China’s rise and the shaping of a new Asian order

Published: July 13, 2015
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The writer is a former caretaker finance minister and served as vice-president 
at the World Bank

The writer is a former caretaker finance minister and served as vice-president at the World Bank

China’s economic rise has rattled the world’s nerves. It has also made the large Asian powers anxious about the changes in the world order that Beijing seems to be orchestrating. To understand where China has come from and where it may be going, we need to look not only at its economic performance, but also need to understand its developing political model.

The Chinese economy has grown rapidly since the late 1970s, when it opened to the outside world. The economy in 2015 is 32 times larger than its size in 1979, when, after the death of Chairman Mao Zedong three years earlier, Beijing began to move away from communism with Chinese characteristics to a system that allowed more space to private entrepreneurs and private enterprise. “It is glorious to be rich,” declared Deng Xiaoping, who succeeded Mao as the great supreme leader of the Communist Party and the Chinese state. The new leader not only introduced a new style of economic governance. He also put in place a new system of political management. This had two important features: the unchallenged dominance of the party along with a systematic renewal of the party leadership every 10 years.

Deng withdrew from leadership allowing the first of three sets of leaders to succeed him. He reappeared briefly to guide the country back to what he regarded as normalcy. He strongly believed that the trauma of Tiananmen Square had to be dealt with firm resolve. In 1993, Jiang Zemin was given the reins of power and he governed the country along with Prime Minister Zhu Rongji. In 2003, President Hu Jintao and Prime Minister Wen Jiabao succeeded the Jiang-Zhu leadership duo. The pair gave way in 2013 to the leadership of President Xi Jinping and Prime Minister Li Keqiang. Each set of leaders left its mark on the Chinese economy, its politics and its place in the world.

Xi took over the reins of government when, according to one way of estimating the size of national income, China was declared to be the world’s largest economy. In October 2014, the International Monetary Fund (IMF) used the purchasing power parity method to calculate the size of large economies. According to its arithmetic, China overtook the US and became the world’s largest economy some time in 2014.

China moved into the first position at a difficult time for the established economies in the West. Buffeted by the Great Recession of 2008-09 and by political developments in the Middle East, both the US and Europe seemed to have weakened not only in economic terms. They had also lost the sense of direction they were taking in the rapidly reshaping global order. That notwithstanding, Washington — both executive and legislative branches of the government — developed strategies aimed at containing China. A number of approaches were developed with Beijing responding to each one of them in its own way.

The Obama Administration wanted to increase China’s share in the IMF ‘quotas’ and the share capital of the World Bank. But that required the authorisation of Congress, which was not forthcoming. Beijing responded by establishing its own development bank, the Asian Infrastructure Investment Bank (AIIB). The Obama Administration worked hard to persuade its European and Asian allies not to seek membership in the AIIB. Instead, most European and Asian states rushed in and became members of the new institution. The Obama Administration also worked to get 11 Pacific Rim states to join it in a trade agreement that would focus on the regulatory aspect of international trade. China was kept out of the Trans-Pacific Partnership. It reacted by setting up its own regional trade arrangement.

Perhaps, the most troubling aspect of this tit-for-tat approach to the creation of a new Asian political order is in the military area. The Chinese have concluded an agreement with Pakistan that will give it access to the deep-water port of Gwadar on the Balochistan coast. This will provide the Chinese Navy with access to a port on the western side of the Asian continent. Watching this development with some anxiety, three large Asian powers responded by moving towards a trilateral arrangement. Senior officials representing Australia, India and Japan met in New Delhi in June to explore how they could work together. In the words of Akitaka Saiki, vice foreign minister of Japan, “the three nations are on the same page with respect to China’s aggressive behaviour”. According to an assessment by David Lang, an analyst at the Australian Strategic Policy Institute, “that the three countries have now reconvened security-focused discussions (with potential spin-off naval activities) speak not only to a shared understanding of China’s rise and the challenges of regional security, but also to their willingness to play a greater role in Asia-Pacific security matters”.

China’s economic rise and the fact that it is now led by an assertive leadership have led to the reenactment of the Cold War, Asia-style. This is unfortunate. The much- anticipated economic rise, not only of China but the rest of Asia as well, was supposed to lead the continent to carve a place for itself in the new global order. For that to happen, large Asian nations were expected to work in unison, not become rivals in their search for prominence. 

Published in The Express Tribune, July 13th,  2015.

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Reader Comments (17)

  • a_writer
    Jul 13, 2015 - 2:09AM

    The reason why “large Asian nations were expected to work in unison, not become rivals in their search for prominence” is not happening is because China is using its military and economic might to bully its neighbors, big and small. Its behavior in South China sea is a prime example. China’s image has not taken the shine as it rightfully should for all its great achievements mainly because of its behavior such as the brutal land grab in Tibet and building sand dunes in S.China sea to make dubious and fake claims of ownership.Recommend

  • Mahesh
    Jul 13, 2015 - 2:26AM

    Not sure when the author wrote this article. China has serious challenges ahead. It’s stock market lost about 40% in the last one month. All efforts by the Chinese government to stop the bleeding failed. It will be a long recovery process. The Chinese real estate bubble hasn’t even burst yet. Granted, Pakistan put all its egg in the Chinese basket and this is not good news for you. Keep your fingers crossed on CPEC. Recommend

  • mahakaalchakra
    Jul 13, 2015 - 2:30AM

    China’s progress and development is astounding but its relations with its immediate neighbours like Japan, Vietnam, Philippines, Taiwan, India and South Korea are not cordial at all. China had war with USSR also in 1968. China’s closest allies are North Korea, Pakistan and Burma (Myanmar) and all three are security (Jangzoo) states.Recommend

  • Arifq
    Jul 13, 2015 - 2:42AM

    Nations have a right and responsibility to protect their rights, if China is going to expand their footprint then they are also educated and experienced enough to understand that there will be push back from states who feel threatened or fear losing influence.

    Not sure why the esteemed writer feels the need to highlight this issue, these are quite normal behaviors. Recommend

  • Mayuresh
    Jul 13, 2015 - 5:57AM

    The china story is not over yet. How its political leadership handles economy from here on will have a large impact on the world. The govt lacks legitimacy so economic issues arise, the tendency will be to channel discontent into drumming up nationalism, which will be Dangerous. Interesting timesRecommend

  • Bairooni Haath
    Jul 13, 2015 - 6:04AM

    China’s economy is a triumph of central planning, not private enterprise. That is also its biggest weakness. China is able to construct infrastructure, skyscrapers, malls and housing at a scale unprecedented in mankind. China is home to 1/6th the world population, but it consumes 1/2 to 2/3rds of all major global commodities like Iron Ore, Copper and Aluminum. In 3 years China consumed more concrete than the US in 100 years. China is replete with empty building and unused infrastructure but still it keeps constructing more as that is its business model. Now it is trying to export the same model to Pakistan. China is also poised to hit demographic disaster with its 1 child policy. China’s birth rate is now 1.35, among the lowest in the world. The population pyramid is becoming inverted with a working adult supporting 2 aged parents and 4 aged grandparents. China is a threat to no one but itself. Like Pakistan, China is its own worst enemy!Recommend

  • Anjaan
    Jul 13, 2015 - 6:11AM

    The Australia-Japan-India trilateral cooperation agreement is one of many more such alignments involving S Korea, Singapore, Vietnam, Malaysia, Indonesia, Philippines, are happening, simply as an insurance against unpredictability and unforeseen developments in the future, and not with hostile intent against China.

    Having said that, the very fact that the list of China’s allies is less than impressive, N Korea, Pakistan and perhaps Sri Lanka and Sudan, it does not reflect well on a future economic leader of the world … Recommend

  • IndianDude
    Jul 13, 2015 - 7:58AM

    The proverb, ‘Man is known by the company he keeps’, also apply to nation states.
    Considering that China’s ttop of the best friends list consists of North Korea, Pakistan, Sudan, Somalia etc., doesn’t show much of a promise for China as a global leader.Recommend

  • abhi
    Jul 13, 2015 - 10:12AM

    In present scenario no one trusts China.They don’t have a transparent system and they support all rogue states in the region. China can do better by discarding thei expansionist dreams and work for a friendly neigborhood.Recommend

  • Cool Henry
    Jul 13, 2015 - 10:17AM

    In the early 90s, Japan was on the rise – but, soon ended in a whimper. Then the Europeans came along for a while and right now they are dealing with a big mess. China came along in the past few years and all of a sudden the Chinese balloon seems to be ready to burst. In between, the US had it’s own fun during the mid-to-late 00s. So, best is to take a chill pill and not get over excited over small matters. Reality of the fact is that China is dependent on US and European markets and policies for it’s economic well being. So, faster it learns to not be a bully – the better it would for it’s well-being in the long run.Recommend

  • V. C. Bhutani
    Jul 13, 2015 - 11:00AM

    The concluding paragraph sums up the author’s approach. He stands for the rise of all Asia in the current century, taking advantage of China’s rise as perhaps the new first economy of the world. What the author is not saying or doing is to take a look at China’s behaviour with a number of land neighbours as well as maritime neighbours. The countries to the east, south-east, south, and south-west of China – with the sole exception of Pakistan – have not signed on to China’s leadership of the new world order which China seems inclined to forge in place of the present West-dominated world order. To be sure, there are no willing followers of the West in this part of the world. It was not for nothing that for a long time several countries newly emerging from colonial rule had opted for a path midway between the power blocs in the post-WWII period. These countries needed space for themselves without becoming tied to the apron strings of this or that world power.
    Now, putting a China-led world order in place of the West-led world order does not give the world a real alternative but just a choice between Tweedledum and Tweedledee. A China-led world order is no improvement on the existing world order. Besides, China has rubbed a lot of countries – except Pakistan – on the wrong side, with the result that China’s rise has provoked some hurried consultations among those who felt threatened. India is definitely one of them and India is perhaps not one of the negligible countries. Xi Jinping talked about inviting India to be a partner in its (China’s) plans of economic reconstruction of the world but took no steps beyond sending occasional teams of Chinese university scholars to visit Indian think tanks and talk with Indian scholars and government representatives. China will need to do more to be considered a leader that other countries will rush to follow. Otherwise China’s plans may not achieve the best possible results.
    Besides, someone needs to give thought to the need to resolving of disputes between countries who fall on the various China-sponsored roads and routes. Otherwise it will look like a latter day re-doing of the old tactics of containment and encirclement which used to be practiced in the first half of the last century.
    V. C. Bhutani, Delhi, 13 July 2015, 1130 ISTRecommend

  • Feroz
    Jul 13, 2015 - 1:08PM

    The fly in the ointment of China’s growth is the expansion of its Debt which now equals around 300% of GDP, a level which is not sustainable. Its effort to control free markets more so the Stock market shows a lack of understanding of market dynamics. Its manipulation will have long term consequences in multiple ways since preventing people from selling cannot work. Trying to control markets will result in further expansion of its debt with debilitating consequences. Any slowdown in growth will cause massive social unrest. Property prices have fallen, Stock prices without sales ban would have also collapsed, add fall in exports and we have a catastrophic situation. Anyone knowing ABC of economics can see the mounting dangers. That the developed world is also seeing a massive slowdown, cannot bring China any comfort.Recommend

  • Frank
    Jul 13, 2015 - 3:07PM

    I beg to differ with the author with regards to Chinese economic rise and might. The fact that their growth is debt ridden as well as the fact that the stock market lost over $3 trillion dollars in under a month shows just how unsustainable China growth has been over the years. With failed market intervention and an already busted and over supplied property market; things are not looking rosier for Beijing. Recommend

  • Harish
    Jul 13, 2015 - 7:53PM

    A bit of level headed thinking tells me that China is going nowhere without it’s neighbors, especially India due to is geographical position and size of economy and nature of govt. Pakistan is insignificant as a prop if something UN-towards happens to Chinese economy. All the big players, be it US, Europe, India and her friends around China are plenty capable of hurting china through trade alone. Recommend

  • V. C. Bhutani
    Jul 14, 2015 - 7:56AM

    @Harish:
    Nobody should want to hurt China. We should all make efforts towards making the world a better place for the good of all humankind in all continents. Look at the suffering of Arabs of the Middle East and North Africa and the people of several African countries. They are all drowned in suffering. The world needs to give them all a helping hand and not keep fighting among themselves. China will recover and rise further. Only it needs to act differently from the earlier colonial powers of the past and it needs to work for peace and development. We in India and Pakistan have been fighting like brothers but we should end the fighting and get on with the task of relieving the poverty of our peoples. V. C. Bhutani, Delhi, 14 July 2015, 0825 ISTRecommend

  • Harish
    Jul 14, 2015 - 9:31AM

    @V. C. Bhutani:
    China is hurting themselves with the colonialist and expansionist mindset and overtures. If they had turned positive towards India rather than trying to occupy Indian land and curtail Indian growth through multiple means India could lend a hand in crisis. Recommend

  • globalobserver
    Jul 14, 2015 - 10:07AM

    @author,

    ” In October 2014, the International Monetary Fund (IMF) used the purchasing power parity method to calculate the size of large economies. According to its arithmetic, China overtook the US and became the world’s largest economy some time in 2014.”

    PPP based ranking means very little. By the same PPP yardstick, India ranks #3 !! China and India are ranked so high because they have such large populations.

    The true economic power of a country should be measured in per capita dollar terms. Is this measure China, China at $7600 is ranked 79 while the US at $55,000 is ranked 12. India at !700 is ranked 143.

    China and India have a very long way to go ahead before they can be compared to the economic power of the larger developed countries.Recommend

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