How the US can secure its global leadership role despite falling behind China

The only way forward is for the United States to continue to invest in the military as it does today, explicitly guarantee China’s security, re-engage commercially with Beijing and enforce a level playing field for all countries

Aravinda Korala

Published: 1:30am, 2 Jan 2021

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When the history of China vs the West is written, 2020 will be seen as a pivotal moment. It is the year of the Huawei affair, the year when US President Donald Trump’s tariffs bounced off the Chinese economic juggernaut, the year in which the Covid-19 crisis demonstrated that the West does not have all the answers, and the year in which chip blackmail became a fact.

It is a year China will not forget. For all the talk of global rules and level playing fields, it became clear the United States does as it pleases while Europe sits on the sidelines. For me, as a Euro-Asian sitting in the audience watching the great power game, the West made all the wrong moves.

To explain why I say that, we need to take a step back and understand the backdrop to the great power game that is unfolding. When it comes to geopolitics, GDP is everything. At a very basic level, it defines what resources a nation has at its disposal that it can devote to defence spending or avoid being blockaded by commercial or military means.

The International Monetary Fund puts China’s purchasing power parity GDP at US$24.2 trillion and the US’ at US$20.8 trillion in 2020. That in itself should have been a warning sign. It is like a heavyweight boxer weighing in at 95kg taking on a boxer of 110kg. Of course, weight is not everything, even in boxing, but it should inform one’s tactics.

This power game is not just a single round in 2020. It will continue round after round, for the next 50 years and beyond. Let’s see how the two protagonists will weigh in during the decades to come. PwC has forecast China’s GDP in 2050 will be US$59 trillion and the US’ US$34 trillion.

That’s a 73 per cent advantage to China. Be very clear that, one day, per capita GDP of the West and Asia will be similar. That day may be a long way away, but it will come.

Population will then translate to a GDP advantage. Pew Research forecasts that the Chinese population will decline dramatically by the year 2100 but will nevertheless be 2.5 times larger than that of the US, while Asia will be six times larger than the combined weight of the US and European Union.

The point I want to make is that our mythical Western boxer will not be just taking on a heavier boxer each year. It will be a gorilla. Tariffs and commercial blackmail will not work against an Asia that is six times larger than the West. It would be just as effective as Britain attempting to blackmail the US today with an economy more than six times smaller.

The West needs a different tactic to stay relevant in the decades to come. Holding back China and Asia is not an option. As Kishore Mahbubani writes, now is the “dawn of the Asian century”.

Apparently, some US defence experts have yet to understand this. I was aghast to read Michele Flournoy’s article on how to avoid war in Asia: “If the US military had the capability to credibly threaten to sink all of China’s military vessels, submarines and merchant ships in the South China Sea within 72 hours, Chinese leaders might think twice before, say, launching a blockade or invasion of Taiwan.”

04:12

Are Xi Jinping’s China and Donald Trump’s US destined for armed conflict?

Really? Ask how the US would react if that was China’s strategy. Would the US military say “oh, let’s just lay down our weapons as China might destroy us in 72 hours”? It was a great relief that President-elect Joe Biden overlooked Flournoy for defence secretary.

The idea of developing overwhelming power over a rising adversary is a hugely dangerous concept. The British tried that with their 1889 Naval Defence Act to keep a rising Germany under check. Britain decided it had to have a navy bigger than the next two powers put together.

We know how that idea ended up, with two world wars and 100 million people dead. France and Germany learned from that experience and the European Union was born.

It turned out that the way to keep Europe from fighting again was to open up markets and commercially connect all countries tightly together so that borders become invisible and the downside to war becomes unthinkable.

The US is following the failed British example and is spending more than the next 10 countries combined. Think for a moment what would happen if China also adopted that strategy.

Be under no illusion that when the Chinese economy is 2.5 times larger than that of the US, they could actually win that, even if it means a significant proportion of GDP would get spent by both sides in the ensuing arms race.

02:31

The growth of Chinese military power over the past four decades

China is currently signalling the opposite defence strategy. Not only does it spend far less than the US, China reaffirmed on December 27 that it would continue to take a defensive posture. Here is a crazy idea – why don’t we take China at its word that all it wants to do is to grow its economy and defend its borders?

If the US wishes to play the policeman to the world and ensure a level playing field for commercial activity, China might well be quite content with that, even when its economy is three times bigger.

Consider the example of Germany. Germany is quite content with its role in the EU, even though France and Britain have nuclear weapons and could easily threaten its security.

Here is the lesson to draw from that, and how the US can secure its global leadership role even when it has a smaller economy than China’s. It should continue to invest in the military as it does today, explicitly guarantee China’s security, re-engage commercially with China and enforce a global level playing field for all countries.

The ball is in your court, Mr Biden. There is no other way.

Aravinda Korala is the CEO of KAL ATM Software headquartered in Munich, Germany. He has a degree in electronics from King’s College London and a PhD in artificial intelligence from Edinburgh University