China as world superpower in post-COVID-19 era?

NS Venkataraman

CHENNAI, India, 14 April 2020

There is no doubt that after the Second World War, the COVID-19 pandemic is the most decisive development in the world, likely to turn upside-down the relations between different countries and the way that humanity will view things in life.

China’s ambition for world dominance

In the last few decades, China has been steadily and cleverly improving its strategic importance in the world by strengthening its industrial, technological, economic, and military base, and by launching schemes such as OBOR, which appear to be successful as far as China is concerned.

China has been emboldened in launching several strategies with the least concern for fairness and with a high level of self-centredness, as it has remained largely unchallenged. For example, China occupied Tibet by aggressive methods several decades ago. The Tibetan dissenters were ruthlessly massacred and the protestors driven out including the venerable the Dalai Lama. The world conscience remained silent.

China launched a big war against India in 1962 which it won decisively, and it is now occupying a large area of India. It also claims Arunachal Pradesh, an Indian state, as its own. The world remains unconcerned.

With nearby countries like Japan, Vietnam, Phillippines, China has raised disputes in several areas such as Senkaku Island and the South China Sea where China claims sovereign power. While the affected countries have been protesting, China remains unconcerned about such protests and the world view on these disputes.

China is rapidly expanding its trade and investment activities, taking over several mines in different countries, and acquiring assets abroad in a well-planned and systematic way to gradually increase its world dominance.

So far, the rest of the world has largely remained as if unconcerned about China’s efforts to increase its dominance in the world arena, since China has opened its large market to the rest of the world and multinational companies, who want to exploit market potential in China, particularly since, the market in developed countries have become nearly saturated for several products. Today, no country or multinational company wants to miss the trade opportunities that China offers.

China’s ambitious march towards emerging as world superpower is continuing.

Why concern about China’s increasing dominance?

There is nothing wrong if any country would want to strengthen itself economically and become a major power in the world. This would be a legitimate ambition for any nation.

However, this logic cannot be straightaway applied in the case of China, as China is known to have expansionist ambitions not only in terms of economy but also in terms of territory.

China has a totalitarian regime, with freedom of speech heavily suppressed and personal liberty severely curtailed. Dissenters in China are known to be eliminated ruthlessly.

The concern is that if a country with a totalitarian regime, having no concern about ethical and fair practices, would come to dominate the world, then the world would become an unsafe place.

One cannot but compare China’s methods and ambitions to that of Hitler’s Germany, which caused World War II.

Now there is a rapidly-developing world view that China’s increasing dominance in the world affairs could upset the world balance of power and create conflicts of interest, in the process creating different types of tensions.

This is one of the primary reasons why US President Trump launched a trade war against China. However, the trade war has not discouraged China so far or dissuaded it from its ambition of world dominance at any cost. At this juncture many people wonder as to who would be the bigger loser in trade war, China or the US.

Is COVID-19 an opportunity for China to claim super-power status?

China is the origin of COVID-19. China stands accused of playing a trick on the world by not sharing information about COVID-19 at the right time, and the disease has now engulfed the entire world.

In the present ongoing COVID-19 crisis, it appears that China looks like it is having the last laugh.

The US, West European countries, and Japan, which have considered themselves as scientifically-advanced leading lights among the world countries, now stand humiliated, with the rapid spread of the virus in their regions causing huge loss of life and their governments lacking a sense of direction as to how to overcome the crisis.

Humiliation is complete for these countries severely affected by COVID-19, as they seem to have no alternative other than to procure safety masks, testing equipment, etc., needed to tackle the COVID-19 crisis from China itself, even as China is quoting fancy prices and dictating delivery schedules.

As the world is struggling to tackle the crisis, facing distress and uncertain conditions, China claims that it has sorted out the issue and it has become free of the virus. When some people were affected by the virus after China lifted the lockdown, China says that that happened only due to the overseas visitors and not due to any internal developments.

In this scenario, China is deliberately trying to create the impression that it has the ability to control the virus, launching a massive propaganda campaign. This campaign obviously implies that the other countries do not know how to go about wiping out the virus as China has. In the process, China is deliberately trying to create an impression around the world that it is more advanced than other countries.

In other words, China seems to convey the view that it has the merits to claim that it is the super-power and not the US, which has recorded the highest deaths in the world due to Coronavirus.

Anger of USA and West European countries, Japan inevitable

Obviously, the US, most European countries, and Japan are seething with anger and frustration at the humiliation that they have suffered due to the COVID-19 crisis. This is more so, in view of China’s arrogant assertion that the COVID-19 infections did not first happen in China but elsewhere, such as Italy or US or anywhere else.

There is a clear realisation among these countries that China’s ambition to dominate the world must be defeated if they are to hold their superior places in the world scenario. This realisation would be the ultimate driving force for any possible coordinated action against China.

While there are no formal coordinated efforts between the US, West European countries, and Japan in tackling the “China dragon”, the pointers are clear that they would soon discuss the strategies in a coordinated manner with mutual interests in view.

The first step to control China has already been taken by Japan, which has said that it would fund Japanese companies to shift production out of China.

Will World War III happen ?

Certainly, in the post-COVID-19 period, a third World War to control the dominance of China is likely to commence, once the COVID-19 crisis is overcome by the world community.

A World War III would last for several years just as World War II, and it would be an economic and trade war, though not as much a military warfare.

How will China fare in this forthcoming economic and trade war? Is China strong enough to face this onslaught, or will it realize before long that it has bitten off more than it can chew?

China’s strength

China’s present economy is huge. It is estimated that the contribution of China’s economic growth to the world economy would remain at 25 to 30 percent.

China has one of the biggest armies in the world and has big fire power, but this strength would not help in an impending World War III, as it would rather be fought on the trade and economic fronts.

Since the late 1970s, realising that it lacks technology capability and investment constraint, China opened its economy to multinational companies, adopting policies and procedures that encouraged multinational companies and other countries to invest in China in a big way. Encouraged by the conducive climate guaranteed by China, almost all multinational companies and even smaller companies from abroad set up projects with updated technologies as well as research centres and trade offices in China.

While the US ranked first in terms of incoming Foreign Direct Investment (FDI), China ranked second internationally in terms of incoming FDI in 2018, which increased 3.7% per year on year to a record 139 billion USD and accounted for over 10% of the global total.

The people in China got exposure to modern technologies, and China’s technology base considerably strengthened and expanded. Today, several Chinese companies are in a position to compete with multinational companies all over the world.

China is rapidly emerging as a technology superpower. China has invested billions of dollars in recent years in developing civilian and military applications of emerging technologies such as 5G, semiconductors, microchips, artificial intelligence (AI), quantum computing, and others, to transform China from an assembly line of low-tech manufactured goods into the pre-eminent economic and technological power, manufacturing high-tech goods.

In the process, the Chinese economy and industry developed in a spectacular manner. The strategies and efforts of the Government of China have turned China into the world’s largest manufacturing base.

As a long-term strategy to increase its global influence, and possibly anticipating issues that would arise due to China’s export-dumping practices, China has been making substantial investments abroad during the last several years.

Overseas investments offer China an opportunity to not just bolster its own economy, but also to leverage its economic strength to increase its influence abroad.

Export-dependent economy

China became the world’s largest exporter in 2010, and the largest trading nation in 2013. While investments in China have gone up in a big way, too much capacity has been built up in several areas such as steel and aluminium, as well as several others such as chemical/polymer and allied products. As a result, the capacity use of industries in China has gone down to an unacceptable level in many cases, leading to losses, closures, and mergers.

Since 2009, China has been trying hard to rejig its export-dependent economy to one more dependent on domestic consumption. However, such efforts to increase domestic consumption are not making a big impact, since China’s per-capita income is below the world average.

Import dependence

Even as China is a large exporter, it is also dependent on imports in a big way for several products and services.

China is dependent on imports of crude oil to around 70% of its requirement, and is the largest importer of crude oil in the world.

About 80% of its microchip requirement is met by imports. It has been spending $260 billion every year on import of semiconductors and chips, which is more than the money spent on imports of crude oil.

High level of debt

China’s total debt is building up in the economy to support growth. China’s debt surpassed 303.6% of its GDP in July 2019, and makes up about 15% of all global debt. That is up from just under 297% in the first quarter of 2018. (Source: International Institute of Finance).

China’s efforts to shore up its sagging economic growth are leading to a resurgence in indebtedness, underlining the challenge the government faces in curbing financial risk.

China’s economic growth is being held up through extremely high credit generation. This is not sustainable for long without substantial damage to the economy and financial system.

China vulnerable to economic and industrial aggression

While the size of China’s economy is huge, the ground reality is that it cannot sustain growth if its exports would be curtailed to any significant extent.

Government-owned companies and private Chinese industries are already reeling under below-capacity use.

The Chinese economy is now an integral part of the global economy. Any trade aggression against China by Japan, European countries, and the US will force China to bend its knees, as China is very vulnerable to any slackening in the export market.

While China is strengthening its export base by launching the OBOR scheme, most such investments are in developing countries with low purchasing power. They are unlikely to benefit China’s export economy in the foreseeable future.

What options for countries wanting to control China’s domination?

A large part of investment in China has been made by multinational companies with bases in Europe, the US, and Japan. They cannot just withdraw from China in the immediate future in view of the investments already committed in China, technologies already shared with Chinese technologists, and the fact that equipment and infrastructure facilities built cannot just be lifted out of China at will.

Further, the market base in China is large and cannot be surrendered quicly by any multinational companies and regions like the US, Western Europe, and Japan. Their alternate strategies to “teach China a lesson” will take time to evolve and implement.

Where will China go from here?

In the event of a trade and economic war launched by the US, West European countries, and Japan, China will not be able to hold on to its present economic strength.

In a war of this nature, Western countries, Japan, and the US will have a share of loss, but the loss for China would be much greater as well as unsustainable.

In the event of a World War III, China’s economy would suffer to such an extent that internal unrest would become inevitable due to loss of jobs.

A totalitarian regime such as China’s is an unnatural form of governance, that goes against human instincts for freedom of speech and liberty.

China with a disturbed economy will find that the existing leaders which are now controlling China with a vice-like grip will face challenges from their own people due to the slowing economy, and the rulers will face an unenviable situation. This may result in visible changes in the leadership and governing style of China, as has happened in the past with Russia and several East European countries, when their economies suffered and loss of jobs happened due to their dictatorial form of governance.

About the author

NS Venkataraman is a chemical engineer as well as a social activist in Chennai, India. He is the founder trustee of Nandini Voice for the Deprived, a Chennai-based not-for-profit organisation serving the cause of the deprived and down-trodden, and working for probity in public life.

More articles by NS Venkataraman on Tibet Sun.