Why the 21st Century Will Not Belong to China

July 14, 2011 by  


Editor’s Note: The following is an edited transcript of Fareed Zakaria’s opening and closing statements at the Munk Debate where he joined Henry Kissinger in arguing against the proposition: “The 21st Century will belong to China.”

By Fareed Zakaria, CNN

China is not going to be the dominant power of the 21st century for three reasons: economic, political and geo-political.

Economic

One thing we’ve realized over recent years is that nothing goes up in a straight line forever. China looks like it is about to inherit the world, but Japan looked like that for a while. Japan was the second largest economy in the world. We were told that one day the world would be run by Japan. It didn’t turn out that way.

Most Asian Tigers have grown at about 9% a year for 20-25 years and then shifted downward to 6% or 5% growth. I’m not predicting any kind of Chinese crash. I am simply saying that China will follow that law of large numbers and regress at some point to a slower growth rate – perhaps a little bit later than the others because it is a much larger country.

But it is also worth pointing out that there are massive inefficiencies built into the Chinese economic system. They have a huge property bubble. Their growth is highly inefficient. In terms of foreign direct investment, China attracts every month what India takes in every year.

Still China only grows two percentage points faster than India.

In other words, if you think about the quality of Chinese growth, it’s not as impressive as it appears. They are undertaking massive investments – huge numbers of airports, eight-lane highways and high-speed rail. But if you look at what you are getting in terms of the return on investment it is not as impressive.

China has another huge problem. The UN just came out with a report that pointed out that China is going to have a demographic collapse over the next 25 years. It is going to lose 400 million people.

There is no point in human history in which you have had a dominant power in the world that is also declining demographically. It simply doesn’t happen. And if you want to look at what a country in demographic decline looks like, look at Japan.

Political

Let’s say that China does become the largest economy in the world: Does it have the political capacity to exercise the kind of leadership you need?

Remember, Japan was the second largest economy in the world for decades and I didn’t see any kind of grand, hegemonic design. You need to have the political capacity to be able to exercise that kind of leadership.

China is a country ruled by a political system that is in crisis.

It is unclear whether the next succession that China goes through will look anything like this current one. China has not solved the basic problem of what it is going to do when it creates a middle class and how it will respond to the aspirations of those people.

When Taiwan went through a similar process, what you saw was a transition to democracy; when South Korea went through it, you saw a transition to democracy. These were not easy periods. They were fairly bloody and chaotic.

Geopolitics

People like to talk about the rise of Asia. But there is no such thing as Asia. There’s China; there’s Japan; there’s India. And they don’t much like each other.

You are going to find that as China rises there is going to be a spirited response in India, Japan, Indonesia, Vietnam, South Korea and others. You already have begun to see the stirrings of this. China is not rising in a vacuum. It is rising on a continent in which there are many, many competitors.

Bet on Freedom

We are going through a crisis of confidence in the Western world. This has been true often when we have faced these kinds of new and different challenges and when we have faced nations that seem on the rise and on the march.

George Kennan, the great American statesman, used to write routinely about how he thought the United States would never be able to withstand the Soviet challenge because we were weak and fickle and we changed our minds and they were far-sighted and strategic. We were tactical and stupid. But somehow it worked out all right.

I think there is a tendency to think the same of China – that they have this incredible long-term vision and we are bumbling idiots. There is a wonderful story that encapsulates this:

When asked, “What do you think of the French Revolution?” Chinese Premier Zhou Enlai is supposed to have answered, “It’s too soon to tell.”

Everyone thought, “Oh, my goodness, he’s such a genius; he thinks so long-term – in centuries.”

Well it turns out that in 1973, Zhou Enlai meant the French revolution of 1968 – a student revolution. It was perfectly rational at that point to say: “It’s too soon to tell.”

So don’t believe that the Chinese are these strategic masterminds and we are bumbling. We have managed to bumble our way to a rather advanced position despite the challenges from the Kaiser’s Germany, from the Soviet Union and from Nazi Germany.

In fact, I think what you will find is that the United States and North America are creating an extraordinary model in this new world.

We are becoming the first universal nation, a country that draws people  from all parts of the world – people of all colors, creeds and religions and finds a way to harness their talent and build a kind of universal dream. It happens over here and it draws together people from all over the world.

Don’t lose faith in free and open societies.

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