China’s Growing International Role

Dambisa Moyo offers important insights on China’s rise, its strategic vision, and the global implications of both. In particular, it has never been more important to recognize that China’s growing international role, particularly in investment, is designed primarily to ensure continued growth and political stability at home. Its economy has slowed, but the need to secure the oil, gas, metals, and minerals necessary to extend its industrial development will continue. The Chinese leadership recognizes that domestic reform – the need to shift from export-based growth to greater domestic consumption, in particular – will continue to slow GDP growth, but avoiding a hard economic landing is as crucial as ever for the Chinese Communist Party’s continued political dominance.

Moyo is also wise to note that recipients of Chinese investment continue to benefit from it. It wasn’t so long ago that the developing world’s cash-starved governments had little choice but to turn to Western governments and institutions for investment. The entry of Chinese players into this game creates competition that helps these governments secure more favorable terms of trade and investment and avoid the hard political choices that Western creditors often demand. Particularly in Africa and Latin America, that’s a plus for development, particularly in infrastructure. China’s need, heightened by its economic slowdown, to make state-owned enterprises more efficient will chasten their spending, and the fear that senior leaders will use Xi Jinping’s anti-corruption program to ensure compliance will enhance this effect. But we will see more Chinese companies going abroad in coming years as part of the state’s plans to achieve all kinds of political and economic goals. 

It’s also true that there is no single international institution with a mandate to regulate this investment competition in order to make most effective use of scarce global resources, and major developed and developing states aren’t likely to find the common ground needed to create and empower one. This is the same problem that blocks agreement on a global approach to climate change. Emerging nations suspect that established powers want to stunt their growth to protect their own privileges. It’s unfair, they argue, that the West, having completed its industrial revolution, inflicting massive environmental damage in the process, wants to restrict the ability of new players to grow. Western powers counter that future damage will be inflicted mainly by large emerging nations like China and India – and that developed and developing countries will pay the price together if carbon emissions are not capped. Moyo is right that this problem extends to access to vital resources like arable land and clean water. 

Moyo’s most important insight is that “China alone seems to recognize the need for a multilateral strategic approach to securing global resource supplies.” What’s true for commodity supplies is true for all other aspects of China’s foreign policy. Today, only China has a coherent global strategy. The core of this approach lies in Beijing’s conviction that China cannot meet its long-term goals in an international system dominated by institutions like the World Bank and International Monetary Fund which allow developed states to decide on the terms by which developing states will grow. 

Yet to understand how its foreign policy is changing, we must also recognize that China is now investing not only to secure needed commodities but to open markets for China’s own excess production, particularly in heavy industry. This is a crucial element of both China’s “One Belt One Road” project, which is meant to open new routes for commercial exchange between China and Europe, and the Beijing-led Asian Infrastructure Investment Bank, which will create opportunities for Chinese industrial policy and help China become an internationally recognized lender of first resort. That, in turn, will help China redefine the rules of international direct investment.   

This is shrewd strategic thinking, but China’s leadership is well aware that China’s greater international role will generate unprecedented challenges. It will force Beijing to manage relations with countries that want to hedge their bets to avoid over-dependence on China’s continued growth and Beijing’s good will. That’s particularly true among its wary East Asian neighbors. Beijing will also find itself implicated as never before in the internal problems of other countries and regions. We have seen this already with China’s attempt to broker peace in Sudan, a country in which China has spent heavily to secure energy supplies. Beijing has mainly been able to avoid vulnerability to turmoil in other regions. But with Washington less willing and able to assume responsibility for managing so many of the world’s hotspots and potential conflicts, China may soon carry burdens it doesn’t really want. How China responds will matter for the entire global economy. 

Finally, the greatest global vulnerability produced by China’s rise centers on the risk that Beijing can’t sustain the expansion. There is little to reason to believe that China will become significantly less stable over the next five years. Its development will likely continue at a healthy, though slower, pace. But over the longer term, China faces new and complex questions. How can China manage the growing gap between rich and poor? How can it continue to grow without doing so much more damage to the country’s air and water that public anger reaches critical mass? How can the country’s leadership manage public demand for better governance at a time when ideas, information, and people surge across internal and external borders on an unprecedented scale and at unprecedented speed? If China gets old before it gets rich, the country’s enormous middle class will likely hold its leadership directly responsible. 

 

This is a country well on its way to building the world’s largest economy. For this reason, China’s vulnerability is our vulnerability. Dambisa Moyo is surely correct that China’s rise will create all sorts of problems in a world of scarce resources and heightened competition to control them. But China’s potential fall should worry us even more. 

Also from This Issue

Lead Essay

  • Winner Take All: China and the Global Race for Resources by Dambisa Moyo

    Dambisa Moyo sounds the alarm about China’s claims to the world’s natural resources. As its population advances economically, the Chinese government has kept pace, and then some, in securing natural resources that can be used in its domestic industries. These moves have consequences for the rest of us, she argues, in part because international conflicts over resources commonly turn violent. Increasingly, China wields market power and sets global commodity prices. Although Moyo does not profess to have all the answers, she believes the question is well worth asking: How should the rest of the world respond? One solution she recommends is to redirect spending from national defense to research and development - although even this may only be one piece of a much larger strategy.

Response Essays

  • A Case for Calm about China by Justin Logan

    Justin Logan is considerably more skeptical that China constitutes a grave threat in a resource-hungry world. He looks at several Chinese economic projects and finds their results haven’t been as successful as anticipated. Political and military tensions may well exist between China and the United States, but, he writes, they do not appear to be driven by economics. Commodity shortages have not been as damaging as feared, and China’s response to them has been less fearsome as well.

  • China Overpays: Still In Thrall to Failed Ideology of Central Planning by Ronald Bailey

    China would do well to abandon its attempts to manage world resources: they aren’t paying off, says Ronald Bailey. He invokes data from the study of economic supercycles, during which the world economy deploys new technologies in response to new and changing resource demands. This data suggests that the world economy has now priced in China’s rise as a manufacturing power - and even managed to supply more or less the mineral resources it will need. Commodity prices were high at the peak of the cycle, but they have since fallen, and there is no reason to think that things will change very soon.