Countering China
Yesterday, Biden and the leaders of Japan and South Korea signed a security pact (the pact) at Camp David. The Biden Administration had been working for some time to arrange such an agreement. It may not sound like much, but it’s a huge deal. It’s the first time Japanese and South Korean leaders have met that was not part of a larger gathering.
Both countries have a long history of hostility towards each other dating back to before World War Two. Despite that history, both countries hopefully are now willing to put it aside and work together on the challenges of dealing China and North Korea. If the pact is successful it will be great for Japan, South Korea and the US.
The pact is primarily about military matters. The US has a large military presence in Japan and South Korea and has long conducted drills with troops from the latter. Under the pact, the three countries will expand joint military exercises, hold annual talks and establish a three-way line of communication. China has become more aggressive militarily in the Pacific lately, including holding a joint exercise with Russia near Alaska. The pact is an effort to counteract that.
In a statement put out by the White House, the three countries emphasized the need for peace and stability across the Taiwan Strait. How best to interpret that, I don’t know. It could be read as a warning to China against invading Taiwan or it may just be stating past policy positions. It certainly will not be well received by China.
The pact may seem similar to NATO, but it’s different in at least one critical respect. Countries that are members of NATO have agreed to defend each other if one is attacked. The pact that the US, Japan and South Korea just signed doesn’t go that far.
There is no guarantee that the thaw between Japan and South Korea will continue nor is it guaranteed that the pact will survive. The leaders of both countries are taking big risks in pursuing the pact. That is especially true in South Korea, where there is anger over the forging of closer ties with Japan. While Trump’s name was never mentioned by any of the three leaders at Camp David, it is understood that if he is president again the pact will probably be ripped apart.
When he was president, Trump had threatened to pull US troops out of South Korea. He infamously met with Kim Jong Un and gave him a huge PR victory. He routinely praises him and calls him a friend. He has spoken favorably and admirably about Xi Jinping on many occasions. One thing that has been consistent about him for decades is his admiration for dictators.
There are so many reasons Trump should never be president again and the pact’s survival is one of them. The pact, I would think, has large, bipartisan support in Congress. It’s the kind of thing I would think most non-Trumpy Republicans would continue if they were president. Presenting it as a counter to China should even satisfy those Republicans who have been hostile towards Ukraine.
While dealing with Russia is certainly important, China is a much bigger deal, as I have written about before. The pact isn’t solely about China, but it was definitely motivated by the need to counteract it, as Biden acknowledged. Historical hostilities notwithstanding, Japan and South Korea have many common interests and have long been US allies. Both countries are threatened by North Korea and are wary of China’s rise in the region.
Japan and South Korea are also both democracies. China’s vision of a world order is vastly different from theirs. Whatever differences and frustrations either of them might have with the US at times, it’s nothing compared to their worries about China.
The pact is part of a larger effort by Biden to counter China in Asia and the world. He has made several big efforts at that since taking office. For example, earlier this year, a nuclear submarine deal was announced with Australia and the UK as part of an effort to push back against China’s increasing military presence in the Pacific. Biden recently hosted Narendra Modi at a state dinner to build closer ties with India and keep it away from China. Although it hasn’t gotten as much attention as the pact, Biden will sign a strategic partnership with Vietnam next month when he visits Southeast Asia.
The effort to counter China has had military, diplomatic and economic aspects to it. The biggest tension has been over semiconductors, which may well be the single most important piece of technology today. The US has restricted chip manufacturing equipment exports to China and has successfully gotten other countries to join in, including Japan. The goal of doing that has been mostly military related, i.e., to slow China’s advance in military technology.
American strengths and Chinese weaknesses
The good news for the US and its allies is that China has ninety nine problems and the economy is one. Among young people in China, unemployment is sky high at around 21.3% as of June. The government has announced that it will no longer publish statistics on youth unemployment after releasing the latest report. That move fits with a pattern of the government no longer releasing data when it becomes unflattering.
Needless to say, no longer publishing unflattering data won’t make it go away. Dictatorships can try to hide information, but eventually it will be found out. If young people are struggling across the country, it will be known. The government will have to figure out a way to fix it or there will be a lot of very unhappy people. China’s economy has had huge growth for decades, but that has slowed down sharply this year.
People in China have gotten used to having jobs and seeing their living standards rise quickly. Even if the economy does not contract, a slowdown will be very disruptive. What China’s leaders will discover about economic satisfaction is that it’s relative. A country that is poor, but is seeing improvements in living standards will have happier people than a country that has higher living standards, but is stagnating or growing slowly.
It has gotten to the point where China’s leaders are hoping for the US to help them out. Gina Raimondo, the Secretary of Commerce, is scheduled to visit there soon. The hope in China is that she will agree to roll back some export restrictions the US has imposed. I don’t know what will come of her visit, but I doubt there will be any big rollbacks of export restrictions. Domestic pressure to not be seen as aiding China will probably be enough to prevent anything of any significance from happening.
Despite the increase in tensions, the US and China still trade plenty with each other. I used to think decoupling from China was the way to go, but that is not practical or even desirable. I think de-risking is the better approach and so do most others in positions of authority. It involves securing supply chains of critical items related to national security rather than moving every single supply chain out of China.
I think it’s important to reduce China’s economic power. Its government has used economic power to export censorship to the world and that shouldn’t be tolerated. My worry with China is not that it could conquer the world militarily. It’s that it could conquer many places economically by making them dependent on it and taking advantage of that to achieve other ends. When we’re at the point where countries, businesses and individuals are self-censoring to avoid retaliation from China, we have a big problem on our hands.
While I want to reduce China’s economic power, it’s not in anyone’s interest for its economy to fall apart. Economically, China is a huge player on the world stage. If its economy keeps struggling, that will have big economic effects around the world and not necessarily in a good way. Politically, an economy that falls into a recession or worse there might lead to instability in the government.
I would love nothing more than to see the Chinese Communist Party (CCP)[i] overthrown and replaced by a democracy, but I highly doubt that will happen. If the CCP is deposed, its replacement might be a group even more militaristic and eager to invade Taiwan and/or pursue much more aggressive military actions towards the US and other Asian countries. That is not a prediction, just to be clear. I have no idea how domestic instability would play out and nobody really does either, but I would rather not find out.
Domestic issues aside, another reason I don’t think it’s in anyone’s interest for China’s economy to fall apart is that the CCP might lash out in a desperate attempt to stay in power. If they feel threatened, especially by the US, they might do something extreme like start a war. I support the efforts to restrict semiconductors and other crucial items from being exported to China, but they raise tensions and that has to be taken into account when deciding how far to push things.
If the export restrictions are effective, China will be hobbled militarily and economically. If it gets to the point where China’s government feels desperate and thinks the only way they could gain an edge with semiconductors is by invading Taiwan, they might do it. Even if it doesn’t come to that, export restrictions that are all-encompassing could wind up hurting the economies of the US and its allies.
While the US has imposed export restrictions and has gotten other countries to do the same, there is an exemption for companies from Taiwan and South Korea. Companies from those two countries are still allowed to maintain and expand their presence in China and will not be sanctioned for it. The exemption is an acknowledgement that the total isolation of China in a highly globalized economy is not realistic and could harm the economies of other countries.
Like trying to predict how domestic instability in China would play out, trying to predict how China will react abroad is speculative. Nobody knows what would happen. That includes leaders in the US and China. What I do know is that China invading Taiwan or starting a war anywhere would be very bad for everyone. It is easy to see many bad things happening from that, up to and including a nuclear war.
My hope is that the domestic problems in China will occupy the attention of the CCP. If they have to worry about domestic threats, they are much more likely to focus on that and to focus less on trying to expand their influence abroad. The domestic problems they have are not just economic, but demographic, too. The government has stopped publishing fertility rate data, but a recent study found that it has dropped sharply.
China’s fertility rate may be as low as 1.09, which is well below replacement level. If so, it’s even lower than Japan’s, which is 1.26. China also has a population that is aging. Last year, its population declined for the first time in decades. The one-child policy that was in place for a long time has been lifted and the government has made active efforts to encourage people to have more babies. So far, none of those efforts have worked.
An aging population is not unique to China. Most developed countries are getting older, including the US. The problem China has is that while some of its neighboring countries like Japan and South Korea have older populations, those countries got to develop before reaching that point. That is important because having a developed economy means having a government with greater means to take care of older people. China has grown plenty, but is not yet a developed country and will have a much harder time taking care of its older citizens.
In the case of the US, it’s not only a developed country, but is also one that people want to immigrate to. The US fertility rate has been declining for some time, but what compensates for that is immigration. Even if domestic births continue to fall, immigration will be likely to make up for it. Depending on which immigration policies are pursued, the US could see its population substantially grow over the years and decades.
While Japan and South Korea don’t have high levels of immigration, they have large, developed economies that can help them deal with their demographic issues. The US is fortunate to be developed and a place where people want to immigrate to. China has the worst of both worlds. It’s not a developed country and it’s not a place where people want to immigrate to. China has never been a place that is welcoming to immigrants and I don’t see that changing any time soon.
Given the demand for immigrating to the US, it would be wise to have policies to encourage as many educated people from China to come here. Other countries that are welcoming to immigrants should do the same. Openness to immigration is a huge advantage the US and some of its allies have against China. It would be a big mistake to not use it.
Thank god for democracy
Something I have written about before is that dictatorships don’t have what it takes to win against democracies. The nature of a dictatorial regime is inherently self-limiting. Political and economic freedom are not strictly the same thing, but they almost always go together. That is not a coincidence.
It’s no accident that nearly all developed and prospering economies are those in democratic countries.[ii] By centering economies around private activity, they become less reliant on the government. That makes the government weaker, which dictators don’t like. In a dictatorship, the government is going to assert heavy control over the economy even if some economic freedom is allowed. Not asserting control means giving up power, which dictators are loath to do.
When a country becomes prosperous enough, the most basic issues like daily survival are no longer worried about. With economic prosperity comes rising living standards. When living standards rise, people can focus on more far sighted matters and not have to worry about the immediate moment. There tends to be much less fear, which leads people to demand rights in other areas, which dictatorships are inherently hostile towards.
A more prosperous people, having achieved economic security, will want political freedom, too. That is incompatible with living under a dictator. If that sounds like some abstract theory, just know that virtually every developed country today is a democracy, but was once a dictatorship of some kind. With economic freedom and prosperity comes political freedom and governmental accountability.
In a dictatorship, leaders are not accountable. That feature is inherently limiting because leaders have no way of knowing if they are making bad decisions. A dictatorship is inherently hostile towards debate and free inquiry. Once a decision is made, that is final. If it’s a bad decision, nobody is going to speak out against it out of fear of being arrested or worse.
Democracies don’t just have free and fair elections. They have other rights, too. Those rights include free speech and a free press. Such rights ensure that the government can be held accountable. Whether voters choose to do that is another story, but they have that option.
Governments in democracies are transparent. The US government regularly publishes data on all kinds of economic metrics, for example. Whether the people in charge like the latest unemployment numbers doesn’t matter. They will be published regardless. Any attempt to stop that from happening or alter the data would be found out fast and would be a huge scandal.
Elections being routinely held serve as a way to let governments know how voters think they are doing. Sometimes governments are unfairly punished or rewarded, but that is a choice people can make. In the short run, dictatorships can make decisions quickly and can get things done. Sometimes, those decisions are right (or lucky) and good results flow from them. China has enjoyed robust growth under a dictatorship that has only gotten more oppressive over the years. As they say, though, all good things must come to an end.
China’s growth may return to its previously high levels or it may not, I don’t know. What I do know is Xi Jinping is determined to exert greater control over China’s economy. That is almost certainly going to make things a lot worse if he goes through with it. If that happens, the CCP will be facing a threat like they have never seen since they took over China in 1949. Dictatorships can deliver good results for years, even decades, but eventually they will make bad decisions and because they aren’t accountable there is nobody to tell them about it until it’s too late.
[i] I’m using the phrases CCP, the government and China’s government interchangeably.
[ii] Singapore is the only developed country I can think of that is a dictatorship. Hungary might count, too, but I hesitate to call it a dictatorship yet. Depending on who you ask, Poland may be heading towards a dictatorship. Other than those three, I can’t name any country that is developed and is not a democracy.