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An Isolated China in a Globalized World

Published
Aug 25, 2020 05:19PM UTC
Author
Alex Barker

This post is part of our Scenario series, where we break down a big-picture scenario into a collection of predictors and metrics we are monitoring on Foretell.


Since 2012, Chinese president Xi Jinping has developed military bases in the South China Sea, interfered in the domestic politics of Taiwan, Australia and New Zealand, and escalated cyber operations against the United States. Unlike Deng Xiaoping, who once cautioned that China should “bide its time,” these actions suggest Xi believes China is ready to challenge the liberal Western order, as Daniel Tobin argues. Yet many analysts, such as Richard MacGregor or Kurt Campbell and Mia Rapp-Hooper, believe Xi’s strategy is backfiring. As a result, China could become economically and diplomatically isolated.

What an isolated China in 2025 might look like: Despite continued globalization, U.S. and non-U.S. firms reduced their exposure to China by shifting their value chains to other countries and entering new markets. Lagging inbound investment and reduced exchange with foreign talent caused China’s technology development ecosystem to fall behind that of its rivals. In response to a faltering economy and with less reliance on Western markets, China turned to nationalism, fueled by anti-U.S. rhetoric. With fewer reasons to prioritize foreign relations, it escalates grievances and more regularly threatens—or uses—military force to resolve them. 

How might this happen?

First, China’s less-than-transparent initial response to COVID-19, coupled with an aggressive foreign policy as the pandemic spread, hurt its image abroad and accelerated a trend in many regions to push back on Chinese influence. Pew Research now finds that two-thirds of Americans have an unfavorable view of China. Andrew Small writes that the European Union, too, plans to “rebalance away” from China. The Japanese government, which has clashed with China before over territorial disputes, is subsidizing domestic firms to reshore their manufacturing away from China. 

Second, the pandemic and accompanying global recession pose serious challenges for China’s economy. As David Cyranowksi writes in Nature, budget shortfalls “will certainly have a negative impact on scientific research, because funding will be reduced and projects will be delayed.” According to senior Chinese government economist Zhang Xiaojing, all of the above factors—slow growth, increasing U.S.-China tensions, and economic decoupling—are “kicking away the ladder” China used to build its tech ecosystem. 

Many Chinese policy analysts believe creating an economic sphere independent of the United States and its allies and expanding the reach of Chinese tech firms could gird against the risks of isolation. However, these strategies could also fail. First, China’s Belt and Road Initiative partners might not generate the economic growth required to compete with the liberal West. Plamen Tonchev suggests in The Diplomat that post-pandemic, BRI countries will likely struggle to service their infrastructure project debt, meaning that China’s “new order” might in fact act as another burden on its already highly leveraged economy. Second, as Chinese technology firms grow intertwined with the military and state security services, foreign companies could become more reluctant to collaborate with them, contributing both to China’s economic hardship and its isolation. 

Finally, to maintain its power as the country’s economy shrinks, the Chinese government might increase its nationalistic and anti-U.S. rhetoric while escalating territorial and sovereignty disputes. As China becomes more isolated, it will see fewer discentives to violate international norms. These factors could be mutually reinforcing, accelerating China’s isolation. 

How will we know if we’re heading toward this scenario?

The chart below includes several predictors, and for each, one or more metrics we can monitor and forecast over the next three to 18 months on Foretell. Together, these metrics can serve as signposts, suggesting whether this scenario is becoming more or less likely.

Predictor Metric
China becomes more economically isolated Chinese trade levels as a percentage of global trade levels [Forthcoming]
U.S.-China decoupling [1] [2] [3] [4]
China becomes more diplomatically isolated Seeking suggestions
China becomes more isolated in the scientific community Percentage of international collaborations on AI publications that involve China [Pending]
Increase in Chinese nationalism and anti-U.S. rhetoric Seeking suggestions
Increase in Chinese state/military-industry connection Seeking suggestions
Increase in Chinese escalation of territorial/sovereignty disputes Chinese actions regarding Taiwan and India [1] [2]
Chinese actions regarding the South China Sea [1]

You can forecast these metrics at cset-foretell.com


Author: Alex Barker, Student, Georgetown School of Foreign Service