from joining the "united front" against China led by the US, China will have more room to maneuver.

East Asia occupies a place just as important as Europe for China. Again, as long as the East Asian region continues to forge ever close economic ties with China and refrains from joining the "united front" against China led by the US, China can secure a key foundation of its foreign relations.

Regarding East Asia, China should continue to promote the implementation of the Regional Comprehensive Economic Partnership and join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

In Northeast Asia, it is imperative for China to stabilize its relations with Japan and South Korea, and maintain stability on the Korean Peninsula. In Southeast Asia, China should continue to deepen economic ties with the Association of Southeast Asian Nations and seek mutual benefit and win-win outcomes.

The deepening of economic ties with other regions, especially Latin America, the Middle East and Africa, is also a must for China to maintain its economic growth. The situation in the Middle East is far more complex and should be placed under more careful research and judgment.

In terms of specific strategies, China can focus on five areas.

First, China has to hold steady in terms of its strategic focuses, avoid being entangled in unnecessary disputes. Whenever necessary, China may want to scale back some of its strategic initiatives, especially avoiding unnecessary involvement in countries and regions with high uncertainty and risk.

Second, China must push its reform and open up to new levels: this will be the most effective strategy to counter the US' containment efforts. Here, it should be noted that China needs to implement not only inward reform but also outward reform. For example, the Chinese economy needs to be further opened up to private enterprises to stimulate growth. Likewise, China's foreign relations need not only to remain open, but also undergo reform.

Third, economic development must remain China's central focus. Economic growth is the prerequisite for national prosperity, and the great national rejuvenation is primarily based on economic strength. Therefore, China cannot deviate from economic growth as the core task, for which all other measures must serve. The Chinese dream has no foundation without sustained economic development.

Fourth, China must re-evaluate its possible trajectory of overtaking the US as the world's largest economy. The US has maintained an average economic growth rate of about 2 percent in the past 10 years. Since 2010-12, China's economy has begun to show signs of slowing down, its economic growth rate dropping from about 8 percent in 2012 to about 6 percent in 2019 before COVID-19. As a result, the rate at which China was narrowing the economic gap with the US has also slowed down, from 5 to 6 percent per year previously to 3 to 4 percent today. Grasping this trend and crafting effective policies is essential for the competition between China and the US and China's future.

A key measure for the US strategic competition against China is its attempts to cajole and coerce key countries to form a relatively stable "united front" to contain China, via US alliance system. This is the most important variable in the development of China-US relations. Therefore, when examining the balance of power between China and the US, China needs to consider the strength of the allies of both sides, instead of just looking at economic aggregates of the two countries alone.

Fifth, the most urgent task for China and the US is to manage differences and prevent conflicts. The two countries must not violate the other side's bottom line and then try to rebuild bilateral cooperation in some important areas while managing differences and preventing conflicts. By doing so, the two sides can start to accumulate some strategic trust and promote more cooperation along the way.

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