INTRODUCTION TO CHINA:
CHINA GROWS AS AN ECONOMIC POWER
The U.S. has been the King on the Hill most of my life, and especially after the end of the Cold War with the USSR. Today, our nation appears to be becoming a diminishing giant. During the first decade of the 21st century, foreign policy blunders and the financial crisis have humbled our international stature. Our “capitalistic” economic model has a big black eye and is struggling to stand once again. Our once mighty dollar totters at the mercy of China and oil-rich countries.
Will China replace the U.S. as the world’s hegemony, economic rule setter and enforcer? What will the world order look like under their leadership? China’s concept of society and policy is:
Community based rather than individualist,
Constraining rather than liberal,
Authoritarian, not democratic.
Their national pride will not stand for an international perception that their policies sway in response to U.S. demands. Delicate diplomacy must allow a perception of two equal powers; that our two economies are interdependent and inseparable. Perhaps a name change for the game will be required: Two Kings on Two Hills.
Let’s observe the changes in China. China has become a major world manufacturer, foremost financier and a leading investor worldwide. They have the cash after years of surplus trading with the U.S. and hold more than $2 trillion in foreign reserves (67% of which is estimated to be in U.S. treasuries).
They have become a competitor and low cost supplier. Their economy now accounts for 11.7% of the world’s total goods and services produced. The size of their economy is expected to pass Japan as number two and to unseat the U.S. in the next two decades. China recently overtook Germany as the world’s #1 exporter, and surpassed the U.S. as #1 auto buying market (their auto sales were up 54%). Portugal, Italy, Greece and Spain (PIGS) complain they cannot compete with China’s cheap labor and undervalued currency. Ergo, their economic morass.
China’s economy has continued to grow while much of the world has been in recession. They import more and more raw materials (such as crude oil and iron ore, driving world commodity prices of these raw materials up 40% in January. Their industrial output was up 19.2%, enabling them to export 18% more in December of 2009.
Yet, most of their people are still poor. The average income is up, but it is still only 12-14% of U.S. income, lower than Turkey or Colombia, and only a bit higher than El Salvador or Egypt. To reign atop their own hill, they must continue economic grow and maintain their social cohesion and political unity. This is apparently not guaranteed, as deep tensions and inequalities could derail progress. Government must deliver steady economic gains to the vast majority of their population, as growth of less than 8% could unleash social unrest. Thus far, their growth has been aided by an undervalued currency and a huge trade surplus (March, 2010 was the first month of a trade deficit in six years).
If the economic game is not renamed, will China knock us to second tier? If so, would democracy and human rights lose their place as a global norm?
Or, might the U.S and the world’s future hold greater respect for national sovereignty, more tolerance for national diversity and/or continued experimentation with different economic models?
Might China shift from making cheap stuff to innovation and inventing advanced products and technologies?
Future articles will address the loss of preeminence for the U.S., the weakening dollar, delicate trade negotiations, careful diplomacy regarding North Korea and Iran, accords on global warming and competition for the world’s resources.