Friday, August 5, 2022

Commentary: China's rise is still not a given

China’s ability to face future challenges will be constrained by the fact that it’s still a developing country, says an observer.

By Henry Storey

15 Jul 2020 
[Note: The news article is two years old.]

MELBOURNE: When discussing the rise of China, a sense of inevitability often pervades.

China’s sheer population size and economic base will inevitably see it become the dominant regional power – or so the argument goes. China’s faster reopening from COVID-19 lockdowns has added to such arguments. [This was in early 2020. Situation has changed in 2022.]

But just how far will China rise? Given the price tag of Australia’s new defence posture – and the significant opportunity costs at a time when COVID-19 will stretch budgets – it is worth still asking the question.

China’s social contract is built in part on the ability of party elites to provide prosperity, public goods and oversee national unity. The Communist Party of China, which values maintaining power above all else, cannot safely ignore the bounds of this social contract.

Nationalism – and by extension achieving foreign policy goals – is arguably an increasingly important part of the social contract, but remains somewhat secondary.

What matters is that China is likely to have no shortage of stresses to its social contract. While China is by no means alone in facing significant future challenges, its ability to do so will be constrained by the fact that it is still a developing country.


The results of the One Child policy mean that China’s already ageing population may begin shrinking as soon as 2027. This is bad news for a government aiming to transition its economy towards domestic consumption.

The dependency ratio – effectively ratio of non-workers to workers – will increase substantially. China has few social safety nets to protect the elderly and may well “get old before it gets rich”.

An often overlooked challenge facing China is water security, especially with the impact of climate change. Up to 80 per cent of China’s water is concentrated in the country’s south, leaving significant population centres suffering from acute shortages.

[Then there is the recent heavy rains and floods. Which is an annual occurrence.]

Proposed solutions such as the US$70 billion South-North Water Diversion project are costly.

Pollution of groundwater aquifers, which up to two thirds of Chinese cities rely on for some or all of their water, has also become a serious health hazard. It will also be extremely expensive to fix.

The potential for unrest in frontier regions will divert resources away from military spending. China’s paramount leader Xi Jinping has left no stone unturned in his drive to ensure national unity by pacifying Xinjiang, Tibet and now Hong Kong.

China’s tactics are unlikely to determinatively quell unrest. Spending on domestic security outstripped the military budget in 2018 and will continue to be a significant burden.

Combined with other pressing problems such as China’s inequality, grossly-uneven development and paltry social safety net, these issues will divert precious resources and attention away from China’s foreign policy ambitions.

China’s mountainous debt, reflecting a cheap debt-fuelled growth model focused on fixed assets, will also significantly constrain policymaker’s options.


This leaves Chinese foreign policy ambitions in a weaker position than is often assumed. China must also realise that destabilising measures will be met with an array of strategic and economic costs.

This matters, as it difficult to envisage a peaceful transition to Chinese hegemony. More costs will presumably have to be incurred.

Consider the example of Taiwan, which remains the People’s Liberation Army’s “primary contingency” and a considerable drain on resources.

More fundamentally, even without the US, the Indo-Pacific is likely to be a crowded region, as Rory Medcalf aptly describes in his recent book.

The idea that the US will simply exit the region given its extensive interests, current posture and the importance of its superpower status to its national identity, is of course very debatable.

Together, India, Japan, Indonesia and Australia (leaving aside Vietnam and South Korea) – all countries that have various grievances with China – are projected by 2050 to have a combined population of 2.1 billion and GDP of almost US$64 trillion.

China will have 1.4 billion people and a GDP of about US$58 trillion.

Of course, there is no guarantee that these countries will form alliance-type arrangements. China will try to prevent this, attempting to prosecute territorial disputes with each country in an individualised and favourable way.

This realisation alone should be enough for the region’s middle and emerging powers to cooperate in countering China.

Of course, it is possible that China may somehow prove capable of maintaining its social contract while also achieving regional dominance, even in the face of concerted opposition. Defence policy is focused on insuring against worst-case scenarios.

Nonetheless, with precious dollars at stake, it is important that policymakers consider in depth these hinderances to China’s rise.

Henry Storey is an editor at Foreign Brief and currently works as an analyst for a political risk consultancy in Melbourne. This commentary first appeared on the Lowy Institute’s blog, The Interpreter.

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