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The Myth of Chinese Power
It's time to see China for what it is.
By Gerald Segal
Newsweek International, Sep. 20, 1999
The hype is building for the 50th anniversary of the Chinese communist revolution. But this is really a time for lamentation, not celebration. Chinese communism, like its deceased European cousins, was a historical dead end. It led to the deaths of 30 million in the Great Leap Forward and a ruined generation in the Cultural Revolution. Only since the Chinese communists began to trade Marxism for the market in the 1980s has China begun to climb out of its historical hole.
Most remarkably, despite its gross failures, China has managed to convince the world that it is actually a success story. In fact, the country that is home to a fifth of some of the poorest of humankind is overrated as a market, a power and a source of ideas. China has mastered the art of diplomatic theater: it has us willingly suspending our disbelief in its strength. In fact, China under President Jiang Zemin is better understood as a theoretical power — a country that has promised to deliver for much of the last 150 years but has consistently disappointed. After 50 years of Mao's revolution and 20 years of reform, it is time to leave the theater and see China for what it is.
Let us begin with some harsh realities about the size and growth of the Chinese economy. In 1800 China accounted for 33 percent of world manufacturing output; by way of comparison, the contribution of Europe as a whole was 28 percent, and that of the United States.8 percent. By 1900 China was down to 6.2 percent (Europe was at 62 percent, and the United States 23.6 percent). In 1997 China accounted for 3.5 percent of world GNP, while the share of the United States was 25.6 percent. China's economy ranked seventh in the world, ahead of Brazil's and behind Italy's. But its per capita GDP ranking was 81st, just ahead of Georgia's and behind Papua New Guinea's. Taking the most favorable of the now dubious purchasing-power-parity calculations, in 1997 China accounted for 11.8 percent of world GNP, and its per capita ranking was 65th, ahead of Jamaica's and behind Latvia's. Using the U.N. Human Development Index, China is a miserable 107th, bracketed by Albania and Namibia — not an impressive story.
Yes, you may say, but China has had a hard 200 years and is now bouncing back. Yet few economists trust modern Chinese economic data; even Chinese Prime Minister Zhu Rongji distrusts them. The Asian Development Bank routinely deducts about 2 percentage points from China's official GDP figures, including notional current GDP growth rates of 8 percent. About 2 or 3 percent of what might be a more accurate GDP growth rate of 6 percent consists of useless goods produced to rust in warehouses. About 1 percent of China's growth in 1998 was due to massive government spending on infrastructure. About 3 percent of GDP is accounted for by the one-time gain that occurs when peasants move from the land to cities, where productivity is higher. Taking all these qualifications into account, China's economy is effectively in recession. Even Zhu calls the situation grim.
In terms of international trade and investment, the story is much the same: China is a seriously overrated power. China made up a mere 3 percent of total world trade in 1997, about the same as South Korea and less than the Netherlands. China now accounts for only 11 percent of total Asian trade. Despite the hype about the importance of the Chinese market, exports to China are tiny. Only 1.8 percent of U.S. exports go to China (this could, generously, be perhaps 2.4 percent if re-exports through Hong Kong were counted) — about the same level as U.S. exports to Australia or Belgium and about a third less than U.S. exports to Taiwan. The same is true of major European traders. China accounts for .5 percent of British exports, about the same level as exports to Sri Lanka and less than those to Malaysia. China takes 1.1 percent of French and German exports, which is the highest in Asia apart from Japan but about par with exports to Portugal.
China is also a second-rate military power — not first rate, because it is far from capable of taking on America, but not third rate, as are most of its Asian neighbors. China accounts for only 4.5 percent of global defense spending (the United States makes up 33.9 percent) and 25.8 percent of defense spending in East Asia and Australasia. China poses a formidable threat to the likes of the mighty Philippines. China is in no military shape to take the disputed Senkaku Islands from Japan, which is decently armed. Beijing clearly is a serious menace to Taiwan, but even this most acute security concern on China's front door cannot be resolved by China because the United States stands in its way. Not much of a great power!
Thus, because China challenges Western authority, it matters to some extent. But it does not matter so much that it can't be constrained. Much the same pattern is evident in the challenge China poses to U.S. security. It certainly matters that China is the only country whose nuclear weapons target the United States. It also matters that Chinese military exercises simulate attacks on U.S. troops in South Korea and Japan. But the fact that a country can directly threaten the United States is not normally taken as a reason to be anything except robust in defending U.S. interests. It is certainly not a reason to pretend that China is a strategic partner — in fact, the United States and China have no important common strategic interests.
Any way you look at it, China matters far less than people think; and as a result the anniversary is nothing to celebrate. The true time for celebration will come when China has engaged in thorough political reforms and genuinely gives its people the ability to stand up tall in the world.
SEGAL is director of studies at the International Institute for Strategic Studies in London and the author of "Does China Matter?" in the September issue of Foreign Affairs.