April 22, 2021 House of Trust

Ascending China: Implications

The rise of China is certainly impressive and unprecedented. Its outstanding advancement in recent decades provides much reason for its 70thanniversary celebration, including its transformation from an agrarian economy to the world’s largest economy on purchasing power parity. It is extraordinary how 40 years of open door policy led to China’s role as the world’s largest exporter, manufacturer and holder of foreign exchange reserves. Even more remarkable is how China is now a world leading digital economic powerhouse with the most e-commerce activity in the world and most successful tech start-ups. 

Yet, the rise of China is perceived as a security threat to the United States and its friends and allies, especially in the East Asian region. Some even go so far as to say that awakening the dragon could challenge United States globally in a new Cold War. However, is this argument overblown? 

In this article, I’ll argue two main points. First, the rise of China disinclines the country from settling its many maritime disputes with weaker neighbors through coercion and force and thereby destabilizes the East Asian region. Second, China’s rise encourages China to contribute to global stability by using its economic power to help solve global problems with examples such as North Korea and Iran.

Back to the earlier question on whether a new Cold War beckons. There is little evidence that China will drive the United States out of East Asia as China is still not a peer competitor yet as of today or in the near future.

For instance, take the possibilty of dedollarisation in the near future. The US dollar was still the dominant global currency today despite the 2008 global financial crisis which started with the US subprime mortgage crisis. Besides, China’s rank of GDP per capita as of 2018 according to the International Monetary Fund (IMF) is at number 73 which is still below Maldives, Mexico and Montenegro. However, China can still challenge the allies of the United States and this might lead to a destabilization of the region. 

From an American perspective, the growth of China’s military strength is asymmetric and does not pose a direct threat to the United States. However, it will be costly for the latter to intervene if there was any case of aggression. Furthermore, a cyber attack on US military intelligence could possible delay US intervention in the region. 

South China Sea Overlapping EEZ Claims
Picture Credits: South China Sea.org

Why is this significant to the East Asian region? Prospect Theory is employed here to explain that the various nations believe their claims on the South China Sea are legitimate. Hence, it is much harder to get each of the nations to back off. 

Prospect Theory: 

Huge majority of human beings have something in common. They will fight harder and take bigger risks to defend what they believe is legitimately theirs, than to take newer things. 

However, many of these nations are interdependent economically on China, especially with the recent Belt and Road Initiative (BRI). As a result, China will be more assertive and reactive as they do not want to look weak, especially in terms of territorial disputes. In addition, Xi Jingping has stirred up Chinese nationalism. He wants to make China Great again in order to achieve the Great Rejuvenation. However, can the Chinese leaders accept setbacks if matters do not go according to planned? Will there be any hyperactive reaction? 

Picture Credits: Japan Times

To sum the first argument up, the United States should be more present in the East Asian region, although the notion to take is: “We are here, but we won’t cause trouble, But we are here!”. This is the best way forward to ensure stability in the region. 

On the second argument, China’s influence is very important to help solve issues of global importance. As China is the world’s second biggest economy by nominal Gross Domestic Product, Iran and North Korea’s respective economies can get by merely with China’s trade. This is also because China is both North Korea’s and Iran’s biggest trade partner. 

In North Korea’s case, the country’s economy will not survive without the Chinese economy. It all boils down to whether China puts pressure on North Korea to become more cooperative in terms of its nuclear weapons program. However, it is harder today than before to get China to fulfill its role, especially with the ongoing US-China Trade War. 

China’s Influence on North Korea
Picture Credits: Japan Times

Moving on to Iran, the Joint Comprehensive Plan of Action (JCPOA) was brought about by Chinese pressure on Iran. Besides, a case study on Iran depicted that secondary sanctions imposed by US Congress bore fruits as it caused Chinese oil firms to slow trade with Iran. Hence, this shows that a rising China can contribute to global stability by using its economic clout. 

Secondary sanctions are a recent type of economic sanction that have become a part of the U.S. government’s economic statecraft through which foreign persons who support targeted bad actors can be subject to a number of restricted measures that, in effect, cut-off these businesses from the United States financial system and make them unpalatable as business partners, customers, and suppliers to other foreign parties.

Source: OFAC Sanctions Attorney 

On other issues of significance such as China’s Belt and Road Initiative. Experts have stated that it was wrong of the United States to classify the economic opportunities offered by China through the BRI as ‘predatory’. This classification is simplistic, inaccurate and looks overly aggressive to China’s neighbours. In other words, the United States was calling the beneficiary countries prey, implying that they were helpless. This arouses uneasy feelings and rekindles postcolonial notions. Basically, these nations were telling the US to not tell them what to do. 

In summary, the unprecedented rise of China has certainly shaken up the dynamics of power and international relations today. Looking forward, it will certainly be interesting to see how these new dynamics unfold, especially in South East Asia.

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