As Putin stole a march
on the United States over Syria and as Obama saw his much-vaulted participation
at the APEC Summit in Bali derailed by domestic squabbles, the unspoken
question is whether this may signal a global tilt away from sole American
leadership.
To be sure, U.S.
military strength remains supreme. But this is not as decisive as it appears in
influencing which way the geopolitical wind blows. Short of an all-out war, leaders
across the globe, while welcoming an American military umbrella, tend to be
more concerned with economics and employment. The question that follows is what
would be the resultant power dynamics and what role is China capable of
playing.
In Foreign
Policy, an authoritative U.S foreign relations journal, doubts have been
expressed by such scholars as Minxin Pei,
senior associate at the Carnegie Endowment for International Peace. In
July/August 2009, he cautioned, “Don't believe the hype about the decline of America
and the dawn of a new Asian age. It will be many decades before China, India,
and the rest of the region take over the world, if they ever do.” (1).
This was contradicted
six months later in the same journal by the late Robert Fogel, winner of the 1993 Nobel Memorial Prize in Economics and Professor of
the University of Chicago Booth School of Business. He reckoned that “China’s
economy would grow to $123 trillion by 2040, or nearly three times the
economic output of the entire globe in 2000. China's per capita income will hit
$85,000, more than double the forecast for the European Union, and also much
higher than that of India and Japan.” (2).
So now, three years on, who seemed to be
right?
According to the CIA World Fact Book
(2003-12), China’s GDP per capita was $6,100 (estimated) by 2012, compared with
Japan’s $46,000 and the United States’ $50,000. China has vowed to quadruple
its GDP in two decades so as to attain the status of a moderately well-off
nation by 2020. If China’s past economic feat is repeated, catching up with
Japan if not the United States in per capita terms in 30 years seems not
improbable.
However, China, along with the
rest of Asia, is now growing at a much slower rate. Indeed, instead of a
super-charged growth strategy, the nation is changing course towards a slower
and hopefully more sustainable pace. Moreover, huge obstacles remain. Professor
David Shambaugh, a Senior Fellow at the Brookings
Institution, doubts if China under authoritarianism can achieve breakthrough innovation.
The spectre of collapse, like that of the former USSR, serves to reinforce
political inertia, entrenched by powerful vested interests including the
military and large state-owned enterprises. An assertive nationalism born of
centuries of victimhood feeds into belligerence towards neighbours (3).
Nevertheless, notwithstanding
the familiar litany of ills including corruption and pollution, the reality
remains that the productivity of a fifth of mankind is now being unleashed,
albeit starting from a relatively low base. The following facts are
instructive.
First, China is churning out some 7 million
university graduates a year. By 2020, the country will have 195 million
graduates, more than the entire workforce of the United States. Already, China
has become the world's top filer of patents and trademarks, according to the
World Intellectual Property Organization (WIPO) 2012 Report. The Royal Society
expects China to surpass the U.S in scientific citations this year.
Second, China is witnessing the fastest and largest
urbanization drive the world has ever seen. 221 new cities each with a
population of over one million will be added by 2025, compared with only 35 of
such cities in Europe at present. This will serve to grow China's massive
consumers. According to the Brookings Institution (4), the global
consumption share of the top ten countries by 2020 would be China (13%), US
(12%), India (11%), Japan (6%), Germany (4%), Russia (3%), France (3%),
Indonesia (3%), Mexico (3%) and the UK (3%). Likewise,
the McKinsey Quarterly (5) shows that urban consumers (those with $9,000
- $34,000 household income in Purchasing Power Parity terms equivalent to those in Brazil and Italy) are expected to
grow from 4% (2000), 68% (2012), to
75% (2022) of urban population.
Third, notwithstanding rising wages, China remains the hub of a global supply
and production chain thanks to its massive economy of scale and excellent global
transportation links. Five of the world's top eight container ports are in
China. A Working Paper (6) by Arvind Subramanian
and Martin Kessler of the Petersen Institute for International Economics highlights
the epochal shifts in globalization and economic power in the 21st century, in
which a rising China plays an increasing powerful role as a “mega-trader”,
reinforced by a multiplicity of regional free trade areas and agreements.
Fourth, China is quietly developing global
transportation infrastructure of epic proportions linking vast continents and
distant shores to the Middle Kingdom. A monumental railway project is being
planned linking the Port of Shenzhen to Kunming in Western China and onwards to
Myanmar, Bangladesh, India, Pakistan, and Iran, and then across Turkey into
Rotterdam in the Netherlands (7). Known as the “Third Eurasian Land Bridge”
(8), the proposed high-speed rail network will cross 20 countries and measure
15,000 kilometres, a much shorter and less geopolitically-vulnerable distance
than by sea via the Indian Ocean through the Malacca Straits. A branch line
would begin in Turkey, crossing Syria and Palestine and end in Egypt, providing
a rail link from China into Africa. In addition, a project with a
50-year concession has recently been approved by Nicaragua's
Congress to build a 286-km canal connecting the Caribbean with the Pacific via
Lake Nicaragua, at a cost of $40 billion, to be completed in 6 years (9). The
canal can serve the largest container vessels which can only be accommodated at
Shanghai’s Lianyungang as the world’s deepest container port. Notably, the
latter is planned to be the starting point of the Second (or New) Eurasian Land
Bridge which runs across the whole of China to Kazakhstan and via Russia and
Belarus over Poland to the markets of the European Union.
Finally, while America is weighed down with debt and
continues to resort to the money-printing machine, faith in the greenback is quietly
seeping away. The G20 is supporting the Special Drawing Rights to shore up the
world’s financial order as the RMB (the Chinese yuan) is speeding up its trajectory
to becoming one of the world’s leading reserve currencies. The days of dollar dominance
appear numbered (10).
Naturally,
with an aging population profile, China is likely to grow old before getting rich
in per capita terms. Assuming that China is able to overcome the so-called
"Middle Income Trap" (by no means a foregone conclusion), her per
capita GDP may well not reach beyond that of a moderately well-off country like
Turkey even by 2050. But then, if the per capita income of Turkey is multiplied
by a fifth of mankind, the economy would be larger than the United States by a
wide margin.
In
measuring a country's overall strength, per capita income alone could be a
misleading yardstick. Few know that Macao, a Special Administrative Region next
to Hong Kong, has the world's third largest per capita income (due to its mega-casino
economy). That doesn't make Macao a world power. But when China's economy with
overwhelming global connectivity grows to be the world's largest, the whole
world should be well advised to sit up and ponder.
**************************************************************************************************************************
(1) “Think
Again: Asia’s Rise”, Minxin Pei, Foreign Policy, July/August 2009 http://www.foreignpolicy.com/articles/2009/06/22/think_again_asias_rise
(accessed on 5 October, 2013)
(2) “$123,000,000,000,000* China’s estimated economy by the
year 2040. Be warned”, Robert Fogel, Foreign Policy,
January/February, 2010
(3) David Shambaugh, China Goes Global: The Partial Power,New York: Oxford University
Press, 2013
(4)
Homi Kharas, “The Emerging Middle Class in Emerging Countries,” Brookings
Institution, 20 June 2011 .
(5)
Mapping China’s Middle Class, McKinsey
Quarterly, June, 2013
(6)
Arvind Subramanian and Martin Kessler, Working Paper 13-6, Petersen Institute
for International Economics, Washington D.C., June 2013 http://www.iie.com/publications/interstitial.cfm?ResearchID=2443
(accessed on 5 October, 2013)
(7)
F.William Engdahl, “Eurasian Economic Boom and Geopolitics: China’s Land Bridge to Europe:
The China-Turkey High Speed Railway,” Centre for Research on Globalization
(27 April 2012), http://www.globalresearch.ca/eurasian-economic-boom-and-geopolitics-china-s-land-bridge-to-europe-the-china-turkey-high-speed-railway/30575
(accessed on 5 October, 2013)
(8)
The “First Eurasian Land Bridge”
runs through Russia, connecting Rotterdam to Russia’s Trans-Siberian Railway
across 13,000 kilometres The “Second (or New) Eurasian Land Bridge”
runs 10,900 kilometres including 4,100 kilometres in China, which is parallel
to one of the ancient routes of the Silk Road, linking the Port of Lianyungang
(near Shanghai) across the whole of China to Kazakhstan and onwards via Russia
and Belarus over Poland to the markets of the European Union.
(9)
Nicaragua’s
proposed canal, The Economist (5 October, 2013)
(10)
James Richards, “Currency Wars – The Making of the Next Global Crisis”, Portfolio/Penguin,
New York, 2011, Chapter 11 – Endgame – Paper, Gold or Chaos – Special Drawing
Rights, pp. 229-234.
