For a decade, Americans have been transfixed by the specter of a rising China. We feared that the Chinese economy would wipe out American jobs and that the Chinese military would draw the United States into a war over Taiwan. Now there are signs that China’s economy is stagnating – and these problems are unlikely to go away as China’s population rapidly ages and shrinks. The “Chinese Century” may be over before it begins.
That should be good news, right? Not so fast.
China has been one of the main drivers of the global economy over the past two decades. Imports of Chinese goods keep prices low for US consumers and China’s purchases of US Treasuries keep interest rates lower than they would otherwise be for US homebuyers. Job losses to China ended around 2010, while job creation related to Chinese trade continues. US exports to China totaled US$192 billion worth of goods and services, supporting more than 1 million US jobs in 2021. No wonder Treasury Secretary Janet L. Yellen has warned that China’s current economic slowdown is a “risk factor” for the US economy.
There is also a geopolitical risk. Although conventional wisdom from the time of Thucydides was that we should fear the rise of revisionist powers, the historical record suggests that a decline in revisionist powers could be even more dangerous. Germany, according to Hal Brands of Johns Hopkins University, entered both World Wars I and II in a mood of “deep pessimism caused by fear of impending decline.” More recently, Russia, a country on a demographic death spiral, launched an invasion of Ukraine in hopes of regaining lost imperial glory.
China’s economic downturn could prompt Xi to pursue more authoritarian and militaristic policies — even an invasion of Taiwan — to stem growing domestic discontent and channel popular anger at external enemies. Paul Heer, a former US intelligence officer for East Asia, warns that US export control policies and tariffs create a convenient scapegoat that allows Xi to blame the US for China’s economic woes. “We should not take comfort in China’s economic slowdown,” Heer told me, “because it is likely to exacerbate domestic tensions and problems within China, which has not been good for either the US or US-China relations.”
In short, evidence of China’s economic woes should be filed under the “Be careful what you want” column. A China in decline could be more dangerous than a China on the rise.
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