Are Romney and Obama Ready for China's Collapse?
China is a nuclear power with the world's largest army and a population of over 1.3 billion people. It boasts the world's second-largest economy, and is the largest single foreign owner of U.S. public debt. Its Communist Party regime, in place since 1949, now serves as a model for authoritarian states around the globe. And it may well be heading toward a major economic and political crisis. Yet for some reason, the U.S. presidential candidates have barely mentioned China in nearly a year of campaigning. When they do, the discussion tends to focus on pressing matters such as the price of imported tires.
Like generals preparing for the last war instead of the next one, President Barack Obama and Mitt Romney, his Republican challenger, have built their China-related campaign rhetoric around the notion that the Chinese are out to steal American jobs by manipulating exchange rates and heavily subsidizing their booming export industries. But this story of rapid, state-led economic growth is increasingly a thing of the past. As China's economy slows, the real concern for the next U.S. administration should be the potential fallout from a hard landing, including social unrest and political ferment.
Expert discussion of a possible Chinese collapse has been gathering steam in recent months, but one could have seen it coming a long way off. China's main export markets in Europe and the United States have been struggling since late 2008, but its own growth statistics, whose accuracy was questionable even in good times, remained strangely robust. Debt-fueled public works projects that make little economic sense have continued. The political priorities of the country's rigid authoritarian system have created massive economic distortions, delayed the exposure of weaknesses, and-ironically for a one-party dictatorship-prevented swift and decisive remedies by the government. The farther the Chinese economy wanders from reality, the greater the shock of the coming correction.
And in China, economic crisis means political crisis. Citizens in all countries are inclined to throw out their leaders when the economy goes bad, but democracies allow this to happen in an orderly fashion, and the new leaders arrive with a popular mandate. In an authoritarian state, change requires a complete overhaul of the constitutional system, and China's Communist rulers have consistently and violently repressed any talk of such fundamental reform. A sharp downturn would therefore mean a dangerous collision between the people and the party.
The regime is especially vulnerable because-in the absence of free elections, social justice, or anything resembling the rule of law-delivery of economic prosperity is one of the party's two claims to popular legitimacy. The other, worryingly, is its self-declared role as the nation's defender against supposed foreign bullying. If one pillar cracks or falls, the leadership can be expected to lean more heavily on the other. This is already happening to some degree with respect to China's maritime territorial disputes and anti-Japanese vitriol. Like all authoritarian regimes, the country presents a thorny composite of fragility and aggression, greatly complicating the work of U.S. policymakers.
As others have pointed out, however, Washington has a record of assuming that autocratic regimes will continue on indefinitely. This makes diplomats' jobs easier, downplaying the need to engage with civil society, build relationships outside the ruling elite, and plan for complicated political transitions. It also leaves them woefully unprepared when a regime's time runs out, as seen most recently in places like Egypt.
The Middle East example serves as a reminder that while transitions to democracy ultimately bring long-term stability, they do not happen overnight and require a sustained commitment by domestic actors and the international community, as backsliding along the way can lead to renewed cycles of repression and revolt. The process is difficult even in the smallest country, so it is hard to imagine a greater undertaking than building democracy in China.
The enormity of the problem-the potential economic and geopolitical repercussions of a Chinese crisis-may be part of the reason why U.S. political leaders seem loathe to discuss it. Fortunately, democracy has ways of forcing us to face uncomfortable questions. The United States has outlived so many dictatorships in part because its policymaking is constantly honed by open discussion and public scrutiny. And while the effect of bearish talk on the economy is a concern, it is important to note that markets cope better with negative predictions than negative surprises.
In that spirit, the U.S. presidential candidates should answer, or at least show signs of contemplating, questions like the following:
* What is your assessment of China's current economic outlook?
* If an economic crisis were to occur, would it be likely to prompt serious social or political upheaval?
* What are some of the scenarios that could unfold?
* How should the United States react to protect its own interests, those of the Chinese people, and global stability in the short term? In the long term?
* What should the United States do now to prepare for or influence these possibilities?
No one expects Romney or Obama to predict the future or tie themselves to elaborate hypotheticals. But the American people need to know that they are aware of and thinking seriously about one of the major foreign policy challenges of the next four years: a rapidly changing China.