T he rise of China is perhaps one of the most discussed topics in current scholarship on international politics. In many ways, it is actually an over-analyzed concept. Within Chinese political dialogue, China’s return to eminence is often bandied about as a goal of national development and is expressed frequently in the speeches of Chinese leaders and documents such as CCP National Congress Reports and Government Work Reports. In addition, foreigners often worry that China’s rapid economic development will present a threat to the stability of the current world order.
Because of this, other countries, especially a United States increasingly anxious about losing its preeminence, are often even more outspoken than Chinese pundits in proclaiming the imminent rise of a Chinese pole on the global power-map. According to the 2006 report of the Chicago Council on Global Affairs, 61 percent of US citizens believe that within the next 20 years, Chinese GDP will surpass US GDP. Yet interestingly, only 30 percent of Chinese citizens hold this view. The “China threat theory” has proliferated across the globe, while Chinese people remain bewildered as to why their country is suddenly the cause for so much international concern.
Thus while Chinese citizens may revel in the glories of China’s rise, from the 2008 Olympics to Shanghai’s nosebleed skyscrapers, they are also seeing its side effects. Externally, they confront an increasingly hostile international community that has become critical of everything from China’s development strategies to its political policies. Domestically, they confront the usual bedbugs of globalization and rapid development: rapidly increasing housing prices, traffic, pollution, and problems with product safety. Not least are the social consequences of development: people are working harder and longer, and there is a frenetic pace to urban life in China that has only arisen in the past few years. Thus, Chinese citizens have complex attitudes toward development and the rise of China. Domestically, the benefits of development are bittersweet, and criticism from the international community has led to a good deal of domestic discomfort with China’s apparent rise.
Rethinking the Implications of China’s Rise
There are two common views regarding Chinese development: first, that it will result in the revitalization of the Chinese nation, and second, that it is a consequence of globalization. The former is often called nationalism by Western alarmists, and has been called so since the imperial powers applied this moniker to China following the Opium War of the 1840s. The latter holds that China correctly implemented liberalization and reform policies and embraced globalization and market liberalization. One could say that Chinese development is a result of successful US policies to bring China into the world market. Regardless of whether the main catalyst was Franklin D. Roosevelt’s construction of an international order based on a police force of “the Big Four” or Nixon’s conception of an order based on a balance between the five great powers, the fact is that today the United States is China’s principal trading partner and investor, and more importantly, Chinese reform and liberalization was conducted in an international system supported by US hegemony. Objectively, then, the United States is aiding Chinese development and helping China achieve a new position of significant power.
But how should we measure this power? Economically, GDP is not useful as a measure of overall Chinese economic strength. This is not only because Chinese per capita GDP is ranked 110th in the world, but also because there is little Chinese investment abroad and a great deal of foreign investment in China. Thus, in comparison with other developed countries, there is a large amount of “hidden wealth” in China that skews the GDP calculation. China’s foreign currency reserves are huge because foreign investment in China must be made in RMB. Because of this, China is not able to make full use of its own economic strength.
A Bifocal World
Currently the world is undergoing profound and complex changes. The traditional world order is gradually unraveling, and its replacement has not yet coalesced. The 2006 World Bank report “Global Economic Prospects: Managing the Next Wave of Globalization” reported that “developing countries, once considered the periphery of the global economy, will become main drivers. Overall, developing countries’ share in global output will increase from about one-fifth of the global economy to nearly one-third. Their share of global purchasing power would surpass half…Roughly half that increase [in global trade in goods and services] will come from developing countries. This means that a growing share of global production of goods and services will be performed in those developing countries able to take advantage of new opportunities.”
The theme of the 2007 World Economic Forum is “The Shifting Power Equation.” The inspiration for this stems from the idea that the rising BRIC countries (Brazil, Russia, India, China) are changing the global power structure. The implication of such a theme is that the United States is in relative decline, as it is no longer the sole leader of economic development and globalization. As journalist Nathan Gardels commented in the International Herald Tribune, “globalization is no longer an American-led phenomenon. Globalization now belongs to everyone who can figure out how to take advantage of its opportunities and minimize its dislocations. American-bred technology may be its midwife, but Americans are no longer solely the parents.”
China’s rise is taking place in this context. That is to say, Chinese development is merely one facet of Asian and developing states’ economic progress in general. Historically, the United States has provided the dominant development paradigm for the world. But today, China has come up with development strategies that are different from that of any other nation-state in history and are a consequence of the global migration of industry along comparative advantage lines. Presently, the movement of light industry and consumer goods production from advanced industrialized countries to China is nearly complete, but heavy industry is only beginning to move. Developed countries’ dependence on China will be far more pronounced following this movement.
As global production migrates to China and other developing countries, a feedback loop will emerge and indeed is already beginning to emerge. Where globalization was once an engine fueled by Western muscle and steered by Western policy, there is now more gas in the tank but there are also more hands on the steering wheel. In the past, developing countries were often in a position only to respond to globalization, but now, developed countries must respond as well. Previously the United States believed that globalization was synonymous with Americanization, but today’s world has witnessed a United States that is feeling the influence of the world as well. In the past, a sneeze on Wall Street was followed by a downturn in world markets. But in February 2007, Chinese stocks fell sharply and Wall Street responded with its steepest decline in several years. In this way, the whirlpool of globalization is no longer spinning in one direction. Rather, it is generating feedback mechanisms and is widening into an ellipse with two focal points: one located in the United States, the historical leader of the developed world, and one in the China, the strongest country in the new developing world power bloc.
It is important to extend the discussion beyond platitudes regarding “US decline” or the “rise of China” and the invective-laden debate over threats and security issues that arises from these. We must step out of a narrowly national mindset and reconsider what Chinese development means for the United States.
One of the consequences of globalization has been that countries such as China, which depend on exporting to US markets, have accumulated large dollar reserves. This has been unavoidable for these countries, as they must purchase dollars in order to keep the dollar strong and thus avoid massive losses. Thus, the United States is bound to bear a trade deficit, and moreover, this deficit is inextricably tied to the dollar’s hegemony in today’s markets. The artificially high dollar and the US economy at large depend in a very real sense on China’s investment in the dollar. Low US inflation and interest rates similarly depend on the thousands of “Made in China” labels distributed across the United States. As Paul Krugman wrote in The New York Times, the situation is comparable to one in which “the American sells the house but the money to buy the house comes from China.” Former US treasury secretary Lawrence Summers even affirms that China and the United States may be in a kind of imprudent “balance of financial terror.”
Today, the US trade deficit with China is US$200 billion. China holds over US$1 trillion in foreign exchange reserves and US$350 billion in US bonds. Together, the Chinese and US economies account for half of global economic growth. Thus, a fantastic situation has arisen: China’s rise is actually supporting US hegemony.
Taking US hegemony and Western preeminence as the starting point, many have concluded that the rise of China presents a threat. The premise of this logic is that the international system predicated on US hegemony and Western preeminence would be destabilized by the rise of a second major power. But this view is inconsistent with the phenomenon of one-way globalization.
The so-called process of one-way globalization can more truly be called Westernization. Today’s globalization is still in large part driven by the West, inasmuch as it is tinged by Western unilateralism and entails the dissemination of essentially Western standards and ideology. For example, Coca Cola has become a Chinese cultural icon, Louis Vuitton stores crowd high-end shopping districts in Shanghai, and, as gender equality progresses, Chinese women look to Western women for inspiration. In contrast, Haier, the best-known Chinese brand in the United States, is still relatively unknown, and Wang Fei, who is widely regarded in China as the pop star who was able to make it in the United States, has less name-recognition there than a first-round American Idol cut.
This sort of globalization must change; otherwise it will be replaced by a system marked by a number of autonomous, regional free trade areas. Regionalization, which is encouraged by cultural diversity and political ambitions in addition to economic reasons, is more efficient than globalization in coming to agreements and improving international competitiveness. Nascent free trade areas have already been established and have also promoted regional security integration goals. The effect of this has been that after the Cold War a once-united world has parted to follow separate paths. The World Social Forum’s slogan “Another World Is Possible” has been taken up by some Latin American countries such as Venezuela, Cuba, and Bolivia. Bolivia has proposed the Bolivarian Alternative for the Americas (ALBA) in opposition to the American Free Trade Zone. Thus, regionalization is a prominent trend in the post-Cold War world.
The perception of globalization as a one-way process has generated a great deal of resistance, which has found an outlet in the creation of regional free trade areas and blocs. Because of this, global hegemony is becoming less and less feasible. If this trend of regionalization continues, the United States, while it will remain the preeminent North American power, will begin to have an increasingly less influential voice in world politics. The “concert of democracies,” NATO, or a trans-Atlantic free trade association (TAFTA) cannot fundamentally reverse this trend.
Thus, for the United States to remain powerful on a global scale, a more traditional international system must be preserved, as opposed to a system that emphasizes regional alternatives. China, because it is providing an additional focal point to the West in a globalizing world, is assuaging disgruntled anti-globalizationalists and thus, rather paradoxically, supporting the traditional international order of a globally interconnected world and market, rather than a system of autonomous regional blocs. In this way, China is providing, rather than destabilizing, the foundations of US hegemony.
A Policy of Mutual Cooperation
As I have previously noted, if Chinese foreign policy in the short run seeks to prevent the rapid decline of the United States, eventually the United States will not only give up its illusions of global grandeur, but will realize that China is an important player in the world order and indeed the one that can best guarantee the United States’ hold on power. The United States’ ultimate strategy should be one of cooperation with China in order to ensure that they both become strong regional powers. It should stop dealing with China in the same way that it dealt with Japan during the majority of the last century: as a rising power that threatens US hegemony and must be contained.
So, when considering the risks and opportunities of Chinese development, one must consider not only strength and intent, but global power structures and the macro-level implications of change in economic arenas. China presents a successful model for other developing countries to follow, not to fight but to embrace globalization in order to bring about a more just, reasonable, and harmonious international order and to avoid isolation. Regionalization cannot be sustainable in the long run, and could result in a far more unstable world than one marked by a power-sharing arrangement between China and the United States.
Thus, the greatest threat to the continuation of the stable world order of the present is not a rising China, but the failure of China to develop further. US Treasury Secretary Henry Paulson described the situation well: “the biggest risk we face is not that China will overtake the United States, but that China won’t move ahead with the reforms necessary to sustain its growth and to address the very serious problems facing the nation.” And China intends to use reform and liberalization to realize its peaceful rise. Despite regional quibbles and the occasional ruffled diplomatic feathers, it is China’s rise—through peace and for peace—that promises to sustain US global hegemony.
When it comes to building the future world order, the unraveling of the traditional order is the most significant problem for China. Contention over how to build this future world order is likely to be the biggest obstacle for future Sino-US relations. A continued misrepresentation and misunderstanding of China and its economic progress would be a strategic mistake for the United States and would likely throw China’s peaceful development off-kilter for many years to come.