The Global Transition to Multipolarity: China’s Rise, Social Contract Breakdown, and Economic Realignment
The current global order is in the midst of a profound transformation, primarily driven by the rise of China and the shifting dynamics of international power. China’s leaders are aware of their growing influence and actively seem to be pursuing efforts to influence the global landscape. Central to this transformation is the vision of a “harmonious world” and China’s perceived indispensability for global prosperity and stability. This signals a significant shift in the balance of power, which challenges the traditional hegemony of the United States. This article will delve into the complex interplay of China’s domestic politics, cultural peculiarities, and its impact on the liberal international order (LIO). It will explore how China’s approach to the international order is driven by factors like “centrality” and “heterogeneity” and how this affects its role in global leadership. Furthermore, it will examine the breakdown of China’s social contract and its implications, and finally, it will dissect the evolving economic relationship between China and the United States within the global economic system.
China’s Approach to the International Order
China’s rise challenges the fundamental tenets of the liberal international order, which include political liberalism, economic liberalism, and liberal institutionalism (Figelj, 2022, 21-31). While China may not be an overt systemic threat, it is actively reorganizing the existing order in a way that prioritizes state control over private enterprise, opposes political rights and activism, favours “rule by law” over the “rule of law,” and promotes an ethno-nationalist style of governance. These characteristics pose a direct challenge to the core principles of the liberal order and raise questions about the existing hegemonic power’s ability to preserve it.
China’s approach to the international order is influenced by the concepts of “centrality” and “heterogeneity” (Figelj, 2022, 21-31). It tends to cooperate on issues with high centrality and high heterogeneity, such as climate change but resists or exerts pressure on issues with high centrality and low heterogeneity, such as maritime disputes. This approach, where China’s international leadership is driven by the Chinese Communist Party’s (CCP) domestic self-interest, has far-reaching implications for the global order. The future of this international order hinges on the domestic political choices made by leading global powers, primarily China and the United States. These leading nations are expected to pursue policies that align with their domestic interests, whether in a more liberal or conservative, authoritarian manner. While the existing international order may survive, it is clear that it is no longer a unipolar system, with China’s rise introducing elements of multipolarity.
The Breakdown of China’s Social Contract
China’s domestic landscape is undergoing significant shifts as it seeks “national rejuvenation” and “high-quality development.” However, beneath the optimistic rhetoric, the social contract that once offered economic opportunities in exchange for political restrictions is eroding (Yu, 2023). This contract was built on the promise of prosperity in exchange for staying out of politics, but it has been undermined by a shifting development model and the government’s inability to address societal issues. At its core, this erosion is a matter of trust, with the Chinese government offering vague promises of security and “a better life” in place of economic opportunities.
President Xi Jinping’s “common prosperity” policy aims to address China’s principal contradiction between unbalanced development and the people’s growing need for an improved quality of life. It emphasizes security and aims to curb the influence of the private sector while promoting the public sector and mobilizing entrepreneurs (Yu,2023). However, this approach has had unintended consequences, including a negative impact on investment sentiment, a shrinking internet sector, and youth unemployment. It also underscores the necessity for crucial reforms in the Chinese economy, particularly the shift away from debt-fueled infrastructure investment and property development and a move toward increasing domestic consumption.
The Changing Economic Relationship Between China and the U.S.
The global economic landscape is undergoing a significant shift as China increasingly trades with developing countries, surpassing the combined trade of the U.S., Europe, and Japan (Douglas, 2023). This shift reflects the growing divergence between China and the West, driven by tensions in trade, technology, security, and other complex issues. The implications of this increasingly divided world economy are multi-faceted. The U.S. and Europe are reducing their reliance on Chinese supply chains and creating job opportunities domestically. However, there are significant risks, including slower global growth, as the costs of decoupling may outweigh the benefits. The International Monetary Fund (IMF) suggests that a more severe break between U.S. and China-led blocs could cost the global economy trillions of dollars. This economic fragmentation hampers companies’ access to markets, hinders technology and capital sharing, and depresses overall growth. Chinese factories are shifting away from Western suppliers and opting for domestic sources or those from developing nations (Douglas, 2023).
However, in examining the relationship between China’s GDP (IMF, 2023) and U.S. Foreign Direct Investment (FDI) in China (Statista, 2023), the linear regression analysis revealed a positive slope of approximately 0.0071. This suggests that, on average, for every 1 billion USD increase in China’s GDP, U.S. FDI in China increased by about 0.0071 billion USD equivalent to 7.1 million USD. Additionally, the proportion of U.S. FDI in China (Statista, 2023) as a percentage of China’s annual GDP (IMF, 2023) remained relatively stable from 2018 to 2022, fluctuating between 0.65% and 0.78%, with an average of 0.82% for the entire period from 2000 to 2022, indicating a consistent although modest contribution of U.S. FDI to China’s GDP. This data highlights a positive correlation between the two countries and underscores the impact of Chinese domestic politics on their relationship with the United States.
The interplay between a global transition to multipolarity, the breakdown of China’s social contract, and the changing economic relationship between China and the U.S. within the global economic system paints a complex and interconnected picture of contemporary international dynamics. China’s rise is reshaping the global order, challenging the existing liberal international order, and introducing elements of multipolarity. This shift is driven by China’s domestic policies, cultural values, and priorities, which emphasize state control and security over liberal values.
Simultaneously, the breakdown of China’s social contract reflects the domestic challenges and complexities that underpin its international behaviour. As China grapples with the need for a new social contract and responds to societal changes, its approach to the global economy evolves. The “common prosperity” policy and its impact on investment sentiment and economic sectors reveal the delicate balance between state control and market dynamics.
The shifting economic relationship between China and the U.S. within the global economic system underscores the changing dynamics of global trade and investment. However, the data regarding the positive correlation between Chinese GDP growth and U.S. foreign direct investment in China underscores the intricate and interdependent nature of the economic relationship between these two major players. Notably, Chinese domestic politics also play a pivotal role in shaping the dynamics of this relationship.
In conclusion, these interconnected messages paint a picture of a world in transition, where the balance of power is shifting, domestic and international factors influence each other, and the global economic system is adapting to a new reality. Moreover, the relationships between China and the U.S., although complicated, are still present and influenced by respective domestic situations. It can be speculated that China is entering a new cautious phase with the U.S. following the changed domestic economic landscape.
Figelj, Peter. 2022. “The Maritime Silk Road in China’s Foreign Policy.” Unpublished Master’s thesis, Università degli Studi di Milano, 2022.
Douglas, Jason and Fairless Tom. 2023. “It’s U.S. vs. China in an Increasingly Divided World Economy.” Wall Street Journal, November 3, 2023. https://www.wsj.com/economy/trade/economy-us-china-tariffs-trade-investment-1c58d24e?st=8m3oiwmujvda06i&reflink=desktopwebshare_permalink
IMF. 2023. “GDP, current prices.” Accessed 3 November, 2023. https://www.imf.org/external/datamapper/NGDPD@WEO/CHN?year=2023
Statista. 2023. “Foreign direct investment position of the United States in China from 2000 to 2022.” 3 November, 2023. https://www.statista.com/statistics/188629/united-states-direct-investments-in-china-since-2000/
Yu, Sun and Leahy Joe. 2023. “The breakdown of China’s social contract.” Financial Times, November 2, 2023. https://on.ft.com/3s9edlx