From Wealth to Power: China’s New Economic Statecraft

As part of Duke Kunshan Colloquium Series, Dr. Zhang Xiaotong from Wuhan University’s School of Political Science and Public Administration presented his “From Wealth to Power: China’s New Economic Statecraft” lecture on November 22nd. This lecture, following on the heels of Xi Jinping’s meeting with Trump earlier this month, gave attendees timely insight into Chinese state policy’s global outlook.

Currently working on a book detailing the rise and fall of great powers through perspective of economic statecraft, Dr. Zhang’s focus is on answering how exactly economic statecraft plays a role in these great power’s ascensions and collapses. He opened the hour-long talk by addressing and analyzing the results of the recent partnership deal signed by America and China to provide an example of the two way street of the “wealth power strategy”.  While the US’s current show of naval might in the West Pacific is an example of converting military power into economic wealth, China’s proposal to inject 250 billion US dollars into the US economy to alleviate the massive trade deficit indicates its economic statecraft of trading economic wealth for international power and stability.

Dr. Zhang points out that it is Zhu Rongji’s reform of taxation, ensuring that the central government has more taxation power compared to the provinces, which really consolidated power for today’s leadership. It is on this solid base that the Chinese government is now able to pursue the wealth power strategy. It is because of this centralized economic power, that the Kenyesian stimulus injections during the economic crisis of 2008 were possible. But it has since resulted in overcapacity in every Chinese sector. The rationale of One Belt One Road Initiative is to digest this overcapacity and to avoid the deadly geopolitical confrontations that resulted when Europe was in a similar situation in the 19th century.

Drawing on parallels to Athens and Sparta, Dr. Zhang made the point that the rise of a new power will lead to confrontation with the declining established power. He held up the TCC and RCEP trade agreements as examples of this competition. Yet he concluded that ultimately, the relationship between great powers is never black and white, with economic cooperation being commonplace.

Dr. Zhang identified four paradigms of economic statecraft: mercantilism, liberalism, imperialism, and communism. As one of his major research interests is European Studies, Dr. Zhang’s delved into European history to contextualize how Europe has gone through these four paradigms. He suggested that in the present day context, Xi has adopted a paradigm closer to liberalism whereas Trump and far right nationalist movements in Europe, such as Le Pen, have reverted to a mercantilist paradigm. Yet in light of all the current crises in the world today, it is difficult to label Xi’s economic statecraft neatly, especially in relation to the One Belt One Road Initiative.

Concluding the lecture, Dr. Zhang focused on Xi’s phrase “community of shared destiny” to describe the current global order. While the phrase suggests that many issues today are actually global issues, Dr. Zhang has a more profound interpretation. He proposes that world history has developed linearly, from empire to religion to nation state and capitalism. Though we are still mired in the nation state spirit, Dr. Zhang believes our future holds a new paradigm, a period of community.