Is America losing to China in a new Great Game?
Just this month, The New York Times published two major stories sounding the alarm, one about China's burgeoning investments in Africa, the other about China's massive investments in infrastructure in Southeast and Central Asia. As the Trump administration slips further into solipsistic delusion, starving its own diplomatic corps and boasting about trade deals in which America got badly outmaneuvered, China's potential moves on the global chessboard only multiply. Alarm would seem to be justified.
But what game is China actually playing? Is China constructing a 21st-century version of a colonial empire? If so, is that something America ought to be concerned about? And what should — what can — we do about it?
On one level, the answer to the key question is obviously yes. China's economic model is state-led, and its large infrastructure projects overseas, whether nominally private (as with the stalled plan to build a canal across Nicaragua) or not, are understood by all parties to be undertaken in coordination with the regime, and with a view to serving the regime's interests. China's interests, likewise, are close kin to those of 19th-century colonialists: control of access to key natural resources and the opening of markets for Chinese manufactures.
Moreover, much of the commentary on China's spending binge recalls the economics of colonialism.
China has substantial surplus capacity in construction, for example. Continuing to build internally will yield less and less financial return, but reducing capacity will increase unemployment and create social tension. So instead, China is exporting that capacity, building roads and dams and railroads and power plants across Asia and Africa. This provides a market for materials manufactured in China and work for the companies that are executing the projects. And whether the projects are owned by Chinese companies or just financed by Chinese banks, assets are being constructed around the world that will pay dividends to China for decades to come.
It's precisely this dynamic of surplus productive capacity (and surplus capital) that, in Lenin's understanding, drove the great European powers to colonize much of the world, and ultimately brought them into conflict with each other over access to monopoly profits from weaker states.
Of course, from the perspective of someone with a sanguine view of capitalism and globalization, the very same dynamic can be described as win-win for China and the world's less-developed regions. If China is able to aid African development, after all, Africa could benefit enormously. And Africa's economic potential is humongous, if for nothing else because of its demographic momentum. Africa already has a population roughly equal to China's, and is projected to be three times as populous as China by the end of the century. Where else but China is Africa to get the capital and expertise necessary to realize that potential? Where else but Africa is China to find a market capable of sustaining its own aging population?
If China's massive bet pays off, this optimistic view will be vindicated. America and Europe may be relegated to secondary players in a Sino-African century, but that century will be one of exceptional progress for the bulk of mankind, and only the peevish would want to impede such a massive potential win for the human species.
But what if the bet doesn't pay off?
The analogy to European colonialism breaks down as soon as one considers this key question. As the Chinese themselves know all too well, 19th-century colonialism was fundamentally and inescapably coercive, as was 18th-century colonialism before it. Either flag or trade may have led and the other followed, but without gunboats neither would have advanced remotely so far upriver as they did. And while China is investing heavily in its military capacity, that investment is still aimed at countering the overwhelming military capacity of the United States and its regional allies. China's own ability to project power is fledgeling at best.
So suppose some of China's massive investments turn out to be unproductive, and Kenya, say, proves unable to service its debt. Will China be in a position to force them to pay? Or suppose certain investments turn out to be extremely productive, and Nigeria, say, decides that the terms agreed decades earlier are no longer reasonable. How much leverage will China have to enforce its existing contracts?
Financial and economic power is not nugatory; you could ask Greece for an earful on that subject some time. But property rights themselves are ultimately the creation of states with a monopoly of violence. If China finally builds that Nicaraguan canal, and Nicaragua decides to nationalize it as Nasser did the Suez canal, China's ability to force them to back down will ultimately depend on its ability to force them to back down.
And to do so with America's permission.
The liberal regime of international trade and finance that has girded the world in the past century is underwritten by the American military, as it was underwritten by the British Navy in the 19th century. It is unlikely that America would deploy that might to protect the interests of a country engaged in explicit and zero-sum competition with ourselves for the highest possible stakes.
But what if China doesn't care, ultimately, about financial return? What if it is using its massive construction projects to buy friends around the world, and by that means challenge the American-led world order? President Obama's Trans-Pacific Partnership was a key ploy in a game conceived precisely that way, intended as a vehicle to preserve American influence and counter Chinese influence in the Pacific Rim.
This is precisely how both the United States and the Soviet Union thought about the developing world during the Cold War, with negative consequences for both countries. American foreign aid during the 1960s did little to buy long-term good will from anyone but the leadership of the recipient countries — and if and when that leadership was deposed, we were back where we started, if not worse. And Soviet support for its own clients only hastened the date of its own bankruptcy. Chinese investment in Africa and Asia shows few if any signs of following that path — but if it did, that would hardly be a reason to compete. The only way to win that game is not to play.
Ultimately, whether China's bets pay off spectacularly or only partially — or whether they are largely written off — the most important fact remains the quality and scale of the bets themselves, and the fact that China can readily afford them. That's the important contest we've been losing.
If we invest in our own human and physical capital, we'll be in a position to deploy that capital in ways that are mutually beneficial to ourselves and our trade and investment partners. If we neglect strength at home in favor of shows of dominance abroad, we'll be playing right into China's hands.