China Rising
China’s recent economic growth has been the subject of a lot of speculation and research. The rate at which businesses seem to be flying into China is staggering, but business people are not the only people who are interested in how China has grow for many years together. Students of economics now have whole new chapters in their textbooks and definitely not the least concerned are the other economic superpowers in the world that can only stand back in awe as China seems to be rising way beyond what anyone may have expected it to rise.
The period from 1966 and 1976 in China is called the Cultural Revolution. This was the time Mao Zedong, the then chairman of the Chinese Communist party decided that capitalism was ruining the country of china and he had to take rigorous measures to save the nation. Set off in 1966, this intense movement put Zedong back on top of China’s political ladder. Zedong claimed that agents of capitalism were all over china wanting to westernize the nation, and he appealed to the youth of china to help remove all these agents so that the culture of china will be saved.
In the years that followed, millions of people who were suspected of having western links were tortured and killed. The nation suffered great economic and social losses and by the time the revolution was called off, China seemed to have been wounded irreparably.
This was the setting in which Deng Xiaoping, vice premier of the State Council of China, took a visit to Singapore in 1978. Deng said he was struck at how am island country without any natural resources of its own seemed to grow just like that by just associating with the larger economic powers. Singapore also somehow attracted investment from international companies and seemed to expand economically using only financial strategy.
China, which had become extremely conservative in terms of financial strategy (and any other given field due to the influence of Mao’s extremist policies) decided to open its doors to foreign investment. Free trade was also sanctioned so other countries would come up with interest in the new markets. Although this move may have been initially received with skepticism, it turned out to be very successful. Eventually, in 2001 the whole country was opened to trade and investment, and China consequently joined the WTO.
One of the most important reasons why China got a lot of foreign investment was the low standards of living in the country. Companies that moved to countries like China and India could cut down on costs dramatically without any necessary lowering of efficient. In fact, in most sectors the companies could appear to give their employees a relatively better life while being able to cut down on overall costs at the same time. This may be the primary reason why many companies especially connected to computers and software moved a lot of their workplaces to China. This went on to the extent that only four out of twenty five top exporters in China were Chinese companies.
China has also tried hard to make the place look more physically accessible. One of the largest advantages of China is its area (third largest country in the world after Russia and the United States) but many places remained inaccessible for a long time. China had only 34000 miles of railroad in 1985 but in 2006 China increased it to nearly 50000 miles. This shows how dedicated the economy is to indulge the investors.
When you look at China’s financial strategy, you will see that this is another reason for its economic growth. They call it following capitalism from a communist view. Since the existing political system was communist, the leaders tried to merge their new interest in foreign investment without upsetting the default setting. This may have been a dangerous thing to try, for conventional economists, but somehow they could reach the delicate balance between the two and use it very much to their advantage.
The amount of money that China invested in infrastructure can no way be ignored. To improve the conditions of the country, they focused on putting money into aspects like drinking water, electricity and telecommunications. Another very significant thing that China did was to design an exchange rate policy that promoted competitiveness.
China followed all these very important measures to help sky-rocket its economy and now it looks well on track to overtake the United States as the largest economy in the world.
Will that come true? Will China pass the United States to be the largest economy?
Indeed, it is just a possibility that China may go on to pass the United States as the largest economy. It is obviously not a simple thing to do given the fact that the States have been ruling on top for the most part of a century now. The momentum clearly favors the Chinese as of now but that does not mean that things are going to be any easier for them.
The biggest reason why the United States is the most powerful economy in the world is the long-term strategic planning by their great presidents most importantly Franklin Roosevelt. After the Second World War was done, he felt that for the States to get on top and to stay there, they would have to create a system which would be difficult to overturn. Roosevelt ended up designing a system which not only helped the war-torn countries mostly of Europe recover and bring together the fallen states but also created mechanisms for prevention of future wars and assist economic growth. After this system was established, the United States went on to make use of it to maximize gains from it. West Germany and Japan were the main enemies of the United States during the Second World War. Through the reforms that the States prescribed, both these nations ended up being bound to the States through different treaties. This made sure that neither of these countries got a chance to differ from the offered system. Most of the other major countries were already allies, so they never posed any challenge. Later, when the Cold War came to an end, the United States was able to convince the leaders of the Soviet Union that joining their system would be a great thing for their economy. This was made possible mainly by the fact that the United States never owned the economic system; it merely played the role of a catalyst bringing more countries to the system. It was not exactly more money or power that the United States wanted. The most important thing that it wanted was a competition-free path. The system was equally shared between the countries that joined it, which was one of the keys to convince Gorbachev to bring Russia to the agreement. The Soviet Union’s primary concern was that unified Germany may end up being a superpower but once it was made clear to them that their joining hands with the United States and the countries of Western Europe effectively prevented that from happening, there was nothing much to stand between their ways.
The different reasons behind the longevity of this system are:
1. The system unlike the earlier economic systems that prevailed before the wars was not closed and one-dimensional. It was actually possible to join the system with an ambitious mind, because that would only help whichever country in question to improve their economic and social status. On the other hand, not joining forces with the Western system would have effectively shut down any developing country’s chances to eventually become a superpower. There were low barriers to economic participation but the possibilities seemed endless.
2. The system was based on alliances. In the past, it was one country that issued orders, but in Western system was designed in such a way that though the decision may look like it came from the United States, it actually came from a group of countries that sat together and discussed their options before it was finally given out. Now the United States being the largest economy had a very important say but decisions were not unanimous, which convinced the other countries that this may not be a bad idea at all because they are not bound to any country directly.
3. The Western system had a thick set of far-reaching rules that are very much more effective if you compare them to any other given economic system that existed before it. They also made sure that the rules are not stationary; they kept revising the rules (with the collective agreement of the other countries of course) in a few years to prevent stagnation of rules from being a problem. Plus the overall set of rules is designed in such a way that they stay compatible to the settings of most countries, be it the geographical setting, or political, religious or security-related.
Now after the Chinese, altered their system in such a way as to go hand-in-hand with the American policies, they came to the conclusion that for them to become an economic superpower, instead of breaking away from the system they had to roll with them rather than break away and try out their own luck. The long-sightedness of the Chinese helped them realize that globalization had changed the way the world works and in order to advance economically, they needed strong support from all over. They were not going to make it alone. AT the same time, the other countries could use the man-power and land that China offered, making it a mutual affair. So China’s growth has not really affected any other economy negatively.
Essentially, the first thing that China did was to take care of its security issues, getting defensively sound, while all the time trying to assure the other states that it means no harm, and proves its friendly intentions by being a part of both global and regional fraternities. Thus China not only successfully became a strong potential opponent in case of war, but also found a way to advance with the help of the other countries it had allied with. In short China learned to grow within the system rather than outside it.
The existing system is very much valuable to the Chinese. Also the economic system of the Chinese is in such a way that it goes parallel with the policies of the Western system and China is aware that no state can even dream of becoming an economic superpower if it plans to stay out of the international capitalist system or if it does not become a member of the WTO. Being part of the WTO for example protects China from the different modes of attack that an envious state could launch against it.
China’s military power and economic power, though advancing steadily, still has a long way to go to match the United States. Similarly China’s political system is still pretty much authoritarian. The significance of this is that, it would be extremely difficult for China to be a ‘glamorous’ place for say immigrants to come in. America attracts millions very year through its film industry (primarily Hollywood), very popular universities and its very many tourist attractions. But China still has a long way to go before it can draw people for its attractiveness. If you are looking from a political point of view, you will see that China still suffers from issues like red tape and bureaucracy, corruption in general, religious intolerance, lack of human inequality and democracy, and denial of human rights. While this may not sound too bad for conservative authoritarian and semi-authoritarian countries in and around South Asia, it definitely does not help China’s image in the rest of the world, the Americas and the European countries importantly. Europe was not at all amused by China’s narrow-minded stance towards Taiwan in early 2005, and this greatly affected China’s public image in the liberated countries of Europe and America.
For China to throw away this image, it is necessary to concentrate on areas like political balance, uniform justice enforcement and equal treatment of the sexes and the different religions, none of which is very simple to do in a conservative South Asian country. It is also important for China to establish itself as a preferred destination for higher education, by building more and larger universities.
The events that the prophets of economics have foretold are not inevitable. The United States can still hold on to their place of not only being the top economic superpower but also the important decision maker of economic policies.
The first and most important thing they should do is to stick to their basic system. It was very much this system that helped them get to the top in the first place. The United States should aim at continuing to champion the set of rules that will promote the concept of answering questions and solving problems collectively. And the more the United States pioneers this cause, the more the other countries will accept it as a natural leader that uses it authority to energize the weaker countries. This will lead to countries being more ready to work with the States rather than against it.
The second thing they can do is to reaffirm itself as an ally of the different smaller countries of East Asia. This will not only lead to them adding to the American side in time of need, this also would lead to very useful trade links between the countries.
Another important thing to do is to double up on the efforts to combine developing countries into the important global institutions. Countries like Brazil, South Africa and India should be given their seats at the key round-table discussions. Studies suggest that within two decades, these smaller developing countries may overtake many of the already developed countries.
While at the same time America should remember that while China may be able to overtake it economically, within a short period of time, it is not at all going to be easy for any country to overtake the whole Western system if it stands together.
The consequences. What will happen if China gets in front?
The advancement of the world in nuclear weaponry has pretty much closed out the chances of a head-on war between the more powerful countries. So the worse that could happen is economic anarchy. If economic power shifts from the west to the east, the whole system may be changed. Many rules that favor the west in terms of trade may be changed to suit the eastern countries better. But all-in-all this may not be a very bad thing for the world at large. New alliances may be formed and old ones discarded. But it is still too early to claim that this will affect the world negatively.
Also this change may not be long-lasting let alone permanent. It is difficult to stick to the same level of consistency that China somehow maintained in the last thirty odd years. China also has its own allowance of troubles. While the coastal areas are very highly developed and industrialized, China is very much unexplored if you look at its interior territories. The very high population may serve as well-needed manpower for the different industries but uncontrolled population gives you a lot of grievances to address.
China’s growth in popular media.
It is interesting, often even amusing to see how the media has portrayed how China has risen. Many Asian news sources claim that China’s rise is the biggest story of the twenty first century rating it even above 9/11 attacks and Barack Obama’s election to presidency. It is also reported that China is one of the most searched keyword in search engines in the last ten years.
Works Cited:
1. Ikenberry J. “The Rise of China and the Future of the West”. Web. 20 January 2008
2. Sharma H. “Issues in Political Economy”. Web. 12 August 2007
3. Yew L. “Challenge in the Pacific: The Rise of China”. Forbes Magazine. 8 August 2011
