The
Western financial crisis heralded a significant shift in the balance of
power between the United States and China. Most starkly, it brought
forward the date when the Chinese economy will overtake the US economy
in size from 2027 (the Goldman Sachs projection in 2005) to 2020. The
reason is simple: while the US economy is around the same size as it was
in 2008, with the prospect of perhaps a decade of very weak growth
ahead, the Chinese economy has continued to grow at around 9 percent and
future economic growth is likely to be in the region of 8 percent.
While 2027 sounded sufficiently far in the future to sound speculative,
2020, in contrast, is less than a decade away and feels much more like
an extension of the present. The rise of China and the decline of the
United States is becoming more tangible by the year.
Significant landmarks are happening thick and fast: in 2010, China
overtook Germany to become the world’s largest exporter; in the same
year it overtook Japan to become the world’s second-largest economy; at
the beginning of 2011, it overtook the United States to become the
world’s largest manufacturing nation, a position the United States had
held for 110 years; in 2020, if not earlier, it will overtake the United
States to become the world’s largest economy; and perhaps not too long
afterwards, when the renminbi is finally made convertible, the latter
will replace the dollar as the world’s leading reserve currency. With
each landmark we move a little further away from a world shaped by the
United States and toward one shaped by China.
There has been a strong tendency in the West to see this world in
narrowly economic terms, with China assuming similar characteristics as
the United States during the process of its rise and the global
furniture that we are familiar with remaining little changed. This is to
greatly underestimate the nature and import of China’s rise. It will
not even be true economically. When China overtakes the United States,
it will still be both a developed and a developing economy; it will
continue to be a huge trading nation, on a far greater scale than the
United States; and it will be far more orientated towards the developing
world, to which it presently sends over half its exports, than
Washington has been.
Nor will the international financial system remain more or less
unchanged. The only way that the IMF and the World Bank will survive
China’s rise to economic ascendancy is if they come to reflect the new
configuration of global economic power: in other words, if, in time,
China comes to call the shots in the IMF. But even in this eventuality,
it is entirely possible that the IMF will be effectively replaced by a
different kind of body, one more in line with Chinese interests and
aspirations, along with those of other developing countries like India.
In this context, it should be noted that already, in 2009-10, the China
Development Bank and the China Exim Bank between them lent more to the
developing world than the World Bank, which suggests that the latter
could, within a decade or so, become increasingly marginalized. Then
factor in the renminbi as the dominant world currency, with Shanghai
replacing New York as the global financial centre, and we are clearly
looking at a very different world economic order.
Furthermore, the accompanying geopolitical and cultural changes are
likely to be even more profound. China may have called itself a
nation-state for the last century, but it remains primarily a
civilization-state, as it has been for more than two millennia. Whereas
the Western sense of identity is overwhelmingly shaped by their history
as nation-states, the Chinese sense of identity is rooted in and shaped
by their civilizational past. It is impossible to comprehend the very
distinctive nature of the Chinese state, and the roots of its
legitimacy, or similarly distinctive Chinese attitudes towards race,
otherwise. Likewise, to make sense of China’s rapidly changing
relationship with East Asia, it is necessary to take account of the
tributary system which was the organizing basis of China’s relations
with its neighbors for thousands of years until around a century ago.
Indeed, China’s present claim on the Spratly and Paracel Islands in the
South China Sea, which is based on inter-temporal law rather than
territorial water law, derives directly from its history as a
civilization-state. Those who believe that China’s rise to global
hegemony will in practice change little can only hold to this view by
ignoring China’s quite different history to that of the West.
Will this Chinese world be better or worse than the Western-made
world we are familiar with? In one very important sense it will be
better: while the West has never represented much more than a sliver of
humanity, China and India between them constitute 38 percent of the
world’s population. Their rise represents a huge rough and ready
democratization of the world. Nor should we fear this world because it
will be so unfamiliar to us. We need to understand and embrace it: the
sooner the better, because, willy-nilly, we have no choice. In time it
will come to pass.
Image by Ricky Qi
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