Saturday, July 27, 2013

Past Trends Never Continue Forever

China's impressive string of economic growth is coming to an end.

Projecting past growth rates that had the advantage of starting from a very low level was ridiculous but commonly done to predict the demise of American economic dominance.

Stratfor addresses the end of China's economic miracle.

This doesn't mean that China is in decline, of course. Nor does it mean China will collapse. But it does mean that there was no real miracle. Mortal rules of economics apply even to the Middle Kingdom between Heaven and Earth.

Stratfor believes that China's relative decline will not result in a more aggressive China trying to compensate for the failure of rapid economic growth to lead to dominance without a fight:

The major shift in the international order will be the decline of China's role in the region. China's ability to project military power in Asia has been substantially overestimated. Its geography limits its ability to project power in Eurasia, an endeavor that would require logistics far beyond China's capacity. Its naval capacity is still limited compared with the United States. The idea that it will compensate for internal economic problems by genuine (as opposed to rhetorical) military action is therefore unlikely. China has a genuine internal security problem that will suck the military, which remains a domestic security force, into actions of little value. In our view, the most important shift will be the re-emergence of Japan as the dominant economic and political power in East Asia in a slow process neither will really want.

I certainly welcome China's relative decline. And I do think that China's military power is not as strong as is commonly believed. But China does have military options for short wars that China did not have 30--or even 10--years ago. China could project power to achieve a quick military victory over unprepared or distant powers and count on diplomacy, nuclear deterrence, and foreign fear of further casualties to cement that quick victory. It didn't work out for Japan (absent the nuclear aspect, of course), but China might think differently--or believe the nuclear angle makes all the difference.

I think Stratfor is right and that it doesn't make sense for China to seek war to get regional dominance that past economic growth promised to achieve without war. I just don't know if China's leaders think the way Stratfor thinks.