The Chinese elite capture-debt trap model is crude in comparison to the US-aid based approach.
China’s rise, role in international affairs and the influence it wielded was natural. Geopolitically, it had brought America’s “unipolar” status to an end. A multipolar world with two dominating poles—the US and China emerged. In the new geostrategic era, a rising China had locked horns with a declining US to ensure that the “old order passeth”. However, that theory is now on shaky ground as China’s influence waned. The shift started, with Covid duly exacerbated by the Ukraine war fallout.
Influence comes in many forms. At the apex is political influence based on common ideologies or common interests. Military influence is derived from use of force coercively. Soft power influence enables getting things done willingly. Technological dominance creates its own influence. Social media has emerged as a great influencer. All this is underpinned by economic power, which has an outsize influence on global affairs. Money speaks in all languages. If China’s influence is waning, it leads one to question: how is it so? While there is no single metric which can define the wane, there are cases which indicate the subtle shift. Hence it is first necessary to examine some of these cases.
The Angolan civil war ended in 2002 after 27 years. China waded into fund the wrecked country’s reconstruction. It encouraged Chinese companies to venture into oil rich Angola. The resulting infrastructure boom in housing, roads, dams, railways and power plants was based on the Angola Model in which “oil-backed” loans were used to access Chinese funding. Angola became a star performer in Africa with an average economic growth of 11% annually between 2001 and 2010. This model was tweaked as “resource-backed” loans for other African countries. All was well. Oil prices crashed and Angola went into recession in 2016. The economy contracted for five consecutive years. Covid-19 exacerbated the problem. The country narrowly avoided a debt default recently. The new government seeks to diversify its oil-dependent economy and reduce its excessive reliance on China. Economic diversification is “a matter of life or death”. The end of the Angolan model is underscored by a decrease in Chinese population from over 300,000 to fewer than 20,000 in Angola. Chinese efforts to establish a naval base in Angola has met with resistance and has provoked a stern response from the US. This will have reverberations in the rest of Africa.
Recent surveys in South Korea indicate a trust deficit with China. External factors, international politics, differences in historical and cultural perceptions, nationalistic outlooks and China’s aggressive diplomacy including gobbling up of Hong Kong have sent alarm bells ringing among Koreans who consider it their long term threat. South Korea has pivoted to the United States and Japan to help preserve peace and stability in the Taiwan Strait and in the region. It has also indicated that it wants to go nuclear. Recently, the new South Korean President, Yoon Suk-yeol was its first leader to attend a NATO summit. The gap between China and South Korea is clearly widening.
When the US withdrew from Afghanistan it was expected that China will fill the gap, stabilise the country and exploit its mineral resources. Despite being proactive, Chinese ties with the Taliban remain uncertain. Afghanistan remains volatile. China has reservations about a stable and profitable partnership. Chinese companies are reluctant to enter into infrastructure projects due to security concerns. China remains worried about the East Turkestan Islamic Movement, which is a “direct threat to China’s national security and territorial integrity”. The Chinese have realised that “the internal situation in Afghanistan is very complex and not everything can be managed by China”. Recent attacks on Chinese nationals in Pakistan have queered the pitch for extending the CPEC into Afghanistan. Limits of Chinese influence have been clearly exposed.
China was Sri Lanka’s “all-weather friend”. However, it is now displaying an arm’s length fair-weather approach to the island’s economic meltdown. Political influence wielded through the Rajapaksas has evaporated. The Chinese leadership is not planning to get involved in any international plan to bail out Sri Lanka. Their pitch has been fully queered. Also, China’s loan disbursing appetite has flagged down since domestic growth slowdown is causing it to turn inward. As India and IMF are playing an increasing role in the affairs of the nation, Chinese influence is waning.
Jacinda Ardern, the left leaning New Zealand Prime Minister, has urged democratic nations to stand firm as China becomes “more assertive” and “willing to challenge international rules and norms” during an address to NATO. Philippines’ newly elected President has stated that he “won’t allow Philippines’ rights to be trampled upon in the South China Sea”. Philippines has gone ahead with a deal to buy the Brahmos Cruise missile from India. Talks over joint energy exploration between Philippines and China in the South China Sea stand terminated, citing constitutional constraints and issues of sovereignty. Pacific island nations continue to send negative signals or buy time on China’s bid to strike a security pact with them. The dialogue between China and EU has been described as the dialogue of the deaf. Malaysia has preferred the Indian Tejas aircraft over China’s JF 17. The list and incidents can go on—Canada, Poland, Lithuania, UK, India, Nepal, Maldives, etc. China has acquired the reputation of being a fair-weather friend. Accordingly its global influence is waning. This was most evident during the Ukraine war when decisions having international repercussions were taken without even consulting China.
All these cases indicate that the Chinese elite capture-debt trap model is crude in comparison to the US-aid based approach. China’s assertive behaviour and expansionist aggression devoid of soft power was abrasive. It contributed to lack of trust in China. Lack of trust inhibits propelling the yuan as the global reserve currency and the influence which it carries. Till the economy was firing on all cylinders, Chinese influence kept increasing. Money spoke. However, the economic slowdown imposed severe limitations on Chinese influence. Its hesitancy to use its military in expeditionary roles or get involved at the grassroots with people limits influence. Despite being the world’s second largest economy, China lags behind in a number of technologies, as stated repeatedly by Xi Jinping himself. This limits its ability to influence events technologically. This gets compounded by China’s chronic deficiency in resources—energy and food, which actually opens up a vulnerability. The new era of nuclear rearmament encompasses Japan and South Korea. It complicates the nuclear environment and limits Chinese influence in its immediate vicinity.
The short term economic prospects of China are punctuated by media mentions like “China’s economic slowdown looks like a ‘lifetime of debt’ for some citizens”; “facing lean times, small businesses dial back summer hiring”; “Fewer billionaires in mainland China as ultra-wealthy feel pain of Beijing’s tech, property crackdowns”; “China to press on with ‘Zero Covid’, despite economic risks”; “China’s cash-strapped local governments accused of misusing funds as economic pressure grows”; “Li Keqiang calls for new infrastructure push to shake off economic slowdown”. They tell a stark story if fully read. When summated, China has pivoted to the “State” with its zero-Covid policy, common prosperity, crackdown on tech sector and a beleaguered property sector, which alone weighs heavily with about 30% share in GDP. Chinese growth in the short term is bleak. There is an evidential impact on its global influence.
The long-term perspective of the Chinese economy has been analysed succinctly in a Lowy Institute paper on “Revising Down The Rise of China”. It argues that China faces a long-term growth slowdown owing to demographic decline, the limits of capital-intensive growth, and a gradual deceleration in productivity growth. It is a macro structural issue. China is projected to grow at 3% till 2030 and 2% by 2040, while averaging 2-3% overall from now until 2050. China might eventually become the world’s largest economy, but exercising influence is different. China’s past performance cannot be projected into the future linearly. This is even if China is “successful” in productivity, education, business investment, containing financial risks, and so on. Overall, the Chinese story of aided economic growth turning into one of opposed growth indicates declining influence.
China can still increase its influence if it is willing and able to use its exponentially growing military power. After all, the US established its influence through it military power much before it established the dollar hegemony. However, the inexperienced PLA remains hemmed in and unable to deploy its force. The shift from being a continental to a maritime power is slow work. In the meantime, the Quad, NATO, AUKUS and other structures are contending for the regional and global influence pie to limit Chinese influence. Despite this, China still remains a consequential nation geopolitically and will attempt to flex its muscles to regain its influence. However, the halcyon days of garnering influence through strong arming without consequences is over.
Lt Gen P.R. Shankar PVSM, AVSM, VSM (Retired) is a retired Director General of Artillery. The General Officer is now a Professor in the Aerospace Department of Indian Institute of Technology, Madras. His articles are available at www.gunnersshot.com