Investors are faced with disparate conclusions about whether China is a truly global power.
According to David Shambaugh’s comprehensive look at Chinese power and its current role in the international system,* China remains a partial power that will continue to struggle advancing its foreign policy preferences within the existing global order.** Shambaugh uses the term partial power to explain that while China’s importance in areas such as global commerce and energy markets is very large, it remains a limited power in terms of its diplomatic reach, cultural influence, role in global governance, and security presence on the global stage. We agree with this nuanced take on the rise of China.
Shambaugh’s most important finding is that Chinese policymakers are being forced to advance the country’s domestic and foreign policy priorities within a global system that is based on liberal rules and norms designed by America in the post-Cold War era. This is a problem because Chinese cultural and political beliefs are opposed to many of the current rules and norms of the game. China is also suspicious of today’s architecture because it was designed by Western powers when China was weak and incapable of influencing outcomes. The stage is therefore set for a revanchist power to take on the declining hegemon.
As a result, China will continue to engage with other states and international organizations only if the result of their engagement directly impacts their strategic interests. As China grows more powerful, it could become more resistant to the institutions and practices that have underpinned the global economy for the past few decades – such as the World Trade Organization or the IMF. In fact, Beijing is likely to attempt to erode those institutions actively whenever the opportunity is at hand. This will create more uncertainty for global investors, as well as opportunities to profit from changes in geopolitical landscape.
Some analyses contend that Chinese power is understated and that the international system will be increasingly shaped by Beijing in the near future. Others argue the opposite, that China is years away from seriously influencing global affairs. Which view is correct? Does it matter?
The second source of uncertainty investors will need to grapple with comes from within China itself. Shambaugh does a good job describing the inconsistencies and opaqueness of the Chinese foreign policymaking process. For instance, after explaining the various actors and bureaucracies that influence Chinese foreign policy, Shambaugh contends that China’s national security decision-making process is “unclear, uninstitutionalized, and unregulated.” This is concerning.
The growing presence of the U.S. military in the region, along with the multitude of calls coming from China’s neighbors for a more assertive American footprint in Asia, will increase the importance of understanding if, how, and when China will react. Unfortunately an opaque policymaking process makes that exercise very difficult. The result is, as we have been arguing at the Geopolitical Strategy for some time, a growing probability that investors are caught off-guard by Chinese response to American strategy of containment.
* Shambaugh, David (2013). China Goes Global: A Partial Power. New York: Oxford University Press.
** David Shambaugh is an international authority on Chinese domestic politics, foreign policy, and international relations in Asia. He is currently the Director of the China Policy Program at George Washington University.