China surpasses America as the biggest economy. What next?

The rise of China as a global power over the last 30 years has led to much speculation about what this meant for the existing global order. China with it’s 1.3 billion people, and huge growth has fast become the world’s largest economy based on PPP according to an FT report which cited data from the IMF. Most economists had foreseen this happening as late as 2019. The US has been the world’s largest economy since it took over from the UK in 1872. Wild speculation surrounds what this would mean for stability in the region, and further what this shift in balance of power means for the world at large. The Chinese economy’s state controlled nature appears to offer in some sense a greater ability for quick movement; one only needs to look at the stale mate over the US fiscal cliff to see the apparent advantages of having no political opposition. But is this speculation founded on solid interpretation of both Chinese future economic growth and related expected expansionist intentions? On one hand the guzzling of resources in Africa, and her new power in international affairs appears to suggest they are. On the other, one might question whether such sky rocketing growth can continue, and whether such an amazing expansion of the middle class will be so easy to manage as the previous CCP’s citizenry of poor.

China surpasses the U.S.

China surpasses the U.S.

It is easy to hyperbolize about the huge implications that the rise in BRICS has, or MINT (Mexico, Indonesia, Nigeria and Turkey) or even “The Next Eleven”, (MINT plus Bangladesh, Egypt, Iran, Pakistan, Philippines, South Korea and Vietnam). But such speculation often overblows the potential for unlimited growth built on extrapolation without expected change and underplays political hurdles countries in various stages of development need to overcome. China’s growth between 1980 and two years ago, was consistently around 10%. Robert W.Fogel, Nobel laureate in economics, forecasts that Chinese economic output would be a huge seven times that of the US by 2040. Jim O Neill, Goldman Sachs strategist who coined the term BRIC, denies those who reject prospective Chinese growth, arguing that urbanization is fuelling the growth and that with plenty of room for urbanization, this will continue. But is such relentless growth realistic? If this is even possible, China must overcome several pretty large hurdles to make it so. First of all, it needs to continue unprecedented growth. Secondly it needs to maintain internal stability whilst doing so. History appears to suggest that large increases in wealth across a population tends to lead to an increase in those who desire greater access to political power. This is coupled with the fact that substantial democratization is, with few exceptions, generally accompanied by decreasing growth. Figures of around 7% this year show signs of such a slowing, and around 60 million empty homes suggest a potential housing bubble on the horizon. China is also huge (roughly the same size as the whole of Europe), travel around the country and one can feel vastly differing levels of central government control. Hot spots like Hong Kong and Beijing are very much in the monitoring gaze of the central party, but travel around the south and west and one finds areas that are much more difficult to effectively tax and direct.

Should China continue to grow however, are fears about it’s potential international influence founded? Well, this is, as articulated, a big if, but if it does continue to grow one might rightly expect greater influence in the region and across the world. But China, unlike the US and European powers has historically displayed rather more internal focus. For millennia, China has been insular, so much so that there was general surprise when the British turned up with advanced weaponry and machinery. So far, China seems intent on being involved through trade, but politically has been most notable internationally for its vetoing of UN action, along with Russia in Syria. This can be read, when coupled with a lack of appreciation for western discussion about human right abuses in China, as a clear sign that China believes in the absolute sovereignty of a government with regards to its people and area. The Confucian basis for Chinese society is useful to note here. Confucianism with its stability held on high does not lend itself to military expansion. Of course this is of no tonic to those in the region who feel China has regularly done that, but it does indicate at least something when it comes to questions surrounding shifts in balances of power and what they may mean for the rest of the world. Another argument for stability comes from the intertwined nature of modern global economies. Chinese investment is global, not least in the buying of US debt, China needs global growth in order to prop up its own. With this in mind, what is perhaps more useful is to view the whole nature of modern international relations in a state of change. Modern elites are less than ever concerned merely with their own governments’ economic outlook, borders may be national, but finance is less and less so. If China were to truly dominate the global stage, it would do so with a very different global environment than previous new empires. In summary, China is unlikely to seek to dominate the world in the same way the US and Great Britain have, it is more likely to continue its subtle (and not so subtle) capitalist building. To do this, it must work with and not against current powers.

By Jack Simpson

Tags: , , , ,

Categories: Asia, North America

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