The top 20 per cent of China’s households take home 45 per cent of the country’s disposable income, with the top 1 per cent owning over 30 per cent of total household wealth. This huge inequality is China’s historical legacy. As Harvard Professor John Fairbank pointed out, China’s ethnic geography divides the country into “inner China” (neidi) and “outer China” (waidi). Inner China is the arable “Central Plain” (zhongyuan), protected from marauding tribes by the Great Wall and seat of the Middle Kingdom (Zhongguo) and land of the ethnic Chinese, or the Mandarin-speaking Hans who constitute 90 per cent of China’s population. It is a low-lying tract of land of nearly 400,000 sq. kms south of Manchuria and below Inner Mongolia, through which flow all the three major rivers of China from west to east: Yangtze, Huang-He (Yellow River) and Zhujiang (Pearl River), and also the Wei, the largest tributary of the Yellow river, making this area extremely fertile for agriculture.

This is where the Chinese civilisation flourished some 3000 years ago under the Zhou, Qin and Han dynasties and then expanded outwards from the Wei and Yellow rivers. By the first century BC, under the Han dynasty, China included all cultivable areas from the headwaters of the Yellow and Yangtze rivers right up to the Pacific Coast and from Bathai Sea in the Korean peninsula to South China Sea.

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About a billion of China’s total 1.4 billion population live here, making it one of the most densely populated areas in the world. This is the only area of China that receives annual rainfall in excess of 40 cms. Even within the region, there is a narrow zone of prosperity within 100 kms of the coast that hosts more than 5 per cent of its population – some 70 million and also most of its factories; 15 per cent of Chinese industrial workers live here, earning more than $25000 dollars a year, way above the national average. This is the area that includes all its major cities and ports: Shanghai, Beijing, Chongqing, Tianjin, Guangzhou, Shenzhen, Chengdu, Nanjing, and of course Hong Kong. It was so even in the ancient times, and that is why the Chinese empire needed to create buffers to protect itself from the nomadic tribes who raided its territory from outside and constantly posed a threat.

Chinese therefore expanded to include the dry, inhospitable harsh lands of Manchuria, Inner Mongolia across the Gobi, Tarim basin and Xinjiang across the Taklamakan and Tibet, to act as buffers. The entire Western China is a vast and empty desert landscape ~ this, together with the Himalayas in the south and Siberia in the north define China’s geographical limits, with the Himalayas serving as another Great Wall between India and China. But the fertile central plain is both China’s strength as well as its weakness. China feeds 23 per cent of the world’s population from 7% of arable land, “by crowding some 2,000 human beings onto each square mile of cultivated earth in the valleys and flood plains”, to quote Fairbank again. But the narrow coastal zone of prosperity also creates a deep social chasm because it profits hugely from maritime trade which does not flow to the rest of China. It therefore remains impoverished, creating an economic divide that manifests in social unrest that has been China’s curse ~ and an existential nightmare. That is why it has always needed a strong military to keep the country together. Because of this, China has always oscillated between openness to trade, uneven prosperity and consequent social instability, or isolation, order and poverty. This binary was why the country had closed itself to the world for three centuries till the two Opium Wars (1839-42 and 1856-60) won by the British forced the country to open itself to opium trade under humiliating conditions.

During much of the 13th and 14th centuries, Mongols of Yuan dynasty ruled China. But the single central authority got fragmented into several Khanates, and then China experienced protracted periods of anarchy which made overland trading by its famous Silk Road almost impossible. As the overland trade dried up, maritime trade flourished. Under the Ming dynasty which took control from the Mongols early in the 15th century, China became highly skilled in shipbuilding and navigation.

Between 1405 and 1433, long before Vasco-da-Gama had sailed into the Indian Ocean, the Ming emperor had sponsored seven voyages of exploration to the countries around Indian Ocean under Admiral Zheng-He who commanded the largest fleet of ships the world had seen till then. His fleet consisted of 317 ships, over 60 of which were more than 400 feet long with tens of thousands of sailors, and stretched from horizon to horizon across the waters as it sailed from Southeast Asia to India and then to the eastern coast of Africa.

Not until World War I could such an armada be assembled again. But that was also the last time China had sent its ships across the Indian Ocean ~ it would not be until the present century that Chinese naval ships would roam in the Indian Ocean again. After Zheng-He’s final voyage, the Chinese emperor halted these expensive expeditions. The ships were left to rot in the harbours, and craftsmen gradually forgot how to build them. New military threats emerged from the Mongols as social unrest and peasant uprisings threatened to tear the empire apart. Such social unrest still continues to erupt from time to time in Xinjiang and Tibet, forcing China to resort to ruthless and brutal suppression of its non-Han people. Underlying this unrest is the deep economic abyss, with the average per capita income outside the central core being a small fraction of that inside. In his “The Revenge of Geography”, Robert Kaplan said, “Empires rarely come about by design; they grow organically. As states become stronger, they cultivate new needs and ~ this may seem counterintuitive ~ apprehensions that force them to expand in various forms.” China suffers from no moral compunction and is driven by its overpowering national interest for survival and growth for which it has to seek and acquire resources from whosoever will supply them. As it grew as a breakneck speed, it needed ever more energy and minerals to sustain its growth. Kaplan calls China “an über-realist power” that seeks to develop closeness to any regime that has oil and minerals, seeking “to secure port access throughout the Indian Ocean and the South China Sea, which connect the hydrocarbon-rich Arab-Persian world to the Chinese seaboard.” It has no scruples with what kind of regime it deals with, and neither for entrapping these countries with unsustainable debt which would keep them permanently within the Chinese sphere of influence.

Many of these countries are now resenting and retaliating, many have suspended or terminated their contracts for the BRI projects funded by China. Even in countries where the regimes steadfastly support China, their people are attacking Chinese installations and businesses, as in Myanmar and even in Pakistan, its all-weather ally bound by an unbreakable iron-friendship. Indeed, in the entire world, except Pakistan, North Korea, Russia and Iran, China hardly has any friend who trusts it. The deep international distrust of China is already showing in the gradual decoupling of global supply chains from it, with many global companies relocating out of China. China’s position as the world’s factory and global hub of manufacturing is now in jeopardy, which will likely impact its growth further. Almost all advanced nations are also denying Chinese companies access to higher technology, like Huawei whose revenues have started plunging. Consequently, China’s ambition to become the global technological standard-setter by 2035, especially in cutting-edge frontier areas like blockchain, quantum computing and AI, may not materialise.

China will be forced to move from export-driven growth to domestic consumption driven growth, which means that it cannot sustain high growth for long. As its growth falters, the huge stockpile of debt it is sitting on will slow it down further. With a debt to GDP ratio of around 300 per cent which has grown dramatically over the past decade and soared to record levels due to the pandemic, debt is the biggest economic challenge facing China. The US and Japan also have similar levels of debt, but while the state-controlled corporate sector debt accounts for 160 per cent of China’s GDP, government debt constitutes the largest component of debt for US and Japan. The debt-fuelled economic boom following the global financial crisis helped China to overtake Japan, but the ballooning debt pile, especially corporate debt, poses a threat to China’s economic stability. Besides, the hidden local government debt amounting to $8.2 trillion has exceeded 50 per cent of its GDP, which is not reflected in the Government’s balance sheet. Since local governments depend on property sales for their revenues, the collapse of Evergrande spells doom for them. Property developers who support about 30 per cent of China’s GDP are sitting on $2.8 trillion debt, and its spiralling effects are yet to unravel.

As Kaplan reminds us, “India already is a blunt geographic wedge in China’s zone of influence in Asia” and they are “destined by geography to be rivals”. But, if with the progressive slowing down of Chinese economy, India can grow annually at 8 per cent for the next two decades, we probably can catch up with China, only if we can keep our focus steady.
(Concluded)