What Does China’s Rise Mean for the World?

By Frank Giustra, CEO of the Fiore Group

Containers ready for shipment from the Port of Shenzhen, located in the Guangdong province of China. MAGNUM/Michael Christopher Brown
Frank Giustra, CEO of the Fiore Group

It seems our world is as unstable as it has ever been. There are brewing conflicts everywhere, in many cases interconnected and with such a cacophony of players that even seasoned diplomats are confused. To make things worse, we have a non-functioning UN Security Council and a lack of will by the international community to resolve conflicts.

Many of these conflicts have the potential to flare up into truly global problems. The war in Syria, for example, has resulted in confrontations between Russia, Western powers, and competing governments and armed factions across the Middle East. The Syrian conflict has also contributed to the rise of the Islamic State, which in recent weeks claimed responsibility for consecutive terrorist attacks in Egypt, Lebanon and France.

Over the longer term, however, I am more concerned with the type of tectonic shift in world power that only happens every century or so. The contest between the U.S. and China is worth examining in this regard.

Unfortunately, the passing of the baton from one global power to the next rarely happens without a major conflict.

The rise and fall of empires follow familiar patterns. Unfortunately, the passing of the baton from one global power to the next rarely happens without a major conflict. It is not easy on the pride of any reigning nation to cede power. The only recent exception that I can think of was the transition from Britain to the U.S. as the dominant power following World War II.

The rise of the U.S. and China as industrial powers share similar features, and are separated by only 100 years. During its industrial build up, the U.S. mostly tried to mind its own business and stay out of global squabbles, much like China today. The U.S. focus was mostly economic superiority, again not dissimilar to China. It was not until the introduction of the Monroe Doctrine in 1823 that the U.S. began to flex its military muscle to warn off European powers from further colonising within the Americas. Any interference would be seen as an act of war. This was the first of a series of U.S. presidential doctrines that incrementally expanded circumstances in which the nation would engage against real or perceived external threats — culminating with the Bush Doctrine proclaiming that the U.S. has the right to attack preemptively if it feels its security is threatened. I wonder if China is about to proclaim its own Monroe Doctrine as its economic might grows.

Over the past 35 years, China has transformed itself from a communist society to a state-managed capitalist economy. During this period, it has maintained a fairly low-key foreign policy. Some analysts predict that China will surpass the U.S. as the leading global economic power within the next ten years — and by some measures, China is already ahead. More recently, Beijing has quietly built up its military strength beyond levels that are comfortable for the West. It is also working hard to catch up to the U.S. in its technological capabilities. Some may argue that the U.S. will always maintain its military and technological superiority. Perhaps, but I would never underestimate the Chinese.

History shows that when countries are busy trading with each other, there is little appetite for conflict.

The potential decline in cross-border trade, especially between China and the West, is worrisome. Over the past several decades, China achieved explosive growth by focusing on its export economy, with the U.S. as its largest trading partner. Going forward, the U.S. market may become less important. There is only so much that China can sell to an over-leveraged economy such as the U.S. The problem is compounded by the fact that China is the single largest holder of U.S. debt. China knows the risks, and is now attempting to move from an export-led economy to one driven by domestic consumption. History shows that when countries are busy trading with each other, there is little appetite for conflict. People on both sides may prosper by selling or be happy in their hedonistic consumption. It is usually when trade stops that wars start.

Recently, competing territorial and maritime claims in the South China Sea between China and its regional neighbours have prompted a U.S. response. In August, at a regional meeting in Kuala Lumpur, U.S. Secretary of State John Kerry sharply accused Beijing of violating international maritime law. “Let me be clear: The United States will not accept restrictions on freedom of navigation and overflight, or other lawful uses of the sea”, Kerry said. In response, Chinese Foreign Minister Wang Yi issued a statement that, “China opposes any non-constructive words and acts which widen division, exaggerate antagonism or create tensions”.

In October, a U.S. navy warship challenged the territorial limits around a Chinese-claimed reef in the Spratly archipelago as part of its Freedom of Navigation program. In November, U.S. President Barack Obama made a point of visiting a Philippine warship soon after arriving in Manila for the start of the Asia-Pacific Summit. He underscored the U.S. commitment to defend the Philippines, one of several South East Asian nations embroiled in the South China Sea dispute.

America’s willingness to play global cop by way of warnings and displays of military might is something that China looks upon with a lot of trepidation. How far will the U.S. go in drawing a red line, given its alliances in the region? How far will the U.S. push its military might in the face of its economic decline versus China? And at what point does China feel sufficiently equipped to proclaim its own version of a Monroe Doctrine and protect its area of influence?

If China stays on track to emerge as the leading global economic power, these questions will take on new urgency. The trends may evolve gradually, and recent signs of an economic slowdown in China may mean that things remain quiet for years. However, if my concern proves correct that one day China will decide to pursue a more muscular foreign policy, it will take the involvement of the entire global community and a lot of luck to prevent a catastrophic outcome.

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This article represents the view of the individual writer, not that of International Crisis Group or of its Board.