No silk road ahead for China
THE uninterrupted ascent of ‘rising power’ for significant longer period in itself is not an easy pill to swallow by established ‘ruling power’. The race to the top has its own dynamics with political and economic implications not only to the Powers themselves but also to countries that forge alliances with them.
In this backdrop, China’ rise has been magnificent in last four decades resulting in transformation of her economy from low levels of development to the world’ second biggest economy worth $17.73 trillion only behind that of US which is worth $23 trillion according to the World Bank data for the year 2021. Since economic reforms led by Deng Xiaoping’ and until 2010, Chinese economy grew at an average growth rate of nearly 10 percent.
By 2010, it was projected by many economists that China’ GDP would surpass USA’ on nominal terms basis by year 2020, however, China could only manage to surpass US on purchasing power parity basis by the year 2015 while in nominal terms she has yet to cover gap to the size of almost Japan’ GDP.
According to some recent estimates, it was projected that China will be all set for number one position by the end of current decade.
For instance, Japan Centre for Economic Research (JCER) initially forecast that this stage would arrive by 2033, however, in revised forecast, the year 2028 was projected to be the year when this milestone could be achieved, however, in 2021 it revised the forecast again to push it back to year 2033. The recent trends of slowing down in China further reinforce that this stage may take further time if she had to face headwinds on many fronts.
In order for China to close this gap and to surpass the ‘ruling power’ requires consistent high level of growth alongside favourable factors on geo-economic and geo-political fronts.
With the end of first decade of this century, China’ progress started decelerating leaving her to grow with an average rate of around 6 percent in the following decade whereas with the start of current decade, the growth has become further uneven resulting into lowering of estimates in between 2-3 percent for this year thanks mainly to strict Covid restrictions.
Though the growth trajectory of China has been impressive one, however, but it was not free of shocks and jolts as after the introduction of Deng’ reforms, the first political incident that affected growth was Tiananmen Square Protests in 1989 that brought down the growth to 3.9 percent in 1990 from earlier double digit growth maintained since 1983. It took two years for Chinese economy to recover and restoring the upward trajectory of double digit growth.
In the very next decade came Asian financial crisis that too dealt a blow to China reducing her growth from higher levels of 14.2 percent in 1992 to 7.7 percent in 1998, however, she recovered her growth rate of 9 percent achieved in 1997,in a period of almost 5 years i.e., by year 2002.
Thereafter, the hyper growth restored again that peaked in year 2007 when it touched growth rate of 14 percent again, at which point another crisis i.e., the Great Financial Crisis struck all major economies including China. This recession brought down the rate from the peak of 2007 to single digit growth of 9 percent by the very next year i.e., 2008.
Though injecting money into the economy sustained the growth somehow around 10 percent but only for three years from 2008 to 2010 and since then it has continuously been decreasing as the Chinese economy grew at the average rate of 6 percent in that decade, however, the previous decade also witnessed initiation of Sino-US tariff war as well as global pandemic that further exacerbated the downward trajectory of Chinese economy and if current year’ growth projections are accurate, she will exhibit 2-3 percent growth rate. At this rate, will China be able to offer as many opportunities as required particularly to huge chunk of new job seekers that are being added every year? Certainly, not an easy question to answer.
From the local protests of 1989 as well as from Asian Financial crisis, she emerged fairly quickly, may be, because of relatively lower magnitudes of crisis in comparison with GFR and Covid-19 which struck on global scales affecting China so deep that her recovery from these to restoring hyper growth rates as acquired in the past seem an uphill task.
This further reveals a pattern in Chinese recent history of progress that crises (from Tiananmen to global pandemic) emerge in every decade of growth particularly toward its end.
This decade which is already marked with rise of tensions on political fronts with respect to Taiwan, Hong Kong, Uighur minorities, border issues with India, support to Russia on Ukraine war, access to critical tech segments and the recent resurgence of Covid waves again may further dissipate the warmth in relations with the West particularly the US that may further weigh down the current growth rate.
China being the export-driven economy with Western world countries as the major markets would therefore have very few cards to play in future. In that case it will be difficult for her to control public anger and protests which are already underway against Covid restrictions.
With that said, China’ dream of revival of old silk route may not turn out to be that silky. The road ahead seems quite rough for China. The stumbling blocks may sap her residual growth momentum.
If experience is any guide, she may exhibit her resilience once again, however, the way walls are erected against her on geo-economic and on geo-political fronts, the ongoing decade may turn out to be a ‘lost decade’ and may further complicate the situation for her to come out of the middle-income trap.
—The writer is Development Policy Analyst, Poet in Urdu and English languages, currently based in London.
