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  • Caroline Floam

Obstacles to China’s Hegemonic Rise

It is no secret that China is looking toward global hegemony. A steadily expanding economy, heightening military strength alongside a blossoming military-industrial complex, and broadening global influence are bringing the nation closer to this goal. The People’s Republic’s favorable economic and defense trends in the past decade have thus given rise to the question: Will China eclipse the U.S. as the top global superpower within the next decade? International actors tend to answer in the affirmative, but many obstacles to the nation’s rise do, in fact, exist.

The international community, U.S. policymakers, and observers alike point to a wide range of promising indicators to back claims of potential Chinese hegemony. Gross domestic product (GDP) has more than doubled since 2010, jumping from USD 6.1 trillion to 14.3 trillion in 2019. While slowing the past two years, economic growth remains relatively stable between 6% and 7%. Further, China leads the world in exports, totaling around USD 2.3 trillion at the end of 2019. Within the past decade, the nation has massively bolstered its military might, revealed through defense expenditures. According to the Center for Strategic and International Studies, China’s defense expenditures increased from USD 143.9 billion to USD 266.4 billion (86%) from 2010 to 2019. As the second highest defense spender in the world behind the U.S., China’s budget suggests it aims to close the gap, as perhaps the nation sees an opportunity in fluctuating U.S. spending.

International observers also cite China’s heightening overseas influence as indicative of its future hegemony. This influence comes in various forms; the two more prominent and recent examples are the Hong Kong national security law, which harshly curtails citizens’ rights of protest and free speech in the special administrative region, and heavy censorship of TikTok content outside of its borders. Additionally, China is fiercely promoting state-owned 5G provider Huawei overseas, claiming it can lead the global 5G revolution, despite questions regarding its data security from Western actors. A brief overview of China’s increasing overseas influence would be incomplete without a discussion of its Belt and Road Initiative (BRI), a massive land and maritime infrastructure investment to carve out new markets for itself from East Asia to Europe. As BRI’s costs skyrocket, Western democracies are concerned that new export pathways will instead become vehicles for military and political expansion.

While these economic and geopolitical trends point to potential Chinese hegemony, U.S. policy actors have incentives to exaggerate the perceived threat of the nation’s rise, such as justifying increased defense budgets and encouraging private sector tech and defense R&D. Despite these trends and their exaggeration for domestic gains, there exist several significant obstacles to China’s ascent to global hegemony.

First, the state is facing the worst aging crisis in history. In 1980, Beijing introduced its infamous one-child policy to reduce the number of mouths to feed, therefore lessening the strain on the economy. Simultaneously, advances were made in healthcare. This combination increased life expectancy and decreased the fertility rate. However, those born before 1980 are starting to retire; more than 330 million Chinese citizens will be over the age of 65 by 2050. Not only does this mean the workforce will dramatically shrink, harming the manufacturing-reliant economy, but also as this generation dies off, economic activity that accompanies individual human existence will harshly drop. Moreover, this retirement wave will create a huge burden on government resources, as it must pay the retirees’ health care and pensions, programs which are already ill-funded. There is no easy solution for this crisis; by 2029, China will enter an era of negative population growth, and despite the authoritarian government organization, the Chinese Communist Party (CCP) cannot necessarily “breed” humans or drive up the population by millions through policy.

Second, despite its size, the Chinese economy is extremely inefficient. This inefficiency manifests itself primarily in excess capacity — or wasted capital — and has roots in China’s “birdcage” socialist market economy. The embraced birdcage theory allows the private market economy to freely flourish within the cage of a centrally-planned economy. As the CCP artificially allocates resources and commands manufacturing, it buys up large pieces of private companies, which then become known as state-owned enterprises (SOEs). Wanting to boost exports and global economic power, beginning in the wake of the 2008 financial crisis, the CCP has provided extremely generous subsidies to SOEs. These subsidies allow the companies to sell their products at a loss and invest in more capital, but once the subsidies run out, as the CCP cannot continuously subsidize the country’s entire “private” sector, the SOEs run into trouble. As funding and profits dry up, production slows, resulting in excess capacity.

What does excess capacity look like? Empty and abandoned manufacturing plants: more than a third of cement factories go unused each year, 700 steel mills sit quiet, and dormant auto plants forgo production of 14 million cars. Wasted physical capital such as this translates into lost jobs, wasted government subsidies, wasted energy and land resources, and a deepening trade deficit due to SOEs selling overseas at a loss. These repercussions have consequences of their own, but they all combine to exacerbate slowing economic growth figures, resource depletion, and poverty rates. Not only will these consequences present a large obstacle to the economic prestige required to be the top global power, they also undermine the CCP’s legitimacy domestically, which promises its subjects economic success in exchange for loyalty and submission.

Third, as noted above, the People’s Republic is depleting its farmland supply. Urban and industrial expansion has encroached on arable land since the early 2000s, threatening the food supply. Beginning in 2001, the annual growth rate of kilometers of developed land was at least 13.4%, as the rural population, seeking higher wage work, migrates to urban centers. The CCP has found it increasingly difficult to feed a quarter of the world’s population with less than 7% of the planet’s arable farmland. With the ruling regime relying on food provision as a source of legitimacy to detract from its Communist grip, this spells trouble. Eroding domestic regime legitimacy, exacerbated on the international stage with the origins of the COVID-19 pandemic, leaves hegemony out of reach.

Lastly, China’s position in an unfriendly neighborhood proves a drain on resources. As China’s influence seeps outward, its Asian neighbors grow apprehensive:

  • In India, frustrations bubble over China-India border disputes and trade deficit.

  • In Mongolia, recent legislation restricts foreign mine ownership, particularly Chinese ownership.

  • In Cambodia, complaints rise about CCP-backed investors over-clearing forests.

  • In Indonesia, manufacturers protest dumping of low-cost, under-valued Chinese goods.

  • In Japan, polls present a 34-year low in feelings toward China, exacerbated by the territorial dispute over the Senkaku Islands.

  • In Myanmar, residents and business owners protest expansion of CCP SOE investments.

  • In the Philippines, frustrations rise over China’s false claim to its oil-rich waters.

  • In Singapore, anti-Chinese attitude permeates civil society and immigration policy.

  • In South Korea, polls reveal that 73% of the population sees a threat in China’s military rise.

These sentiments, primarily in response to China’s outstretched influential hand, further place its military on guard. While the likelihood is slim that these nations would undertake an offensive attack, the CCP claims buildup under self-defense. Although there may be a hint of truth in this claim, these nations, save South Korea and India (Japan lacks an offensive force), barely pose a threat. This buildup contains a two-fold consequence: widespread weariness from international observers and a drain on China’s resources. Concerning this latter implication, as aforementioned, military expenditures already amount to USD 266.4 billion. Further expenditures contain opportunity costs for pandemic relief and the nation’s infamous welfare net used to buy citizen loyalty. If China maintains its current international posture, it will face a choice regarding where to allocate its resources, and it certainly will not be an easy one.

For all of the People’s Republic’s competitive advantages, perceived and real alike, China faces an equal amount of rather tall hurdles to clear to achieve global hegemony. However, these obstacles should not be understood as impassable barriers; every hegemon throughout global history has faced considerable challenges to reach the coveted top spot. These obstacles pose more of a question of if, whether, or when they will be overcome. They are also subject to U.S. exploitation to get ahead and stay ahead, or conversely, fall behind if opportunities such as coalition building and negotiations lack effectiveness. Simply put, observations of who these obstacles will help and hurt is simply a waiting game, as is anticipating the next global hegemon.

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