Since the late 1970s when China started to pursue a policy of opening up to the rest of the world, it has experienced unprecedented economic growth and development. Between 1978 and 2014, the Chinese economy grew at a rate of more than 10% yearly, and in the process, over 800 million people were lifted out of poverty.

As its economy opened up, foreign direct investment (FDI) flowed into China at record rates and the country became the world’s manufacturing and supply chain hub. On the foreign policy side, it also generally projected itself as non-threatening.

Of late, several observers have wondered whether China has reached its peak and is now entering a period of decline. Under a decade of Xi Jinping’s presidency, China has rolled back many of the reforms pursued by his predecessors. There has been a consolidation of power under Xi’s leadership, resulting in a systematic purge of senior officials from the government and the communist party. Citizens are subject to mass surveillance, millions of Muslim Uyghurs face victimisation and the private sector, including prominent business figures, have been crowded out in favour of state enterprises.

The heady days of China’s seemingly unstoppable ascent now appear to be vanishing. From double-digit economic growth for an unbroken three decades, China’s economy is now expected to grow at a rate of 4.3% this year according to World Bank figures. Almost any other country would welcome such growth, but for China, higher growth rates are required to sustain its development objectives and trajectory.

Jonathan Tepperman, a former Editor in Chief of Foreign Policy and a former Managing Editor of Foreign Affairs, has chronicled China’s recent economic malaise. Tepperman notes that China’s economy is currently straining under the weight of three years of a zero-COVID policy, which resulted in some of the harshest lockdowns imposed by any country. Meanwhile, the value of its currency has plummeted, as have corporate profits, industrial output and investments in some sectors. Unemployment is also high, especially among young people where it rose to 20% last summer.

As domestic pressures increase, the external pressure on China is also growing. The United States ( US) and some of its allies have intensified their military and economic campaign against China. In September 2021, the US, United Kingdom (UK) and Australia formed AUKUS, a trilateral security pact aimed at deterring possible Chinese aggression.

The US also formed the Quadrilateral Security Dialogue (Quad) with Australia, India and Japan. This too is aimed at countering China.

In the economic domain, the US continues its trade war against China. Last October, the US government issued an order barring American companies from supplying semiconductor chips and chip making devices to China. This came in addition to the tariffs that the US had already imposed on several Chinese goods.

Some global corporations are already decoupling from China and relocating their operations to places like Vietnam.

Several global firms are also engaging in what is referred to as “ near shoring” or “friend shoring” where they either bring production closer to their home base, or to countries which are on friendly terms with the US respectively. This is being done to reduce the risks associated with being caught up in a wider geopolitical spat.

Predictions of China’s decline may turn out to be grossly exaggerated. However, what is clear at the present moment is that gigantic shifts are occurring which would require firms and governments to reassess their sourcing patterns and foreign policies respectively.

There is also the risk that a Chinese decline could make China unpredictable, which could have implications for how it behaves towards Taiwan and some of its other Asian neighbours.
A Chinese decline is nothing to celebrate as it could upend decades of a relatively stable global economic, diplomatic and military status quo. A more predictable, stable and prosperous China is preferred.

Joel K Richards is a Vincentian national living and working in Europe in the field of international trade and development.
Email: joelkmrichards@gmail.com