China’s growth over the past decades has been observed and analysed by many in a way similar to the way Silicon Valley corporate unicorn stories are looked at – extremely positive, often defying theory and odds and given as an example for correct strategy. The reason is simple – everybody loves success and the consideration of the risks and drawbacks takes a second stand. 

This creates fertile ground for countless analysts, professors, and policymakers because since the time periods are fairly long, proving them wrong is next to impossible – corporate success stories range from short to midterm, while state policies are almost always long-term.

Naturally, the analysis of the shorter term success without the longer-term risks and threats is incomplete and faulty.

While companies of that type grow from garage operations to become integral parts of the society, the story of China is different because integration is exactly the opposite of what is sought. They are isolationist and the growth is at the cost of its trading partners. They have proved that repeatedly through official declarations and actions in the economic, diplomatic, and military fields. 

The defined goal is to achieve “the great rejuvenation of the Chinese nation” by 2049 and the road to that would go through periods of cooperation and later confrontation with its main trading partners, i.e. the US and the rest of the democratic world, effectively changing the established word order as per their understanding.

Essentially that means China would have to gain so much economic, diplomatic, and military strength that they would be able to get what they strive for in those fields and be able to keep it in the time of world backlash. These are the plans laid by its leaders and implemented by the Chinese Communist Party (CCP) apparatus. 

The only way before the US and the world is to confront China in the economic, diplomatic, and military spheres. The interests of the US, India, Japan, Australia, the UK, the EU, and the majority of the western world, even those of Russia, are aligned in the long run. Not only that – a failure to counter the Chinese actions would guarantee losses, which would be incomparably greater than the short-term shocks that they would have to endure. 

The world in 2021

The fall of the USSR 30 years ago marked the end of an era. The world, in terms of geopolitical relations, was till then largely a binary system, where country interests and policies would be tied to the USA-USSR axis. The world now is far more complex with four major camps having distinctively different interests and a growing international body of states, some of which have noticeable gravitational pull allowing them to exert greater than ever influence on the big camps. 

The US has kept the leading position, while Russia has had its economy tarnished and then fuelled by energy exports, keeping the military just as strong. China’s economy grew to the size of the US and its military even surpassed the US’s in numbers for the largest ground force and largest navy. India’s economic growth has allowed for a stronger military, turning it into the hottest arms market in recent years.

Even mathematically, analysing such dynamics requires  a greater degree of complexity – the previous system had one major relationship, while the current matrix of four key players has six relationships, and adding any additional influence would result in an exponentially increasing number of relationships.

China’s goals

Understanding China’s strategy is paramount to understanding its future economic and military strategies. Summarised, the CCP seeks to achieve “the great rejuvenation of the Chinese nation” by 2049. This includes expanding its national power, improving its governance systems, and revising the international order. As if to leave no doubts about it, President Xi Jinping declared on October 1, 2019, in a speech marking the 70th anniversary of the foundation of the People’s Republic of China (PRC) that they would be pursuing the two major centenary goals accompanied by a very exact statement –

“Today a socialist China is standing in the east of the world and there is no force that can shake the foundation of this great nation.” He used practically the same sentence in a very similar speech the night before referring to the unification of China with Hong Kong, Macao and Taiwan. 

Interestingly enough, the timeline of the Ministry of Foreign Affairs of PRC website has the speech from the night before together with a picture of Xi on the speech the next day, but missing the important speech on Tiananmen Square on the National Day. The newsfeed of the State Council of PRC also uses far more mellow expressions in describing the event and does not even mention Taiwan. This indicates an effort of the official authorities to portray the future plans as less aggressive and expansionary. 

It is very important to note that the plans for the national rejuvenation by 2049 cannot be completed peacefully. The party leadership views the unification with Taiwan on Beijing’s terms (essentially taking over) and completing the integration of Hong Kong and Macau as fundamental conditions. In this regard, there are two steps for renewed China - first to ‘fight and win,’ and secondly - to ‘resolutely safeguard’ the country’s sovereignty, security, and development interests. It is clear that the last word describes external territories, which could be deduced to be Taiwan, all areas of ambition in the Himalayas in India, Nepal and Bhutan, as well as all places for international military bases, where Beijing is currently expressing developmental interests – Pakistan, Sri Lanka, Kenya, Seychelles, Tanzania, Angola, Tajikistan, Indonesia, Singapore, Thailand, Myanmar, and the UAE. The whole Indochina Peninsula is of prime importance to China because its tip controls the vital Malacca Strait and the possible Thai Canal, which can turn into the Achilles heel of the Chinese economy in case of a blockade. 

Additionally, if taking over foreign territories requires strength that is far greater than the existing defense capabilities, then safeguarding those territories during the next step requires even greater strength, as the retaliation from the remaining local resistance and the international community, which is likely to be united, is going to be stronger as well. It is because of this second condition that China seeks to achieve a ‘world-class military.’ For that, however, a well-functioning and producing economy is needed. 

CCP strategy milestones

The development plan was revealed nearly four years ago. The highlight of the 19th National Congress of the CCP on October 18, 2017, was Xi’s three-hour 24 minutes speech where he laid out a broad plan to achieve national rejuvenation with a timeline linked to two important centenary milestones - 2021 (CCP’s centenary) and 2049 (the PRC’s centenary). In order to bridge the gap, a mid date was used - 2035, separating the 28 year period in two steps of 14 years. 

The first stage, in party terms, is for China to meet its goals to become a “great modern socialist country,” where economic development would be the central goal. Unlike previous years, targets would not include economic growth, but rather a prolonged period without major economic shocks. It is very likely that this is in response to the aftermath of the 2007-2008 financial crisis, which seriously affected China as well. This line could be seen in the newly accepted 14th Five Year Plan (2021-2025), where the first target is to keep the major economic indicators within an appropriate range. For the first time in the country’s history of making five-year plans, a specific GDP growth target was not set, which, in an environment where everything is planned, is a huge precedent.

The quest to avoid shocks is understandable as a crisis has the potential to wipe out the gains for decades. If the end goal, requiring a steadily producing economy to finance it, is time-sensitive, then predictability in planning is paramount. Additionally, since stability is sought, rather than growth, it literally means that China is at the level of production, where the goal is 100% certain to be achieved, definitely factoring in wide margins for error. 

The second stage from 2035 to 2049 is for China to attain national rejuvenation. In it, China will achieve international status, which Xi Jinping describes as being a “global leader in terms of composite national strength and international influence”. This is the stage where they will attain a world-class military and assume a leading position within the international order, establishing a “community with a shared future for mankind.” One does not have to read between the lines to understand that the effort here will be solely on the military side, quite possibly conducting military operations of various scale from small conflicts to regional wars, maintaining the gains, and choreographing the community of allies. 

Peace not an objective

Even if official announcements declare China as a peace champion, Xi himself has pointed out the opposite numerous times, especially at events, where his speeches are extremely carefully constructed. These events in front of the CCP Central Committee is similar to the State of the Union messages delivered regularly by the US presidents - they are exceptionally well formulated by whole teams considering every word for its weight and possible influence on the billions of people it would affect, directly and indirectly, everything aligned to the vision of the leadership for the nation. Improvisation or careless mistakes are impossible. 

In a speech in 2013 in front of the CCP Central Committee, he pointed out the disadvantage that China had in the economic, technological, and military domains compared to the developed western nations and warned that China had to prepare for a long period of cooperation and then conflict between these two social systems in each of the domains. The announcement for a conflict from such a tribune points out to its inevitability and outlines the determination for it. 

Even though the gains for China from peaceful collaboration with the world have been extraordinary over the last decades, CCP views core aspects of the current international system as incompatible with its strategy. Because of the fact that the US is the main international competitor, the PRC leadership considers all US security alliances and partnerships, especially those in the Indo-Pacific region, as destabilising and irreconcilable with their sovereignty, security, and developmental interests. Considering India’s growth in power in the last decade and the fact that they share a physical border, the same is true for all of India’s alliances and partnerships. It is only logical to assume that significant effort will be put to counter and destabilise such relationships rather than participate in them as a contributing member. 

Military development 

As mentioned, economic development without shocks will be the sought course in the first phase till 2035 to guarantee the production goals and mid-term sustainability of the Chinese economy and society. The already extensive military complex will be gradually improved even further in the next 14 years until it has reached whatever milestones they have created. If we take into account the planning and construction times, now will be the time when the work on some of the projects will be starting. 

For example, if we consider the navy, aircraft carriers take 10-12 years to be planned and constructed, which leaves a margin to ensure completion. Since aircraft carriers are not sole vessels roaming around, but rather utilise a whole fleet of support vessels (cruisers, destroyers, submarines, logistics and supply ships) in a carrier strike group, the planning, and construction of each one of them would need to commence soon as well (in case it has not started already). Currently, China has two ready carriers, the Liaoning and Shandong, the third is on the way, the fourth will be nuclear powered, possibly being completed by the current decade. It is believed the fifth and the sixth will be completed by the end of this first period. 

The increases in the military budget through the years speak volumes. In 2019 the increase was 6.2 percent, while in 2021 that was 6.8 percent indicating a steeper, i.e. more aggressive expenditure curve. Additionally, PRC’s military budget does not include several major categories of expenditures, which indicates that its actual spending is higher and the official budget figures are grossly underestimated.

Diplomatic pressure and propaganda

The work of the diplomatic apparatus, together with the covert propaganda to destabilise democratic societies, will be of immense importance. Time and again, the Chinese diplomats show the same trait common for all communist countries - boasting declarations of peaceful principles or vague statements indicating very idealistic goals, while conducting policies diametrically contradicting those statements.

One such example was the response of Cui Tiankai, the Chinese Ambassador to the US, to the comments by the US President Joe Biden on the relationship with China. Ciu stated that “Our (Chinese) goal is to meet the growing inspiration of the Chinese people for a better life. Our goal is not to compete with, or replace any other country, … this has never been our national strategy.” This contradicts the idea to change the world order as per their understanding. Additionally, he mentioned, “We’ll have no problem with open and fair competition - actually we very much stand for that.” In turn, this is the opposite of the reality of exorbitantly high import tariffs (30 percent), extremely restrictive capital and ownership regulations, and so on.

The propaganda effort is part of PRC’s influence operations. Since democracies, such as the US and India, are considered more susceptible to influence operations through cultivating counter-culture groups via the freedom of speech tenet, it is expected that more funding through proxies will be allocated in the next decades to what is broadly known as the “progressive liberals.” We have seen such pressure in the farmers’ protests in India.

Economic expansion

The ‘One Belt One Road’ initiative serves as the backbone for the majority of the effort in this regard. Practically all the projects along that are heavily financed by EXIM Bank of China to the magnitude of 85 percent (85 percent Chinese loan, 15 percent local government). Such debt to equity ratio levels is extremely rare, especially regarding funding of infrastructure projects by governments in financial distress.  What follows at later stages could be seen by the development in Sri Lanka, where delayed debt payments were agreed to be transferred to equity ownership in the underlying projects, essentially giving EXIM Bank, i.e. CCP, control over them. It is expected that this modus operandi will be followed in Pakistan to guarantee factual control over the whole CPEC and its adjacent projects, practically allowing for control of the entire country. 

Such a scenario is not limited to Asian countries. On March 21, 2021, the Montenegro government asked the EU for help with the 2014 EUR 1 billion loans from EXIM Bank to build a highway, citing increased Chinese pressure and influence. It is only expected that such time bombs will only occur increasingly more often in the following years, which will serve as a pretext for pressure from Beijing.

Post-election America seems to have lost the illusions about their biggest trading partner and the new administration has adopted the hard-line policy of the former President Donald Trump administration. The hardline path from newly appointed Secretary of State Anthony Blinken and the special attention by Biden, making the China topic the third most important in his recent address by allotting over 15 percent of the time, speaks about the intentions. The EU, Australia and Japan already had noticeable diplomatic encounters with China. The situation is similar in the UK, where Boris Johnson will have to reassess UK’s foreign policy, also possibly addressing the national security flaws from Huawei network equipment. 

Understanding of  the Chinese policy as highly calculated, well planned, and -excluding the probability element is fundamental. From a game theory point of view, the democratic world does not have a useful move other than to counter the Chinese advances. It has to be assumed that every action with regard to Beijing will bring some level of negative consequence - be it economic or diplomatic. The pursuit of the Wall Street dream for constant growth might become hard or even impossible at times. However, these societies have to accept the new reality and adjust accordingly.

(The writer, a strategic affairs and geopolitical analyst, holds master’s degrees in economics from the University at Buffalo, The State University of New York, and MBA from Cass Business School, London. The views are personal. He can be contacted at ivo.valchev@gmail.com)

References:

“China’s Xi: ‘No force can stop the Chinese people and the Chinese nation’”, Evelyn Cheng, Oct 1, 2019, CNBC; https://www.cnbc.com/2019/10/01/china-70th-anniversary-xi-says-no-force-can-stop-the-chinese-people.html

Ministry of Foreign Affairs of the People’s Republic of China

https://www.fmprc.gov.cn/mfa_eng/wjdt_665385/zyjh_665391/default.shtml

“Military and Security Developments Involving The People’s Republic of China, 2020, Annual Report to Congress, Office of the Secretary of Defense, USA

https://media.defense.gov/2020/Sep/01/2002488689/-1/-1/1/2020-DOD-CHINA-MILITARY-POWER-REPORT-FINAL.PDF 

Full text of Xi Jinping’s report at 19th CPC National Congress

https://www.chinadaily.com.cn/china/19thcpcnationalcongress/2017-11/04/content_34115212.htm 

“Xi says no force can ever undermine China’s status”, The State Council, The People’s Republic of China, Oct 1, 2019

http://english.www.gov.cn/news/topnews/201910/01/content_