It is easy to underestimate the geostrategic implications for the international order of China’s rise. China’s relative economic strength has grown remarkably, and yet its place in the international order has not yet changed nearly as much. It is tempting to conclude that China’s economic growth has little geostrategic impact. This assumes however that geostrategic change follows steadily and smoothly as economic weight shifts. That is not necessarily so. The geostrategic consequences of economic change can be ‘sticky’: the status quo may persist for years as economic weight shifts, and then fall swiftly when the pressure becomes too great to bear.

The tipping point may not be far away. The Australian Government’s Defence White Paper released in May 2009 predicted that on some measures China’s economy could well overtake America’s to become the largest in the world around 2020. The precise date is questionable, but the trend is not. China’s growth may falter for any number of reasons, but it is more probable that America will no longer be the richest country in the world, well within the timeframes of today’s strategic and defence policymakers.

Of course America will continue to enjoy a significant advantage over China in many other aspects of power, including the soft power of culture and the hard power of armed force. It will be a long time, if ever, before China could emulate America’s position in recent decades as the world’s leading military power. But China does not have to replace the US as the global hyperpower in order to overturn the US-led global order of recent decades. China does not need to compete with the US globally in order to erode US primacy in Asia. And to do that China does not need to equal the US in military capability, but simply limit US options. In both these respects, the military-strategic competition between the US and China is asymmetrical, in ways that benefit China. The shift is already underway. American capacity to project power in Asia is slipping away as China develops the capacity to deny important areas of the Western Pacific — especially those closest to China — to the US Navy’s surface fleet.

Some will argue however that the true foundations of American primacy are not to be found in its armed forces or its economic output, but in its ideas, values and institutions. Clearly many of what Americans regard as American values are highly attractive to many others around the world, including in Asia. But do Asians believe that those values can only flourish in a global order dominated by the US? Not necessarily. They certainly seek many of the values that America champions, but they do not necessarily believe that only American global leadership can deliver them.

Of course American decline has been predicted before, but this time it is different. Never before has US primacy been challenged at its most fundamental source, by its eclipse as the world’s most productive economy.

The source of that challenge runs very deep. As China emulates the productivity of a modern advanced economy, its sheer scale ensures that it will end up again — as it was before the industrial revolution — producing more than anyone else. In geostrategy, destiny is not so much demographics alone, but the combination of demographics and labour productivity.

What does all this mean for Asia? Since the early 1970’s Asia has enjoyed the most prosperous and cooperative period in its long history, and in retrospect it seems clear that the main cause has been the stable and uncompetitive strategic relationships between Asia’s most powerful states — the US, China and Japan — based on uncontested US primacy. As the economic foundation of America’s primacy erodes, the Asian order which has been built upon it will change. There is no reason to expect that China will continue to accept US primacy as the basis of the regional order in Asia while its own power approaches and exceeds America’s. Of course China will want Asia to remain peaceful and harmonious: but it will not see American primacy as necessary for that.

There is no evidence that Beijing seeks the kind of ‘hard’ militarised hegemony that we associate with the Communist strategic policies of Stalin and Brezhnev. It is much more likely that China will seek a kind of ‘soft’ hegemony, something like America’s Monroe Doctrine. It is hard to see why Beijing should want anything more: but nor is it clear why, as their power grows, China would aim for anything less.

Much will therefore depend on how America responds to China’s rise. It could slowly withdraw, or it could share power with China, or it could try to maintain primacy by contesting China’s challenge. Whichever option America takes, Asia’s international order would very different. And the most risky of these outcomes is also the most probable. America is unlikely to withdraw from Asia, and would find it hard to share power with China, so the default option is strategic competition. That is a risky course. Do the costs and risks of sharing power with China outweigh the costs and risks of sustained strategic competition with a country of China’s immense strategic potential? China is not the Soviet Union.

America’s allies in Asia likewise face tough choices. Australians will need to decide whether to encourage America to contest the Chinese challenge, or share power with Beijing. And if America decides on competition, should Australia encourage them, or slide towards an uneasy and insecure neutrality? Either way Australia faces greater strategic risks than it has been used to since the 1960s.

See my full chapter here [pdf] from this year’s China Update: China’s New Place in a World in Crisis.

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