When most of the Western world is still struggling with economic recovery, China with deep pockets is buying up the world’s resources and business assets, including some of the West’s iconic companies such as Smithfield Foods and Club Med. China’s massive foreign direct investment is projected to reach as much as $1 trillion to $2 trillion by 2020. It is receiving red-carpet treatment in Africa, Latin America and Europe, including Greenland, which has modified its minimum wage rules for China’s workers in order to secure much needed investment projects. .
In the United Kingdom, China already owns 9% of Heathrow, according to the Financial Times. Additionally, China is waiting to develop a huge swath of land adjacent to London’s City Airport to turn it into something like a financial centre for China’s outgoing companies Click here.
In New York, the families of Chinese property developer Zhang Xin and Brazil’s banking empire Safra have bought a 40% stake in the iconic General Motors Building for about $1.4 billion.
China’s growing global influence is not limited to buyouts. According to the World Intellectual Property Organization 2012 Report, for the first time, China tops the world in the filing of patents, trademarks and industrial designs. According to the Royal Society, China will surpass the United States in citations in scientific literature by end of this year. This is perhaps not surprising. Adding some seven to eight million university graduates a year, China is expected to have nearly 200 million university graduates by 2020, more than the current workforce of the United States.
Even the dollar’s dominance since the Second World
War is now beginning to be challenged. While the Renminbi still accounts for a
miniscule proportion of world trade, there are now more currencies moving in
tandem with the Renminbi instead of the greenback, making it a de facto “reference
currency” Click here. The global influence of the RMB is likely to grow rapidly with its
quickening internationalization through currency swaps, use for trade
settlements and issuance of RMB-dominated bonds and financial instruments. China’s
State Council has recently called for a detailed roadmap to achieve full convertibility
of the RMB by 2015 Click here
A further measure of China’s growing clout is in geopolitics. For example, rivalling America’s Trans-Pacific Partnership (TPP) which initially excludes China, a “Regional Comprehensive Economic Partnership (RCEP)” is set to be formed by 2015, consisting of the 10 ASEAN Member States and its Free Trade Agreement Partners (Australia, China, India, Japan, the Republic of Korea and New Zealand), absent the United States.
This shows that notwithstanding recent discord with some ASEAN states over territorial disputes, China remains the dominant regional trading partner at the centre of a globalized production and supply chain, supported by the location of an overwhelming majority of the world’s top container ports.
This reality is further buttressed as Nicaragua has just awarded a Chinese firm a 100-year concession to build an alternative to the Panama Canal, according to a report in the Guardian on 6 June, 2013. The new canal, to be built through the waters of Lake Nicaragua, is expected to have more than double the size of the vessels that will be able to pass through the Panama Canal even after its current widening at a cost of $5.2 billion.
Another example is the influence of the Shanghai Cooperation Organisation (SCO) in Central Asia, with China and Russia playing a leading role. Originally set up primarily to fight regional terrorism and separatism, the SCO now encompasses trade, economic, financial, cultural, diplomatic and military exchanges outside anti-terrorism. Now, India, Pakistan, Iran, Afghanistan, and Mongolia have become Observers; Turkey, Belarus, and Sri Lanka are Dialogue Members; and ASEAN, CIS and Turkmenistan, are Guest Attendees. What distinguishes the SCO is the significant Islamic representation. At a time of the rise of Islam worldwide, both as a geopolitical force and as growing Islamic economies, this gives the SCO special gravitas to balance the influence of NATO in the region.
Eight out of ten of the world’s fastest growing economies are now in Africa, where China’s footprint is ubiquitous Click here. In 2012 China surpassed the United States as Africa’s largest trading partner with a two-way trade worth $200 billion. With state-sponsored packages of financial loans and various forms of aid, grants, and investments, China has been contributing massively to capacity-building of a host of poor African countries in terms of roads, railways, power plants, as well as schools, hospitals and agro-technology centres, out-sizing those of the World Bank. China’s state-run radio and TV network has the largest number of bureaus in Africa than any other country. There are now twenty-eight Confucius Institutes in Africa, still counting, as well as a “Peace Corp” type program for Chinese young volunteers.
(See David H Shinn and Joshua Eisenman, China and Africa: A Century of Engagement, University of Pennsylvania Press, 2012 and Deborah Brautigam, The Dragon’s Gift: The Real Story of China in Africa, Oxford University Press, 2009)
There are eight extensive “special economic zones” throughout Africa which are set up by various African states with China’s help and management. These are not all for extractive industries. For example, the Ethiopia Eastern Industrial Park houses, amongst others, a Chinese company which, in partnership with the China Development Bank, will invest $2 billion over 10 years to develop shoemaking clusters for world-class brands such as Tommy Hilfiger, Guess, Clarkes and others. This is slated to have a potential of generating 100,000 local jobs (Financial Times, 3 June, 2013). This is in answer to accusations of China’s focus on non-job-creating extractive industries and fits well with the rising costs and dwindling cheap labour pool in China.At the conclusion of a summit in Durban on 27 March 2013, the BRICS countries announced the formation of a new development bank targeting Africa. Each BRICS member is already proactively engaged in the young and dynamic continent. If successfully constituted, this new BRICS initiative is likely to balance against the West-dominated Bretton Woods institutions of the World Bank and the International Monetary Fund (IMF) with their not entirely successful record in driving growth in the developing world. Click here
According to the U.S. Department of Defense’s 2013 Annual Report to Congress, China has dramatically improved a wide-range of military capabilities including Anti-Access/Area Denial (A2/AD), C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance), survivable long-range nuclear deterrence, nuclear submarines, guided missiles, stealth fighters, complex-environment information-warfare (IW), cyber warfare, space warfare, and civil-military integration. Although China’s comprehensive military strength still lags decades behind the United States in terms of cutting-edge technologies and global reach, it is beginning to pose a balance against US force projection in near-theatres of China’s core interests.
In the East and South China Seas, China appears to be adopting a more robust stance in guarding her vast territorial claims. This is supported by a fledging blue-water navy with plans to build multiple aircraft carriers and the developing of longer-range transport planes. It is instructive that recently China openly acknowledges that her navy is patrolling within the 200 nautical-mile exclusive economic zone of the United States, around Guam and Hawaii, in much the same way as US navy has been doing the same around China.
Perhaps the most dramatic shift in global gravitas is the surge of the Emerging and Growth Leading Economies (EAGLEs), of which China is clearly leading the pack. According to research by BBVA, a Spanish bank, the EAGLEs and NEST countries (upcoming-EAGLEs) are together expected to contribute 68% to world growth between 2012 -2022. China and India are each expected to represent a higher share than the U.S., while the G7 economies together will add a mere 16% Click here. Goldman Sachs estimates that by 2050, the combined economic weight of the six EAGLEs, what may be called the E6, would be over two and half times more than the economies of US, Japan, United Kingdom and Germany put together.
The picture is unlikely to change much even with the advent of robotics and 3-D printing. Such technologies will not generate a lot of employment and China, for one, is also embracing such technologies, for example, in aeronautics.
Nor would the table be completely turned with the recent American shale gas revolution Click here, even if the environmental costs of fracking could be contained Click here. This is because China is likely to remain by far the largest customer. Besides, China’s shale gas reserve is 50% more than the United States, albeit in more difficult terrain. The U.S. is sharing its fracking technology with China in order to grow the global shale gas market for both. (See Thierry Bros, After the US Shale Gas Revolution, Editions TECHNIP, Paris, 2012)
Nevertheless, whether China will “rule the world” (Martin Jacques, 2009) remains highly debatable. China has repeatedly affirmed that she does not and will never seek hegemony. Moreover, the country’s host of critical challenges both domestic and global, including corruption, inequalities, vested interests, monopolies of state-owned enterprises, financial repression, shadow banking risks, pollution, resource scarcity, an aging population profile, and worsening relations with neighbours, leave little room for illusions of grandeur.
China appears to want to play the role of a leading responsible stake-holder in the global commons. She has become the largest contributor of peace-keeping forces amongst Permanent Members of the Security Council. She is instrumental in brokering the six-party talks on North Korea and is recently beginning to take a keener interest in addressing conflicts in the Middle East.
In any event, in an increasingly connected, inter-dependent, and multi-polar world, the time for hegemony by any country is past. The spirit of the times requires balancing and cooperation with a host of state and non-state actors, allies and rivals alike.
However, China is clearly growing too big to
be an elephant in the room. Zbigniew Brzezinski, a doyen in American foreign
policy, puts forth a “Strategic Vision” of how the United States should
re-balance the world.
First, America should act as “promoter and guarantor” of a renewed “Larger West” by drawing Russia and Turkey into the European Union through gradual democratization and eventual conformity with Western norms. Paving the way for Russia to join the World Trade Organization (WTO) would be part of this strategy. At the same time, he emphasizes the importance of a strengthened Europe by deepening the unification of the EU through close cooperation among the key players of France, Germany, and the United Kingdom.
The second, and inter-related, strand is the “Complex East”, where U.S. best interest would be served by acting as “regional balancer”, “replicating the role played by the United Kingdom in intra-European politics during the nineteenth and early twentieth centuries.” Seemingly echoing America’s “Asian pivot”, he suggests that the United States “should help Asian states avoid a struggle for regional domination by mediating conflicts and offsetting power imbalances among potential rivals”. His ideal solution is through a “U.S.-Japanese-Chinese cooperative triangle” to be nurtured through progressive, but lasting reconciliation between China and Japan, similar to that between France and German and between Germany and Poland after World War II. In this context, “the guiding principle of the United States should be to uphold U.S. obligations to Japan and South Korea while not allowing itself to be drawn into a war between Asian powers.”
Whether Brzezinski’s formula will work or not remains to be seen. But what is clear is that the world’s pendulum is swinging from the West to the East and from the advanced to the developing countries. A “Great Re-balancing” is already taking place around the globe.
As a historic tide is turning when a rising power is perceived to challenge the interests of an extant power, China and America can ill afford to fall into the classic “Thucydides Trap”. Named after the Greek historian who wrote the History of the Peloponnesian War (431-404 B.C.), this saw war occurring in 11 out of 15 cases since 1500 whenever a rising power emerged to challenge a ruling power. Click here
In a fractious and uncertain world, there are so many global issues for closer cooperation and coordination between American and China. They may not need to go to bed together but they should always feel comfortable enough to call on each other for a drink and a chat. Comfortable mutual trust and understanding always trump dangerous suspicion and miscalculation, especially in an Age of the Great Re-balancing.
Perhaps this is the real stuff for Obama and Xi’s tete-a-tete at Sunnylands in California.
