Archive for June 12th, 2012

Regionalism and Chinese Economic Growth

One topic that hasn’t received as much attention as it might is differential economic growth within China.  I’ve been perusing the First Quarter 2012 edition of the China Beige Book (http://www.chinabeigebook.com/), which offers a high-fidelity, comprehensive survey of current national, regional, and sectoral economic conditions in China.  It is based on original primary source sourced within and throughout the country.  What it reveals is some considerable differences in the economic climate between (and within) China’s various regions.  Shanghai, Jiangsu, and Zhejiang, for example, have experienced strong revenue growth this quarter as autos and IT have been doing well, but Shanghai also has the most firms with falling output.  In the northeast, by contrast, manufacturing is plodding, hurt by sluggish textile and capital goods demand, but many domestic and foreign companies are still investing. In China’s central region, growth is disappointing and manufacturing results are lackluster, but the region is attracting an impressive set of local and foreign firms seeking untapped markets and cheap local labor. Farmers are hopeful but worried about drought.

Such regional differences have heretofore taken a back seat to high levels of economic growth.  One wonders if they will feature more prominently in decision making as Chinese economic growth slows.

As the draft Global Trends 2030 report points out, the United States’ relative economic decline vis-a-vis emerging powers is inevitable and already occurring.  The most likely scenario is an “economically restored” United States that is able to retain its global leadership role.  A weak and defensive US, on the other hand, would “increase the chances of a dysfunctional international system.”

But in either case, the role of the United States, and its ability to shape the future international order will depend in large part on the strategic orientation of other major powers, particularly China and Russia.  As the world’s remaining great power autocracies, these two nations share a foreign policy outlook that often places a higher priority on retaining traditional spheres of influence, protecting national sovereignty, and opposing the West than on implementing broadly accepted international norms, including non-proliferation and the protection of human rights.  If these great powers continue to be governed by authoritarian regimes, the United States and the West will face significant obstacles in their attempts to solidify a liberal international order.

The most dramatic factor impacting the future of the international system, however, could be the collapse of authoritarianism in China or Russia and an evolution toward more democratic and liberal models of governance.  A democratic China, for example, might see itself as a natural political and economic partner with the West, facilitating its ability to join in addressing collective concerns.  Similarly, a democratic Russia might find its interests on key issues converging with the West, leading it to cooperate on a more sustained basis, as was the case at times during the early years of Yeltsin era.

This could open the door to a potentially transformative and so far illusive “concert of powers.”  Even if American predominance over the international system recedes, its impact could be potentially far less significant, because their collective commitments to democratic values would allow other great powers to work together cooperatively to adopt and enforce a set of globally-accepted rules and norms — reinforcing and expanding a liberal international order.