• Sai Charan

Why Today's China Will Not Become The Next Superpower?

The argument that China will emerge as a superpower is based on assumptions that the current economic growth in China will continue for the foreseeable future. However, This assumption is too good to be true as it is evident that China's economy is slowing down even as per official figures.

It is a well-known fact that there are only three ways to generate economic growth: adding more capital inputs, more labour inputs, or using capital and/or labour more productively. Between 2005 and 2015, China's official GDP has increased by 162 per cent. Of this 162 per cent increase, additional labour inputs have contributed about 6 per cent. The remaining 135 per cent is due to fixed investments. This means that the increasing levels of fixed investments in China are behind more than 80 per cent of China's GDP growth. These estimates are based on China's official data which tend to be quite unreliable.

The enormous levels of Capital inputs used to generate growth has meant that China's national corporate debt levels have risen from 147 per cent of GDP at the end of 2008 to over 250 per cent at the end of June 2014. It is almost universally agreed that China's official non-performing loan (NPL) ratio of 1 per cent is not credible due to the rapidly rising capital-output ratios. Most independent analyses place the NPL figure to be at least 5 per cent. This means that the NPLs of Chinese state-owned banks could be around US $2 trillion which is enough to cause an economic catastrophe.

Activity such as the building of uninhabited housing or an increase in steel-making capacity which will not be utilised is counted as ‘economic growth’ under the measurements of GDP although the Chinese economy is not actually growing due to these activities. Therefore, It can be said that much of the fixed investment is unproductive, not needed or significantly underutilised, and cannot be justified by any commercial logic.

The demographics are also not on China's side. By 2030, China’s age demographics are expected to resemble that of Norway or the Netherlands today. Incidentally, the United States is the only great power with favourable age demographics leading up to the middle of this century.

China undoubtedly has developed substantial military capabilities in the last decades. The Pentagon in a report to the US Congress on China's military makes it clear that preparing for potential conflict in the Taiwan Strait “remains the focus and primary driver” of China's military investment. Although China has developed potent military capabilities, Beijing cannot still enforce a full military blockade of Taiwan or attempt a full-scale amphibious invasion of that island. The Pentagon also observes that limited logistical support remains a key obstacle preventing China's navy from operating more extensively beyond East Asia, particularly in the Indian Ocean.

A survey by the US Office of Naval Intelligence also described China's capabilities in the acquisition of targeting information essential for anti-submarine warfare (ASW) as marginal. This brings to light another important deficiency of the Chinese navy. China's conventional submarines are relatively easy to detect and its nuclear boats also possess little ASW capability. Without major improvements in ASW, the Chinese Navy would be an easy target for US military forces.

There are similar deficiencies in China's air defence capabilities against any technologically advanced enemy. China's ability to detect and intercept ballistic missiles or stealthy aircraft and cruise missiles also appears to be limited. The Chinese Over The Horizon Radar (OTHR) antennas are large and fragile structures that are crucial to China's ability to track and target American aircraft carriers. The US military forces could easily destroy these antennas and affect China's ability to track and target American aircraft carriers.

It is generally widely agreed that in order to become a superpower, a nation should have the capability to wreak vast nuclear destruction anywhere on the globe, anytime and the capacity to decisively project conventional military power anywhere in the world and intervene. Only the United States fulfils both these conditions. As far as China is concerned, even with its main military priority, that is, to retake Taiwan, at the time of its choosing, according to the Pentagon, China still has substantial deficiencies in amphibious assault in order to do that. It is also very important to take into consideration that China's economic growth is also slowing down even as per official figures. Therefore, for the foreseeable future, China is unlikely to become a superpower.