Brittle China? Economic and Political Fragility with Global Implications
| Author | Alanna Krolikowski |
| Published date | 01 June 2017 |
| DOI | http://doi.org/10.1111/1758-5899.12434 |
| Date | 01 June 2017 |
Brittle China? Economic and Political Fragility
with Global Implications
Alanna Krolikowski
University of Alberta
Abstract
Once regarded as an unstoppable giant and stalwart of the global economy, China today shows signs of economic and politi-
cal fragility. The interrelated risks of an abrupt economic slowdown, a collapse of the financial system, and political instability
in China are now apparent, warn international observers. In spite of these risks, or perhaps because of them, Chinese foreign
policy is at its most assertive and activist in decades. A China that is bold, but brittle, presents significant new foreign policy
challenges for European countries. To navigate these successfully, European states must develop a coherent and proactive
strategy in recognition of both circumstances. This article discusses the state of recent international scholarship and contro-
versy on China’s domestic political economy and global engagement. The discussion relates a wave of recent attention to Chi-
na’s mounting domestic economic and political vulnerabilities and points to implications of these developments for China’s
ambitions to play a leading role in the international system beyond its immediate region.
Policy Implications
•European policy makers now face a China that is internally vulnerable, but externally assertive. China may become a more
difficult interlocutor to European countries, even as its importance on the world stage grows.
•Europe cannot rely on China to lift it out of its economic doldrums. A deeper and steeper decline in China’s growth is
possible and would hurt European economies. In the longer term, however, a rebalanced and reformed Chinese economy
would create both new losers and new winners in Europe.
•Recent scholarship suggests that European policy makers should pay attention to a broad range of indicators signalling
changes to vulnerabilities in China’s growth model, financial system, and high-level political institutions. These include:
large or numerous bankruptcies or restructurings of major state-owned enterprises (SOEs); the growth of debt; robust state
action to regulate or formalise shadow banking; changes to the structure of non-performing loans; data on diverse con-
sumption phenomena ranging from power utilisation within China to prices in overseas destinations for fleeing Chinese
capital; the evolution of the anti-corruption campaign; and the composition of the next Standing Committee.
For the past several decades, international observers have
characterised the Chinese economic system as robust, if not
miraculous, and its political system as stable and capably
staffed, though imperfect. In the immediate aftermath of
the global financial crisis, for example, Chinese leaders were
hailed for timely and large-scale interventions that spared
their domestic economy the full brunt of the collapse in glo-
bal demand and backstopped the global economy’s slide.
Since 2013, however, international assessments of China’s
political economy have grown markedly more pessimistic.
This article discusses the recent wave of attention to vulner-
abilities within the Chinese system and their implications for
European policy makers.
In what is emerging as an influential view, China has
entered a stage of compromised economic growth and
tightening political constraints that present its leaders with
new challenges. The probability of a severe economic crisis
or a political collapse in China remains remote, but the
channels by which such developments could occur have
changed. If leaders allow the economy to remain on its
current trajectory, then systemic vulnerabilities that have
already set in may grow, reach a tipping point, and bring
the economy to the brink of a severe, abrupt correction. At
the same time, political vulnerabilities appear to sap the
regime of the resolve it needs to implement the reforms
that would avert this outcome.
These looming problems present a new kind of challenge
for the regime, warn experts. For most of the reform period
since 1978, leaders have implemented changes that acceler-
ated growth and created far more winners than losers
(Naughton, 2006). Today, to steer the economy onto a sus-
tainable course, leaders must implement reforms that will
slow growth in the short run and force losses upon recalci-
trant vested interests. And they must impose these difficult
adjustments simultaneously if any of them is to succeed.
The task is made more challenging by new strains upon
the governance institutions that have maintained political
stability since Mao Zedong. The structures that have so far
contained factional competition at the top and managed
mass grievance at the bottom have either been dismantled
©2017 University of Durham and John Wiley & Sons, Ltd. Global Policy (2017) 8:Suppl.4 doi: 10.1111/1758-5899.12434
Global Policy Volume 8 . Supplement 4 . June 2017
42
Research Article
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