The Growth of China as a Balancing Politico-Economic Force

By Craig Wright | 22 Nov 2022 | Economics

A work co-written with my daughter and extending her paper.

Kim and Gates (2015) investigated the role of power transition theory in the rise of the People’s Republic of China (PRC) and explored whether it would lead to an onset of global instability or a possible great power war. The authors (Kim & Gates, 2015, p. 224) proposed that “if the USA and China maintain their capacity for nuclear deterrence, and continue to depend on each other economically, the likelihood of power transition leading to a great power war will be minimized”.

            Organski (1968) forecasts the eventual rise of China and the return of the nation as a great power. Yet, Organski (1968) was also incredibly reticent about extending the prediction toward the eventuality of a great power war. Instead, by constructing power transition theory, Organski foresaw the decline of the United States as a hegemonic power and the consequential division of power from unipolar to bipolar or even multipolar structures (1968, pp. 338–376). At the same time, Organski (1968, p. 361) foresaw the collapse of unipolar hegemonic power and the growth of non-Western political systems with the growth of leadership through the PRC.

            While multiple economic responses have occurred between the United States and China, with the resultant contentions over trade wars (Itakura, 2020), it is highly unlikely that the models of bargaining and warfare (Frieden et al., 2022, p. 103) will follow a model described by the growth of German forces within Europe before the First World War (Kim & Gates, 2015, p. 220). Understanding such a position requires an analysis of why nations go to war and the distinctions that arise when analysing the existing formally hegemonic structures within the United States in international relations and the rising power of the People’s Republic of China and when comparing them with the structural differences between Germany and Britain a century before.

            Frieden et al. (2022, p. 96) provide two motives for war. Firstly, nations fight “to prevent an enemy from becoming relatively more powerful”. Secondly, the “security dilemma” arises through the growth of competing nations and the fear that it could lead to instability and attack. As one of the founders of the neorealism skills of political thought, Mearsheimer (2014) contends that international relations continually fluctuate between defensive and offensive realist positions.

            The deterrent threat of nuclear weapons provides a different structural foundation to the underlying causes of direct conflict than earlier European disputes. Tønnesson (2015) extended the argument of nuclear deterrence, contending that the development of power blocks through the alignment of third-party countries such as Japan provides an extended deterrence capability. Additionally, the development of economically integrated trade and production networks ties the PRC and the United States into an uneasy alliance.

The Effect of Nuclear Deterrence

Chase (2013, p. 52) contends that “China is currently modernizing and expanding its nuclear force with the deployment of road-mobile intercontinental ballistic missiles and the development of a submarine-launched ballistic missile to arm its new nuclear-powered ballistic missile submarines”. The substantial policy implications of such changes mean that China is developing a more secure second-strike capability. Such changes will increase the perceived security within the Chinese government and increase the importance of the US-China relationship.

            Frieden et al. (2022, p. 96) assert that the fear of attack may lead to war. Yet, as the Chinese strategic forces and military gain confidence in their second-strike nuclear capability, fear and apprehension are likely to diminish. Chase (2013, p. 54) claims that “China’s transition to a more secure second-strike capability will likely contribute to greater strategic stability in the U.S.-China relationship”. But, it is also noted by Chase (2013, p. 77) that an extended possibility exists that the enhanced nuclear position would also “give China greater confidence in using its conventional capabilities to coerce its neighbors” and that “China’s larger and more sophisticated nuclear force will also create challenges for U.S. policymakers” (2013, p. 77).

            The dilemma exists that while relationships between the PRC and the United States may stabilise, “aspects of Chinese doctrine could undermine crisis stability and heighten the

risk of escalation in the event of a confrontation with another nuclear power” (Chase, 2013, p. 77). Christensen (2012, p. 454) argues China’s growing nuclear position also places the United States at risk as “Chinese leaders might be more bold in conventional crises with the United States than they otherwise would be, knowing that China is at least capable of countering any American threat of nuclear escalation”.

            Even though the arguments suggest that China’s increasing capabilities around nuclear deterrence will lead to stability between the PRC and United States, other analysts have noted that the potential for relationships to sour exists and that third-party escalations, including those using conventional weapons, may become more likely (Bradley, 2016). Importantly, Kurita (2018), Singh (2007), and Arbatov (2021) each challenge the relationships between India, Pakistan, and the PRC, noting that they may lead to regional instability.

            Such third-party escalations may utilise limited nuclear responses that are integrated with conventional forces (Peters et al., 2018). Despite the limitations in direct confrontation and the growing integration between trade and production networks, reviewers such as Goldstein (2020) argue that a US-China “Cold War II” may develop. Yet, the distinctions between the US-China integrations and trade relationships against the Soviet-American rivalry of the Cold War will be such that a “Cold War II… will not simply replicate the rivalry of Cold War I” (Goldstein, 2020, p. 48).

            Instead, new technological developments around cyber warfare may produce an environment that leads to false flag operations and cyberattacks coupled with conventional warfare involving third-party nations (Goldstein, 2020, pp. 58–59). While direct conflict between the United States and the PRC remains less likely, power transition theory posits the creation of a “Thucydides Trap” (Allison, 2017) that may escalate third-party conflicts between neighbouring nuclear powers and increase the number of traditional conflicts in the region.

Integrated Trade and Development Networks

The role of economic interdependence and the changing global attitudes toward foreign trade are discussed by Frieden et al. (2022, p. 355), who noted that the openness of a nation “to trade affects its pattern of economic and social development as well as its relations with other nations”. Likewise, “international trade has become one of the more contentious issues” (2022, p. 355) in geopolitics. Such interdependence has led Chan (2007) to critique power transition theory, arguing that the deepening economic interdependence will result in a scenario that would “restrain Beijing’s bellicosity in its foreign relations and to encourage its domestic political and economic liberalization” (Chan, 2004, p. 130).

            Additionally, Chan (2004, p. 105) contends that “[i]nstead of challenging the United States, Beijing will try to restrain Washington’s grand design for global hegemony and, by implication, its intention to block and defeat any aspiring regional power”. Next, Degterev et al. (2021, p. 221) examine the ongoing responses to the Sino-American trade. Yet, such discrepancies can also lead to problems with regional powers that are lightly aligned. For example, while greater alignments have been demonstrated between China and Russia, they also lead to growing tensions and economic discrepancies in such regions.

Thus, the Russian attempts to grow trade in the region also put political and economic pressure on China from competing nations. Moreover, the competition between Russia and China extends the diminishing power of the Russian nation, causing more competition in the region. Consequently, despite political tensions, the economic integration of the PRC and the United States will likely lead to regional divisions but a grudging understanding that economic integration is essential.

Rising and Declining Powers

The United States is declining in relative power as China grows in global influence and wealth. Yet, the former bipolar counter to the United States, Russia, is diminishing in influence within the international system faster than the USA. Kim and Gates (2015, p. 224) note that the growing alignment between Russia and China could lead to developments that result in scenarios where “Russia could very well become a junior partner to a powerful China, thereby diminishing its ability to influence the international system”.

            In such an analysis, the positions of the other declining nations and the power positions between smaller nations must be examined. Moreover, despite Degterev et al.’s (2021, p. 213) claims that a power transfer will be completed “after the power of the PRC reaches 120% of the American one,” there are differences in the amount of available capital for each nation. As a result, the total GDP and the GDP per capita lead to very different outcomes.

Economic Distribution of Wealth in Foreign Power Struggles

In 2021, the GDP of the United States approached USD23 trillion. On the other hand, China had a lower GDP of USD17.7 trillion (GDP (Current US$) – the United States | Data, n.d.). Yet, the Chinese figures have been debated (Fernald et al., 2021). The main distinction lies in the level of free capital. The World Bank reports that the United States has a GDP per capita exceeding USD69,200. Conversely, the PRC has a GDP per capita of just over USD12,550.

The differential allows for higher levels of purchasing power and provides a greater level of government and military expenditure for the nation with the higher GDP per capita. In each instance, the required level of US$10,000 to maintain the existence of a middle-class means extensive opportunities for political growth within the United States compared to China. The growth of purchasing power in China will eventually lead to increased capabilities.      

The Rise of a Chinese Political Supremacy

Given the difference in per capita expenditure and earnings, it needs to be noted that China must first exceed the United States by more than just the total GDP. Moreover, undermining the growing middle-class position would diminish the government’s political power. Consequently, a more stable nuclear position and China’s regional dominance will likely lead to increased stability in negotiations in a bipolar geopolitical state between the United States and the People’s Republic of China.

            Conversely, China’s interactions with other nations could devolve based on the growing confidence in the ability of the PRC to respond to regional events using conventional weapons. The likely consequence would be the growth of regional groups, such as in the form of a non-Western alliance between Russia and China. Such an alliance would lead to enhanced instability as the diminishing position of the Russian government on the world stage continues to decline.

Conclusion

A Chinese-dominated international system would put economic pressure on the PRC because of the increased costs of maintaining an enhanced military position. Consequently, this would increase the need to maintain existing trade relationships and production lines with Western nations. Additionally, the probable development of cyber warfare and enhanced trade responses would mitigate the need for traditional or nuclear responses. Yet, each nation will exert power and extend control through pressure on third-party nations. While doing so will lead to greater stability between the US and PRC, it could also lead to a larger number of conventional conflicts between smaller third-party nations.

Works Cited

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