Rumors of China's decline are premature and dangerous

Speaking in Davos, Switzerland, last week, Chinese Premier Li Qiang pitched his country as a solid investment destination. The Chinese economy, Li said, has “huge potential,” and choosing it “is not a risk, but an opportunity.”

His audience listened skeptically. After decades of unstoppable Chinese economic, demographic and military growth, the past two years have seen more trouble than triumphs. That has led some analysts to worry not about the rise of Chinese power but instead the irrevocable decline of China’s economy.

These fears are utterly premature. Worse, if they represent the assumptions on which U.S. policy is based, America will fail to rise to China’s challenge. The chief near-term risk is not that Beijing’s ascent will fizzle, but rather that Washington will fail to muster the strength necessary for an adequate response.

True, the logic of China’s decline seems straightforward. Long gone are the double-digit growth rates its economy enjoyed for decades; growth has fallen to just over 5% by official figures (others believe the rate might be as low as 1.5%). Official youth unemployment is at 15%, debt problems plague the economy and the real estate sector has cratered. The country’s population declined in 2022 for the first time in 60 years and fell last year by more than 2 million. Efforts to boost population growth have proved ineffective and a fifth of the Chinese population is more than 60 years old. Writing in the Financial Times, investor Ruchir Sharma captured the sentiment. “It’s a post-China world now.”

Sharma’s not alone. President Biden called China a “ticking time bomb,” and suggested that Beijing “probably doesn’t have the same capacity that it had before.” The New Yorker’s Evan Osnos, an astute observer of Chinese affairs, writes that “the feeling of ineluctable ascent has waned. To spend time in China at the end of Xi’s first decade is to witness a nation slipping from motion to stagnation.” Some foreign policy analysts predict that the world will soon witness “peak China.” Others say that we already have.

Despite these challenges, Beijing retains enormous advantages. Its economy remains very large — larger by some measures than our own — and while growth has moderated, Chinese gross domestic product growth was higher last year than in the United States. China remains the top trading partner of more than 120 countries and continues to innovate in such key technologies as artificial intelligence and quantum computing while working around U.S.-led controls on items such as advanced semiconductors.

China continues to translate these advantages into strategic power. While smaller than the Pentagon’s, its defense budget is growing, and the Pentagon projects it could keep growing for at least five or 10 years. Beijing now possesses Asia’s largest air force and the world’s largest navy — more than 370 ships and submarines. (The U.S. Navy remains larger in tonnage but, unlike the Chinese fleet, has struggled to grow in number.) China is rapidly expanding its arsenal of nuclear weapons and delivery systems, including new intercontinental ballistic missiles. Beijing pursues military installations and bases in numerous countries across multiple regions.

Its ambitions under President Xi Jinping, moreover, remain grandiose. Last year, Beijing convened and expanded the BRICS group of developing countries, offering leadership to key non-Western countries. Chinese vessels act aggressively in the South China Sea, ramming Philippine ships in contested waters. The Pentagon reports dozens of unsafe intercepts of U.S. aircraft, and Chinese warplanes now routinely cross the median line of the Taiwan Strait. This past week, Beijing stripped away the tiny Micronesian nation of Nauru, one of the few remaining countries to recognize Taipei, two days after Taiwan’s presidential election. Chinese leaders tout their leadership in contrast to a fractious West clinging to its historical prerogatives, especially in the Global South.

China’s economic doldrums could persist and someday cut into defense spending, constrain its international activism and perhaps render it a less formidable challenger. But there is little sign of that now and it would be folly to rely on such an outcome.

China continues to rise and seems bent on regional domination and international revisionism. In the grand U.S.-China contest that increasingly drives international politics, however, Beijing’s absolute strength is only half of the equation. Relative power ultimately matters most in contests of this sort, and so America’s own strength will be all-important. Here we have work to do.

American power — the size and vibrancy of our economy, our military capability and capacity, the strength of our alliances and coalitions, and our ability to muster the political unity necessary to solve problems — is fully capable of dealing with even a rising China. Yet these advantages do not combine on their own. We should use the Chinese challenge to stir ourselves to success.