Editorial 2 : China’s dominance rests on fragile foundations
Context:
China’s rise as an economic superpower faces structural vulnerabilities that may weaken its long-term global dominance.
Introduction
China has emerged as the main challenger to US supremacy since 2008, its economic strength is built on weak foundations such as overdependence on exports, political rigidity, and demographic decline. This raises questions about whether the ongoing US–China rivalry represents a sustainable “new cold war.”
Key Issues
- Evolution of US–China Rivalry
- Historically, the US dominated both economically and politically, but China’s rapid growth has challenged this position.
- Unlike the ideological divide of the US–Soviet Cold War, both the US and China today operate globally integrated economies, making rivalry more complex and interdependent.
- China’s Rise After the 2008 Crisis
- The 2008 global recession weakened Western economies and exposed internal contradictions in Europe.
- China used this moment to expand global influence through manufacturing dominance and large-scale investments.
- Structural Fragilities in China’s Economic Model
- Domestic Dependencies
- The US became deeply dependent on Chinese goods, which earlier limited its capacity to impose tariffs.
- China’s control over rare earth minerals gave it critical leverage during trade tensions.
- Internal Economic Strains: Recent indicators show China’s economic foundations facing severe stress:
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- Real estate sector collapse (e.g., Evergrande crisis).
- Declining consumer demand and slowing GDP growth.
- Manufacturing overcapacity, leading to excess exports.
- Debt accumulation among local governments and state-owned enterprises.
- Political and Social Constraints
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- China’s political model restricts market reforms that require transparency and institutional accountability.
- Over-centralization of power under Xi Jinping creates policy risks and slows course correction.
- Demographic Decline
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- China faces rapidly ageing population and shrinking workforce.
- UN projections show China losing nearly 100 million working-age individuals by 2035, affecting productivity and consumption.
- Limits of China’s External Influence
- China’s Belt and Road Initiative (BRI) has faced debt pushback from many developing countries.
- Its dominance in Africa and Asia resembles earlier resource-driven relationships, limiting long-term economic partnership.
- Overdependence on export-driven surplus (e.g., to the US and Europe) exposes China to global demand fluctuations.
- Can China Replace the US as the Global Economic Centre?
- China’s per capita income is still only one-sixth of the US.
- Innovation capacity remains uneven despite advances in AI, EVs, and green tech.
- Future consumption is uncertain due to demographic and income-related challenges.
- Without strengthening domestic markets, China cannot sustainably overtake US-led economic structures.
Conclusion
It concludes that China’s rise, while impressive, is built on fragile socio-economic and political foundations. For the world, this means that a stable bipolar order may not emerge soon. Instead, international systems may continue to be shaped largely by the US, as China grapples with internal vulnerabilities that limit its long-term dominance.