China’s global ascendancy is off to a slow start

China pursued the expansion of the Shanghai Cooperation Organisation, welcoming Saudi Arabia under the East Eurasian political and security umbrella. China unveiled its standard map in 2023 — unequivocally claiming almost the entire South China Sea and two controversial regions on the China-Indian border as its territory — which met sharp protests from its neighbours.

Meanwhile, Chinese naval and air deployments sought ultra-close contact with US and Philippine assets, coming within metres of them, raising the chances of accidental collision in the Indo-Pacific. Surrounding the Taiwan Strait, the US security apparatus suspects that China will launch a military attack on Taiwan either by 2027 or 2035.

At a meeting between the presidents of the US and China in San Francisco, President Xi personally rejected such predictions and denied a timeline for a military move for unification with Taiwan, with an apparent air of frustration toward Biden and an over-simplification of the US view of the issue.

Surprisingly, China helped broker the Saudi-Iran rapprochement in the Middle East, testifying to Beijing's increasing sway in the area of regional security. The US's attempt to broker a normalisation of diplomatic ties between Saudi Arabia and Israel was suddenly halted by the outbreak of war in Gaza.

With 13 Pacific nations, the US conceived the Indo-Pacific Economic Framework (IPEF) as a resurrected Trans-Pacific Partnership, aiming to circumvent US critical supply chains away from China and outcompete China's trade and industrial penetration in the region.

China led the expansion of the BRICS nations to include large emerging powers in Africa, Latin America, and the Middle East, collectively expressing their frustration over the Bretton Wood institutions, warning against the weaponisation of the dollar, and seeking to construct a suite of alternative developing world institutions.

While the US celebrated its second Global Democracy Summit – championing the US-led global security architecture premised on democratic values – China welcomed the leaders of Syria, Iran, Palestine, the Taliban government of Afghanistan, and Venezuela to its capital, celebrating a series of strategic partnerships outside the West.

In 2023, China significantly reduced its global infrastructure investments due to capacity constraints. China's total infrastructure outlay under the Belt and Road Initiative over 2021 to 2022 was a mere $ 2.2bn, a marginal fraction of its trillion-dollar investments in the 2010 decade.

However, China has accelerated the scope and efficiency of its investments in green energy across the developing world, supported by its global dominance in solar, wind, and lithium battery supply chains.

Over the past decade, western economists and geopolitical pundits often applauded the 21st century as the Chinese century. Will 2024 be the beginning of the end of the Chinese century?

Twilight for breakaway growth

China's global ascent started with growing economic might and will continue to be powered by it.

Amid debt defaults domestically and internationally in the ailing real estate sector, the state is prepared to do "whatever it can" to stop the contagion spreading into the broader economy. A strong financial rescue is what China has long needed.

Fashioning in a financial rescue modelled on the US response to the Global Financial Crisis may well pull the Chinese economy out of its slump.

More important than a stimulus, China needs to define a new growth driver to ensure the longevity of its global economic ascent. The investment-led economic growth model is no longer sustainable. The next phase of China's growth must be driven by innovation and modelled on sustainability.

Read more: Will Africa be China's economic saviour?

China is particularly vulnerable to the US-led sanctions covering technology  in its drive towards an innovation-led economy. The Western sanctions on China's access to advanced technology supply chains have been effective, causing some immediate destruction.

Alibaba Cloud folded its IPO plans, citing the severe disruptions brought to the company by the lack of access to advanced chips. However, there has never been a case the industrial history of the world where technology can be permanently isolated from one particular place. Global technology diffusion will defy all efforts of government intervention. Time is the only variable.

As technology and two-way investment flow between the US and China inevitably decouples, the Middle East sovereign wealth funds will substantially replace some of the US capital previously committed to investing in early-stage Chinese technology. The high-tech products of such investments will, in turn, be applied to the Middle East to support its sustainable transition into a modern digital economy.

Nicolas Aguzin, CEO of Hong Kong Exchange and Clearing, predicted that the Gulf sovereign wealth funds will swell to $10tn in value over the current decade, between 10% and 20% of which will be invested in China. This translates to a potential $1tn to $2tn of capital reallocated to the Chinese market in the current decade. Indeed, capital from the Gulf can be identified in 67 listed stocks on the Shanghai Exchange in 2023. 

The West's restrictions on Chinese technology have also motivated China to expedite the speed and scale of its investments in science and technology. Chinese companies are recruiting global talents to support their global ambition. Huawei's release of 5G phones is a testament to the success of China's global talent strategy.

In 2024, China's economy will be in twilight, relying on the old growth engine to pull market confidence up while cultivating new areas of opportunity.

A calm ocean with strong undercurrents

Following President Xi's record-setting third-term, Chinese political power has become ever more concentrated in the party's core, more precisely, to Mr. Xi and his close confidants. This consolidation has diminished the impact of party factionalism. It also brings the instability inherent in any unipolar power structure — a fracture from within.

In the fall of 2023, former Chinese foreign minister Qin Gang and defence minister Li Shangfu, both prodigies of Chinese president Xi Jinping, disappeared from their public duties and, weeks later, were removed from their prominent posts.

China's top national security figure and former foreign minister Wang Yi returned as China's foreign minister. The crucial cabinet position of defence minister, is still unfilled.

In addition to the cabinet reshuffle, senior-level shakeups took place in China's Rocket Force, the military unit commanding China's missile arsenal. In an apparent effort to consolidate unity within the Chinese military and beef up the military readiness for potential conflicts, the Chinese military's internal cohesion among newly appointed top brass will take some time to achieve. The current state of affairs holds little imminent possibility of a military conflict over Taiwan.

For decades, Chinese political science has been, by default, about elite politics due to the great social order achieved over the past three decades. But it would be wrong to ignore the power of the people in the current era.

The "White Paper" movement that broke out in Shanghai and spread across China in late 2022 catalysed the government's sharp reversal of its protracted zero-covid policy. Such a public contestation of the political system has been unprecedented in China since 1989.

Communist China's subtle social contract — economic prosperity for social obedience — is cast into doubt as economic growth slows, property prices fall, and youth unemployment hovers above 20%.

In 2023, Chinese youth showed its dissatisfaction over an uncertain economic future with their expressive Halloween costumes in Shanghai. On its first anniversary, the "White Paper" protests reemerged in Shanghai and other Chinese cities.

In 2024, the Chinese leadership's prominent task will be to restore the social contract and boost economic opportunities at home. As President Xi said, "Development is the assurance of security."

The economy itself is political. In 2024, in a seemingly calm political system in China, more undercurrents, though not all visible, will be strong. 

A Trump card may alter global roles

President Xi's statement in the San Francisco meeting was direct and clear. For China and the US, he said, "disengagement is inconceivable; coercing each other for change is unrealistic; and the cost of confrontation is unbearable."

This directly challenges the Biden administration's framing of US-China relations with fierce competition. Mr. Xi further stated that "competition should not underpin the modern era."

He is right.

Any modern global order should not rest on the principles of the law of nature —one competes against another and all against all. The dominant consensus of the 21st century should be collaboration, not competition.

China is the world's largest food and energy importer. It is the world's factory. It requires a robust global market to thrive. The US must also rely on the global value chain as its economy is 80% driven by consumption: consumers procuring goods and services from the global markets. Therefore, the US-China competition will continue to manifest itself in all regions worldwide, from the Middle East, Africa, and Asia to Latin America.

In 2024, the presidential election in the United States will not substantially reverse the US's China policies. Technology export control, two-way investment restrictions, and trade tariffs are deeply entrenched in the US bipartisan political consensus.

However, a possible Trump 2024 victory will bring one change. It will most likely destroy the democratic alliance in Europe and the Indo-Pacific that the Biden administration has secured.

Suppose the Netherlands began to pursue its independent economic and security policies with China. Dutch firm ASML may supply China with the world's most advanced lithography machines, making China's global technological ambition much more tenable.

If the East Asian trilateral security treaty began to weaken, led by Trump's isolationist instincts, China would welcome a security respite in the Western Pacific. Presidential candidate Trump also claims to withdraw from the Indo-Pacific Economic Framework that the Biden administration has nearly completed, leaving the Indo-Pacific supply chain open for China's further penetration.

However, Trump's isolationist policy will likely strengthen the US's unilateral advantage in the global economy further, leaving all countries, including China, at an economic disadvantage to the US.

Western economies will likely suffer from the US's trade protectionist policies. The emerging world will be further deprived of investments from the US as it focuses on domestic infrastructure building. And the commanding global aspiration for green energy transition will fall into oblivion.

A possible Trump victory will disentangle the US's Middle East foreign policy paradox. Rather than enforcing democracy and LGBTQ rights as a core part of the US Middle East policy, the US's engagement in the region will once again be driven by realism. On its part, Saudi Arabia will be rightfully portrayed as an important regional and global geopolitical power.

In East Asia, the high risks of conflicts may not be in Taiwan but in the South China Sea or the Korean Peninsula. Potential clashes at the China-Indian border or the China-Philippines waters can happen without pre-warning.

2024 may very well be a year of contained regional conflicts fused in the larger symphony of peace on a global scale.

Other parts of the developing world — particularly Africa — may continue to suffer from a lack of investment and technology flow from the advanced economies. 2024 may be a year of relative peace and underwhelming global prosperity.