More than a century ago, Prussia rose to great power status relatively unchallenged in Europe. A few decades later, Germany was the leading power on the European continent. Its power would continue to grow, virtually unchecked, until 1914. How it did so is important when considering China's rise today.
China's economic rise gives it an imperative to secure key trade routes and to protect its overseas resources and markets, adding to the three imperatives that have historically defined the country's geopolitics. Aside from innate geopolitical constraints, U.S. action is the biggest determinant of China's decisions.
The gap between central and local interests is a fundamental concern for Beijing. Since the start of "Reform and Opening" in 1978, the distribution of fiscal and administrative power among China's central and local governments has fluctuated. With reforms on the horizon, China again faces the problem of enforcing national policies.
While the coming years will be difficult for China's economy and political system, the question remains: What kind of power will China be when it emerges on the other side of its current troubles? The question of how it will wield its considerable power might be answered by examining its dynastic history.
Chinese social stability is based on the premise of near-total employment. The need to maintain it -- or at least its pretense -- forms the bedrock of Chinese political economy, structuring the financial system, long-term industrial policy, the incentive structure for bureaucrats and everything in between.
Many have come to speculate that China may adapt to domestic and international pressures by transitioning to a quasi-democratic system like many of its Asian neighbors. While modern East Asian history offers models for ways the Communist Party might preserve its legitimacy, China is fundamentally different from its neighbors.
The slowdown in China's property sector that began in March 2014 ushered China into a new stage in its evolution. The Party hopes a highly centralized bureaucracy will help it survive disruptive economic changes to come. But can the Chinese government adapt quickly and effectively enough to China's new economic reality to stay in power?
What will China's role be in the international order five, 10 or 15 years from now? For the foreseeable future, China will remain one of the few states credibly challenging the political, economic and military supremacy of the United States and the legitimacy of the U.S.-designed and -led international order.
The key concern remains the potential impact of a default on China's financial system, but equally important is what the rising risks of default say about China's coal sector.
