China Has Become Powerful Before It Is Rich

Under Xi Jinping's leadership, China has prioritized military strength and global power competition, particularly with the United States, leading to a situation where it has become powerful before achieving significant wealth. Despite spending only about 2% of its GDP on defense, which is lower than Cold War levels, the focus on military expansion has resulted in reduced openness and weakened ties with the global economy. This shift poses a significant challenge to China's future economic growth, as its integration into the world economy has been crucial for its development over the past fifty years. China's economic model is at a critical juncture, with slowing growth rates reminiscent of Japan and South Korea's past trajectories. The country has maintained high investment levels, exceeding 40% of GDP, but transitioning to a more consumer-driven economy is becoming increasingly difficult. Xi's recent policies indicate a move towards more state-driven investments aimed at enhancing high-end manufacturing, reflecting a response to perceived threats from the U.S. The tightening grip of the Communist Party on the economy and the emphasis on national security as a foundation for modernization suggest a strategic miscalculation by Xi. By focusing on offensive military capabilities, China risks escalating the security dilemma, where its growing power is viewed as a threat by other nations. This could have been mitigated by prioritizing defensive measures instead. Ultimately, while China was destined to become a superpower due to its size and resources, Xi's choices may have exacerbated international tensions and hindered the country's economic potential, limiting the benefits of its rise on the global stage.