China is everybody’s destiny! So says Ray Dalio whose admiration for Beijing knows no bounds:
“Time is on China’s side and it’s not on the United States’ side, for various developments,” Dalio said Monday in a conversation with New York Times columnist Thomas Friedman at the Milken Institute Global Conference. “What’s going to be a difficult situation in the new administration is destiny is on the side of China growing, and doing better probably.”
He noted how China’s economy has rebounded faster during the pandemic than that of the U.S. and that the listing of “hot” companies on Chinese stock markets is attracting capital. He also said China’s higher interest rates mean the nation is in a better position of “not having to print money.”
…“You’re going to see the internationalization of the renminbi, which was intentionally not developed before, because it is a threat to the American world order,” said Dalio, 71.
Just a few issues:
- Chinese soft power has collapsed post-COVID.
- Chinese decoupling is real and accelerating.
- Chinese stimulus is easy but it borrows growth from the future which gets ever bleaker with each new iteration because it kills economic dynamism with rentier debt.
- I assume Dalio is joking when he says that China isn’t printing money. How does he think that they maintain the $US peg? Which is one reason why it will never be able to internationalise CNY. If it did so it would collapse and domestic growth tank.
- China is unable to reform to prevent this slide into the middle-income trap, which will get much worse as its demographics deteriorate:
In short, China will grow old long before it grows rich. Sure, it’s large enough anyway for GDP to catch and overtake the US (it already has in volume terms in some segments). But this is not the profile of tearaway rising power. It is the economic profile of a peaking and abortive development economy.
I expect China to be growing at 3% by 2030 and probably to be shrinking in real terms if it actually calculated its misallocated capital correctly in the national accounts.
Does this profile suggest global dominance and reserve currency status? Meh. It suggests a hegemonic great power that dominates only like-minded autocracies that rule over relatively poor states. Pretty much like it does now.
Which is not to say that it won’t be a serious military contender. It will. Hugh White is equally enamored of the Chinese rise:
China’s challenge to the Anglo-Saxon dominance of Asia is, so far, much less militaristic and violent than Japan’s was 80 years ago, but in the long run it is more formidable. That is because China is so much more wealthy, and hence a lot more powerful, today than Japan was in 1941. Japanese GDP then was perhaps one-fifth of America’s, whereas today Chinese GDP is well on the way to overtaking America’s.
Even without COVID-19, and even without Donald Trump, China today poses the most serious challenge ever to America’s strategic position in Asia. For all the tough talk in Washington of a “new Cold War”, there is no clear way for the United States to resist China’s ambitions without risking a major war, which it seems quite unwilling to fight and cannot win. So it is time to recognise that we are probably seeing the end of the American era in Asia, and the beginning of Chinese-dominated era.
That means Australians should start thinking hard about how we prepare ourselves to survive and hopefully flourish when we can no longer rely on America for our security.
Clearly we have a long way to go before we get this right. We must strike the right balance between excessive deference towards Beijing and unnecessary provocation. The first step might be to realise that China’s power and ambition is not going to go away, as some people in Canberra seem to hope and expect. They are new realities that we must learn to live with and manage as best we can.
…This is the immense challenge facing Australian defence policy today. Our task is to build armed forces that would allow us to defend ourselves independently from a major power like China. This is a far harder challenge than we have ever faced before, and it requires us to rethink our approach to defence from the ground up.
Chinese GDP can overtake that of the US without destroying the latter’s power if the disparity slows, as it is and will keep doing so.
Asia will not want Chinese overlordship any more than Australia does. It has a long history of enmity with China, much more so than Australia does, and plenty of embedded liberal democratic institutions to bulwark it. Nor is the US going to abandon the western Pacific. Not even if it lets Taiwan sink. Why would it when that would invite the rising great power to occupy everything west of Hawaii meaning it draws the enemy closer to US soil?
In short, Asia is going to be fiercely contested not simply roll-over into the Chinese embrace. And the US will keep it that way, via many proxy wars if needs be.
That, in itself, may not be a great prospect for Australian living standards. But we’re far enough away for it to be no disaster, either.
We don’t need to be planning for life without the US. If that day comes then we’re cooked any way with regards to China. There’s no military option that can keep it out without a US regional hegemon. We need to be planning how to keep the US as engaged as possible, as well as how to slow Chinese development and keep it from bluffing its way to power across the region.
Not listening to Beijing fanbois like Dalio and White is a good start.