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Why is China Convinced of “East is rising and West declining”?

Prof. Di is one of China's most prominent scholars in economics and international relations. The following article is the first of his series of research on the trend of "East is rising and West declining" and its corresponding theoretical framework.

June 3, 2024
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Di Dongsheng
Professor of International Relations at Renmin University of China. Distinguished Fellow at the International Monetary Institute, Renmin University of China
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During the COVID pandemic, the assessment of “East is rising and West declining” gained considerable consensus and support. However, in the past two years, as the Federal Reserve’s interest rate hikes have led to an increase in the dollar index and the Russia-Ukraine conflict has sparked Eastern and Western confrontations, many people have begun to question this assessment. In the American media landscape, there has even been talk of the so-called “Peak China” theory.

Has the West truly declined? Is the rise of the East sustainable? These are the pressing questions facing China’s policymakers today. The answer to these questions will not only determine our future choices but will also significantly shape the fundamental trends of the first half of the 21st century. For such a grand and important issue, we must engage in deep reflection on both methodology and epistemology.

Firstly, from an epistemological perspective, the issue of “East is rising and West declining” is not purely an objective factual judgment but a matter where subjective cognition and objective facts are intertwined.

There is a significant difference between the objects of study in natural sciences and those in social sciences: the former are primarily purely objective facts, while the latter often involve the coexistence of objective and subjective elements. The objects of study in natural sciences, their structure, function, characteristics, and trends, are usually independent of how we perceive or define them. For example, the Earth revolves around the Sun, and the Moon revolves around the Earth—these are objective facts. Even if humanity collectively believes the earth is flat, such wills cannot flatten the Earth. However, in social sciences, many phenomena, their characteristics, structure, and trends are significantly influenced by how we perceive them and act based on that perception. This self-fulfilling prophecy is quite common in socio-political and economic operations. George Soros calls this “reflexivity” and uses it to guide his investment. For example, if everyone expects a large corporation to fail, its upstream suppliers will stop extending credit and start demanding payments, banks will terminate their loan agreements, its downstream distributors will stop prioritizing their products, and even the company’s key staff may start considering offers from competitors. Thus, collective cognition and expectation shape the actions and choices of stakeholders, which in turn confirm and reinforce the initial perception, accelerating the company’s downfall.

The decline of the West clearly aligns more with the latter type. The United States, with 4% of the world’s population, does not exhibit particularly high average individual quality or effort, and its political system has many inherent flaws. Yet, it accounts for about 25% of global GDP. The United States has a far greater influence on world affairs and international consensus than its economic share would suggest. The enormous disparity between the wealth and power held by the U.S. and its share of the global population results from the collective cognition, division of labor, and choices of the global community. Countries around the world tolerate U.S. debt surpassing gold to become the global reserve asset and source of credit, ultimately storing their wealth in dollar assets. The smartest young people worldwide aim to study at prestigious American universities and stay in the U.S. because working in the center of the global market offers the best welfare and salaries, and starting a business there attracts significant venture capital. Most countries dare not offend the U.S., and many proactively ally and cooperate with it to gain market access, security protection, and technology spillovers. This collective action and network effect exponentially amplify America’s capabilities and wealth. Therefore, when studying and estimating the balance of power between the East and West, we must consider the distortions and amplifications brought by this network effect and recognize that the U.S. is not a normal country but an empire in the political and economic sense.

For most small and medium-sized countries in the world, their choices have little impact on the overall situation; in fact, they don’t have many choices. However, for a country like China which has a systemic influence, whether the West continues to decline, and how drastically it would decline, is closely related to our own choices. As the home of the most concentrated and efficient supply chain in global manufacturing, China’s large-scale exports and high savings rate support the purchasing power of the U.S. dollar in global markets. Amid the ongoing conflicts in Ukraine and the Middle East, China has, in fact, become the last defender of world peace. For China in the 21st century, the life or death of Western hegemony is akin to Schrödinger’s cat: if we lift the lid, the cat dies; if we don’t, the cat in the box will continue to survive.

Secondly, what constitutes the East, what constitutes the West, and which countries belong to neither or are in between? These conceptual boundaries also require careful consideration.

Readers familiar with the author’s theoretical framework of global political economy know that during the rise of (neoliberal) globalization from 1979 to 2008, the global market exhibited a clear and multilayered center-periphery structure centered around the United States. Left-wing scholars in the 1960s divided the world market system into two layers, while Immanuel Wallerstein divided it into three layers. In my 2010 publication, the world market system was divided into four layers based on the division of labor in different types of countries: the outermost countries provide energy and raw materials, the next outer countries provide physical labor, the next inner countries provide intellectual labor, and the innermost countries provide credit and rules. After 1980, China entered this system from its outermost periphery, initially exporting mainly primary products like energy and resources. Through an export-oriented foreign economic policy combining the “Three Foreigns” (foreign trade, foreign investment, and foreign debt) with “indigenous innovation,” we gradually squeezed into a quasi-core position within the system. Today, our export product structure is increasingly similar to that of Europe, Japan, and South Korea. Since 2008, as the political foundation of the Sino-American symbiotic relationship has gradually disintegrated, the China-U.S. trade war, technology war, and geopolitical contention have unfolded. The previously unified world market system is now splitting into two “new parallel systems,” each with its own blocs but some overlaps. Based on my current predictions, this ongoing fragmentation and gradual decoupling process will continue until around 2035, when it will reach a relatively stable and formed equilibrium state.

Within this framework, the so-called “West” is relatively clear and fixed: it consists of the long-established industrial nations with the United States at the core and Europe and Japan as its periphery. The G7 can be seen as synonymous with the West. In contrast, the concept of the East is still evolving and changing. Russia has become the vanguard of resisting and challenging the geopolitical expansion of the U.S. and Europe, but its strength and prestige are significantly lower than those of the former Soviet Union; India is sitting on the fence, attempting to benefit from both blocs; Brazil, South Africa, and some Middle Eastern countries have joined BRICS, but they do not intend to confront the West. So, who is the core of the Eastern system? In terms of comprehensive national strength, China is perhaps the only country capable of taking on this responsibility, but China is neither psychologically prepared for this role nor has a strong desire to assume it. In other words, the current East is neither a bloc nor does it have a “core” country. I propose that to quantitatively define the trend  of “East is rising and West declining”, we can measure the balance of power by comparing China and the U.S. and by comparing two blocs: the West can be defined as the G7, while the East can tentatively be defined as the circle of formal members of the Shanghai Cooperation Organization (SCO) and BRICS.

Thirdly, the research on the components and weights of a comprehensive national strength formula requires considering its context.

In the 1980s, both the East and West conducted studies on comprehensive national strength, with a popular method being to weigh and calculate economic power, technological power, political power, and military power together to derive a quantitative measure of overall strength, such as Ray S. Cline’s formula for measuring national power. In my view, this method has logical flaws in its methodology. Can different types of power be freely converted between each other? Are their weight relationships consistent across different eras and historical contexts? If the answers to these two questions are negative, then we cannot use the such a method of calculating comprehensive national strength.

Emperor Taizu of Song, Zhao Kuangyin, once said, “The Khitans often invade our borders, and I would pay twenty bolts of silk for one decapitated Khitan head. Khitan elite soldiers number no more than 100,000, which would cost only 2 million bolts of silk, and the enemy would be exhausted.” The logic behind this statement is that fiscal resources can be converted into military resources; with sufficient fiscal resources, the comprehensive national strength of the Chinese empire far exceeds that of the northern Khitans. However, the ultimate demise of the Song Dynasty three hundred years later tells us that such a conversion process is not only nonlinear but also limited. In the post-World War II era, failures of the United States in Vietnam and the Soviet Union in Afghanistan both indicate that even with a clear advantage in military and economic resources, a superpower can lose a war if its political will cannot be sustained.

Therefore, I advocate for using scenario-based methods to define the formula for calculating comprehensive national strength. Let’s consider three potential scenarios for the world in 2035: maintaining the status quo, a new Cold War, and a hot war. In a scenario where the status quo is maintained, economic factors have the greatest weight in comprehensive national strength, followed by political factors, with military power being relatively less important. In a new Cold War scenario, the weight of economic factors decreases, while the importance of political and military factors increases, making them roughly equal. In a hot war scenario, military factors have the greatest weight, political factors are secondary, and economic factors have the least weight.

Finally, there are several technical factors that need attention in the calculation and comparison of comprehensive national strength.

For example, when discussing economic scale, we should not use the GDP data published by individual governments, nor should we use the purchasing power parity (PPP). Instead, we should calculate based on the output of each country’s tradable sectors. This approach avoids the misleading effects of statistical discrepancies and the large cross-border price differences in non-tradable sectors.

Additionally, in the calculation of economic and military power, we should place a high emphasis on the leapfrog changes in power dynamics brought about by technological breakthroughs. Behind these technological breakthroughs, besides supply-side factors like financial and human resource investment, demand-side factors are often underestimated or neglected. In fact, whoever controls the main share of the global market in relevant fields can provide the application scenarios and capital cycles necessary for the iterative evolution of major new technologies. During the Cold War, the Soviet Union found it difficult to surpass the United States in technological innovation precisely because it was always at a significant disadvantage on the demand side without realizing it.

Moreover, political power is not only related to a country’s own governance capabilities but also significantly depends on the cyclical rise and fall of global political ideologies. This is the notion that “when the times are favorable, everything aligns; when fortune declines, even heroes are constrained.” Before 1980, the global political trend leaned left, giving the Soviet Union a clear political advantage. Newly independent countries preferred to align with the Soviet Union, and many elites within the Western bloc were also sympathetic to Soviet ideals. After 1980, neoliberalism became the dominant political ideology, and the Western influence overshadowed the East bloc. Following the 2008 global financial crisis, which discredited American-style neoliberalism, the West itself lost confidence and became divided and confused. Even though China has no intention of actively promoting its development model as a global template, many developing countries have spontaneously shown interest in China’s path to modernization. Some countries aim to replicate China’s special economic zones and investment attraction strategies; others are interested in its military development or the party school system and grassroots party-building practices. The prevailing trends in global political thought and governance models significantly amplify or diminish the international influence of relevant major powers in various fields such as alliance building, brand value, international voting, and espionage activities.

Based on the aforementioned methodological considerations, my team has recently undertaken a qualitative and quantitative study on the issue of “East is rising and West declining”. While detailed and comprehensive calculations are ongoing, I will offer some preliminary viewpoints due to space constraints.

The trend of “East is rising and West declining” is valid. As long as China’s policy adjustments are appropriate, this trend is likely to continue in the future, potentially even accelerating.

The rise of the East is primarily driven by China, followed by India, while the ascent of other countries is not as significant, especially in comparison to China.

The decline of the West is systemic and trend-based. If we consider the United States as the core of the West and countries like Europe and Japan as its periphery, the long-term decline of the West in the post-Cold War era has a clear process from the periphery to the core. In other words, the periphery withers first, followed by the core. Conversely, the rise of the East starts with the emergence of China as the core, subsequently driving the ascent of other non-Western major countries.

The root cause of the West’s decline lies within itself, rather than external factors, particularly due to the inherent flaws of neoliberal political economy. These flaws have led to the relocation of leading core industrial and technological sectors, internal social divisions, fiscal constraints, and the disintegration of political consensus.

Today’s Chinese people are fortunate to live in such a rare era of great transformation and to be able to contribute to it in their own way. How lucky we are!

References
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Di Dongsheng
Professor of International Relations at Renmin University of China. Distinguished Fellow at the International Monetary Institute, Renmin University of China
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The China Academy Picks
Top picks selected by the China Academy's editorial team from Chinese media, translated and edited to provide better insights into contemporary China.
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