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QUARTERLY ESSAY 76 Red Flag

 

Correspondence

John West

Peter Hartcher’s recent Quarterly Essay provides an excellent, informative and insightful analysis of the challenges Australia faces in managing its deepening relationship with China. But like many important works of analysis, it raises just as many questions as it answers, a few of which I will address here.

The first point is that Hartcher may be guilty of overestimating China’s historical economic and political power. He highlights the economic power of China when he notes that “China’s economy was the biggest in the world for at least half a millennium, until as recently as 1820.” While that may be true, over this same period China progressively slipped behind Western Europe and especially the United Kingdom in terms of GDP per capita, which is a better indicator of economic and technological sophistication than total economy size. Although Chinese and Western European GDP per capita were similar for the first millennium of the Common Era, by the year 1500 Western Europe’s GDP per capita had leapt 30 per cent ahead of China’s. And by 1820, Western Europe’s GDP per capita was more than double that of China, and by 1950 it was more than ten times China’s. The reality is that for much of the past 500 years (in fact, until the reforms launched by Deng Xiaoping in 1978) China had a stagnant and relatively declining economy. In other words, its economy was big thanks to its enormous population, but backward. And this economic stagnation made it highly vulnerable to outside forces like the Manchus, who conquered China in the seventeenth century and created the Qing dynasty, and also Japan and several Western countries, which invaded China in the nineteenth and twentieth centuries. Overestimating China’s historical power is now a widespread trend, and gives the impression that China’s renaissance is returning the country to its natural dominant position in global affairs. The reality is that for more than 500 years, China was a fading power with a relatively declining and stagnant economy.

Second, Hartcher mentions some of the challenges facing the Chinese economy today. Indeed, despite its rapid development in these past few decades, China still has a big but backward economy, with a GDP per capita that is only one-quarter that of the United States. And China faces significant challenges, such as its enormous debt, rapidly ageing population, weak productivity, and trade and geopolitical tensions with the United States and other Western countries. Chinese productivity is only 30 per cent of that of world leaders like the US and Germany.

In this context, one issue not explored by Hartcher is how Australia’s relationship with China might be affected if China fell into a scenario of long-term economic stagnation (as Japan, Asia’s previous superstar, has done) or if it succumbed to an economic crisis like some Asian countries did two decades ago. The Australian economy would suffer from such a scenario, given our close economic relations. But the Chinese Communist Party, which relies on strong economic growth as a source of political legitimacy, would likely ramp up nationalism to maintain popular support. Such nationalism could take many forms, such as assertive behaviour towards Australia’s close friends, like Japan. It could also involve more coercive behaviour towards Australia’s ethnic Chinese population. Further, a weakening economy could see more Chinese citizens seeking to leave China for countries like Australia, as well as even more capital flight.

In short, a China that gets bogged in economic stagnation and becomes more paranoid and insecure may well prove an even more dangerous country to deal with. We see this today with Russia, which is an economic basket case, but is flailing about on the international stage, causing havoc wherever it goes.

Lastly, Hartcher lavishes praise on the Chinese state: “Imperial China, a world leader in technology, also pioneered the capable, modern nation-state. It took Europe almost two millennia to catch up. China is again thrusting to the forefront of technological know-how and pioneering a more effective nation-state.” While this is true, it is also true that China has never had the rule of law, by which the country’s highest political authority should also obey the law. Even today, the Chinese Communist Party is a law unto itself, and China’s judiciary is highly politicised and corrupt. “Constitutionalism” is a taboo subject in China. Nor have China’s rulers ever been subject to “downward accountability” to the country’s citizens through democratic elections. The nation-state may have come to the West very much later than in China. But the Western nation-state is vastly superior to that of China thanks to the rule of law and electoral democracy, even if Western democracy is struggling somewhat today.

How long China’s anachronistic political situation can persist is a big question. Today, the CCP is visibly worried, as is evident from the growing repression, surveillance, use of propaganda, and nationalism. The political crisis in Hong Kong shows the limitations of authoritarianism. Any political instability and possible regime change in China would certainly have a massive impact on the world, and especially on Australia.

 

John West is an adjunct professor at Tokyo’s Sophia University and Executive Director of the Asian Century Institute. He has also worked at the Australian Treasury, the OECD and the ADB Institute, and is the author of Asian Century … on a Knife-Edge.

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This correspondence discusses Quarterly Essay 76, Red Flag. To read the full essay, subscribe or buy the book.

This correspondence featured in Quarterly Essay 77, Cry Me a River.


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