Lecture Notes: The End of China's Epic Rise

Introduction

• Common belief: We're in an Asian Century dominated by a rising China.
• Contrarian view: The 2020s mark the end of China's epic rise, transitioning from a globalized order to intense security competitions among rival blocs.

Key Points

1. China's Reversal

• China's rise isn't just slowing; it's reversing.
  • Relative economic shrinkage compared to the US using Chinese government data.
  • Actual growth estimates suggest China's economy is smaller than reported.
• Decline in productivity and efficiency.
  • Negative productivity growth for over a decade.
  • Increased capital-output ratios, indicating inefficiency.
• Rising debt levels, surpassing even the US.

2. Global Economic Impact

• Many countries economically tied to China face challenges.
  • China's economic slowdown dragging other economies down.
  • Dependence on Chinese loans now a liability.

3. China's Potential Reaction

• Historical peaking powers often react poorly, leading to aggression.
  • Potential for domestic crackdowns and international expansion.

Factors Contributing to China's Rise

• Security: Stable geopolitical position historically.
• Decent Governance: Post-Mao leadership focused on economic growth.
• Demographic Dividend: Large working population with low dependency.
• Natural Resources: Self-sufficiency in resources allowed for cheap growth.

Current Challenges

Resource Depletion

• Significant pollution affecting water and land.
• Increased reliance on imports for food and energy.

Demographic Shift

• Aging population; declining workforce.
• Imbalance between workers and retirees.

Governance Issues

• Economic efficiency sacrificed for political control.
• Censorship and repression increasing.

Geopolitical Tensions

• Reduced access to Western markets and technology.
• US military encirclement adds to security concerns.

Global Responses and Future Outlook

• Economic decline in China affects global trading partners negatively.
• Rising anti-China sentiment globally.
• Possible aggressive international posture from China.

Historical Context of Peaking Powers

• Historical examples show peaking powers often react with aggression.
• US, Russia, Germany, Japan as past examples.

Concerns about China Today

• Increasing domestic repression seen as fascist tendencies.
• Economic strategy focusing on leverage rather than growth.
• Military buildup and potential for conflict.

Conclusion

• Potential for a future rebalancing, possibly requiring a major shift in power or leadership change.
• Cold war dynamics could spur innovation despite tensions.
• Long-term cautious optimism if global tensions are navigated successfully.