A war in all but name

The historian Max Hastings described World War II as primarily the death grapple between two gargantuan monsters — Adolf Hitler’s Nazi armies against Joseph Stalin’s Soviet forces. The rest, Winston Churchill’s speeches and the American struggle against Japan in the Pacific, was at most a sideshow, which is true as the nationality of those killed reveals.

The great contest of our time is also between just two powers: Donald Trump’s United States of America and Xi Jinping’s People’s Republic of China. The rest of the world is a noisy sideshow. The contest between America and China is not military, at least not yet, but the stakes are similar and in many ways higher.

From the outside, it can be seen as a struggle for global economic dominance between the West and Asia. Ordinarily, we would or should support a fellow Asian power against the West, but desis in my experience are both insecure and petty. Let us leave it at that.

What China needs is time. In 1991, when India entered this new phase called liberalisation, we were level with China in economic terms. The average Indian produced as much as the average Chinese. It is true that China had been reforming for a decade before that, and that is seen as an advantage over us, but it had done so from a position which was far below India’s. In industry and agriculture, it had been shut off from the world for decades, unlike India. Also unlike us, the Chinese leadership had put the ordinary Chinese through gratuitous suffering, out of which the country was just emerging.

Over the next 35 years, China averaged 9 per cent annual GDP growth, a faster economic advancement than any power had ever achieved in the West. In the last 10 years, China has slowed to average 5.8 per cent growth, which was similar to India’s but on a base five times larger.

If China gets another decade to grow without distraction, it will eclipse the United States as the world’s largest economy. It has already done so in what is called Purchasing Power Parity terms, but in a decade, it will likely be larger also in absolute terms.

Being number two in a world it has dominated for 150 years is totally unacceptable to the United States. Western political scientists like John Mearsheimer say China’s rise will inevitably lead to conflict because of what is called the Thucydides Trap, which theorises that when a rising power is about to displace the dominant one, war is the result. In this theory, violence ensues because the existing dominant power, in this case the US, will never accept second position and will subdue its rival whichever way it can.

Some argue that this is a probably a Western way of looking at things and that Asian powers are not interested in meddling in global affairs in the way that Europe and the US have done for the last two centuries. They think China’s rise will not threaten US bases around the world or its stranglehold on institutions like the IMF, World Bank and United Nations Security Council. And therefore, the US should consider these aspects when assessing what China’s becoming number one means. But just like the Thucydides Trap, this is also mere theory and nobody knows how China will act when it eclipses the US.

For the last eight years, the US has tried to stall and block China’s economic progress. It has denied China’s companies access to advanced semi-conductors. It has imposed duties on Chinese exports using the drug fentanyl as an excuse, just as much as it has used ‘dumping’. It has accused China of building over-capacity in industry, though this is normally what is called export-oriented growth. And under Trump’s second presidency, it has tried to decouple from China entirely by imposing tariffs so high that trade would become impossible.

Unfortunately for the US, that has failed. The stock and bond markets told Trump firmly that any idea of isolating China would lead to harming the US economy and this has forced Trump to backtrack.

China has now won time. How much time? Enough to see it through, I believe. Already, the focus of the Trump administration has moved away from trade to tax cuts and for the rest of this year, which will take up most of its energy. With mid-term elections to the US Congress coming up in 2026, the appetite for reckless policies of the sort Trump has dished out on trade over the last few months will be lower. That will also buy China time. Given the failure of Trump’s trade gambit, it is possible and perhaps likely that his successor will not go down the same road after 2028.

The Chinese have prepared for the last eight years for a trade war. They have deliberately removed state support from floundering real estate businesses and let them collapse, to get capital to flow to industry. They have tried to build markets for their exports around the world outside the US and they have consolidated their supply chains through deals in Africa and Latin America.

The US is only the third largest trading partner for China now, behind the Association of South East Asian Nations and the European Union. Above all, they have accelerated their lead in a range of future-facing technologies. The leverage that Trump’s US has on Xi’s China has shrunk.

If things continue as they are, for the first time in 200 years, the largest economic power in the world will not be Western but Asian. The implications of this will affect all nations though the government in no country, including the US, has prepared its citizens for the shift.

More of Aakar Patel's writing may be read here