China's Population Predicament

And some U. S. policies that could take advantage.

Welcome back to The Burnett Breakdown! Make sure to subscribe if you haven’t already and share with anyone who may be interested.

Qilai Shen for The New York Times

China’s Population Decline

On Tuesday, the Chinese government acknowledged that more people died in China over the last year than were born. In other words, the population of China declined. This is the first time this has happened since Mao Zedong’s disastrous Great Leap Forward program in the 1960s which led to mass starvation.

It’s possible that this was just a one-year phenomenon and the Chinese population will increase next year. On the other hand, it’s very possible that China has already reached its population peak.

Demographers have been projecting China’s peak to come at some point this decade but there weren’t many projecting it to occur already. The quickening timeline could be due to the COVID-19 pandemic that has continued to ravage China in spite of its draconian zero-Covid policy. It’s also in spite of the Chinese government’s best efforts to delay by ending the one-child policy and providing incentives for families to have children.

This past summer I wrote about China’s demographic predicament and the likely economic consequences of it. I wrote, “Population decline is never a boon for a country’s economy, and the Western world will probably face a similar predicament, but the inefficient nature of the Chinese economy means a population decline and old age will be significantly more detrimental.” China’s excessive debt levels make it particularly susceptible to potentially devastating economic consequences if economic growth slows down.

An economic slowdown also makes China vulnerable to social disruption as the implicit deal that the Chinese government has made with its citizens, curtailed freedom for economic contentment, risks being shattered.

It may seem like this would be beneficial to the United States, and long term it certainly may, but it is very likely to lead to Chinese desperation in the immediate future. Countries that are ascendant tend to avoid rocking the international boat as patience is all they need to gain superiority over other countries. On the other hand, countries that perceive themselves as slipping in relevance on the world stage are more prone to be aggressive in order to maintain or regain their stature. Faced with demographic and economic decline, China could become more belligerent in its territorial ambitions.

It is vital that the United States is prepared for such an option.

U. S. Policy Response

Let’s talk about some political options that I believe the U. S. should consider taking (and has wisely already taken) in its approach to China.

First, the United States should continue to financially and militarily support Ukraine in its fight against Russia. While Ukraine fought against all odds at the start of the war (and Russia displayed remarkable incompetence), it is clear that Ukraine would be unable to continue to hold off Russia without assistance from the West. Putin knows this and would love for the isolationist forces in the West to get their way leaving Ukraine out to dry.

While he isn’t Putin, Xi Jinping would certainly take note if this were to happen. The lesson would be clear: be patient and the West won’t last long. China would face intense backlash, sanctions, and resistance from the West if it invaded Taiwan, but none of that would matter if the West grew impatient and stopped supporting Taiwan. On the other hand, Western resolve in Ukraine would demonstrate to Xi Jinping that it is deeply committed to maintaining the post-World War II rules-based international order making him count the cost of a Taiwanese invasion.

Second, the United States should support and push for Japanese rearmament. At the end of WWII, Japan was forced to include a prohibition against militarization in its constitution. Japan’s “self-defense force” basically functions as a military, but it should remove the formality. Japan plans to double its defense budget to 2% of GDP by 2027 and the United States should support and encourage such a move.

While a weak Japan made sense following World War II, Japan is a significantly different country now than in 1945. Now, a strong Japan would serve as a deterrent against China and a defense for Western, democratic values.

The United States has taken steps in this direction with the establishment of the “Quad,” officially the Quadrilateral Security Dialogue, an alliance between the United States, Japan, Australia, and India. It is undoubtedly true that the soon-to-be largest country in the world India will play a vital role in deterring China, but I am still skeptical of India as an ally of the United States. China is clearly the biggest threat to the United States right now, so working with India is necessary; however, the United States would be wise to keep India at an arm’s length while strengthening Japan and Australia as much as possible.

Finally, the Biden administration in particular needs to get its act together regarding its position on Taiwan. President Biden has slipped up multiple times and said that the United States would defend Taiwan if China were to invade the island country. It’s fine if this is the Biden administration’s position, but advisors on each occasion have “clarified” Biden’s comments to mean exactly what he didn’t say.

There could be some strategic benefits for maintaining a position of ambiguity towards Taiwan, but that is different than being internally ambivalent. Internally, the Biden administration should know exactly where it stands and be disciplined in its messaging towards that end. That simply hasn’t been the case with this administration and it damages America’s image.

The United States also has various economic policies that it should employ to counter Chinese power. First and foremost, the United States should reenter the Trans-Pacific Partnership (TPP) which established free trade agreements with Pacific Rim countries such as Japan, Brunei, Vietnam, Singapore, Australia, New Zealand, Peru, and Chile. Signed in 2016, TPP included the United States until Donald Trump decided to withdraw from the partnership in one of the worst decisions of his presidency.

Maybe even more importantly, the United States should go beyond TPP and establish free trade agreements with other Southeastern Asian countries like Cambodia, Laos, and Bangladesh. These free trade agreements would accelerate the ongoing process many companies are going through to diversify their supply chains away from China.

The gravity model of trade makes it vital that the United States target Southeast Asia in particular. Essentially, the gravity model of trade explains the tendency of countries that are close in proximity (along with similar economic sizes and cultures) to “gravitate” towards one another in trade. This means that countries in Southeast Asia will trade more with China by nature of their proximity. In order to combat this, the United States must allow comparative advantage to take full effect by removing any trade barriers that could deter trade.

If the United States does not do this, it risks Southeast Asian countries becoming increasingly reliant on China for economic growth. As they become more reliant on China economically, they will be forced to align themselves with China politically leading to a Chinese-led bloc that would be immensely powerful. The United States has the opportunity to benefit itself and these countries by building economic ties all the while undermining Chinese influence in the region. Protectionist “America First” economic policies, such as domestic subsidies and tariffs, are actually not in America’s best interest.

Conclusion

As I mentioned back in July, the Chinese model of governance is unsustainable, particularly on the back of the declining demographics that were made more evident this week. I concluded then by saying, “These cracks in the Great Wall of China shouldn’t lead to American complacency but to American resoluteness in the sureness of the inevitable victory of American liberty.”

In order for this to be true, it is vital that the United States take measures that increase the likelihood of it coming to fruition. Isolationism and “America First” economic policies are simply not the best ways to address China. Like with the Soviet Union, the United States has to maintain a strong presence around the world and work with other countries economically to increase material prosperity.

By retreating behind its borders, America would be creating a power vacuum that China would love to fill. America must not allow this to happen. America must keep exerting its influence in the world allowing China’s demographic problem to become too much for the country to bear.

God Bless,

Hunter Burnett