China Is Deteriorating, Which Is Not Good News.

China Is Deteriorating, Which Is Not Good News.

The phrase “Thucydides’ trap” was first used by Harvard political scientist Graham Allison a number of years ago. It was based on the remark made by the ancient historian that the Peloponnesian War’s primary catalyst “was the rise of Athens and the fear that this instilled in Sparta.” Allison observed a pattern of conflicts and tensions between governing and emerging powers throughout history, most notably, in his opinion, with the threat that China’s rise presents to American hegemony.

Although intriguing, this concept has a serious issue when applied to China: The People’s Republic’s collapse, which has been evident for years and has been irrefutable in the past year with the country’s real estate market catastrophe, is the greatest threat we will face from it in the upcoming decade rather than its ascent.

Western politicians must reframe their thinking in light of this reality. How? with two dos and five don’ts.

Don’t mistake China’s troubles for our good fortune, to start.

Global growth will unavoidably be hampered by a China that can purchase less from the rest of the world, whether it be in the form of grain from the United States, handbags from Italy, or copper from Zambia. In the past year, China accounted for 37% of all retail car sales for German automaker Mercedes-Benz and 64% of all sales for American chipmaker Qualcomm. Boeing predicted that during the next two decades, China will account for around 1 in 5 of its wide-body plane sales in 2021. It goes without saying that there is only one economy, and that is the global economy.

Second, don’t think the situation will pass quickly.

Because China only makes up a small portion of Western countries’ exports, optimists believe the crisis won’t have a significant impact on them. But the crisis’s potential scope is horrifying. According to a 2020 study by economists Ken Rogoff and Yuanchen Yang, real estate and its linked sectors make up close to 30% of China’s GDP. It is largely supported by the $2.9 trillion, notoriously opaque trust sector of the nation, which also seems to be in trouble. Furthermore, even if China avoids a full-blown crisis, the country’s working-age population will decrease by almost a quarter by 2050, severely restricting long-term growth.

Third, don’t take economic management competence for granted.

Donald Trump recently praised Xi Jinping’s leadership in China as “smart, brilliant, and everything perfect.” The reverse is more accurate. Xi was “considered of only average intelligence” as a young man, obtained a three-year degree in “applied Marxism,” and survived the Cultural Revolution and its aftermath by turning “redder than red,” according to a peer from his youth. His term as supreme leader has been characterized by a shift toward stronger state control of the economy, increased persecution of foreign corporations, and a terror campaign against entrepreneurs with independent minds.Despite strict capital controls, one outcome has been a rise in capital flight. The country’s wealthiest citizens have also emigrated abroad in greater numbers under Xi, which is a strong sign of where they believe their possibilities lie.

Fourth, don’t assume that there will be peace in the home.

The recent move by Xi’s government to obfuscate data on youth unemployment, which was just north of 21% in June and double what it was four years ago, is part of a pattern that primarily undermines investor confidence. But as they were in 1989 on the eve of the Tiananmen Square protests, youth movements are nearly always a significant source of unrest. Ignore Thucydides’ trap; the actual China tale can be found in a variation of what is commonly referred to as Tocqueville’s paradox, which holds that revolutions occur when rising expectations are abruptly disappointed by deteriorating social and economic realities.

Fifth, never assume that a power in decline is a less dangerous one.

It is riskier in a lot of ways. While failing nations will be tempted to take risks, rising powers can afford to wait their turn. When he stated of China’s leaders this month that “when bad folks have problems, they do bad things,” President Joe Biden was speaking off the cuff but on point. In other words, the hazards to Taiwan increase as China’s economic fortunes decline.

Finally, adhere to the four red lines.

When it comes to our fundamental interests in our relationship, American policymakers must be unyielding and unflappable. These interests include freedom of navigation, particularly in the South China Sea; Taiwan’s security and that of other Indo-Pacific allies; the protection of American intellectual property and national security; and the safety of Americans (both in China and in the United States) and people of Chinese ancestry. In that it sends a message of Western political resolve and military strength that will make Beijing think twice about a military expedition over the Taiwan Strait, aiding Ukraine in defeating Russia is also a component of a larger China strategy.

Seventh, adopt a detente policy.

A new Cold War with China should not be pursued. A warm one is beyond our means. American economic generosity is the best solution to China’s economic problems. The repeal of the tariffs imposed by the Trump administration, which have harmed American businesses and consumers just as much as they have the Chinese, could be the first step in this process.

There is no guarantee that this will alter Beijing’s problematic behavior pattern. But we should strive as China descends into catastrophe.

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