CHINA’S GRAND STRATEGY

THE STATE OF THE WORLD: ASSESSING CHINA'S STRATEGY

George Friedman

Stratfor, March 6, 2012

Simply put, China has three core strategic interests. 

Paramount among them is the maintenance of domestic security. Historically, when China involves itself in global trade, as it did in the 19th and early 20th century, the coastal region prospers, while the interior of China -- which begins about 100 miles from the coast and runs about 1,000 miles to the west -- languishes. Roughly 80 percent of all Chinese citizens currently have household incomes lower than the average household income in Bolivia.

Most of China's poor are located west of the richer coastal region; this disparity of wealth time and again has exposed tensions between the interests of the coast and those of the interior. After a failed rising in Shanghai in 1927, Mao Zedong exploited these tensions by undertaking the Long March into the interior, raising a peasant army and ultimately conquering the coastal region. He shut China off from the international trading system, leaving China more united and equal, but extremely poor.

The current government has sought a more wealth-friendly means of achieving stability: buying popular loyalty with mass employment. Plans for industrial expansion are implemented with little thought to markets or margins; instead, maximum employment is the driving goal. Private savings are harnessed to finance the industrial effort, leaving little domestic capital to purchase the output. China must export accordingly.

China's second strategic concern derives from the first. China's industrial base by design produces more than its domestic economy can consume, so China must export goods to the rest of the world while importing raw materials. The Chinese therefore must do everything possible to ensure international demand for their exports. This includes a range of activities, from investing money in the economies of consumer countries to establishing unfettered access to global sea-lanes.

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