What do the fluctuations in China's capital market mean for the global economy? As can be seen in the recent stock market slide, capital markets outside of China were impacted, but quickly rebounded. Make no mistake, whatever happens in China certainly ripples across the globe, but until such time as Chinese president Xi Jinping can stabilize the economy and liberalize domestic policy, China in actual terms will not become a true global power.
China is the second largest economy in the world. It is pumping money into countries all over the globe and those investments come with strings attached. As China expands its foothold into Africa, Middle East, Australia and further into Asia, they may find that they will not be able to sustain that type of expansion if the economy at home is not stable.
Xi Jinping is caught between a rock and a hard place. Xi is desperately trying to maintain the integrity and power of the Chinese Communist Party while at the same time pushing forward with economic reforms that have taken on the appearance of a quasi-capitalistic system. Even though China appears to be gaining a huge amount of global influence I hesitate in saying that China will ultimately achieve the rank of a true global power, at least not yet.
Perception has it that China is quickly catching - or already has caught - the United States in terms of economic prowess. Some have calculated that China will surpass the United States in economic terms by 2025. It appears that these calculations have been determined using a vertical approach to seeing how power is accumulated. However, if you look at China’s growth in a horizontal perspective one will soon see that China looks towards achieving ‘comprehensive power.’
Comprehensive power is the type of power that emerges when “genuine global powers possess multidimensional strength.”
In other words, China sees power being achieved when power is comprehensive and integrated. Most studies have viewed China’s growth by taking into consideration only their economic and military expansion and overlooking other dimensions like science, education, governance, diplomacy, technology, values to name a few.
To be a true global power a nation must not only possess dominance in the hard skills of industry and military, but in the soft skills of culture and normative values as well. This can be seen through China’s reaching out across the globe to enter into a trade status with numerous nations that have been ignored or passed up by other powers. Huge amounts of money are being poured into countries like Ecuador. Of course, these investments come with the afore mentioned strings attached.
Yet even with China’s expansion appearing to be broad, I don’t believe it to be deep. The Chinese system as a model is not one that appeals to many in terms of duplication. Coupled with this is the fact that China has numerous weaknesses, one of which is domestic policy.
True, China already has many of the trappings of a global power. By way of example China has the world’s largest population, second-largest economy, second-largest military in size and budget, largest hydroelectric dam, largest exporter, largest foreign exchange reserves, second-largest recipient of foreign direct investment, largest producer of a broad range of goods not to mention the largest concentration of millionaires and billionaires.
David Sambauch argues in his book China Goes Global(2012) that China is an actor on the global stage, but is not a true global power because the ”distinction being that a true global power can influence other nations and events.’” China may be a global “player’ is not a global ‘power” in that it has not exercised enough influence in any one particular region by shaping China’s desired outcome.
The clock is ticking and if the United States sits on the sidelines, China will eventually achieve comprehensive power. Only time will tell.
Seth M. Kaplowitz is a lecturer at San Diego State University's College of Business Administration. Kaplowitz is also a partner at Blumberg Law Group, LLP.