Is China today doing what the US did yesterday?

When democracies lose economic power democracy itself is weakened.

global economy, world economy, global chess board, China, United States, Europe, anti-democratic rhetoric, Wen Jiabao,
Hu Jintao may be shorter than Obama but China still makes the smartest moves on the geo-political global chess board.

This year China, the world’s largest dictatorship, overtook Japan to become the second largest economy in the world and replaced the United States as the world’s top manufacturing country.

The US on the other hand, as we all know, has a huge budget deficit and its credit rating has been down graded. China is the largest holder of US debt, so no wonder it’s showing its power.

Fiercely Chinese anti democracy rhetoric

Chinese state-owned media openly blasted the US and the failures of the West. Even warning Chinese citizens about the dangers of democracy.

Following the U.S. debt deal, Chinese newspapers provided some of the most biting anti-Western, anti-democratic commentary. For example:

“The West can no longer cover up its problems. The rise of emerging powers is challenging Western dominance. However, the West only tries to deal with these problems by highlighting past achievements. Political reform is unlikely to make any more progress in the U.S. than in other countries — despite the illusion of change that comes as parties rotate with elections … Western countries are losing the authority of their democratic system.”

Contrast that to statements supporting the US dollar coming out of Japan, the second largest holder of US debt.

China buying Europe at bargain prices?

Not only does China hold a lot of America’s debt. Chinese premier, Wen Jiabao, has also thrown the euro zone a vital lifeline and pledged to buy billions of euros of European debt to keep the single currency project alive.

And unless someone else, like Saudi Arabia or India, start buying continued Chinese purchases of U.S. and European government bonds will be essential to maintaining global financial stability.

“Stable Europe vital to China”

When Chinese Premier Wen Jiabao was on a tour of European capitals recently, he stressed that a stable euro zone is vital to China, Europe’s friend.

From Beijing’s perspective, when it comes to Europe, self-interest and altruism actually coincide.

If China were to buy, say, half of all outstanding Greek sovereign debt (for a bargain of around $220 billion), it would not only resolve the euro zone’s problems and add to Chinese prestige but it would contribute to giving Beijing the kind of reserve asset it needs to diversify its holdings out of dollars.

And it’s interesting to note that as a result of U.S. and European actions in financial markets, there is now the possibility that China could buy even sensitive assets from Europe, at bargain prices.

Money makes the world go round

China is today able to do what the US did yesterday i.e. sequence and prioritize policy objectives across a great number of sectors and focus on achieving them, ignoring distractions, and not allowing events or passions to hijack national attention.

China continues to produce and Westerners keep on consuming on borrowed money, not least from China, which is an equation that doesn’t add up. Soviet communism declined because the economy didn’t add up but that’s not the case with China whose economy is capitalistic while the government keeps a firm grip on power and its people. Most likely the majority of Chinese would like democracy, but for China to become a functioning democracy is nevertheless way into the future since their government will crush dissent.

What’s the strategy of the West?

Today America and Europe are suffering from lack of vision and strategy and seem unable to resist the next big battle in Washington or Brussels and the desire to take on yet another complex security challenge (maybe Syria) to distract from the more important geo-strategic challenges of the day.

China stays on track — and the West seems unable to come back

Not only is the Chinese economy performing very well, they are also partly bankrolling the West. And money talks.

The US, Europe and India are the worlds largest democracies and China is the world’s biggest dictatorship. It does matter who has the best performing economy in the world. To ignore that would be a fatal mistake. But for some reason it seems Western politicians are not able to make an effort to stop power slipping away. That the center of the world is moving East has been obvious for a long time, but what surprises me is that the West doesn’t seem to be able to come up with a strategy to stop, or at least delay, it. What’s your opinion? Is China’s geo-strategic policies making them the winner of the geo-political global chess game? Do you believe China is taking over the West? Or will Western politicians get their act together and, again, start start making intelligent moves on the global chess board that work? If not, it will be a set back for democracy.

(Photo: United States Government Services – Flickr)

30 thoughts on “Is China today doing what the US did yesterday?

  1. There's no question that China has been helping to stabilise Western economies: it needs to if they are to continue to buy Chinese-manufactured products. Furthermore, owning so many Dollars and Euros, it doesn't want to see these lose too much value.

    However, China's also facing its own problems: inflation is running at 6.5% now and could go higher. The Chinese property market looks very much like the Japanese one did before that bubble burst some years ago and domestic consumption is still not nearly enough to keep the wheels of industry turning if Western markets enter a further deep recesssion, or even depression (as some are forecasting). Most commentators seem to believe that if the Chinese economy really ran into trouble there would be a level of unrest that the government there could not control, so it's absolutely critical for the Chinese government to keep the economy growing.

    Key to this is probably propping up the big Western economies, just because of their buying power. I'm not sure it's so much a case of the Chinese wanting to take over the West (the last thing they want is all the freedom of expession the West has!), as of the Chinese supporting the West to keep itself stable.

    We live in interesting times…

    1. Good and correct points Guy. But they don't address the issue that China today is following in America's footsteps and implementing the geo-political strategies outlined in Zbigniew Brzezinski's book "The Grand Chess Board" that has been the basis of US geo-political policies since Jimmy Carter was president.

  2. China knows it will not stay in business very long if it puts its customers out of business. A very plausible argument was made by Fareed Zakaria on GPS on CNN about not being too concerned about China dumping US Bonds or engaging in a withdrawal. However, plausible arguments and reassurances have always been red flags for me. (No pun intended.)

    Europe has a different problem. A piecemeal approach. Instead of a round table where they all face each other, a better approach would be to site side by side and look up at the blackboard. We learned more in school with that approach, businesses performed better with that approach, and the EuroCrats should use that as a metaphor to shift their strategy.

    China buying Greek Debt would be a brilliant tactical move–from the standpoint of China.

    Meanwhile, I've been watching the steady decline here in the US as we embrace one ideological solution after another to solve problems we did not have until we had the solutions for them.

    Democracy may erode in the West as a tactical manoeuver to accomplish something. [In a time of extreme crisis people look to a leader, not to a committee.]

    As far as the US is concerned, we can learn a very important lesson from the Greeks.

    "Those whom the gods would drive mad they first give them everything they want."

    Slim
    My recent post You Can't Lead if You Can't Manage

    1. Glad you agree with me Slim. China will not dump US bonds, by the way. What they are doing now is simply implement Zbigniew Brezinski's geo-political strategies outlined in The Grand Chess Board. As you know his ideas have been the basis of US geo-political policies since Jimmy Carter was president. But instead of doing what's good for corporate America China is doing what's good for corporate China and the party.

      1. Each time a read a critical remark about China's economic policies in the WSJ, I post a response on The Side Street Journal to the effect that China does what is good for China. There was a time when we said, "What's good for GM is good for America." That was met with derision. Not so when now that we are looking for jobs and GM is doing the hiring.

        We often do things like that here in the States. We used to say that crime is a social problem as the crime rate skyrocketed. When we finally said, crime is a criminal justice problem, the crime rate plunged. (Not ironically, prosperity moved in.)

        That was then, this is now. When we finally decide that economics is an economics problem and not a social problem and deal with it as such, our economy will improve and so will our social problems.

        Regards,

        Slim
        My recent post Side Street Journal 16 August 2011

  3. I agree with earlier posts that China is buying influence into the public policy of developed nations/consumer nations to help keep their economy strong. The difference from Jimmy Carter era and I would argue that it should be attributed more to Kissinger's concept of nation building than to Carter is that the U.S. strategy was based on placing dictators or anti- government rebels into oil rich nations to affect policy. That did not work out so well; Shah of Iran, Bin Laden and Saddem Hussein are the examples. China is using its economic power not its covert military power in creating a global stability that favors its economic interests. Its governmental structure also gives them flexibility. They achieved market share in building solar panels because the government funded the expansion by taking funding away from other government owed industries. In the western world, we need private enterprise to fund our expansion- two very different processes and the current political dysfunction in the west is affecting private enterprise’s willingness to fund these projects thus China has become a stronger economic power. Chinese policy is conceptually similar to the Carter- era but strategically employed differently.

    1. Glad you agree with me Robert that China's geo-political strategies are similar to US policies since the Carter era. Wasn't trying to say that China today operates like the US during the Carter era but that their objectives are the same i.e. based on Brezinski's ideas. Can actually not help wondering if China would have used it's enormous military power today to further it's interests if they could. Catch is the US military capacity prevents that. Remember Tibet? As you know, that's where the "Chinese gold" comes from.

      Agree with you completely that, to quote you, "In the western world, we need private enterprise to fund our expansion- two very different processes and the current political dysfunction in the west is affecting private enterprise’s willingness to fund these projects thus China has become a stronger economic power."

  4. Another thought provoking article Catarina. I agree with you about China not being distracted. They have been focused for years unlike the west and I also read in the paper the other day that they will not dump US bonds. I am not sure whether China will take over but at the moment you can see the west does not appear to be doing a lot strategically as they are so focused on their short term problems. Because of this I would not be surprised if Europe looks to China to ease some of the financial problems.
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  5. The approch of China is not to compair with The US. China is a peaceful country that never attack other country. China and her government is taking care of the country. All your thoughts are far to complicate. China comes from a very poor country with too many mouth to fill with many people with lack of education since 1949, used by the West to produce their cheap crap that they even in the end are not able to pay for and complain about the quality that they themselves was asking for, to a more development country and all Chinese want this development and they all want very quick and this can only when it is under strong controll happen and be a success and stay a success for all the Chinese but also for the world. You should live here to feel what is going on here. China and Chinese need the controll that is there at the present. China will controll the world with more responsibility than the West ever did. See what they achieve in some African countries. How afraid was HK and the Hongkongnees when China became the ruler and what is HK now. More booming than ever.

    1. Gerbrand, you forget that China invaded Tibet for its minerals. Currently they simply cannot attack another country due to the US military migth. If they did it would start World War III.

      However, they are, like they should, implementing the same geo-political strategies the US has followed since Carter was president i.e. they do on the global chess board what's good for corporate China and the party. And that's the intelligent thing to do for them and any other coutnry. Let's hope you are right and China will not attack other countries in the future when they are the main super power.

  6. This is another thought provoking post Catarina. I am very surprised to learn that it’s taken so long for China to replace the U.S. as the world’s top manufacturing country. Manufacturing has been pretty much dead here for years in favor of inexpensive labor.
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  7. I admit Catarina that I don't stay up on the current news, I find it too depressing the majority of the time. I always know if something major happens I will find out about it through my friends and family.

    Just last week though a friend sent me a video that had been used as a commercial but was yanked off the airwaves. It was about China and how they've been bailing the US out for decades it seems. At the end of the video the guy just looked at us and said, "we own you". I found that so scary but the more I know, the more I realize that has become our reality. Not a very good feeling if you ask me.

    You definitely share some very interesting topics on your blog. I guess your place can be my "go to" place for the news! If I want to know something, come ask Catarina. 🙂

    Adrienne

  8. What might curb China's advance where its power is concerned politically as well as economically is how it deals with its own people, the huge economic disparities that exist in its own country, and the tensions between the ruling classes and the many peoples of various ethnic backgrounds. There are more and more unrests, which are often violantly suppressed and the government does all possible to try and limit what leaks to the outside world. Another pressing problem is demographic – China today has one of the fastest ageing populations which brings with it a whole range of social and economic problems. Sabine

    1. Maybe Sabine. Funnily enough we have those problems in Europe as well. However, unlike us, the Chinese regime don't have to worry about public opinon when it comes to how it handles dissent. Time will tell.

  9. It is a myth to say that China has not invaded any nation…..Tibet, India, Vietnam…do we need more examples? The sabre rattling in South China Sea/ Taiwan, Sprattlys, Indian Ocean exploration etc. further buttress this demand. China has propped up some of the most authoritarian regimes in the world…..N Korea, Myanmar, Pakistan, Iran, Nepal Maoists and sundry terrorist groups in South Asia are all beneficiaries of China’s clandestine Military and Nuclear largesse.

    To be frank…the Chinese nurse a grouse against the West and Japan…born partially out of a perceived and real sense of injustice. The Middle Kingdom ever since Mao took over has largely managed to convert it’s diversity in population in to a Han dominated monolith. The Cold War and the China-Russia spat during these times led Kissinger/ Nixon duo to placate China in order to checkmate USSR. This was a win-win situation for both which led China to gain acceptability and respectability in the Western world. Post Tienanmen Square incident where the world was forced to take notice, China initiated course corrections, the results of which we see now. ….a capitalist economy sustained by captive labour and large scale copyright infringement, and managed by a rigid government under the ever watchful eyes of a jingoistic PLA.

    China has dumped goods abroad on a large scale, reverse engineered equipment and manufactured them in millions which led to increased purchasing power leading to hungry purchases abroad…mines in Africa, oil wells in South America, Ports in Sri Lanka, Pakistan, Madagascar, US Treasury bonds and now, European debt….Doesn’t this convince the esteemed readers about the truth in Catarina’s theory about the Chinese implementing the strategies outlined in Zbigniew Brzezinski’s book “The Grand Chess Board” ? My tuppence please.

  10. Good points Lou. Actually reluctantly am beginning to think that maybe it wouldn't be such a bad idea if China and India became the new super powers asap. If the next president in the US gets rid of your Supreme Court the shift to the east may as well take place now:-)

  11. I'm not sure that I'm well-read enough to even comment on this situation, but I don't think it's as simple as China "owning" the US simply because it holds a big portion of our debt. China can't just sell of it's debt and screw over the US – it would lose both its ability to manufacture at costs that encourage foreign investment, as well as its customer base if it puts the US in a worse position economically.

    Quite frankly, I see the whole situation as unsustainable – not just because the US can't continue to take on so much more than it spends, but also because China can't keep up with the natural resources it uses/destroys forever and because limitations on birth rates will have significant ramifications in 20-30 years when overall population declines.

    Guess we'll all just have to wait and see how this plays out…
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    1. China doesn't own the US, Sarah. Only part of your debt. What's going on is that they are, like the US has done for a long time, implementing long term geo-political strategies to further corporate China and the party on the global chess board.

  12. On a related note. The Pentagon noticed that China is building a Navy. They suspect that China may be wanting to expand it's influence beyond Asian waters.

    This reminds me of one place I worked where one employee was a power lifter. Another was a body builder.

    "The guys" tried to get them to have an arm wrestling match. One said he never lost a match. (He never said he was in one. He just said he'd never lost one.)

    The other didn't arm wrestle. [Although he and I pretended to have an arm wrestling match and he pretended to find me a worthy opponent, however, as his arm was the size of my leg, that was for laughs. Still, there was one "kid" who wanted to know if I really thought I could win.]

    This is analogous to US-Chinese Relations. There is little to make me believe that there will ever be a war between us. There was never a "war" between the US and the Soviet Union. Although we did not do well on the soft tactics, propaganda, and such. We can expect to do just as poorly in "global relations" against China as we did with the Soviet Union.

    I had a teacher who said, (1965) "Don't ever believe that The Soviet Union and China will go to war with each other. They never did. However, now the Soviet Union is Russia once again.

    We won't go to war with China. How will we do with Global Relations with other countries, vis-a-vis China. If our track record is any indicator, not well.

    "Those who forget history are doomed to repeat it." Santayana
    "Those who never learned history are doomed–period!" Slim Fairview

    Sincerest regards,

    Slim
    My recent post You Can't Lead if You Can't Manage 2.0

    1. Good point Slim. It just shows that China is intent on using military might, like the US did in the past. Besides, being a future super power they will need military might.

  13. Wow, there's a lot to digest here.

    I've been working in Korea for 1.5 years & have gained some insight into Asian economies.

    The bad news is that we keep doing the wrong thing: shipping jobs to low labor countries where the economic strategy is based on exporting.

    The good news is that the Asian ascent won't last forever: inflation and worker expectations are on the rise; & Asians are not intuitively innovative. They think in the box to maintain their "fast follower" economic strategy.

    So i still have faith in Western "entrepreneurism" if we use it to keep jobs at home & don't ship the technical know how off-shore.

    We have to turn the China's of the world into consumers – not just labor sweat shops to keep prices low for Westerners.

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