by Major Chad M. Pillai. Major Chad M. Pillai is an Army Strategist in the U.S. Army Capabilities Integration Center (ARCIC). He recently served as a Special Assistant to the Commander, International Security Assistance Force (ISAF) and the 38th Army Chief of Staff. Major Chad Pillai received his Masters in International Public Policy from the Johns Hopkins School of Advanced International Studies (SAIS) in 2009.
The recent Asian-Pacific Economic Cooperation (APEC) meeting cemented China’s place as a Global Power. Recent critical agreements the Chinese made with both the U.S. and Russia demonstrates its geo-strategic position between the two former Cold War adversaries. Additionally, significant announcements by the Chinese government ranging from plans to invest heavily in a “New Silk Road” to seeking to solidify itself as a space power on par with the Russians and the U.S. adds to its growing prestige. China’s achieved its quest to undo the century of humiliation as the world witnessed the return of the Middle Kingdom atop the international system. 2014 will go down in Chinese history as the year this ancient civilization regained its prominence among the nations of the world and put it on a path to become the world’s leading economic and military power; however, internal and external challenges remain that may obstruct that path.
The Prize of Former Cold War Superpowers
The Ukraine Crisis is escalating geo-strategic tensions between the U.S., NATO and Russia. In response, the U.S. and its Western Allies have imposed strict economic sanctions against Russia, especially its financial sector. This has created two consequences: severely impacting the Russian economy and the value of its currency, and pushed Russia towards China as a means to offset its economic relationship with the West. While China has not publically stated its support or condemnation of Russia’s actions, it recent $400 Billion Natural Gas Deal provides Russia an outlet to offset its economic downturn as a result of Western sanctions. This deal is significant because it provides further evidence that Russia is leveraging the Chinese to break the US Dollar’s strangled hold on the international energy sector, and thereby, weakening the impact of U.S. led sanctions.
While Russia is competing with the U.S. for influence with China, China remains wary of Russia and therefore has also made significant deals with the U.S. During APEC, the Chinese made key agreements with the U.S. on climate change, tariffs; and rules and procedures governing air and maritime encounters between U.S. and Chinese Forces. Of these agreements, the governing air and maritime disputes elevates China in the minds of U.S. policymakers to the same degree the Soviets enjoyed during the Cold War. For China, this recognizes its growing military capability in the Asia-Pacific region and it that the U.S. and its Asian Allies such as Japan, South Korea, and Australia must take seriously. Finally, APEC allowed China to set the scene for its strategic initiatives to counter the U.S.’s Asia-Pacific Rebalance, which the Chinese view with suspicion, by promoting economic and diplomatic efforts of its own in the region.
The Asia-Pacific Dream
China’s answer to the U.S. Asia-Pacific Rebalance is the announcement of its Asia-Pacific Dream that would better connect Asia to markets in Europe by investing heavily in land and maritime infrastructure throughout the region. While China has benefited from the U.S. led international economic system, China seeks to transition to a model more akin to its historical roots where China, and to some degree India, was the epicenter of the global economy. As the U.S. remains pre-occupied with the instability in the Middle East, China, through its Renminbi Diplomacy, is rapidly shifting the loyalties of many Eurasian nations who would be beneficiaries of China’s investment strategy, and eventually squeeze the U.S. out. While the U.S. can provide military protection in the near-term, its own fiscal challenges will allow China to outcompete the U.S. for influence in the long-term. Despite its growing clout in the international arena, China has significant challenges it must overcome internally and external challenges from other regional powers to include the “swing vote” in the region, India.
Getting Old before Getting Richer
In October 2014, according to the IMF, China overtook the U.S. as the world’s largest economy in the purchasing power parity index. However, the U.S. remains the world’s absolute largest economy by GDP and therefore establishes a tie between the two nations as the world’s largest economies.
Despite this impressive achievement, there are warning signs that China’s economy is entering a period of less rapid growth. Recent data from China forecast slower growth in its industrial sector, a key component in the government’s efforts to raise the standard of living for its people. Without sustained growth, China faces potential political unrest as its unemployment rises and causing a down-turn on the standard of living for its people. This will place greater stress on its social-welfare system as the implications of its “One-Child Policy” create an unstainable model where fewer workers support a larger aging population. This along with further environmental degradation from industrial pollution means China will get Older and Sicker before its gets Richer. This will either lead to positive internal reform or a more dangerous and nationalist China attempting to avert collapse.
India as Swing Vote
Historically, India and China are two vast ancient civilizations that served as the political, economic, and cultural foundations of the Asia-Pacific region. These two nations, through cross-cultural trade and interaction, shaped the regions from Central Asia to South East Asia. This ranged from religious influence, Buddhism, to cuisine such as Thai food, a blend of Chinese and Indian flavors mixed with indigenous ingredients. Despite these interactions and influences, China’s and India’s direct entanglements with each other have been limited as a result of the geographical separation from the Himalayan Mountains. And for most of that early history, China, a unified nation, engaged with a fragmented India. Today, China confronts a unified India whose population will exceed China’s population by 2028.
While India, the world’s largest democracy, lacks China’s central planning discipline, it possesses a talented population competing in information technology, engineering, and industry. And while its middle class is smaller than China’s, it has one major competitive advantage – a greater mastery of the English Language. With the election of Prime Minister Narendra Modi, India is doing away with its traditional Non-Alignment Strategy and engaging more with its neighbors and becoming the world’s largest importer of weaponry. This has implications for China as India continues to modernize its armed forces, including its nuclear arsenal, as they attempt to peacefully resolve their border disputes.
The role of India in the international arena will also change the balance of power as both Russia and the U.S. increasingly seek India as a counter-balance to China’s rise. India’s and Russia’s relationship date to the Cold War and continue today as Russia serves as one of India’s major weapons supplier to include co-development of the Sukhoi PAK-FA stealth fighter. This may provide India the means to compete militarily with China’s emerging 5th generation stealth fighters. At the same time, the U.S. has increased its military-military engagement with India and seeks to become a major supplier of weapons to the Indian Armed Forces. Not only is the U.S. traditional sale of military hardware with India, but also seeks opportunities for joint ventures in the future. Of course, China is also increasing its dialogue with India as a means to incorporate it into its future plans for the region and mitigate creating a future regional peer adversary.
A Multipolar World
The APEC meeting introduced the world to the return of Great Power Politics, where the unipolar world of the post-Cold War has come to an end. The economic shift between the U.S. and China along with the competition between Russia and the U.S. for China’s influence has returned China to its historic position as the Middle Kingdom. Its strategy to invest heavily in the Asia-Pacific region will further cement its central position both regionally and internationally. However, challenges remain both internally and externally. Without necessary reforms, China risks becoming older and sicker before its gets richer, this may create a more dangerous China. However, a Rising India, along with Russian and U.S. engagement with India may temper China’s ambitions and create a future “Gang of Four” – Multipolar World – a balance of power envisioned by President Richard Nixon to maintain global peace.