The geopolitical effects of China’s slowdown

I don’t pretend to know what those are going to be, but it’s useful to compare some of the different arguments that are out there.

Slower growth = more aggressive foreign policy. This is probably the most widespread view I see in the Western press. Richard Haas at the Council of Foreign Relations considers it a live possibility but seems to think realism will ultimately triumph:

There’s a bigger debate going on, is to what extent does China use foreign policy and geopolitical adventurism as something of a venting mechanism—that, if you can’t satisfy the folks at home with 8% economic growth, you satisfy them with nationalism… There are those who think we’re seeing elements of that already in the South and East China Sea.

I end up being slightly less alarmist, I guess is the word, because I think that China, as it slows down economically, is going to need a stable external environment. The last thing it could handle is a turbulent external environment. So I lean on the side that you won’t see a tremendous geopolitical push by China to offset or compensate from lost political standing. But I simply say that that is a robust debate, including people here at the Council as well as beyond.

Slower growth = less aggressive foreign policy. David Dollar and Michael E. O’Hanlon at Brookings make two arguments in favor of this. The first is more about attitudes:

There is no obvious correlation between economic growth and foreign policy chutzpah in international affairs. But internal Chinese voices in favor of greater bullishness and assertiveness—over Taiwan, or over overlapping claims to islands and seabeds and waters in the South China Sea, or over the Senkaku (also called Diaoyu) islands—will be emboldened if Chinese are collectively feeling their oats. Narratives that talk about a Chinese century, or China as the new hegemon, or China as the world’s top economic power, will likely be more influential in internal debates if growth rates remain inexorably robust. … And the expectation that, in a crisis, other countries will choose to kowtow to Beijing rather than push back against it will strengthen as does China’s economic clout.

Both the “opiate of the masses” and “feeling their oats” arguments have something to them, and I haven’t figured out which one I really believe yet. So I find Dollar and O’Hanlon’s second argument to be more convincing, since it is more about objective capabilities:

Historically and bureaucratically, China has tended to couple its defense spending levels closely to GDP. For several decades, the military budget has averaged 1.5-2% of national economic output, depending on different estimates. The linkage does not seem quite as strong or precise as in Japan, where the military virtually always receives 1% of GDP. But there has been far less variation in the military spending of the People’s Liberation Army relative to overall economic output than, say, in the United States. As such, a slowdown in the economic growth rate of China implies a likely slowdown in increases to the defense budget.


  1. Didn’t Ronald Reagan start the great 1980s defense buildup during one of the worst economic downturns since the depression? don’t plenty of people in China and other countries see defense spending as a kind of economic stimulus beyond its military/power/geopolitical impact?


  2. “Slower growth”: is one thing, a deep recession and/or the chaos of a broken dollar peg is something else entirely. China did not grow at 6% last year, even China bulls admit the official numbers are a farce, and even the gov’t says year-over-year comparisons are problematic due to the changing methodologies. They burned through another $100B of reserves last month and they are quickly reaching the point where the remaining reserves are illiquid.

    China is ranked at the bottom of Freedom House’s political freedom index. They have no real territorial ambitions, but a contrived conflict could benefit them the same way it does Putin: by stoking nationalism and distracting from their own deplorable institutions.


  3. When a country is mired in deflation it must inflate its way out. But inflation is tricky politically as it affects different groups differently and can lead to the rich bailing out of the country or chaos in the streets. The most politically feasible way to bring about inflation while serving elite interests and providing relief to the poor is militarism.


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