China is a paper dragon

A terrific note from The Atlantic’s David Frum sums it all up:

China was mentioned only four times in Joe Biden’s first address to a joint session of Congress, but it shadowed almost every line of the speech. “We’re in a competition with China and other countries to win the 21st Century,” Biden said. His aides describe the president as preoccupied with the challenge from China. “It informs his approach to most major topics and the president regularly raises it in meetings, whether he is discussing foreign policy or electric bus batteries,” CNN’s Jeremy Diamond reported. “And aides say Biden believes it is a key test by which historians will judge his presidency.

As Biden said to the nation from the well of the House of Representatives, the authoritarian President Xi Jinping is “deadly earnest” about China “becoming the most significant, consequential nation in the world. He and others—autocrats—think that democracy can’t compete in the 21st century with autocracies.”So this might be a useful moment to hear a contrary voice. In 2018, the Tufts University professor Michael Beckley published a richly detailed study of Chinese military and economic weaknesses. The book is titled Unrivaled: Why America Will Remain the World’s Sole Superpower.

The book argues that China’s economic, financial, technological, and military strength is hugely exaggerated by crude and inaccurate statistics. Meanwhile, U.S. advantages are persistently underestimated. The claim that China will “overtake” the U.S. in any meaningful way is polemical and wrong—and wrong in ways that may mislead Americans into serious self-harming mistakes. Above all, Beckley pleads with readers not to focus on the headline numbers of gross domestic product. China may well surpass the United States as the largest economy on Earth by the 2030s. China was also almost certainly the largest economy on Earth in the 1830s. A big GDP did not make China a superpower then—and it will not make China a superpower now, or so Beckley contends.

Beckley is a voracious reader of specialist Chinese military journals and economic reports. And, he argues, many of the advances cited as Chinese strengths don’t hold up to close scrutiny. American analysts often publish worries about China’s growing navy, and especially its two aircraft carriers. But, Beckley writes, “Chinese pilots fly 100 to 150 fewer hours than U.S. pilots and only began training on aircraft carriers in 2012,” and he adds that “Chinese troops spend 20 to 30 percent of their time studying communist ideology.”When Chinese forces do train, Beckley argues, the exercises bear little resemblance to the challenges the People’s Liberation Army would face in a great-power conflict:

PLA exercises remain heavily scripted (the red team almost always wins) … Most exercises involve a single service or branch, so troops lack the ability to conduct joint operations, and assessments are often nothing more than “subjective judgments based on visual observation rather than on detailed quantitative data” and are scored “based simply on whether a training program has been implemented rather than on whether the goals of the program have been achieved.”

Worried about Chinese students’ high scores on comparative math tests? You’re looking at the curated outputs of highly selective groups of students.

Whereas public school is free through high school in the United States, China’s government only covers the costs of elementary and middle school. At many Chinese high schools, families have to pay tuition and other expenses, and these outlays are among the highest in the world. Consequently, 76 percent of China’s working-age population has not completed high school.

Things don’t improve at the college level.

Many Chinese college students describe their universities as “diploma factories,” where student-teacher ratios are double the average in U.S. universities, cheating is rampant, students spend a quarter of their time studying “Mao Zedong thought,” and students and professors are denied access to basic sources of information, such as Google Scholar and certain academic journal repositories.

Surely China is winning the industries of the future? Not really.

Chinese firms’ total spending on R&D as a percentage of sales revenue stalled at levels four times below the average for American firms. … Chinese firms remain dependent on foreign technologies and manual labor and have a rudimentary level of automation and digitization: on average Chinese enterprises have just nineteen robots per ten thousand employees; U.S. firms, by contrast, use an average of 176 robots per ten thousand employees.

But isn’t China sprinting to overtake the United States? Yes, but it’s stumbling badly in that pursuit.

China now leads the world in retractions of scientific studies due to fraud; one-third of Chinese scientists have admitted to plagiarizing or falsifying results (versus 2 percent of U.S. scientists); and two-thirds of China’s R&D spending has been lost to corruption.

Undergirding these examples and dozens more like them is Beckley’s clarifying theoretical insight: Repression is expensive.

The lines that plot the comparative GDP of the United States and China distort the real balance of power between the two societies, Beckley argues, because China must devote such a large share of its resources to basic subsistence needs to avert the overthrow of the state.Beckley dramatizes this point with historical context. The concept of GDP did not exist in the 19th century, but economists have retrospectively reconstructed those figures backward into time. They have found that in the 1800s, the Chinese empire had a GDP much larger than that of Great Britain. The Chinese army of 800,000 men also enormously exceeded Britain’s troop numbers. Yet when the two states clashed in the two Opium Wars, from 1839 to 1842 and again in 1858, China was crushingly defeated. Why?A great part of the answer, then as now, was the cost of repression.

Nineteenth-century China faced an average of 25 local uprisings a year. Most of its troops had to be deployed to suppress rebellions and control banditry, leaving few available for war-fighting.

The next part of the answer is that mass is not power.

Although China’s resources were enormous in the aggregate, most were consumed by the basics of subsistence. In the 19th-century, Britain produced only half as much as China, but it did so with one-thirteenth the population—making more wealth available for more purposes.

A final piece of the answer is that technological copycats face huge disadvantages against technological innovators. They will always lag behind the more creative rival, not only in the factory, but on the battlefield. “Repeatedly during the Opium Wars … Chinese armies of thousands were routed in minutes by a few hundred, or even a few dozen, British troops,” Beckley notes.

Beckley does not suggest that the lopsided outcome of the Opium Wars would repeat itself in the 21st century. Anyway, nuclear powers do not fight expeditionary wars on each other’s territory. Instead, Beckley seeks to highlight the immense defects of gross GDP as a measure of national strength—factoring in the costs of repression—and the strategic predicament of China’s location, barred from the open ocean by a ring of potential enemies on its eastern front, extending from Russia, through Korea, past Japan, to the Philippines, and then to Vietnam.

I spoke with Beckley shortly before Biden’s address to ask whether he had revisited any of his assessments since finishing his book early in Donald Trump’s presidency. He said that he had become more alarmed by China’s aggressive and repressive intentions, but remained as dubious as ever about Chinese capacities.

Americans need to hear this perspective of confidence. The self-doubt that afflicts so many Americans is pushing this country to wrongheaded policies, most especially trade protectionism, and even outright trade war. Biden had it closer to right back in 2019, when he dismissed overwrought fears of China: “China’s going to eat our lunch? C’mon, man.” Since then, Biden has been pushed by political necessity to a more confrontational approach—pushed not only by a Trumpified Republican Party, but also by his own party’s turn against trade and markets. One of the swiftest critics of Biden’s “C’mon, man” comment was his then-rival Bernie Sanders, who tweeted that same day:

Since the China trade deal I voted against, America has lost over 3 million manufacturing jobs. It’s wrong to pretend that China isn’t one of our major economic competitors. When we are in the White House we will win that competition by fixing our trade policies.

Sanders lost the nomination, but he won the debate within the Democratic Party over trade policy. In his address, Biden committed to extending and enlarging “Buy American” favoritism in government procurement. His administration is maintaining Trump’s anti-China tariffs and is “reviewing”—not yet removing—tariffs against the European Union and other trade partners. Biden economic advisers warned during his campaign that trade expansion would rank low on their list of priorities, and so it is proving.

You often hear the criticism that Americans terribly miscalculated when they opened the door to freer trade with China, and received in return only a richer and more dangerous enemy. Disappointment and disillusionment are then invoked to justify more aggressive policies of confrontation. The Trump administration raised the defense budget by more than $100 billion a year, and the spending increases have continued even after the campaign against ISIS came to an end. More and more of the money is being directed to preparations for a conflict with China.

China’s language and behavior is assertive and provocative, for sure. China’s power is rising, yes. Its behavior at home and abroad is becoming more oppressive and more brutal; that’s also tragically true. But as Americans muster the courage and will to face Chinese realities, that reckoning needs also to appreciate the tremendous capabilities of this country, and the very real limits besetting China: a fast-aging population, massive internal indebtedness, and a regime whose worsening repression suggests its declining popularity.

On April 28, the Financial Times reported that the suspiciously delayed Chinese census would reveal a population decline from 2010 to 2020, the first since the state-caused famines of the 1960s. The FT report was hastily disavowed by Chinese authorities, but in a strangely ambiguous way. Whatever the census ultimately claims, and regardless of whether it is believed, the story points to two deep truths about Chinese society: It’s about to be home to a lot of old people, and trust in the state is very low, and for good reason.

As China’s population ages, it will deplete its savings. Chinese people save a lot to compensate for the state’s meager social-security provision. For three decades, the savings of ordinary people financed the spectacular borrowing of China’s state-owned enterprises. How much was borrowed? Nobody knows, because everybody lies. What happens as the savings are withdrawn to finance hundreds of millions of retirements? Again—who knows?China misallocates capital on a massive scale. More than a fifth of China’s housing stock is empty—the detritus of a frenzied construction boom that built too many apartments in the wrong places. China overcapitalizes at home because Chinese investors are prohibited from doing what they most want to do: get their money out of China. Strict and complex foreign-exchange controls block the flow of capital. More than one-third of the richest Chinese would emigrate if they could, according to research by one of the country’s leading wealth-management firms. The next best alternative: sending their children out. Pre-pandemic, almost 1 million young Chinese attended Western universities. Pre-pandemic, only about 10,000 Americans were studying in China; single thousands were from other Western countries—and almost all of them were in the country to study language, not any academic specialty.This is merely a sample of the gathering troubles facing America’s designated strategic competitor and economic adversary. The United States is hardly trouble-free, but if you had to choose either set of troubles, you’d surely rather face the American list than the Chinese. That’s why Biden said, “C’mon, man,” and why U.S. policy makers should look to the future with a little more confidence and a lot more trust in trade, markets, and the superior potential of a free people under an elected government.

David Llewellyn-Smith
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