Given that China is in a more precarious position than many think, Trump has many advantages. The Freedom of Navigation patrols are important in what could become China’s unchallenged claims in Southeast Asia. Targeted efforts to stop Chinese banks from money laundering could restrict the assets of over-leveraged Chinese banks. This wouldn’t even need a new law but could be done through the Patriot Act. Even the threat of a tariff or two, such as on Chinese steel or based on substantial theft of intellectual property, could provide leverage as China is in a more precarious position than the United States.
Along with Russia, China seems to be the biggest boogeyman in foreign policy circles today. They regularly produce new technologies such as high-speed missiles and advanced fighters that seem like direct challenges to American superiority. They continue to artificially build islands in contested areas and seem to aggressively pursue their policies across South Asia. Many analysts predict that by 2032 or as soon as this year, China’s economy and military will overtake America’s. But there is a danger in straight line projections.
For example, just from personal experience, I have reason to doubt the doomsdayers on this matter. When I was a kid in the ’80s, everybody was worried about the juggernauts of Japan and Germany overtaking the United States. They had rather impressive economies and were growing for quite a while. But both countries face severe demographic crises. They don’t have enough workers to support their aging population. Japan faced a severe economic recession that took them a decade to recover from. Germany is the relative workhorse of Europe but is being dragged down by debt-ridden countries like Spain.
Then in high school, I heard about the Chinese. For literally the last 20 years I’ve seen pictures of a red Chinese flag on the cover of Time Magazine with talk about the rise of China. But the one-child policy has introduced demographic challenges similar to Germany and Japan, with an aging population and a lack of young workers to support the care of the elderly. China still has a significant number of people living in caves however, their progress was amazing but didn’t touch everybody and may not continue forever.
In the 2008 recession, China embarked on an unprecedented loan and spending spree that prevented a downturn similar to that experienced in America and across the world. But they now have a debt bubble that is larger than that faced by the US in 2008, even though their economy is one-third of the size. Recently their GDP dropped to just over 1 percent, which is half the growth of the US, and may decline further.
The last time China recorded a downturn was 1976, so China will eventually have to face a correction that will dwarf the US crisis from 2008. It will perhaps be a crash, or maybe a decade-long recession similar to the much vaunted Japanese economy. As a result of the warning signs, many of the Chinese elite are shielding their money in offshore accounts. Whatever course the correction takes, it will mean that China will not catch the United States within the next 50 years.
China is similarly over-reaching in foreign policy goals. A key example includes how Vietnam is now working more closely with the US. The US aircraft Carrier Karl Vincent is planning a trip there in March, which will mark the first time American troops have visited the country since we left. India increasingly sees the East and South China Seas as integral to the security of the state in a direct challenge to China.
Given that China is in a more precarious position than many think, Trump has many advantages. The Freedom of Navigation patrols are important in what could become China’s unchallenged claims in South East Asia. Targeted efforts to stop Chinese banks from money laundering could restrict the assets of over-leveraged Chinese banks. This wouldn’t even need a new law but could be done through the Patriot Act. Even the threat of a tariff or two could provide leverage, as China is in a more precarious position than the United States.
As I discussed last week in regards to the J-20, China is an important player on the world stage. But for too long, every action and development has been reported in breathless terms as though Americans should be afraid. There is increasing evidence —based on previous rising powers that turned out to be paper tigers and based on specific indicators in China such as their level of debt— that China is facing a dangerous turning point that suggests they have their own significant problems as well.
