Question: Is China rapidly building up its military to guard the trading routes and global investments it needs for robust economic growth?

1. No
2. Yes

The answer to this simple question—they will get much harder—is of course yes. China's imperative to protect its trading routes begins with what former Chinese president Hu Jintao once described as China's “Malacca Dilemma.” Here, a little economic history is in order.

For the first three decades after its communist revolution in 1949, the People's Republic of China subsisted as a backward agrarian nation that traded very little with the world. During this autarkic phase, China had no need to import foreign oil—it had its own significant reserves, relatively few cars, and very little manufacturing.

In 1978, then vice premier Deng Xiaoping began to create an entirely different reality with what he called China's “second revolution.”1 This economic revolution would establish a particularly unique brand of state-run capitalism with very distinct Chinese characteristics. The essence of Deng's mercantilist strategy was to set up special economic zones for trading and then heavily subsidize China's exports from these zones—all the while fiercely protecting China's own domestic markets from foreign competition.

At the same time, to ensure a cheap source of labor for Chinese enterprises, Deng smashed Mao Zedong's “iron rice bowl” system. This “iron rice bowl” had been the hallmark of Chinese communism, guaranteeing jobs and housing and free health care and pensions for hundreds of millions of workers; but it was swept away in Deng's bid to make China more competitive in world markets.

The results of China's great leap forward into a mercantilist state capitalism would be nothing less than astonishing. China's economy would grow close to 10 percent annually, year after year, for more than three decades, in what would be the most impressive economic expansion of any country in history—ancient or modern.

This decades-long growth spurt has transformed China into the world's undisputed factory floor—it surpassed the United States as the largest economy in 2014.2 China's rapid industrialization, coupled with its critical dependence on heavily subsidized exports to fuel its growth, has also made China just as heavily dependent on, and highly vulnerable to, a global supply-and-delivery chain linked by the major seas and oceans of the world.

Just consider that, as the world's largest manufacturing nation, China has also become the world's largest oil importer. Today, over 70 percent of China's petroleum imports—along with almost half of China's energy needs—must travel first from Africa or the Persian Gulf, then pass through one of the most infamous maritime choke points in the world—the Malacca Strait.

This strait, situated between the Malay Peninsula and the Indonesian island of Sumatra, is an extremely narrow and relatively shallow five-hundred-mile stretch of pirate-infested waters linking the Indian Ocean to the South China Sea. Through this narrow and perilous gateway to Asia passes not just most of China's imported oil (along with much of the oil for Japan and South Korea) but also more than sixty thousand vessels annually carrying some one-third of world trade. This volume of traffic is almost three times that of the Panama Canal and more than double that of the Suez Canal.³

China is, of course, keenly aware of its “Malacca Dilemma.” Indeed, in November of 2003, China's president Hu Jintao accused “certain major powers” of seeking to control the strait to the disadvantage of China and called on the People's Liberation Army (PLA) to develop new strategies to insulate China from foreign coercion.⁴ According to scholar Ian Storey: “Thereafter, the Chinese press devoted considerable attention to the country's ‘Malacca Dilemma,’ leading one newspaper to breathlessly declare: ‘It is no exaggeration to say that whoever controls the Strait of Malacca will also have a stranglehold on the energy route of China.’”⁵

Map 3.1. The Malacca Strait, through which most of China's imported oil and more than sixty thousand vessels carrying some one-third of world trade passes. Control of this strait has given rise to China's “Malacca Dilemma.”

The highly congested and easily blockaded Strait of Malacca is, however, hardly China's only maritime dilemma. As the world's largest consumer of raw materials, China must likewise import vast quantities of commodities like alumina, cement, copper, lumber, nickel, and iron ore from far-flung continents like Africa and South America.

Just consider the millions of tons of copper that China imports each year from Chile—China consumes almost half of the world's annual production. This key industrial metal must travel by ship first around South America's Cape Horn, then past Africa's Cape of Good Hope, through the Indian Ocean, and finally around the southern part of Indonesia on a sixty-six-day journey traveling over fifteen thousand nautical miles.

Of course, to propel its heavily export-dependent economy—over 50 percent of its gross domestic product is trade-related—China must likewise export over two trillion dollars of its products annually into large markets like Europe and the United States and into smaller markets in Africa, Latin America, and across Asia. Over 80 percent of these “Made in China” products travel by sea, and many of China's container ships must pass through other key choke points like the Panama and Suez Canals and the Strait of Gibraltar.

It is precisely this increasing vulnerability to disruptions in its trade that taps into China's deepest fear—that some type of naval blockade will be imposed by a hostile foreign power seeking to exert economic, political, or military pressure on China. As to what foreign power China believes might ever take such a step, there really is only one with the global military capability—the United States of America.

We must next ask if China's deepest fear is also a legitimate one—or simply the paranoia of an authoritarian regime famously prone to paranoia. This is a critical question for our investigation, because if Chinese Communist Party leaders truly believe a foreign power has both the capabilities and the intention to use a blockade strategy to bend China to its will, these leaders will, at least in their own eyes, be perfectly justified in building a military fully capable of defeating any such blockade—and by implication, defeating the United States Navy itself.