By China’s official account, its priorities and outlook (courtesy President Xi Jinping), internally and externally have changed so much over the past twelve months that it points towards establishing a new normal for the country, both in its domestic and foreign policies. China’s economic governance and development strategy has shown different characteristics from being merely a ‘crisis-coping strategy’ promoted several years ago to the present day one where decisions are taken keeping in mind China’s ambition to now be seen as a responsible global economic leader. This is the reason that of late China has become more concerned about its economic trends than simple results, the inner strengths of its market than mere data movements, and with the results of its underlying reforms than simply relying on broad stimulus measures cum quantitative easing policies. The much feared report on the alarming situation on pollution in the large Chinese cities, especially Beijing and Shanghai, is now out and the numbers look much worse than originally thought. Had such a damaging report to China come out a few years back, the reaction would have been that of a ‘western conspiracy’, but today’s Chinese leadership is instead seriously focused on all aspects of the report to determine what should be China’s practical response to redress the present situation. The pollution is now so severe (in major cities) that it’s creating a political backlash by a rising middle class against the Chinese leadership for obvious reasons. As mentioned above, the challenges of pollution within China are not just limited to Beijing. The pollution in Shanghai is steadily getting worse. Expatriates working for multinational corporations are becoming increasingly less willing to live in these cities, even though their companies are offering progressively higher salaries to do so. Expats who do remain are, understandably, sending their families back home while themselves opting more and more for short stays.
Nouriel Roubini is one of most out-of-the-box thinkers as an economist. Remember, he was one of the very few who predicted the near-depression of 2008. He has recently written a neat little essay on China, which points that as the most populous nation on earth, and the world’s second-largest economy, China is increasingly becoming both a concern and an opportunity for investors. In the case of China, the goal of peaceful rise is to avoid the fate that has seized other emergent powers, such as the Empire of Japan during the Second World War, and Germany during World War I and World War II. So far, the reforms needed to achieve rebalancing have been postponed as President Xi is busy with consolidating his power, cracking down on corruption, and dealing with foreign policy and security issues. But the longer China kicks the can down the road and postpones reforms, the greater is the risk of a hard landing as bad assets, bad investments, and bad debts are mounting. Given that the dominant western powers, USA and Europe, and other large emergent economies of the world, India, Brazil and Russia, are grappling with revival initiatives in their own respective economies, the competition for global economic opportunities is only going to heat up in the coming days.
This means that we are likely to see a more assertive China in trying to safeguard its economic gains made over the last three decades. And this also means it would be looking to step out of the comfort zone of BRICS and strengthen its relationship with some of its old and dependable allies; Pakistan certainly being at the top of the list. Prime Minister Nawaz Sharif during his recent trip to China signed 19 agreements that add up to about US$ 42 billion investment in the next 3 to 5 years, about US$ 34 billion of it in the energy sector.
In engaging a changed China, it would be dangerous for the West to assume a posture of mechanical appeasement; deferring to too many of China’s economic and diplomatic demands. The Chinese leadership, if it were to meet with such a permissive policy, might be inclined to stretch toward evermore territorial ambitions. So, the US and its new ally in Asia, mainly India, need to find a right balance between cooperation and competition with China and avoid both containment and entrapment. Finally, as the dominant economic power in the region and the largest funding source of projects like the Maritime Silk Road (MSR), Pak-China Economic Corridor, and most future South Asian region’s developments, Beijing also faces difficult questions ahead – will China be able to keep domestic nationalism and its newfound confidence in check to resist dictating terms to regional countries and ignore existing international norms? Will China continue to value ASEAN as the driver of regional efforts? Can Beijing muster enough political will to address the MSR’s strategic implications on regional security and the South China Sea dispute? And more importantly, in our context does China have the will to not only fit Pakistan in its larger Asian plans, but also the confidence in itself to be able to take us along without jeopardizing its other perceived economic interests in the South Asian region?
In the emerging domestic debate, Chinese scholars point out that with or without the MSR and with or without assuming a policeman’s role in South Asia, China will continue to strengthen its economic dominance and political influence both in Southeast Asia and South Asia. Therefore, ASEAN or SAARC or any country in its independent capacity should ask itself what role it can play in partnering China, rather than waiting passively for information and clarity from China. It should take initiative to help shape China’s external policy and remind China of its existing multilateral and bilateral efforts in enhancing regional connectivity – Given its history with China, Pakistan as we know should have a strong case here! Yet, while China can justify its move to revive its ancient role in Southeast Asia and South Asia, there are many questions about its implementation that are waiting to be answered. The most pressing one and the most fundamental is whether China’s ambition to regain global prominence is outstripping its capacity to execute the big ideas at home.