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Rise of New Global Economic Superpowers – Why do foreign companies want to exit China?

Rise of New Global Economic Superpowers – Why do foreign companies want to exit China?

Relevance:

  • GS 2 || International Relations || India & its neighbor || China

Why in the news?

The growth in China’s overall national power, including its military capabilities, and how China’s leaders will employ this power will have far reaching implications for Asia and the world.

What is superpower?

  • Dominant position in the international system: A superpower is a state with a dominant position in the international system, with the ability to shape events and safeguard its own interests by projecting force on a global scale.
  • Level above a great power: A superpower is typically regarded as one level above a great power. The four axes of power may be used to gauge the main components of superpower status: military, economic, political, and cultural.

History of china:

  • China’s history is both intriguing and complicated. It has been described as having both a calm and a warlike culture. China was founded on conquest and has been controlled by a succession of warlords.
  • Peace and robust commerce: China, on the other hand, has had periods of peace and robust commerce with its neighbors. China has also experienced long periods of isolation from outside influences, resulting in a closed society. These events have had a significant impact on Chinese culture and strategic thinking.
  • China had a tough century in the previous century. The Japanese occupation of China in the 1930s and 1940s, as well as the civil war that brought Mao Zedong and the Chinese Communist Party (CCP) to power in 1949, were extraordinarily tumultuous periods in the country’s history.
  • The People’s Republic of China (PRC) arose from this civil conflict. However, this marked the start of a new period of isolation during which China tried to rejuvenate itself.
  • China succeeded in becoming self-sufficient in virtually all resources and technology under Mao, but it lagged behind current technical norms by twenty to thirty years.

Background of rise of china:

  • Military capabilities: The first criterion for determining China’s rise is its military capabilities. China possesses nuclear weapons and the world’s largest standing army, as well as the world’s second-highest military budget.
    • China is building a stronger fleet and purchasing planes. Most significantly, this military modernisation does not focus on a hostile superpower’s strategic and power capabilities, but rather on the demands of certain war scenarios in China..
  • Rapid economic expansion: The second criterion for China’s ascension is its rapid economic expansion. After implementing market-based economic reforms in 1978, China has become the world’s fastest expanding economy, and it is a member of international organizations such as the WTO, APEC, BRIC, Shanghai Cooperation Organization, and G-20. It is currently the world’s second largest economy, after the United States.
  • China’s political arena: China’s political arena is the third criterion for its rise. China is a major contributor to the financing of western economies, and this financial and political action might signal a shift in the world’s perception of China as a major actor.
    • This Chinese “rescue plan” may not be the next “Marshal Plan,” which helped restore Europe’s economy after WWII, but it does represent a turning point in the European-Chinese relationship.
  • Cultural advancement: China’s rise is due to its cultural advancement. The PRC’s economic performance in the 1990s, under President Jiang Zemin and Premier Zhu Rongji’s ten-year administration, lifted an estimated 150 million peasants out of poverty and maintained an average annual gross domestic product growth rate of 11.2 percent.

China’s economic reform:

  • China’s economy has matured, and real GDP growth has slowed substantially, from 14.2% in 2007 to 6.6 percent in 2018, with the International Monetary Fund (IMF) projecting growth of 5.5 percent by 2024.
  • China’s leadership has accepted slower economic growth as the “new normal,” recognizing the need for China to adopt a new growth model that depends less on fixed investment and exports and more on private consumption, services, and innovation to drive economic growth.
  • The “middle-income trap” : Such reforms are required for China to avoid falling into the “middle-income trap,” which occurs when countries reach a particular economic level but are unable to adopt new sources of development, such as innovation, resulting in dramatically declining economic growth rates.

China’s military:

  • Defensive to offensive: China’s military has changed dramatically in the previous decade. Its military policy has shifted from defensive to offensive, and it has realized the necessity of projecting force with contemporary military technologies.
  • Upgrading its armed forces: China has begun the process of upgrading its armed forces, and while it is currently plagued with antiquated equipment, it has set long-term objectives.
  • High-tech defense policy: There is a lot of debate about how soon China can make these adjustments. China’s high-tech defense policy is widely regarded as the driving force behind the country’s scientific and technological progress. This agenda appears to be centered on a high-tech competition with the West.
  • One trend that has emerged from China’s military development is the stronger ties it has formed with Russia. These two countries have a long history of mutual mistrust and, at times, hostility. On the other side, relations have significantly improved and are now more driven by common geopolitical objectives.
  • Between 1991 and 1995, China acquired $4.7 billion worth of military equipment from Russia, accounting for more than a third of the country’s foreign arms sales..

Western Strategic View

  • Canada’s strategic policy concerning China was in a state of confusion in the years immediately following the 1989 Tiananmen Square massacre.
  • The government was caught between trying to rebuild economic trade links and publicly expressing its displeasure of the 1989 events. In the early 1990s there was an effort to link human rights performance to both trade and the funding of aid programs.
  • By 1992, it was obvious that this policy was damaging trade and opportunities to engage China. As a result, trade became the focal point of Canadian attention while the human rights agenda was softened. The 1994 visit by Team Canada, led by the Prime Minister, was the high point of the post-Tiananmen recovery in relations.
  • The US security policy for East Asia stresses regional stability and proposes to achieve this through both bilateral and multilateral engagement.
  • The US will continue with the bilateral agreements that have served its interests in the area for over 40 years. While the US has stated that it will not leave the region, there is deep concern by many Asia-Pacific countries over a security vacuum that could possibly be filled by the Chinese. The US policy on China continues to evolve and is designed to promote cooperation and avoid conflict.
  • These policies are now focused on common strategic issues. Although issues such as human rights are seen as important, individually they will not be allowed to dominate the Sino-US relationship. This approach has emerged from the “US concern that China may become the next superpower”.

Problem areas:

  • China’s rise as an economic power, combined with its large-scale program to modernize its military, raises the question of how this power will be used. Associated with this new power has been an increase in the aggressiveness in China’s territorial claims in the region.
    • Taiwan is the most volatile issue concerning territorial claims and security in the region. The Chinese government sees Taiwan as a renegade province and treats any conflict between the two as an internal matter. Western countries have developed a policy of “one China” and officially recognize the regime in Beijing.
  • A second area of concern is China’s political stability. The Communist regime maintains firm control despite the huge challenges of running such a large and complex country. However, the main occupation of the regime is to stay in power. China perceives issues such as human rights and efforts to encourage democracy as an attempt to contain and interfere with internal affairs. The Chinese perspective is best described by the following:
    • In history, Chinese leaders have believed in force. Force worked in Tiananmen. It intimidated the intellectuals, and that paved the way for economic growth and political stability.
  • The final area of concern is related to the resources that will be required to ensure China’s continued existence. China has twenty-two percent of the world’s population, but only seven percent of the cultivable The average cultivated land per capita is only one third of the world average and continues to shrink.

China: Partner, competitor, and economic rival:

  • Some version of the EU’s China policy, which views the growing superpower as a partner, competitor, or economic opponent depending on the policy area, will become the worldwide norm.
  • Within the United Nations, India’s interests are more aligned with China’s interests than with those of the US and the EU. This broad perspective is reflected in India’s participation in both the Shanghai Cooperation Organisation, which aims to counter the spread of Western interests, and the US-led Quad, which has an anti-China stance.
  • Sharing the COVID-19 vaccine with other countries sets India and China apart from the rest of the world.

China need to concentrate on:

  • The opening up of China’s service sectors to competition from private businesses and the foreign market is the final area of reform. State-owned businesses continue to dominate the contemporary service industries, which include financial services, telecom, media, and logistics, to mention a few.
  • As the economy shifts from investment to consumption, manufacturing will develop at a slower pace than in the past, while the service sector expands.
  • China will require higher service sector productivity development, which is difficult to accomplish in a protected environment.

China has restructured its relations with the world. Nevertheless, it still confronts serious challenges in its attempts to improve how it is understood around the world as evidenced from the media coverage.

Conclusion:

China’s growing global economic influence and the economic and trade policies it maintains have significant implications for the United States and hence are of major interest to Congress. While China is a large and growing market for U.S. firms, its incomplete transition to a free-market economy has resulted in economic policies deemed harmful to U.S. economic interests, such as industrial policies and theft of U.S. intellectual property. This report provides background on China’s economic rise; describes its current economic structure; identifies the challenges China faces to maintain economic growth; and discusses the challenges, opportunities, and implications of China’s economic rise for the United States.

Mains oriented question:

Rise of China as a superpower is a change for world order. How far is this statement correct? (200 words)