The Rising Dangers of a Falling China

The international relations of peaking powers.

Photo by Eirc Shi on Unsplash

As noted in this space yesterday, the number of stories and deep dives into China’s faltering economy has reached tsunami levels and that, “the discourse is starting to catch up to the reality that maybe, just maybe, Chinese power has peaked.”

The hard-working staff here at Drezner’s World does not want to re-litigate that question. Let us instead take as given that China’s growth has slowed down to the point where eclipsing U.S. gross domestic product using market exchange rates is not going to happen for a lot longer than previously expected.¹ What does that mean for U.S. foreign policy and international relations more generally?

The natural impulse would be to presume that this is good for the U.S. of A. After decades of “China will eat our lunch” mantra, it would seem to be a good thing for U.S. national security if the anxiety about a rising China subsides. For IR scholars, a China not rising means far less concern among “power transition” theorists about the likelihood of war. The concerns expressed in, say, Graham Allison’s Destined for War would be muted.

This is certainly the opinion of Erik Gartzke, an international relations professor at UC-San Diego and one of the smartest guys I know. Writing in RealClearWorld, Gartzke suggests that the danger is ebbing:

Scholars and pundits have highlighted a potentially catastrophic dynamic known variously as a “power transition,” “commitment problem” or more recently as “the Thucydides Trap.” This theory predicts war between countries as they transition in relative power. The prospect of China and the United States, the two largest economies in the world, facing off against each other --- with their respective nuclear arsenals --- is more than a bit disconcerting. Fortunately, the danger of war, at least in the form attributed to Thucydides, may just have passed….

It is precisely the ongoing trade war that offers what may be a glimmer of hope for peace in the Pacific, at least in terms of the Thucydides trap. There can be no trap if there is no transition. War between China and the United States, which of course may still take place for other reasons, cannot occur as Allison predicts if China starts to lag behind economically. 

War is a process of competitive harming, intended to drag an opponent to the bargaining table or to weaken them so that they can no longer resist (as effectively). A trade war can do much the same thing as a real war, but absent the violence. In contrast to most of the cases Allison examines, the United States and China are heavily interdependent economically, with China depending on trade with the United States more than the reverse. This means that the two countries can harm each other through commerce, rather than with guns or nuclear weapons.

Not so fast, however. In the summer issue of International Security, my Tufts colleague Michael Beckley has an article entitled, “The Peril of Peaking Powers” which suggests that we may be entering an even more dangerous moment in world politics due to China’s growth slowdown. If China thinks it has peaked, it might take more risk-loving actions to preserve its status:

One factor that might compel a rising state to expand aggressively abroad: slowing economic growth. Rising powers sometimes suffer severe and sustained economic growth slowdowns. These slumps may not immediately alter the balance of power, but they raise the specter of future decline in the minds of a rising power's rulers. The fear that the country's moment in the sun is about to end, that its strategic window of opportunity is starting to close, and that its regime will not be able to deliver the goods that it has promised the people, can incite aggression and expansion that a nation more optimistic about its economic prospects might avoid. Given China's slowing growth today, this is a dynamic worth worrying about….

The most common reaction to slowing growth is mercantilist expansion: the use of state power to carve out economic spheres of influence. Most of the rising powers that stagnated over the past 150 years tried to revive their fortunes by restricting foreign access to their domestic markets while investing heavily overseas to generate demand for their exports and secure critical resources. To protect their far-flung assets, they developed military power-projection forces and deployed them along key trade routes. In most cases, these attempts to forge empires fueled great power competition. In some cases, they triggered major wars….

Much of the debate on U.S. policy toward China concentrates on the perils of an ascendant and confident China. Yet the United States actually faces a more volatile threat: an ambitious and anxious China suffering a prolonged economic slowdown. China's economic growth rates are sliding and could fall further in the coming years as debt, demographic decline, environmental degradation, and other headwinds take their toll. Economic stagnation would render China a less fearsome long-term rival to the United States, but possibly a more explosive near-term threat. Whereas a fast-growing China could afford to expand slowly and back down in crises—safe in the knowledge that its wealth, power, and status were rising and that the legitimacy of the CCP was secure—an economically sluggish China could be more desperate for economic outlets and primed to react violently to slights and setbacks.

Beckley’s argument unsurprisingly echoes the arguments he made with Hal Brands in Danger Zone. What is intriguing, however, is that Beckley seems to be voicing more caution in U.S. foreign policy in this piece than he and Brands did in Danger Zone. For example, in this article Beckley cautions that, “The United States does not need to confront China everywhere at once; enacting across-the-board trade sanctions, covert action programs to destabilize the CCP, or a U.S. version of the BRI, for example, would be financially ruinous and strategically destabilizing. Nor should U.S. policymakers engage in symbolic gestures, such as upgrading Taiwan's diplomatic status, that provoke Beijing without enhancing U.S. or allied capabilities.” Why yes, symbolic overreactions are probably a bad idea.

So who is right, Gartzke or Beckley? Ha, trick question! I believe that their arguments are not contradictory but rather complementary. Gartzke is likely correct when he says that a stagnating China reduced the odds of a standard power transition war that Allison et al have been squawking about. But Gartzke and Beckley likely agree that this standard argument is not a terribly potent theory of war. Beckley’s point that a China in relative decline is a source of concern rings true to me — in no small part because I said something similar last summer:

If leaders believe the future looks unfavorable, they will be tempted to take risky actions in the present to forestall further decline, which can lead to arms races and brinkmanship during crises. In contrast, optimistic leaders foresee a brighter future ahead for their country and thus favor strategic patience, which tends to produce investments in global governance….

Relations between countries are most unstable when all the leading powers have pessimistic expectations—a situation that threatens to characterize the coming decade of great-power politics. China and the United States have adopted negative worldviews, and there is reason to fear that their outlooks could darken even further.

Weirdly, I think the best way for Americans to handle a China that has plateaued is to adopt a more optimistic posture about the future of the United States. Positive expectations about the future incentivizes strategic patience and disincentivizes bellicosity. The less that U.S. foreign policy obsesses about China, the less likely it will provoke a more anxious set of Chinese policymakers to take risky actions.

What do you think?

1. By purchasing power parity China’s economy eclipsed the U.S. economy five years ago.