The Challenge of China and How NOT to Respond

There is no doubting the status of China as a global economic superpower. Through the wide expansion of its manufacturing sector, with combined elements of statism and neoliberalism, it created historical record double digit growth rates for 30 straight years. By virtue of its massive size, China is both large and dynamic enough to significantly affect the world economy and contribute to global growth. Through its strategic open engagement of trade and capital flows, China is deeply integrated into the world economy. China, by definition, is a superpower. More crucially for the world, however, it is increasingly acting like one. Rising under conditions defiant of international norms, China poses this century’s major challenge to the existing United States-led global economic order. On the front of trade policy, China is disruptive to the norm of multilateral arrangements and liberalizing obligations. In 2008, it rejected the multilateral initiative of the Doha Round, marking the first failure of a major multilateral negotiation in the postwar period. Consequently, the World Trade Organization-led trade regime is in jeopardy. Instead of multilateralism, it seeks to lead politically-motivated bilateral trade in the Asian region to pit against, not cooperate with, the established trans-Atlantic bloc. With regards to the international monetary system, China continues to frustrate the US by rejecting the rule of a flexible exchange rate policy through its intervention in making the renminbi competitively undervalued. When criticized by the International Monetary Fund, China brazenly questions the existence of the IMF and threatens to create its own Asian counterpart. Indeed, China-led Asian Infrastructure Investment Bank is the boldest concrete rejection of a US-dominated global economic governance. On the area of production, China remains to be the world’s manufacturing powerhouse while maintaining its relative independence from foreign capital. The three areas of trade, financial and production are the critical pillars from which the global economic order stand; and China has managed to aggravate every one of them.

China is flexing its muscles; yet the world, primarily the US, still engages it as if it were a status quo superpower. Responses continue to be dominated by cooptive approaches, forcing China to get on board the status quo norms and existing global institutional architecture. These cannot be any more mistaken. The battle for global supremacy begins with a clear understanding of the enemy. China is a revisionist power; it seeks to upend a global economic order that it absolutely had no part building. In this case, efforts to forcibly integrate it to existing norms and institutions are not only misguided but also counterproductive. An effective response necessitates a recognition of the patterns of China’s calculated moves. Yes, a revisionist power ultimately wants to change the status quo. However, it understands that the decks are stacked against it for it throw an immediate huge blow. Critical observation reveals China’s strategy—frustrate the status quo, gauge the response, calculate whether to push forward or step back. Case in point: The Doha Round. After effectively blocking the multilateral trade initiative, it can be argued that China calculated the moves to be made thereafter. Without a strong response from proponents of multilateralism, China pushed to frustrate the global order even further by leading an Asian trading bloc. The same calculations can be observed in China’s approach on the issue of the West Philippine Sea. Initially frustrating international norms by claiming on the basis of its historical nine-dash line, it pushed even further to land reclamation activities in the absence of an effective response from the vocal opposition in the Philippines and Vietnam. The legal approach of the Philippines is another example of engaging China for what it is not; it does not and will not back down on the basis of status quo legalities. A revisionist power will not respond to status quo forces. The world needs to beat China at its own revisionist game.