The Chinese Economic Miracle and Thucydides’ Trap

Victor Luca

14-Apr-20, revised 16-Jan-25

Unpublished

Over the past 40 years China has been able to master almost every technological area.

More than 2,500 years ago the Athenian historian and Military General, Thucydides, in his history of the Peloponnesian War, concluded that “It was the rise of Athens and the fear that this inspired in Sparta that made war inevitable”. Nowadays we talk about the Thucydides’ Trap in reference to the current world order and the tensions between great powers such as the United States and China.

The disintegration of the Soviet Union in the late eighties left the United States of America as the sole world superpower, leaving us with what is termed a unipolar world. The United States which has reigned supreme for the past 75 years is of course a great nation. It is commonly regarded to be the ‘richest nation in the history of the world’, although that wealth is spread very unevenly. This top ranking is due largely to tremendous scientific and technological development that occurred post World War II and the new world order established by the Bretton Woods System made the US dollar the reserve currency for the world. The capitalist machine provides strong incentives to turn scientific and technological prowess into what we call wealth.

Although Chinese civilization dates back thousands of years, the century beginning with the first Opium War (1839–1842), and ending in 1945 has been termed ‘the century of humiliation’ by the Chinese.

In 1949 China was among the poorest handful of countries in the world, its people suffering abject poverty. Following the 100 years of humiliation, quietly and without fuss, from about the 1980s, China started to change the way it did things. You could call this period the start of the Chinese industrial revolution. Europe’s industrial revolution started about 250 years earlier and now it would seem it is the turn of China.

Fast forward to today and we live in a world where almost everything you pick up is made in China. As a result of this rapid development of a manufacturing industry, the hybrid Chinese economy has become a global powerhouse and more than 800 million Chinese people have been lifted out of abject poverty. This has truly been a miracle. The other great power, America, of course doesn’t like this and it has undertaken a systematic campaign to rein China in.

Some consider China’s dramatic assent as an engineered bubble, others as China’s natural destiny. I would argue that the miracle stems from a tradition of thousands of years of technological development followed by a brief period of dormancy. The Chinese probably developed the first writing systems. They invented the compass, gun powder, paper money and made numerous other early inventions.

Yes, China may be a totalitarian state which is not ideal from the perspective of a medium sized European nation, and its human rights attitudes are continually questioned by the west. However, China is a nation of 1.4 billion people, and what suits the west, will undoubtedly not be suitable for China.

Although many criticize human rights in China we should not forget that it was only as far back as 1952 that the US state of Delaware was carrying out public floggings. Of course, it was mostly blacks that were being flogged. We should also not forget that it was only relatively recently in the west that women were given the vote, permitted to drive and even join the Bondi Beach surf club.

So it’s not like there is no dysfuntionality in the west today. We only need to look at the United States after four years of Trump followed by as many years of Biden to see how dysfunctional this ‘pseudo-democratic’ corporatized superpower has become and how close it has come to fascism. This phenomenon is likely driven by rising wealth disparity.

America has become a nation barely able to feed its own people. A nation where good education and medical care is the province of the elite and where homelessness is rife. The scourge of poverty is on display on almost any street corner of any major US city and has been for decades. The Americans have a for-profit healthcare system that consumes 20% of annual GDP and the education you get depends on how wealthy your parents are.

Brutal capitalism and wealth disparity have burgeoned in recent decades. It wasn’t Trump alone that achieved this as the gutting of the middle class probably started with the actor president, Ronald Reagan and the development of neoliberal economics in the 1970s.

America has become a nation ruled by corporations, a nation that prefers to keep people away from the voting booths while corporations send their lobbyists to Washington in droves offering bribes thinly disguised as political donations to ensure they get what they want. The bogey man is regularly trotted out to scare the population into sanctioning extravagant expenditure on a massive military-industrial complex comprising at least 750 military basis in 80 countries. In contrast, Britain, France and Russia have about 30 foreign bases combined.

In terms of arms sales, excluding China, the United States is responsible for a whopping 59% of global arms sales eclipsing Russia (8.6%), the United Kingdom (8.4%), France (5.5%), Italy (2.8%), Trans-Europe (3.7%), Japan (2.4%), Israel (2.2%), Germany (2.0%), India (1.4%), S. Korea (1.2%) and the remainder (3.4%) by a substantial margin. In contrast, the best estimates would only put China near the bottom of the top 10 arms producers.

The great American political theorist, Sheldon Wolin, referred to the control of government by corporations as ‘inverted totalitarianism‘ in reference to the fact that it is the corporations that are behind the democratic facade.

Peeling back the curtain, it is worth pondering whether China is just doing what is right for China. And boy are they doing something right, much to the chagrin of the United States. It would seem that from Harry Truman to Joe Biden the United States has had to constantly be in search of enemies. For more than half a century enemy number one has been the Russians and now the Americans are turning their attention to the Chinese.

The Americans complain about what China is doing to them, as they play the victims. The trade wars of the 1st Trump presidency were not able to take China down. US complaints about patent violations and intellectual property theft may have some validity, but they can hardly blame China for the fact America gutted its own manufacturing capability. US companies flocked to China of their own accord seeking lower production costs and access to the huge and increasingly lucrative Chinese market. China allowed this to happen but only in return for an exchange of knowledge which US companies were ostensibly happy to give away.

Therefore, today there are currently over 300 American corporations that continue doing business in China, including Tesla. These corporations didn’t go to China for no reason. They went for their own benefit and they brokered deals with the Chinese government for the privilege to tap into cheap labor and a huge market. Whether the situation reverses as international friction mounts remains to be seen.

Having accommodated US corporations has allowed China to grow enormously in the areas of telecommunications, aviation, aerospace, micro-electronics, artificial intelligence and so forth. They already are possibly leading the Americans in many of these fields and they are moving fast.

US tertiary education is a for-profit business just like ours. When I went to the US to do my post-doctoral training in the late 80s, out of a research group of 20, there were only two Americans. Most Americans opted out of science and engineering fields and into finance. Many Chinese that got educated in US ivy-league universities returned to China and set themselves up there. Today these Chinese researchers want for nothing and have research groups that are probably at least twice the size of the average US university research group. In my estimation, China is producing probably upwards of 70% of all publications in science, technology, engineering and math fields.

In the nuclear arena the latest generation of nuclear reactor to be built in the world is the French-designed 1,600 MW European Power Reactor (EPR). Construction of these reactors commenced in France, Finland and China in the mid to late 2000s. The Finish reactor project (Olkiluoto 3) commenced construction in 2005 and was more than 12 years behind schedule before finally entering commercial operation in May 2023. Construction of the reactor was originally budgeted at €3 billion and escalated to about €8.5 billion. It has been described as the second-most expensive building in human history, behind a hotel complex in Mecca. First concrete was poured for the French EPR reactor (Flamanville) in 2007 and first fuel was loaded 17 years later in 2024. It was connected to the grid on 21 December 2024. In contrast, in 2009 China started building two 1750 MW EPR reactors at the Tainshan nuclear power plant. Unit 1 was connected to the grid on 29 June 2018. Construction was on-time (less than 10 years) and on-budget.

On 27 November 2020 China National Nuclear Corporation (CNNC) announced connection of its Fuqing-5 nuclear reactor to the national power grid. This reactor utilizes China's indigenous Hualong One third-generation nuclear technology. Export of these reactors to Asia and Pakistan has commenced.

On the 28th of April of 2021 China gave its space exploration program some serious forward impetus with the launch of the first module of the Chinese Space Station dubbed Tianhe, or ‘Harmony of the Heavens’ aboard a Long March 5B rocket. This occurred at the same time as President Biden was giving his 100-day speech on 29-Apr-21. Folk lost count of how many times he mentioned China in that speech.

Most recently China started commercial production of its fully domestically manufactured passenger airliner the C919. With the C919, Beijing clearly wants to challenge the decades-long dominance of top plane makers Airbus and Boeing while reducing its reliance on foreign technology.

In the Electric Vehicle space the Chinese have overtaken Tesla in terms of output. The Geely Zeekr 007 that is about to enter production looks like it will be a Tesla killer although the awesome Xiaomi SU7 could make the same claim. The Xiaomi is Ford CEO Jim Farley’s favorite EV. Most recently the IM L2 Lightyear Edition has been launched and sports a range of 1,000 km. It is hard to keep up with China’s world-leading developments in the EV space.

More recently, the west has become concerned about reliance on Chinese manufacturing and one area of particular concern is semiconductors. In August last year Huawei released its very competent Mate 60 Pro flagship smart phone powered by the indigenous Kirin 9000s chipset which utilizes 7 nm technology.

Although China appears to be well on its way to mastering 5 nm technology it is still behind the state-of-the-art which is already at 3 nm and which is mostly being undertaken in Taiwan which China claims as its own. This of course worries the west and now the US is frantically striving to expand its semiconductor manufacturing capability. However, it is likely that China has already realized that it must move fast to close the gap and so the race is on.

The Chinese One-Belt One-Road initiative (aka The New Silk Road) is a global infrastructure strategy that is pouring billions of dollars of investment into 150 countries and will ensure that China’s products are able to get to Eurasia, India, Pakistan, West and Central Asia, Indochina and of course Europe.

Without Chinese manufacturing prowess the clean energy transition that we must have to avert the worst consequences of climate change would not be possible since it produces 80% of the world’s solar panels, 60% of the wind turbines and 58% of electric vehicles.

This unstoppable technological march, coupled with dissent over Chinese governance of Hong Kong, aspirations to take back Taiwan and domination of the South China Sea is cause for concern by the other superpower as attested to in Biden’s 100-day speech and the many subsequent pronouncements by Biden. As Biden leaves the White House and Trump takes over, trade wars are likely to intensify.

None of China’s development over the past decades has occurred by accident. It has been quite deliberately and methodically engineered by Chinese heads of state. Not coincidentally, these heads of state have been technocrats (engineers), not puppets, like Reagan the actor, and Trump the reality TV star. The last three Chinese presidents Jiang Zemin (1993-2003), Hu Jintao (2003-2013) and Xi Jinping (2013-present) have all been engineers of one form or other.

The Americans do not want a multipolar world but seek to maintain world dominance. They continue to encircle China with military bases of which they have somewhere between 750 and 800 in 80 countries, 313 of which are in East Asia alone. In contrast China has about eight foreign military bases - one in Djibouti and some on human-made islands in the South China Sea.

Meanwhile, Australia has recently signed up to the AUKUS deal to purchase eight nuclear-power Virginia-class submarines containing conventional non-nuclear missiles for a cost of an eye-watering $368 billion AUD to be spent between now and 2050.

The former prime-minister of Australia, Paul Keating, has been vehemently against this deal. He has also been very vocal in denouncing the China threat that the west is inventing. He has stated that ‘the threat of china is the fact that somehow the rise of 20% of humanity from abject poverty into something approaching a modern state is illegitimate, but more than that, by its mere presence is an affront to the United States. It is not that China presents a threat to the United States, something that China has never articulated or delivered, rather its mere presence represents a challenge to US pre-eminence’.

The war in the Ukraine has seen China and Russia enhance cooperation and collaboration. The world is becoming increasingly divided as BRICS nations (Brasil, Russia, India, China and S. Africa) move away from trading in the United States dollar which for now continues to be the global reserve currency. The BRICS nations are also expanding beyond the founding members to include Indonesia, Cuba, Egypt, UAE, Iran and possible also Saudi Arabia. With these additions the BRICS member states would account for more than 44% of world crude oil production (reference) and have a combined GDP that exceeds that of G7 nations.

China went from one of the poorest nations in the world in 1949 to being today the second largest economy after the United States (When measured in terms of purchasing power parity, it is larger than that of the US). This represents the fastest increase in GDP growth in world history. The lifting of 850 million people out of poverty from the 1980s representing the most rapid increase in average living standards of any country in the world (see International Labor Organization). And lest we forget, China is our major trading partner.

I wouldn’t live in China for all the money in the world, but I can’t help but gaze in wonderment at what they have and are achieving. Who can deny them a place at the superpower table?

My only hope is that China’s superpower status does not precipitate military action, or heaven forbid, a nuclear war. I hope that these two great super powers do not fall into Thucydides’ Trap and can work things out in a civilized manner for the benefit of all. Countries like Australia and New Zealand need to tone down their rhetoric because when you play with dragons, you risk getting burned.

Like it or not, superpower shenanigans affect us all.

BS about China being a threat

If China is a threat then why is it that the United States has close to 800 military bases in foreign countries while China has about four? Why is it that the United States is the biggest vendor of weapons and military hardware in the world?

Why is it that the Unites States has been in perpetual wars since WWII. Think Vietnam, Iraqi, Korea, Afghanistan ...? Add the proxy wars like Ukraine and complicity in the genocide in Gaza and it doesn't look pretty.

Simple logic should tell you who is the belligerent war-mongering nation.

The United States has 800 military installations in dozens of countries around the world.