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China’s Century?

After watching the unbelievably beautiful, complicated and artistic Olympic opening ceremony in China, people are starting to realize that this country of 1.3 billion people, after decades of misrule by Mao and the Communists, could be on a path to becoming the dominant world power. They have had record growth rates of around 10% a year for almost thirty years, and while they remain Communist in name, there is nothing communist about how the country’s economy operates. So, after the American century, are we about to experience the century of China?

Since the end of the Cold War China has seen its world position skyrocket. Not only has their economy continued to boom, but the American trade deficit has grown by five times, as Americans buy more and more Chinese goods. This deficit is financed in large part by China’s investment in American markets, helping China build a large current account surplus, as well as a large saving rate. All of this suggests that despite the pressures of poverty and population, China’s economy is far from spent; in fact, it is reaching a position where it could allow its currency to appreciate, shift from foreign markets to its internal market, and balance export led growth with domestic economic improvement. The US, with a large current accounts deficit (though declining a bit thanks to the dollar’s recent weakness), would be further pressured by less Chinese investment in the US economy, perhaps sparking inflation along with recessionary pressures (i.e., stagflation — made even more likely with high oil prices). Even now the Asian economies appear to keep booming even as the US drifts into a crisis of unknown proportions.

Geopolitically, China’s position is as good as ever. American errors in Iraq have not only bogged the US down, but have increased anti-Americanism world wide. This has broadened China’s appeal in the EU, as well as wtih Russia and Iran. Russia and China have always been rivals, but they both have interests in the stability of Central Asia, minimizing American power in the Mideast, and building a strategic partnership with Iran. In Asia, China is the dominant economy, and its influence is even working to improve relations with Taiwan, and the two economies are increasingly linked (suggesting a ‘unification’ may not be out of the question down the line — but one of choice, not force). China’s political leaders now have a strong argument against the military concern for the US: the US experience in Iraq shows the limited usefulness of military power in the 21st century, and the US is so over-stretched that it is in no position to challenge China in Asia or really anywhere. China can undercut US policy directed to Iran without worry over any American retaliation — both politically and militarily, the US cannot afford to confront China.

China’s military is not especially large, given the size of the country, nor is it likely to engage in the kind of interventionism world wide that has weakened the US. They not only put respect for sovereignty as a primary principle, but they recognize that military adventurism is not worth the price. Better to make deals and leverage economic clout. That’s actually how the US achieved so much in the 20th century, military actions have in general hurt the US, including Korea, Vietnam, and of course recently Iraq.

To be sure, China faces hurdles. Some are external: China needs oil, wood and other raw materials. This has lead to a proliferation of agreements between China and various African states, as well as aggressive Chinese deals in the Mideast. As oil prices rise, however, it will stress and even threaten all fossil fuel based economies. China, also harmed by alarming rates of pollution growth, is starting to look at alternate sources of energy (and has for awhile) but they rely on the outside world for raw materials.

Others barriers are internal: hundreds of millions Chinese are still living in poverty, and this could threaten stability. One reason democracy is unlikely to work in China is that these millions could skew elections, and create destabilization or even chaos. But as the middle class grows in wealth and number, they will demand a say on political matters. The Chinese Communist Party will have to manage political reform as adeptly as economic reform to assure that the 21st century will be the “Century of China.” Ultimately, the Communist Party, who despite ditching communism has remained in power because of fear of national fragmentation, will need to give up its grip on authority. It’s unlikely that they will embrace democracy of a western style, but they will need to find a way to share authority and open up the country’s political system. They don’t have to meet our standards, but they have to make sure the Chinese people are satisfied.

Also, if the economic growth continues to poison the earth and water in China (as well as contributing to things like global warming), they could find themselves with ecological disasters that undercut the progress they make. Finally, they need to balance their own love of sovereignty with the globalized political economy they benefit so greatly from.

Finally, corruption has thrived as the economy has expanded. This hasn’t led to the problems corruption often causes, since economic growth has been so intense that there is money to spare. But to really become a stable, long term world power, they need to have rule of law that limits corruption.

In all, though, the Chinese should be thrilled by the attention they are receiving, and are justified to take it as an omen that their Olympics began at 8-8-08, at 8:08 PM — eight being a lucky number in China. Things could go wrong, challenges exist (as they do for every country), but right now China’s future looks bright.

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