China is quietly looking weaker
Xi Jinping's paranoia, rapidly changing technology, and the limitations of China's system could cut short the Chinese Century.
In the 1980s, a lot of people wrote books and articles about how Japan was going to be the world’s leading country. The most famous of these was Ezra Vogel’s Japan As Number One: Lessons for America. At the same time, in 1989, Bill Emmott wrote a book called The Sun Also Sets: The Limits to Japan’s Economic Power, in which he predicted that Japan would revert to the mean. History has judged Emmott the winner of this contest of ideas. He didn’t get everything right — his characterization of Japan as an export-led growth model didn’t fit the facts, for instance — but in general, he got more right than wrong. His analysis of Japan’s financial weakness, aging challenges, and low service-sector productivity were right on the money.
At the time, though, with Japan at its zenith, it was easy to make Vogel-like predictions of continued domination, and it was out of vogue to be a contrarian like Emmott. The same is true of China today. Over the past few years, skepticism of China’s rise has mostly evaporated in the West, and most Americans now believe that China has either overtaken their country or will do so in the near future:
There are still a few hawkish types out there writing articles about China’s coming collapse, but almost no one is paying attention. All the attention is on Chinese cars, Chinese cities, Chinese trade surpluses — or on America’s flailing in the Middle East, its chaotic policymaking, its divided society, and its inability to manufacture anything in volume. Between America’s dysfunction and China’s technological achievements, the idea of a Chinese Century has become conventional wisdom.
In a post last year, I assessed that this conventional wisdom was probably right — that the 21st century would be a Chinese century, although China’s dominance wouldn’t be as pronounced or as beneficial to the world as America’s was in the 20th century:
I don’t think I made the same mistake that Ezra Vogel and many others made when assessing Japan in the 1980s — of just assuming that recent trends would continue. China is about 12 times the size of Japan. It can dominate the world, industrially and geopolitically, without ever coming close to the U.S. or even Japan in terms of per capita GDP.
I also hedged my bets a bit. Though I’ve always been highly skeptical of the idea that demographics will sink China (I think they’ll be more of an annoying but minor drag), and although I don’t think China’s housing bust will sink it, I do think that China’s dictatorial system is already putting it in danger via the personal failings of Xi Jinping:
In the past couple of months, though, I’ve become more of a Chinese Century skeptic than I was before. I’m not quite ready to write a Bill Emmott-style book about how China is going to bump up against hard limits. But I do see several factors that have adjusted my thinking a bit in the direction of China-pessimism, and I don’t see a lot of other people writing about these. So I thought I’d write a post about why I’ve updated.
Basically, the four things I’ve noticed are:
China’s industrial policy is hitting its limits faster than I expected
The rapid rise of AI agents makes me think that China’s technological advantage is less defensible
Xi Jinping is entering his paranoid “Death of Stalin” phase earlier than I expected
Trump’s attacks on Venezuela and Iran, whether you think they were good ideas or not, demonstrate possible Chinese military weakness
These factors don’t mean I expect China to go into decline today or within the next few years. But I do now think there’s a good chance that China is now stumbling in ways that will become more apparent in a decade or two, and will cause it to disappoint many of the current boosters and bulls.
