Unveiling the Awakening: China's Belated Recognition of Internal Threats

Amidst the relentless drumbeat of China-centric narratives, hardly a day passes without a new tale of intrigue or apprehension. Even before the era of Covid-19, the Middle Kingdom grappled with its global image, but the pandemic solidified Western perceptions. Since then, each Chinese action is scrutinized through the lens of escalating paranoia, fostering a mutual atmosphere of suspicion.

Recent events have only deepened the shadows. With accusations of Chinese cyber attacks threatening British democracy, and the United States and Japan fortifying their security alliance to historic levels, tensions escalate. Beijing's response, a decisive move to phase out foreign chips in government systems, underscores its resolve.

Moreover, China's alignment with Vladimir Putin's Russia paints a picture of a burgeoning authoritarian axis, openly antagonistic to Western interests. The rupture with the West appears irreversible, marking a stark departure from years of economic integration aimed at fostering convergence.

Yet, amidst the clamor, one must question the true extent of the threat. While China's military ambitions, particularly concerning Taiwan, are cause for concern, its economic prowess may be waning. After a meteoric rise, China now faces uncertain economic prospects, casting doubt on its long-term viability.

In this landscape of shifting alliances and escalating tensions, the specter of China looms large. But as the noise reaches a crescendo, it prompts reflection on whether the rhetoric matches the reality of the perceived threat.

Gone are the days when China's rise seemed inevitable, casting a shadow over the economic dominance of the US and Europe. The notion of a "Chinese century" has dwindled, making space for a new contender: India, emerging as a potential economic powerhouse. China's economic slowdown, fueled by an imbalanced economy heavily reliant on debt-driven growth, underscores its vulnerability. The country is aging rapidly, with demographic challenges poised to thwart President Xi's ambitious economic plans.

Contrary to the narrative of a democratic world under siege from an authoritarian rival, China's fundamental issues belie such a simplistic portrayal. Recent discussions on global demographics, prompted by a Lancet study, highlight a broader trend of declining fertility rates worldwide. While many nations face this challenge, China's population decline has already begun, marking a significant shift from its past trajectory.

Despite a temporary pause in the decline, projections indicate a steep downward slope for China's population, with implications reaching far beyond demographic shifts. This decline poses a formidable obstacle to China's aspirations of superpower status and economic development. Compounding the issue is the limited agency of Chinese leadership in addressing this demographic decline, leaving them grasping for solutions in a situation with few viable options.

In many developed nations and beyond, birth rates have dwindled below the threshold of 2.1 offspring per woman, considered necessary to sustain population levels. China, with its draconian one-child policy enforced in 1980 to combat soaring birth rates, faces an exacerbated version of this demographic challenge. Although the policy was replaced with a "three-child" policy in 2016, the damage was done. Even if there were a concerted effort to encourage childbearing, the sheer scarcity of women of childbearing age renders maintaining, let alone increasing, the population an insurmountable task.

The one-child policy may have worsened the situation by skewing the gender ratio due to a cultural preference for male offspring, though conclusive evidence is lacking. Regardless, China finds itself ensnared in a "low-fertility trap," where irreversible population decline looms ominously on the horizon. The forecasts from the Shanghai Academy of Social Sciences paint a stark picture: a dwindling working-age population, plummeting from its 2014 peak to a mere 210 million by 2100. The ratio of working-age individuals to dependents is set to plummet, exacerbating the strain on social services and the economy.

As populations age, preferences shift towards stability and comfort, with a decreased appetite for conflict. Traditionally, wars have relied on a surplus of young, eager soldiers, but the demographics of the future may not support such endeavors. While the turn of the century may seem distant, the specter of conflict remains, albeit in evolved forms. Totalitarian regimes, reliant on expansionist agendas, may find it increasingly challenging to rally support for conflicts among an aging populace. While some leaders may defy this trend, they ultimately underscore the folly of aggressive militarism, echoing the sentiment: "They make a desert, and call it peace.

There are several key points to consider regarding the tendency to exaggerate the threat posed by China. Despite perceptions, China is not yet a dominant force in the UK economy; it remains the fifth-largest trading partner behind the US, Germany, the Netherlands, and France. Even in terms of imports, it lags behind the US and Germany. Moreover, recent trends suggest a decline in trade size with China and minimal direct investment from China into the UK economy.

Concerns about China's potential to disrupt critical infrastructure should not unduly influence decisions, such as whether Chinese companies like EVE should build factories in the UK or if tariffs on Chinese electric vehicles should be imposed. Any risks can be effectively managed, and it's unlikely that any nation seeking to engage in global trade would deliberately sabotage its own economic interests.

While China has been criticized for unethical practices such as intellectual property theft and deceitful tactics, it operates within a largely closed economy that increasingly rejects foreign influence, thereby limiting its capacity for innovation. Despite its current assertiveness, China's demographic trajectory suggests a future of diminishing influence and economic prowess.

In reacting excessively to the perceived Chinese threat, nations may inadvertently harm their own interests. As China navigates its zenith of power, there's a risk of hubris leading to reactionary behavior. However, in the long term, demographic realities paint a picture of a China with reduced capabilities and influence on the global stage.

This article is an excerpt from The Telegraph's Economic Intelligence newsletter, offering exclusive insights from leading UK economic commentators Ambrose Evans-Pritchard and Jeremy Warner every Tuesday.

In conclusion, while concerns about China's influence and behavior are valid, it's essential to maintain a balanced perspective. Exaggerating the threat posed by China may lead to detrimental overreactions that harm global trade and economic interests. Despite China's rise, its closed economy and demographic challenges suggest a future of limited innovation and waning influence. Rather than succumbing to fear and mistrust, prudent management of risks and cooperation where possible can help navigate the complexities of the global economic landscape. As we look ahead, it's crucial to approach China with realism, recognizing both its capabilities and limitations in shaping the future of the world economy.