Chinese economy is growing more slowly. So what?

- Hard power is what matters in this point in history

I am not sure whether China will hit its 5% growth target this year. The economic outlook is certainly difficult for 2025, probably for some years to come.

The global economy is going through a tough patch with geopolitical conflicts, wars, and deglobalization affecting prospects for most countries in the world. Energy transition, pandemics, climate change and plain old economic cycles all exert downward pressure.

Importantly, the single biggest risk factor for China in the coming decade is NOT economic performance per se, but rather its geopolitical competition with the incumbent hegemon the US. This competition is broad and deep in trade, technology, and military spheres. It is likely that this competition will turn kinetic and a hot war will break out.

This competition will have lasting effect on both China and the US’s historical destinies and probably the fate of the world.

In this context, 1 or 2 or 3 percentage point variance in GDP growth in any given year hardly matters. Don’t forget Germany went through the so called “German economic miracle” in the 1930s before WWII broke out while Soviet Union went through terrible famine and industrial stagnation under Stalin during the same period. When USSR crushed the Wehrmacht, Germany was dismembered with its cities in ruins and population in starvation. Nobody in 1945 remembered and cared about the German miracle in the preceding decade.

Closer to home, in 1840, the Qing Dynasty had a GDP that was 6 times of Britain and 20 times of the US, as per Wikipedia. But it lost badly in the Opium War and as a result, China suffered a hundred-year humiliation. China’s economy was much larger than Japan when it lost the Jiawu War (also known as the First Sino-Japanese War) in 1895. It had to cede Taiwan to Japan until 1945 when Japan was defeated in WWII.

The brutal reality is China must focus completely on winning the hard power competition with the US. The best outcome is of course winning without fighting a hot war. But that is unlikely to happen as no hegemon in history has chosen to fade without fighting with everything it has. Nothing in US rhetoric and behavior today or its short but violent history in the past gives hope that it wants to pursue co-existence with adversaries, real or imagined, anywhere in the world. It is clear that the US doesn’t want a multipolar world unless forced to live in one.

A war is coming, if you spend a minute listening to US politicians, generals and media who seem to want it with all their hearts.

For China, Russia, Iran or any other countries who want to remain sovereign, it is a choice between living on your knees or fighting with a stiff spine. The choice taken by the US vassal states in Europe, Asia, Australia, and elsewhere is neither desirable nor practical. So, whether we want it or not, things are coming down to a life-or-death fight, most likely in less than a decade.

If this line of thinking is logical, then strengthening national military and technological prowess far outweighs short-term economic growth. If China prevails in the coming conflict, economic and financial benefits naturally accrue, just like the US reaped the biggest benefits after WWII and shaped the world order to its liking. Decades of accelerated economic growth and peace dividends will flow to the winner.

In contrast to its weak economic performance, I think China is doing very well to prepare for the coming conflict and that is the one truly relevant parameter to evaluate how well the country is doing.

Here is the scorecard –

- China now leads in 57 out of 64 critical technologies for the future in the fields of telecommunication, quantum science, material science, semi-conductor, aerospace, biotech, etc. with overwhelming leads in many areas. This analysis was performed by ASPI in a report called Critical Technology Tracker. ASPI is a viciously anti-China Australian think tank funded partially by US State Department. This organization that published the fake Xinjiang genocide and covid-pandemic reports to smear China can hardly be considered as biased favourably to China.

- China test launched its DF31AG ICBM successfully last month, making it the only country with a successful recent test performance in long-range (12,000 kilometre) nuclear attack capability. China also has DF41 in its arsenal, a Mach 25 18,000 km hypersonic ballistic missile that carries 6 times more nuclear warheads than DF31. These, together with submarine-launched JL-3, serve as a strong deterrent to US nuclear blackmail

- China 5th-gen stealth heavy fighter J20 has upgraded its engine with WS15. It now outperforms F22 (let alone the smaller F35) in speed, manoeuvrability, and longer beyond-visual-range air to air missile (PL17). Its stealth, avionics, radar, EW capability, speed, range, and firepower far exceeds F35, a medium-size jack-of-all-trades cheaper fighter which is now the main aerial combat platform for the US. China produces 100 J20s a year and the US has stopped producing F22 due to its high cost. There is also a two-seat version of J20 – the J20S – which has unmanned loyal wingman swarming capability. China has started production of its own medium-size stealth fighter J35 as a cheaper, high volume 5-th gen figher.

- China has fielded multiple hypersonic missile systems such as DF17, DF26, DF100, YJ21, while US has yet to field any, falling behind not just China and Russia but also Iran in this critical future military technology. Russia shocked the west with its hypersonic HGV missile Oreshnik in Ukraine just the other week. While the Oreshnik is still an experimental weapon, China’s DF17 or DF26 are mature systems tested many times over the years and have been deployed in the Rocket Force for half a decade. According to the US DoD, China has conducted twice more hypersonic missile tests in the past decade than all other countries combined.

- On the naval front, US Navy openly acknowledges China's ship building capacity is 230 times of that of the US. The US Navy is now resorting to outsourcing navy ship building and maintenance to Korea and India, against US own laws

- China can produce conventional precision-guided rockets at the same unit cost (USD4-5000) as US builds dumb artillery ammos like the 155mm shells. The US DoD head of procurement warned in 2023 that China’s defence budget has a 3 or 4 to 1 advantage against the US in procurement value for money. Given its industrial base, China can not only produce more cheaply but in much larger volume as well. As we can see in Ukraine and the Middle East, quantity has a quality of its own when it comes to high intensity modern warfare. In a hot war, the cost exchange and quantity exchange will heavily favor China.

- China is the only country in the world that can mass produce CL-20, the most destructive non-nuclear explosives. Imagine CL-20 explosive warhead on DF17 in an attack on US aircraft carrier – a hit translates into 5000+ KIAs and $14 billion capital asset excluding aircrafts on board. The much-acclaimed “mother of all bombs” that the US dropped on the hapless Afghanis will fale next to that meteorite strike.

- China's PHL16 multiple launcher rocket system is a high mobility high precision attack platform similar to HIMARS but it has a range of 500 KMs vs 300 km for HIMARS with higher payloads and higher precision (guided by the Beidou satellite system, which is itself far superior to the outdated GPS system the US military relies on). Unlike the HIMARS system which is treated as a scare miracle weapon by the west, China has deployed the PHL16 system to more than 40 army battalions in 4 provinces close to Taiwan. PHL16 alone can conduct blanket precision strikes on any point in Taiwan on road-mobile TELs. The Chinese call such cheap saturation strike weapon as “all-you-can-eat buffet” in a Taiwan pre-landing bombing campaign.

- For the latest Chinese military advances in unmanned, stealth, AI, swarming, networked battlefield areas for air, sea and land domains, you can refer to my Substack articles on the 2024 Zhuhai Airshow.

Let’s go back to talk about why GDP is not relevant in a hard-power competition. Russia now has a GDP less than 5% of the collective west but it outproduces the west in arms production and is defeating NATO on the battlefield in Ukraine. The Russian economy is growing faster than any NATO countries too.

At the moment, hard power is what matters. The significance of China's technological and military advancements far outtrump slower GDP growth (which is still higher than any western economies).

Once China wins the war against the US and its cronies, economic benefits and higher GDP growth will naturally come.

Samuel Huntington, author of Clash of Civilizations, said "the west rules the world not because of the superiority of its values or ideas, but because of its superiority in organized violence. The west doesn't acknowledge it but the rest of the world never forgets it". Let's remember this.