Outcomes of China’s jolt unclear
The reverberations of mainland China’s economic jolt are being felt worldwide from New York, to London, Frankfurt and Tokyo. It’s the fear of a slowdown in the once supercharged Chinese economy, which has sent China’s Shanghai Index market into a tailspin down over 20 percent in two weeks. The economic knock-on effect has been sobering since China, as the world’s second-largest economy, has been a driver of global growth and commerce.
Ominously in parallel, the People’s Republic of China is set to stage a massive military parade in Beijing to commemorate the 70th anniversary of the end of WWII, and to celebrate the country’s role in defeating Imperial Japan. China’s ruling Communist party (CCP) and its Chairman/President Xi Jinping are using this event to stoke a new nationalism not only against Japan but as crucial towards letting East Asia know that the Chinese dragon is not a paper tiger.
China’s decelerating economy and rumbling social unrest, may soon be offset by ramped up patriotism. While China’s rulers know that communism has long ago lost its luster, proud and justifiable Chinese nationalism serves to unite the people.
For a generation, China’s economic reforms brought a grudging legitimacy to the CCP.
The PRC’s power Paradigm is simple: a Supercharged economy/ high GDP growth, Chinese nationalism with the self-righteousness of regained status, and a strong military able to both defend the borders and project power in regional crises such as the South China Sea or Taiwan.
The PRC has mollified its citizens with socio/economic prosperity, has seduced them with high octane nationalism, but has kept them in check through the CCP’s undisputed one party rule and rigid authoritarianism.
If the CCP now falters in its eco- nomic growth, and maybe can’t deliver the benefits to a growing middle class, does the regime then turn to darker methods and stoke the embers of border disputes, historical grievances and look to outstanding disputes like Taiwan, the South China Sea or the contested Daioyutai/Senkaku Islands?
Western commercial hype over China is nothing new and the dazzling economic stories which have emerged from the mainland over the past 25 years, while impressive, need to be taken with more than a grain of salt. Beijing’s statistics may look good on a press release but has the CCP fudged the numbers? Growth is expected to be 7 percent this year. Officially anyway.
Will the PRC’s GNP-ism, namely the ideology of high economic growth and crony capitalism swag, be replaced by saber-rattling nationalism? This is where it can get dangerous.
Despite being political rivals, the PRC and the Republic of China in Taiwan remain major commercial partners; China is Taiwan’s number one trade partner with US$130 billion in two-way trade last year. Moreover as a political enticement, Beijing is willing to run a large trade deficit with the island democracy.
China remains the USA’s second largest trade partner with US$590 billion in trade but with a massive US$343 billion deficit favoring Beijing.
The PRC is South Korea’s number one trade partner too. China has just declared its currency by 2 percent as well to boost commerce.
And let’s not forget about Beijing being the USA’s major banker with over a trillion dollars in U.S. debt to the People’s Republic. What if China called in these American loans to prop up its economy? At the same time, the PRC is saddled with towering and dangerous debt of its own.
But let’s return to the parade for a moment. This patriotic excess is based on a very selective reading of history. To be sure China was a victim to Japanese aggression starting with Tokyo’s takeover of Manchuria in 1931 and the subsequent dismembering of China well before Pearl Harbor in 1941. Millions of Chinese died.
Yet it was Nationalist China under attack. For the most part it was the Nationalist army, not the Communist rebels, who resisted the Japanese. Chiang Kai-shek’s China, one of WWII’s Big Five Allied powers, thus played a significant role is fighting and tying down millions of Japanese on the mainland who otherwise would have been free to fight General MacArthur’s advancing American military onslaught in the Pacific.
Unquestionably the PRC has had an serious economic setback which has been felt round the world. China seems to have lost some economic luster, but is hardly out of the game. John J. Metzler is a United Nations correspondent covering diplomatic and defense issues.