Can Beijing rule the world?
Chinese participation in globalization is based on American principles. After taking power, Xi Jinping finally broke with a long-standing Chinese doctrine of hiding potential, manifesting his ambitions to become a superpower. Behind the Chinese rhetoric of today, few real instruments could make up a truly alternative global order.
Looking at the emerging Chinese-American conflict, it is easy to fall into the ruts of Cold War thinking – the return of the bipolar world, the clash of two systems with global reach and aspirations. It is an easy, understandable and orderly framework – very attractive in the atmosphere of loss and increasing chaos in the international space. The bipolar view is fostered by buzzwords such as Thucydides’ Trap, drawing a conflict between Beijing and Washington as a clash between an aspiring superpower and an old hegemon from which a new global order is to be forged. This creates the impression of a zero-sum game played by both superpowers. The less the USA are present in one place of the world, the more China is present there. This impression is deepened by the ever louder message from Washington, D.C., which, while preparing for a battle with Beijing, strikes the Cold War tones and orders its allies to take sides.
Designing a policy based on these Cold War patterns of behaviour will, however, be misleading. The fact that the US puts the matter on a knife-edge is, of course, obvious. For the beneficiaries of the American order, crossing (the still fluid and undefined) red lines in cooperation with China will probably have tangible consequences.
For much of the world, however, the choice between two versions of the global order, Chinese or American, is largely illusory and often even false. While Donald Trump provides daily evidence of the US’s withdrawal from its role in the world after the collapse of the Soviet Union, the other side of the global equation – the shape and functioning of China’s global order – remains problematic. At present, China has neither superpower aspirations nor the tools to build a global order. Immersed in internal problems, China is not determined to bear the burden of the world on their shoulders either.
How does the hegemon fall?
If we are to look for historical metaphors, instead of looking at the Peloponnese Wars and Thucydides (or to be precise, the author of the term 'Thucydides’ trap’, Graham Allison), let us take a closer look at the times and achievements of the outstanding American economic historian and one of the architects of the Marshall Plan, Charles Kindleberger. He presented a very memorable explanation of the chaos that occurred in the world economy after the First World War.
The British Empire, the former economic hegemon, was mortally wounded by the immense war effort. Also, just after the war, it started to follow an extremely expensive, deadlocked direction of rebuilding the gold standard in its pre-war shape. The United States, which emerged from World War I as an economic, political and financial 'heavyweight player’, proved to be mentally and institutionally unready to take the lead in the global economic order (and, looking at the fate of the League of Nations, also politically).
According to Kindleberger, the course of the Great Depression, the economic chaos and the currency-customs game of everyone against everyone were the result of a lack of clear leadership. The 'Kindleberger Trap’, leading to chaos and uncertainty, resulted from the UK’s inability to maintain its former order and, at the same time, the unwillingness for its place to be taken by the United States. Kindleberger himself focused primarily on monetary policy, but his thinking was quickly extended to other, also political, elements of global governance. This gave rise to the so-called theory of hegemonic stability, combining economic prosperity and political order with the existence of a clear leader, guaranteeing a coherent system of international coexistence.
How does this relate to the contemporary situation? Let us start with the USA, a potential hegemon whose actions continue to set the tone for world politics. The financial crisis of 2008 strongly hit the global economic system, built by the USA since the 1970s, after the 'ballast’ of the Bretton Woods system, which tied the dollar to gold, was dropped. By entering an era of permanent trade deficits and taking advantage of the dominant position of the dollar, the United States has become a 'last-chance consumer’, absorbing the huge trade surpluses produced by the allied states – Europe, Japan and later also China.
The system worked because the resulting global financial surpluses were still returning to Wall Street in the form of debt that allowed America to continue to consume, despite the exodus of jobs and the deterioration of American industry fuelled by globalisation. This 'circular movement’ of goods and capital also became the engine of American political hegemony in the world after 1989. The large and deep market attracted countries wishing to live cosily, protected by Uncle Sam, while access to capital allowed for the financing of the world’s largest army, and with its use – for disciplining the 'marauders’.
The 2008 economic downturn made the US elite face the need to revise this order. The crisis hit hardest the indebted American workers and the middle class. At the same time, it revealed the enormous social inequalities and special privilege of the American '1%’ – those fabulously enriched with world capital trading and rising asset prices. When the dust settled, American politics were governed by the willingness of the victims of the crisis to settle scores – not only the American 'Rust Belt’ but also the poor middle class. The 2016 elections became a yellow card for the American elite. The anti-establishment postulate of Bernie Sanders, „let the rich pay 1%”, lost against Donald Trump’s vision, which was much more favourable to the rich elites, according to which the rest of the world should foot the bill for economic troubles. After Trump’s victory, China was mainly targeted, the largest and at the same time most problematic foreign beneficiary of the American system. The rise of China and the unwillingness of the Chinese Communist Party to carry out political reforms have been a long-standing concern for the USA. After a relative strengthening of Beijing during the crisis, further 'feeding’ of China within the existing system became unacceptable.
However, the change in US foreign policy goes far beyond the conflict with China itself. Under Trump, Washington is conducting a major overhaul of its existing system and is 'cutting’ it according to current opportunities and challenges. In areas that are no longer of vital interest, such as Syria, the US is ruthlessly withdrawing its forces – placing them in the hands of other powers. In Donald Trump’s aggressive business logic, allies are required either to share the costs of global governance or to be subordinate to American interests, according to the „I pay – I demand” principle. With regard to competitors – including China – Trump does not shy away from the threat of overturning tables – exclusion of competitors from the economic order created by the USA, or even partial dismantling of this order. This process is already underway. Donald Trump’s trade wars, which rebuild the world’s economy, are being waged bilaterally, betting American power against individual opponents, with the World Trade Organization bypassed and paralyzed.
Self-confidence and putting the future of the American order at stake results from the unique position of the USA in a situation where the table is overturned. In a truly multipolar world in which the US does not have to stand up to the rest of the world to defend its order alone, Washington would start from the most privileged position – as a powerful and domestically demand-driven economy, rich in natural and human resources, defended by two oceans and the world’s largest fleet. The USA’s position would be in a new concert of the powers, closest to that of the former UK, which could maintain equilibrium in the balance of power in the world.
Trump’s reluctance to be the 'policeman of the world’ in Syria is a foretaste of the USA’s new role. Today, the USA still has an interest and a chance to maintain its systemic domination in many areas of the world, and Trump’s toying with the idea of a concert of the superpowers can – hopefully – again replace the building of broad alliances by the USA. The pressure to revise the existing order will continue, however, regardless of who hosts the White House. The 'Unilateral Moment’ is over, and the world protected by the American umbrella will inevitably shrink and be thoroughly rearranged.
Would China step into the shoes of a retreating America?
After taking power, Xi Jinping finally broke with a long-standing Chinese doctrine of hiding potential, manifesting his ambitions to become a superpower. In response to Trump’s policy, he decided to act quickly, rhetorically positioning himself as the defender of the global order. In his famous speech in Davos in 2015, he presented China as a new 'champion of globalisation’ and a defender of free trade. In its talks with European leaders, Beijing is calling for the maintenance of multilateralism, the WTO regime and the Paris climate agreements. The Belt and Road Initiative, which was initially a regional project, has also experienced rapid rebranding. Today, at the Belt and Road summits in Beijing, Xi Jinping speaks to leaders from all continents and calls for a global opposition to American protectionism. In the eyes of the world that is craving stability, this is a promise of a new Chinese order within which one can once again immerse oneself in blissful trade and consumption. Selling this hope opens many doors for Beijing, also in Europe.
Behind the Chinese rhetoric of today, few real instruments could make up a truly alternative global order. Firstly, Xi Jinping’s ambitions face internal constraints. The Belt and Road Initiative has already provoked significant resistance within China – visible in backstage talks with representatives of a part of the elite, as well as with ordinary Chinese people. There is the talk of too much 'stretching’ of limited resources, and questions are also being asked as to whether they could not be used for the development of the still relatively poor China. The People’s Republic of China is today at the most significant turning point since the reforms began and its opening in the 1970s facing the challenge of disarming the ticking bombs of internal debt, changing the model of growth, combating inequalities, protecting the environment, amongst other things.
It was not without reason that Xi Jinping – focusing on internal challenges – announced that China would become a superpower as late as in 2049. However, even if internal problems do not stop the Chinese leader’s ambitions – after all, the more you have, the more you want – to build a superpower, he now has very modest instruments at his disposal.
Let’s start with the economy, which is the main focus of Kindleberger’s interest. According to the American researcher, the guarantor of global economic governance must establish a set of rules for the system and persuade the rest of the countries to apply them universally, as well as be ready to assume a disproportionate burden: consume production surpluses, sustain streams of investment and capital, and act as a global 'lender of last resort’. It is hard to believe that Chinese declarations of maintaining the existing order and quickly stepping into the US shoes are a realistic scenario. The US would sooner paralyse and kill institutions than put them under Chinese administration.
This is one of Beijing’s greatest weaknesses – it has still not developed its global framework for regulating trade, capital and technology flows, freedom of navigation, etc. Chinese participation in globalization is based on American principles. It is also interesting to see whether China wants to bear the enormous cost of ensuring global stability at all.
Let us look at the first Chinese attempts at building its order, which we have been observing for several years. Today, it takes place as part of the Belt and Road Initiative, under which Beijing is trying to deepen its economic relations with a group of selected foreign partners on its terms, in a Sinocentric model of 'hub and spoke’. The driving force behind this is China’s massive expansion of capital in the world in the form of loans, direct investments, purchases of debt securities, etc. Beijing is working to ensure that increased capital flows translate into the integration of new countries into Chinese supply chains, synchronisation of economic policies, increased people-to-people contacts and, consequently, political dependence. So far, Pakistan has taken this furthest, and in Europe, this idea has been developed furthest in Belarus and Serbia. It is worth noting that today there are only developing countries, which are often white spots in the American global order.
The foundations of Beijing’s constructed order, however, are fragile. First, the Chinese loans that are now flooding developing countries are denominated in the dollar. The financial health of Chinese debtors depends on the interest rate decisions made in Washington.
When a Chinese partner like today’s Venezuela, Turkmenistan or Pakistan is in economic trouble, China is also unable to play the role of the 'lender of last resort’ and restore system stability. Beijing needs relatively large Chinese dollar reserves to protect its’ economy rather than help partners who have slipped up. One example of this is Pakistan, which had to turn to Saudi Arabia or the International Monetary Fund because of currency problems, with all the political consequences.
Making the yuan a globally accepted reserve and settlement currency could remedy these problems, but for several years now the share of the Chinese currency in international trade has been steadily declining, despite Beijing’s efforts. This is mainly due to China’s internal problems, the unstable Chinese financial market and the chronic unsustainability of its economy. In times of crisis, Beijing continues to manipulate the currency and limit its convertibility, deterring all potential earners and yuan counterparties. Suffice it to say that even Russia – one of Beijing’s closest partners, with all the political motives to move away from the dollar – chooses the euro in its dealings with China.
The stability of the system built by Beijing also undermines its approach to trade. China’s industrial policy today aims to concentrate the most advanced industrial production within the Central State. This will probably not allow China to reduce its chronic trade surpluses and become a 'last resort consumer’, absorbing surpluses within the system. This is the subject of constant conflicts with partners, such as Belarus, complaining about chronic trade deficits with China and the pushing out of the domestic industry. Living on Chinese credits, or possibly proceeds from Chinese tourism is not an optimistic vision for most partners. Beijing does not seem to be able to make any compromise here – the internal challenges, the ageing population and the billion citizens who want to join the middle class are forcing an extremely mercantilist policy.
Even the most flawed global order works much better if it is supported by a strong army, especially a fleet. A promise of security, or the threat of war, is capable of persuading partners to adopt less favourable trade rules. Here, however, Beijing’s ambitions are limited by the capacity of the Chinese People’s Liberation Army. After important reforms implemented by Xi Jinping, it is now at the very beginning of a long road to developing the capacity for global power projection. The Chinese army was developed over decades in preparation for the regional, defensive conflict in East Asia, and later also in South-East Asia. Hence the emphasis on ballistic missiles and the expansion of anti-access capabilities increasingly further from the Chinese borders. Today, the Western Pacific is the horizon for Chinese action. Besides, Beijing is not in a position to forcefully enforce its own rules, guarantee free trade and capital circulation, or even guarantee the payment of its debts. Let us remember that the last Chinese negotiations on the repayment of Venezuela’s debt were held under the protection of Russian military advisers.
China is being held hostage by its foreign policy doctrine and partially by its mental unpreparedness to conduct global politics. The official state ideology, which has a strong influence on PRC’s behaviour, assumes a doctrine of non-interference in the internal affairs of other countries.
It stems from the defensive orientation of the People’s Republic of China, ruled by a communist party that is afraid of losing power in China. Non-interference is also the foundation of the 'peaceful growth’ ideology aimed at foreign partners. Through 'unbounded’ economic cooperation, China wants to distinguish itself in the eyes of the world from the imperialist traditions of the USA and Europe. As a result, in the face of global international crises, China is remaining tight-lipped and taking a neutral position. This was the case during the Russian annexation of Crimea or the war in Syria and does not always have to be based on the dogmatism of Beijing. It is often the result of a lack of interest in stabilising areas not directly affected by Chinese interests. In the multipolar world sought by China, the powers that are interested in it will be solving the problems distant for Beijing on their account.
China is not a global alternative
The choice between American or Chinese order is real today, but mainly in the long geographical belt between Japan and Australia, in the Western Pacific. About this area, there is a real possibility of discussing the possibility of supporting Chinese rules of the game by a tough military force. China’s economic position – its role in trade and value chains – is also so strong that Beijing can try to achieve economic domination. Achieving this goal will give China not only control over one of the world’s economic drivers but also a starting point for further expansion. Both sides – Beijing and Washington – are now aware of the fundamental importance of this game, and so the Western Pacific is becoming the most important place of confrontation between China and the USA. The ball is now rolling, and the USA still have several advantages. However, the further away from the borders of China, the smaller are the Chinese ambitions and possibilities for systemic world governance today. Even in the 'testing ground’ along the Belt and Track, the foundations of the Chinese order remain fragile and sensitive to currency crises and coups d’état.
For most of the world, the choice between American and Chinese order is therefore fundamentally false – the alternative to US protection is not Chinese order, but a political vacuum, which is a field of competition between the powers.
An example is the region of Central and Eastern Europe, which Beijing considers at most to be a field of economic expansion and a bargaining chip in negotiations with Berlin and not an area of vital interest. The Central State has neither the ambition nor the capacity to become a regional political and security playmaker. In the natural and desirable Beijing multipolar world, the region between Moscow and Berlin will once again be an object of a superpower game in which China, for the time being, can take part as a guest.
This does not mean, of course, that the world is not a field of conflict between China and America today. The USA put pressure on its allies – sometimes consciously exaggerating the power and reach of Beijing – to 'strangle’ China and eliminate its presence from countries protected by the USA. In this way, they are cutting Beijing off from resources, sales markets and potential bridgeheads for future global power. In the globalised world a full break with China does not work even for the USA, a lot of it is a smoke and mirror show. Today, almost all American allies are trying to find real 'red lines’ in cooperation with China, which would cause a real reaction from the USA.
The Chinese road to building its global order will be long and bumpy. Setting 2049 as the superpower date appears to be a 'measure of the force intentions’ of Xi Jinping. Beijing has to solve several internal problems and build a real superpower instrumentarium. All this under intense American fire, in the reality of tough competition in the Western Pacific. Global stability today, therefore, depends on the decisions taken in Washington. How fast and how deep will the revision of the American order be? How many areas will the USA decide to withdraw from? And above all, will the USA start working towards the same goal with its allies in Europe and Asia, which are the inalienable support of the American order? The test for Washington’s leadership could be another major global economic turmoil. When the US is unable and China is not ready to assume world leadership, the result will be global chaos and a return to a policy of strength. The Kindleberger Trap can be no less dangerous than the Thucydides’ Trap, although it leads to very different conclusions.
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