China. The Influence of a New Type of World Power

China’s development during the past decades is more than impressive: as recently as the 1980s, the Chinese economy was not even half the size of West Germany’s. Today, the Chinese gross domestic product not only surpasses the overall German economic performance by more than threefold. Taking purchasing power parity into consideration, China’s share of the global economy has already caught up with that of the US. Nonetheless, China remains a developing country in many respects.

Change of Meaning

If the gross domestic product is divided by the enormous overall population, China no longer appears at the top of worldwide economic powers. Quite a way further down the list, the People’s Republic is placed approximately between 70th and 80th in the respective rankings of the International Monetary Fund or the World Bank. This puts the country in the same region as Brazil, the Dominican Republic, or Serbia. Furthermore, it is battling structural issues such as rural poverty – issues that do not in this form have an equivalent among established industrial powers.

However, all of this barely diminishes China’s increased international importance. Its population of approximately 1.3 billion alone already lends China global weight that is not comparable to that of other emerging nations. Following an economic growth of three thousand per cent within just thirty years, China is frequently referred to as a ‘world power’, and indeed: the country has achieved considerable global influence. China has grown into one of the most important trade partners for a wide range of nations spanning from Latin America to Southeast Asia.

The Potentials of International Restructuring

Economic leverage leads of course to political influence, and the People’s Republic is starting to utilise this influence more and more consistently. For example, the Chinese government is trying to shape the contours of the global economy and global politics to a greater extent than would have been conceivable even just a generation ago. The key German industries are strongly dependent on the profits yielded from the Chinese market.For some time now, Xi Jinping’s ‘New Silk Road’ has been extending beyond the geographic areas of the historic Silk Road. Moreover, this concept increasingly stands for investment and infrastructural projects – ranging from railway construction to the expansions of docks – on nearly all continents. China is very openly striving for a new world trade order, which would at the very least position China as a second global centre next to the United States. Many of the newly founded institutions, for example the Asian Infrastructure Investment Bank created in 2014, can be interpreted as attempts to launch alternatives to global institutions established under Western dominance, such as the World Bank or the International Monetary Fund. Connected to these attempts, the Chinese government is increasingly trying to lend its own industrial norms and other standards global validity.

For the first time since the 1970s, when the Soviet Union still possessed significant international trade opportunities, a non-Western nation boasts serious global importance. In many ways, Chinese weight also reaches far beyond the USSR’s geographic framework of power. After all, the latter represented an economic system that radically deviated from that of the West which considerably restricted its possibilities to exert direct influence on Western states and its economic and political allies. In contrast to the Soviet model, the Communist Party of China distanced itself from the revolutionary ethos of its own past already under Deng Xiaoping (who died in 1997) and turned China’s active involvement in the global market economy into one of its guiding principles.

Because of China’s economic opening and its tremendous gain in importance, many countries around the world are now depending on the Chinese market to a significant extend. This also applies to Germany: particularly the key German industries, such as automobile manufacturing, are by now strongly dependent on the profits yielded from the Chinese market. If this market were to collapse or cease, the global existence of even some global corporations headquarted in Germany would be threatened. Taking into account the tensions with the US under Trump or the crises within the European Union, the narrowing of the political scope (concerning not only economic policy) becomes evident.

Unusual Relationships

This is in many ways a historical novelty as well: the German economy has never been so closely interconnected with one single nation outside of the West as it is with China today. At least since the end of World War II, the West German and later the unified German government had never experienced the urgent necessity to cooperate with a fundamentally different political system on such a broad basis as is the case today with the People’s Republic of China. The political contacts of Germany’s history were certainly not restricted to liberal democracies; nonetheless, for a long time the country was used to interacting with other political systems based on a firm Western framework. This generally implied a clear power imbalance in favour of the West.

This situation no longer exists today: the European and North Atlantic foundations of the German foreign economy and foreign policy have lost stability and therefore sustainability. Compared to the 1990s, Germany’s overall political environment today is to a far lesser degree shaped by transnational political structures. Contrary to the hopes of those days, national policy principles and thought patterns play a much more important role again. A German nation that continues to remain firmly integrated in various international contexts, but must act much more independently than before, is now facing a new and (not just in the political sense) sovereign China.

German leaders in politics, economics, and other areas can no longer act based on the familiar foundations of a Western supremacy.

German leaders in politics, economics, and other areas can therefore no longer act based on the familiar foundations of a Western supremacy. Germany, at least in some economic policy areas, is now being pushed into the role of a junior partner. German decision-makers are now facing a China whose global influence in some areas far surpasses Germany’s.

This constellation will surely continue to shape German-Chinese interactions until the year 2030. The contrast between a global China and a more regionally influential Germany may well further intensify. The export nation of Germany will remain strongly depen­dent on the Chinese market, and China’s international politics will not remain without influence on the fabric of the European Union and on Germany’s relationships relationships with the US either. In any case, continuities or changes of direction in Chinese domestic policy will affect Germany more than ever before in history.

Chinese Uncertainties

The great uncertainties of the Chinese future are therefore also directly relevant to Germany. As a result, the question “How stable is China?” also touches upon our own stability nowadays; this makes it so critically important. If we want get a more concrete idea of the future of Germany and Europe, we must concern ourselves with the domestic political situation in China. This issue continues to be more difficult to assess than in many other cases. Because fundamentally, modern-­day China constitutes a gigantic experiment – the attempt to elevate a country numbering nearly 1.4 billion people to a new, industrialised level, and all this with an unprecedented combination of a communist government and an open market economy.

The Communist Party of China (CPC) is clearly a more pluralistic and – despite the every-day life of the political party – also a considerably more dynamic environment than the Eastern European communist systems that fell apart at the end of the Cold War. During the past decades, the party base with its eighty million members has been clearly pluralised; for example, shortly after the turn of the millennium, entrepreneurs received permission to join the party. The ongoing anti-corruption campaign must particularly be examined in the context of the widening inner-party gaps. Nonetheless, the current government is by no means attempting to trim the CPC back down to a workers’ and farmers’ party. Although the government under Xi is surprisingly emphatic about enforcing increased censorship and stricter control of the media, science, and the public. Still, these measures have so far not been used to massively redesign wide facets of the Chinese people’s everyday lives.

While the political sector is subject to unambiguous control, everyday life in China remains characterised by a degree of individual freedom that knows few parallels in modern Chinese history. This includes the freedom to travel, exemplified by the high number of Chinese students abroad, which already climbed above the mark of half a million in 2014. Another example are the growing waves of Chinese international tourism. On a domestic level, an increasingly colourful urban life is continuously allowing a degree of self-determination concerning lifestyle choices which shows no fundamental differ­ences to the Western world.

Not least for these reasons, the Chinese government is facing a population that refrains from demanding new freedoms en masse – whether personal or political. Nonetheless, social dissatisfaction and political resentment exist, repeatedly entering the visible realm and taking many different shapes and forms. Take, for example, spontaneous protests in villages against new construction measures or protests in cities against bureaucratic inadequacies. As a measurement of the social and political climate, we should also not neglect the unique kinds of ‘shitstorms’ that emerge in the Chinese social media again and again, not rarely stirred up by scandals which have a political dimension to them.

Trouble Spots: Corruption, Environment, Urbanisation

What are the causes of these crisis symptoms? The answers hearken back to the topic of economic growth and prosperity for all, which the Chinese government has claimed as its basis for legitimacy for thirty years. Up until ten years ago, all social classes dreamt the dream of a rising common standard of living. In the meantime, however, Chinese society has become more differentiated; particularly the quickly growing number of university graduates no longer places much trust in the Chinese job market. As a contrast to this development, a jeunesse dorée has emerged, immune to existential worries thanks to their inherited wealth.

These kinds of social challenges make the general criticism of cases of corruption considerably more contentious. The same applies to the breadth of environmental and health topics that currently form a focal point among China’s still-critical public – especially on the Internet. Air and water pollution, which now affect large parts of the Chinese population, are not only connected to the massive industrialisation in the low-tech sectors. They also constitute the side effects of a tremendous wave of urbanisation.

In this regard, too, China has essentially entered new historical territory: while one generation ago, the country still mainly comprised an agricultural society, the proportion of urbanites has in the meantime risen to nearly sixty per cent. According to the plans of China’s Premier of the State Council Li Keqiang, this development must continue, and by 2025, seventy per cent of all Chinese citizens should be living in urban areas. Rapid urbanisation also implied a radical transformation of individual cities. For example, the population of Beijing grew from about six million in 1990 to more than twenty million today. This number merely refers to registered citizens; another ten to fifteen million new arrivals, largely migrant workers, reside there as well, meaning the actual number lies above thirty million. Cities such as Shanghai or Tianjin have experienced similar developments, and in general, many of the so-called ‘tier 3’ to ‘tier 5’ cities are growing at a breath-taking pace.

Modern-day China constitutes a gigantic experiment – the attempt to elevate a country numbering nearly 1.4 billion people to a new, industrialised level.

The urbanisation of China presents an indirect challenge for the Chinese government sector through associated new problems in the environmental and social sector, but it goes beyond that. It also directly touches on the nature of the party and its anchoring in Chinese society at large. After an initial phase within the urban intellectual milieu, the Communist Party of China became closely interlaced with the rural population, in part because of the anti-Japanese resistance during World War II. These close ties with the Chinese agricultural society lent it a high level of stability, which en­abled it to survive the crises of the Mao era as well as the major upheaval that followed. A primarily urban society, which emerged largely from new waves of migration, is not linked to the party to the same extent as the farming community of the twentieth century.

The Chinese leadership must respond to all these problem areas and it has already begun to do so. Various political initiatives can be interpreted as steps towards reducing the rising tensions and legitimacy problems. Aside from the anti-corruption campaign – which, as highlighted, is also connected to inner-party relations –, the Chinese leadership has now introduced quite decisive measures towards environmental protection, in addition to addressing social redistribution. It seems very likely that, in light of the accumulating problems, the Chinese government will retain its experimental character and could potentially take up a more experimental approach to new forms of politics and economics again. The environmental problems alone make it basically impossible to simply ‘continue down the road’ of the past thirty years.

However, without sustainable economic growth it will not be possible to further consolidate political legitimacy in the medium term. The Chinese government will retain its experimental character and could potentially take up a more experimental approach to new forms of politics and economics again.Here, darker clouds are casting a shadow over the sun-drenched general economic situation in China.  Even though in some areas, particularly those important to the German industry, private consumption continues to boom, many signs point to an economic slowdown. Additionally, the share of growth injections of the gross domestic product, for example through infrastructure projects, has strongly increased. Public funds will not be available to this extent to consolidate the economy for long. Because China’s public authorities – from the municipalities, to province governments, all the way to the headquarters in Beijing – are deeply in debt. If unprofitable state-owned companies are accounted for, this reinforces the impression of fiscal weights that could potentially drag the Chinese economy down. These also can by no means be balanced out by China’s huge foreign exchange reserves, domestic and abroad.

If the sharply risen real estate prices in the cities now also turn out to be a bubble, the stability of the Chinese economy faces further danger. However, experts disagree on the extent to which, in a very specific financial system with the Renminbi as a non-freely convertible currency, a financial crisis would trigger similarly destructive waves to those that we know from the history of the West and many other countries. Nonetheless, in the future, the Chinese state will probably no longer possess the same financial means as in the past. Even the fiscal magic wand, which was able to conjure substantial profits for the state by transforming state-owned land into private building land, will most likely lose some of its effective force.

China’s Willingness to Change the System is Limited

Nevertheless, it is unlikely that a serious political crisis or a fundamental system change will occur in China until 2030, and it is still an issue for severa different reasons. First, a potential and broadly organised counterforce in, for example, civil society networks or religions is barely detectable. Second, despite all the adversities of everyday life, broad sections of the Chinese population see themselves as winners of the past decades’ development. Third, the tortuous breaks in modern Chinese history between the Opium Wars and the end of the Cultural Revolution are strongly entrenched in the population’s historic consciousness. Particularly in educated social classes, the willingness to change the system is likely to remain limited, even in the case of serious economic crises.

In many important sectors, China’s rise into the spheres of cutting-edge technology still appears to be a long way ahead for the future.

None of this means that the political spheres of action will not be contested in the upcoming decade. Many topics will be disputed between the government and various groups of society, and even within the party: these include the relationship between freedom of opinion and censorship, corruption and accountability, and also between economic liberalism and social redistribution. National and international companies – in cooperation with their governments – will also remain important factors in these disputes. As is the case with questions about the Chinese justice system’s independence, these matters could revolve around topics that directly affect foreign investors, but also have broad political relevance.

By 2030, we can expect further changes within the Chinese system, which has not actually been that rigid in the past. But revolutionary transformations will probably not take place. The approximation to a basic order like that of liberal democracies is a highly unlikely scenario in the medium term. China’s political and economic design will presumably continue to move within its very own types of political and economic order that have developed over many decades of revolution and reform – and in which, according to the opinions of quite a few historians, touches of the Chinese past are visible. Germany will have to profoundly deal with this very unique system by 2030. After all, the latter is gaining influence worldwide.

China’s Global Position

How can and should we imagine China’s global standing in the future? Long-term trends are easier to predict than short-term upheavals. Although we do not necessarily need to imagine China as a ‘superpower’ by 2030, there are few indications that the newly emerged significance of the Chinese economic area will dwindle during the twenty-first century. Even massive crises generally do not prevent major shifts within the world economy. For example, neither of the two world wars had a notable influence on Europe’s and North America’s share of the overall global economy. Only since the 1970s have we experienced notable shifts towards an economically multipolar world.

However, it is in the medium term possible that the Chinese economic area may no longer expand with much steeper growth rates than the West, but instead stagnate at a still relatively high level. Generally, the danger exists that the Chinese economy could fall into a similar ‘middle income trap’ as Brazil’s or South Africa’s economy. Because of the economic success, wages have even risen so much in the lowest Chinese sector that textile manufacturers and other low-price industries are already moving to cheaper production locations such as Bangladesh or Kenya. At the same time, in many important sectors, China’s rise into the spheres of cutting-edge technology still appears to be a long way ahead for the future. A similarly complex goal lies in awarding a board range of Chinese brands a global reputation comparable to companies like Apple, Siemens, or Toyota.

The Search for Innovative Power

Not just China’s worldwide standing, but above all its inner stability will depend on whether the People’s Republic succeeds in becoming an innovative power, at least in some key sectors of industry. In some areas, the Chinese high-tech industry is tasked with leading the country out of several problem zones at once. Promoting new sources of energy, such as wind power or electric mobility, aims to help China establish a lead in technologies that represent new territory for all global economic areas. At the same time, exactly these technologies are key in managing important environmental and health problems. The same applies to the development of new mobility concepts, which are indispensable for any further, sustainably led urbanisation wave in the People’s Republic.

Large-scale Strategy ‘Made in China 2025’

One example in this context is the overarching strategy concept ‘Made in China 2025’, which aims to allow China to catch up with the world leaders as a location for key technologies such as robotics, the automobile and aviation industry, and new forms of energies. Digitally connected and primarily self-organised production systems will play a major role. ‘Made in China 2025’ includes various measures such as changing the regulatory framework of the Chinese market in favour of domestic providers and offering substantial financial support to relevant Chinese state-owned and private companies, with the goal of making them technologically more competitive. Promoting the targeted takeover of important foreign companies also falls into this category.

Not least in Germany, with its leading role in many of the affected industry sectors, this development is often observed with concern. How should we evaluate the Chinese measures for building internationally competitive cutting-edge technology fields? In at least two respects, the Chinese approach is hardly unusual. First of all, state funding of key domestic industries has belonged to the basic principles of global capitalism since the nineteenth century, and this was also the case – despite all claims to the contrary – in the more recent age of neoliberalism. Secondly, Chinese company takeovers fall into a well-known pattern of transnational entanglements and the steadily growing role of multinational corporations. Last year, the volume of takeovers of German companies again remained far below corresponding investments from the US or other countries.

Although the Chinese overall economic volume has already reached the scale of the US, China still clearly lags behind regarding other facets of international power – at least until 2030.

This, however, is only one side of the coin. On the other side, the Chinese market in many ways remains much less accessible than its equivalents in the old world of the G7 and many other national economies. The fairly opaque interconnectedness of party, state, and justice system also shrouds the courses of actions of many international companies in uncertainty. Nonetheless, Chinese efforts such as ‘Made in China 2025’ should not cause international observers to simply surrender to crude alarmism. At least in the near future, Chinese investments in key technologies signify lucrative possibilities for German and other providers. Second, even in the medium term, China’s rise in individual spheres of cutting-edge technology does not necessarily indicate a zero-sum game but can continue to open up new – if also different – opportunities for Germany.

Third, we should not overestimate the potential international influence of the Chinese economy up until 2030. Surely, the country is seeing more international steering capacity than ever before in its modern history. Nevertheless, China’s rise is particularly marked by an interconnection with other parts of the world. This in turn implies a pattern of complex mutual dependencies, which stands in contrast to purely national interests and radical unilateralism. International governments are already representing the interests of foreign companies in China more decisively, even considerably beyond the already existing trade agreements. In the medium term, concentrated actions among the most important industrial powers in the world are likely to increase in relation to China-related trade policy. All of this will continue to add value to China’s international standing in the trade system and at the same time create regulations and mechanisms that remain acceptable for many sides.

China as a World Power? A Comparison with the US

Although the Chinese overall economic volume has already reached the scale of the US, China still clearly lags behind when it comes to other facets of international power – at least until 2030, it will not yet be able to compete with the major world powers of the past one hundred years in many crucial aspects. For example, significant sums are being invested into developing the Chinese military sector, but it will take considerable time before it will reach the status of an armed force capable of interventions spanning broad geographic areas. China has certainly also gained international influence in its fiscal standing – but in the coming decade, it will not truly be able to compete with the strong arms of the US dollar, the euro, and the established forces of the finance industry.

Of the growing number of German managers that are sent to China, a negligible number at best has even basic knowledge of Chinese politics, economics, and society – not to mention language skills.

There are additional reasons why the possibility of an international order centred around China by the year 2030 is very slim. In contrast to the United States, China does not have a historically well-founded network of allies, which helped the US rise to the status of global power during the first half of the twentieth century. And just to stick with the comparison to the US in the twentieth century: for significant parts of the elite around the globe, China remains a much more unknown world than the New World of North America was. This is far less due to the global influence of American pop culture, or the alleged reticence of Chinese civilisation, as some opinions in the debate around China’s ‘soft power’ suggest. And also the contrast between the American immigration society and the Chinese emigration society can only explain part of the differences in the level of the public’s familiarity with both powers.

Completely different historical contexts play a crucial role here: the world power of the US replaced the British Empire; however, it in many ways also emerged from it. When the United States became the uncontested superpower after the two world wars, the English language was already established as the lingua franca in many parts of the world. The main features of the political and economic order as well as the key principles of everyday culture do not fundamentally differ within the ­English-speaking powers on both sides of the Atlantic. Much of America’s ‘soft power’ developed upon this inheritance.

China in the Educational Landscape

China is not in the same situation: since educational systems around the world are still centred around the West, even in neighbouring countries such as India people intimately familiar with China remain a great exception. If they travel abroad, the future elite of most countries in the world choose to study at Western universities – personal, that is biographical links to China are still rare. The world is also starting to change in this regard, but this is taking place at a much slower pace than the changes in the overall global economic distribution.

In German school and university education, China is no longer considered to be an exotic exception to the extent it was just one generation ago. Nonetheless, only a fraction of university graduates has reliable knowledge on China, not to mention language skills. The situation is even more critical among today’s decision-­makers: for example, no major political or public debate has so far shown serious efforts in looking at the complex, multi-faceted, and at the same time also contradictory Chinese landscapes of the present in closer detail. Instead, judgements and evaluations are preferably made from afar.

In China, it is basically impossible for students to complete a degree without becoming at least familiar with the basic Western principles and having studied English and perhaps another Western language for years.

This pattern also becomes evident in the direct interactions with China: of the growing number of German managers that are sent to China, a negligible number at best has even basic knowledge of Chinese politics, economics, and society – not to mention language skills. This means that substantial foreign investments must mainly be carried out by employees who have excellent professional training but remain in the dark concerning society and culture. Many universities are facing a similar situation, as a lot of them have in the meantime discovered the benefits and pressures of globalisation and want to cooperate with Chinese universities. Since German companies and universities are lacking bridge builders, their Chinese partners are frequently forced to take over this function on their own – with all the disadvantages that come with such a distribution, especially for the German side. Because, in the former ‘Middle Kingdom’, it is basically impossible for students to complete a degree without becoming at least familiar with the basic Western principles and having studied English and perhaps another Western language for years. By contrast, in Germany we still demonstrate knowledge horizons from an era in which China only played a marginal role in the world.

New Relationship Patterns

China will not be a dominating world power by 2030, and we may be heading towards an era which will be shaped less by ‘superpowers’ than large parts of the post-war epoch. Nonetheless, China’s global possibilities for action will continue to grow. For example, in light of the Chinese economy’s rising potential for innovation, it is clear to see that the times in which German companies served, in a certain sense, as aid workers in China are over. Both countries will meet at eye level in the coming decade – and this also implies that German leaders must gain a better understanding of China in its own dynamics. Germany is not yet sufficiently prepared for this.

China

How We Must Act

For a long time, German-Chinese relations were embedded in a framework of Western supremacy. But the relationship with China has fundamentally changed: in various areas – politics, economics, science – Chinese leaders are now meeting their German colleagues at least at eye level. This trend will continue until 2030; and Germany is neither structurally nor mentally prepared for this.

  • In the future, a sufficient number of leading figures must be just as familiar with China as they are with the US, for example. The German educational system must react to China’s increasing importance with much more determination. To date, the knowledge horizons that prevail here stem from an era in which China only played a marginal global role.
  • A more intensive examination of the different facets of Chinese politics, economics, science, and society is urgently needed. Continuous and critical forms of cooperation can only be developed based on broad and intensive debates. These must take place in public as well as in specialist forums.
  • Stronger European cooperation in interacting with China remains a crucial goal. In many sectors of science, economics, and politics, relationships with China are still nationally fragmented.

Prof. Dr. Dominic Sachsenmaier (48) holds the chair for Modern China with a Focus on Global Historical Perspectives at the University of Göttingen. Previously, he taught at Duke University as well as the University of California, among others. In addition to other functions, Professor Sachsenmaier is an Elected Member of the European Academy of Sciences and Arts and President of the US Toynbee Prize Foundation. Dominic Sachsenmaier’s current research focuses on China’s global and transnational connections in the past and the present.