When China Rules the World

by Martin Jacques

  No sooner had the new century begun than two developments suggested that a major change in their relationship was likely, even though it did not appear immediately obvious that this was the case. First, the Bush administration abandoned the previously consensual multilateralist US foreign policy in favour of a unilateralist policy that, amongst other things, embraced the principle of pre-emptive strike. The US turned away from its previous espousal of universalism and towards a nationalism which denied or downplayed the need for alliances. The new strategy placed a priority on military strength and hard as opposed to soft power, a position made manifest in 2003 with the invasion of Iraq. The principle of national sovereignty was subordinated to the desirability of intervention for the purpose of regime-change. A new and aggressive America was born. [1169] In the event, an overwhelming majority of nation-states opposed the invasion of Iraq and, according to global opinion polls, an even more decisive majority of their citizens. As the occupation faced growing opposition and was perceived to have failed, the United States became unpopular to an extent not seen in the sixty years since the Second World War. [1170] Second, around 2003-5, the moment of China arrived, as global awareness of its transformation, and the meaning and effects of that transformation for the rest of the world, suddenly began to dawn. By accident, these two developments happened to coincide, thereby serving to accentuate their impact. [1171] It was widely acknowledged that China was on the rise and there was a slow dawning that the US was not as omnipotent as had previously been thought. There was a growing perception that the balance of power between the two countries was starting to shift in China ’s favour. [1172] The mood in the United States towards China grew more uncertain. [1173] James Mann, in his book The China Fantasy, challenged what he described as the ‘Soothing Scenario’, namely the consensus which holds that engaging with China through trade will be to the political and economic advantage of the United States and will ultimately result in a free-market, democratic China. Mann argued that, notwithstanding China ’s market transformation, it by no means automatically followed that China would become democratic. [1174]

  The general mood of uncertainty and unease was accentuated by the credit crunch which started in summer 2007 and which a year later brought the American financial sector to its knees, with illustrious names like Lehman Brothers going bankrupt and the few remaining American investment banks forced to renounce their status — Goldman Sachs, the favoured bank of recent US administrations, amongst them. In an extraordinary volte-face, the government announced a huge bail-out of the financial sector, marking the demise of the deregulated neo-liberal regime which had been the calling card of American capitalism since the late 1970s. In a few spectacular weeks the Anglo-American model had imploded, plunging the Western economies into a serious recession. The fact that the US had been living well beyond its means — and relying on Chinese credit in order to do so — underlined both the fallibility of American prosperity and the shift in the centre of economic gravity from the United States to China.

  GROWING CONFLICT

  There are a number of issues that seem likely to shape US attitudes towards China and increase the possibility of conflict between the two countries.

  The first concerns American attitudes towards globalization. In the 1990s globalization was seen in the US as a win-win situation, a process by which the US left its imprint on, and gained advantage in its relationship with, the rest of the world. In effect, it was something that the United States exported to the world and then reaped the benefits from at home. [1175] Now, however, globalization is seen more and more like a boomerang that is returning to haunt the US. [1176] Previously, the US was regarded as the overwhelming agent and beneficiary of globalization. Now the main beneficiary is perceived to be East Asia, and especially China. [1177] Through globalization, China has transformed itself into a formidable competitor of the United States, with its huge trade surplus, its massive ownership of US Treasury bonds, its consequent power over the value of the dollar, and the fact that it has undermined key sectors of American manufacturing industry, with growing numbers of workers being made redundant. The widening controversy over the value of the renminbi, the safety of Chinese exports such as food and toys, and the frequent accusations of ‘unfair’ competition, are a reflection of growing sensitivity towards China. [1178] This is not to suggest that the balance of American opinion has shifted significantly as yet. The winners, above all the US corporate giants that have moved their manufacturing operations to China and the consumers who have benefited from China prices at home, still considerably outnumber the losers and in any case enjoy much greater power. [1179] But this could change. The political consequences of spiralling commodity prices, especially oil prices, which were brought to a premature end by the credit crunch, could, if they had continued, have turned American attitudes towards China in a more negative direction. More pertinently, the threat of a serious and prolonged depression is already leading to growing demands for protection. [1180] It is striking that, even before the credit crunch, the number of Americans who thought that trade with other countries was having a positive impact on the US fell sharply from 78 per cent in 2002 to only 59 per cent in 2007. [1181]

  In the longer term, as Chinese companies relentlessly climb the technology ladder, the US economy will face ever-widening competition from Chinese goods, no longer just at the low-value end, but also increasingly for high value-added products as well, just as happened earlier with Japanese and Korean firms. [1182] In that process, the proportion of losers is likely to increase rapidly, as will be the case in Europe too. Such a development could undermine the present consensus in support of free-trade globalization and result in a turn towards protectionism, the most important target of which would be Chinese imports. [1183] The impact of the depression, however, suggests that this process may already be happening. If the United States did resort to protectionism, one of the key planks in the Sino-American relationship since the early eighties would be undermined. It would also signal a more general move towards protectionism worldwide and the end of the phase of globalization that was ushered in at the end of the 1970s. The failure of the Doha round is a further indication that this kind of scenario is possible. [1184]

  This brings us next to East Asia. There is clear evidence, as discussed in the last chapter, of a fairly dramatic shift in the balance of power in what is now the most important economic region in the world, East Asia having overtaken both North America and Europe. Nothing decisive has happened but nonetheless China has palpably strengthened its position, with even established US allies like Singapore and the Philippines now hedging and seeking a closer accommodation with China. Only two countries, in fact, have tried to resist being drawn closer to China — Japan and Taiwan, though both have become deeply involved with China economically. Furthermore, it is clear that, notwithstanding the presence of a large number of its troops, the American position on the Korean Peninsula has weakened as South Korea has moved much closer to China and the US has been forced to depend on China playing the role of honest broker in defusing the nuclear crisis in the North. The wider significance of these developments in terms of Sino- US relations is that East Asia has, ever since the last war, been a predominantly American sphere of influence, threatened only by a relatively isolated China during the Maoist period and, of course, the US’s defeat in the Vietnam War. This can no longer be presumed to be the case. East Asia is now effectively bipolar. The fact that the US ’s position in East Asia has declined could well have knock-on effects for its commitment to Taiwan, potentially even undermining it. [1185] The waning of American influence in East Asia also has implications for its position globally, on the one hand serving to embolden China and on the other acting as a marker and signal for other nations. As yet, there is little sign of any clear American response to these trends, although the Obama administration seems to recognize their importance. The US has been hugely distracted by its entanglement in the Middle East and, as a consequence, ha
s neglected its position in East Asia. [1186]

  China, meanwhile, has slowly begun to emerge as an alternative model to the United States, a view which the Chinese have cautiously promoted, though in a manner very different from the kind of systemic competition that characterized the Cold War. The growing American emphasis on hard power, especially since 2003, has made it increasingly unpopular in the world and created a vacuum which China in a small way has started to fill, not least with its embrace of multilateralism and its emphasis on its peaceful rise. [1187] China ’s pitch is essentially to the developing rather than the developed world, with its offer of no-strings-attached aid and infrastructural assistance, its respect for sovereignty, its emphasis on a strong state, its opposition to superpower domination and its championing of a level playing field. As a package these have a powerful resonance with developing countries. [1188] The main plank of American soft power is the stress placed on the importance of democracy within nation-states: China, by way of contrast, emphasises democracy between nation-states — most notably in terms of respect for sovereignty — and democracy in the world system. [1189] China ’s criticism of the Western-dominated international system and its governing institutions strikes a strong chord with the developing world at a time when these institutions are widely recognized to be unrepresentative and seriously flawed. Most powerfully of all, China can offer its own experience of growth as an example and model for other developing countries to consider and learn from, something that the United States, as the doyen of developed countries, cannot. East Asia apart, there has been a significant shift of power and sentiment away from the United States and towards China in Africa and Latin America. This should not be exaggerated — it remains embryonic — but it is, nonetheless, significant. Meanwhile the spectacular collapse of the neo-liberal model in the financial meltdown has seriously undermined the wider appeal of the United States, notwithstanding the exhilarating and uplifting effect of Barack Obama’s election as president. And the fact, more generally, that the American-run international economic system has been plunged into such turmoil as a result of a crisis which had its origins in the United States has served further to accentuate the loss of American power and prestige. [1190]

  Finally, there is the question of China ’s military strength. This has been persistently highlighted by the United States. The Americans attach greater emphasis to military power than anything else, a position which is reflected in their continuing huge military expenditure and the importance they place on maintaining overwhelming military strength in relation to the rest of the world. In the 2002 National Security Strategy of the United States of America, such massive military expenditure is advocated in order to ‘dissuade potential adversaries from pursuing a military build-up in hopes of surpassing, or equalling, the power of the United States ’. [1191] The fact is that American unipolarity is overwhelmingly a military phenomenon. [1192]

  The American argument that China is determined to develop a strong military capacity of its own, beyond what is needed in the context of Taiwan, plays on the fears of many nations, especially in East Asia. China ’s size and cohesiveness, together with its history of authoritarian rule, arouse doubts enough in the minds of others, so the suspicion that China is also embarked on becoming a military superpower could help to tip the balance of perception towards something closer to paranoia. The political purpose behind the annual Pentagon statements on China ’s military spending, as well as the not infrequent warnings from members of the Bush administration, [1193] has been to create a mood of doubt and distrust, playing in part on old Cold War fears about the Soviet Union. [1194] In fact China, as we have seen, has hitherto opted for a different path, one that emphasizes economic growth rather than military capacity. Although it has undertaken a major modernization of its armed forces, the twin objects of this have been to ensure that China can respond by force if necessary to any declaration of independence by Taiwan, and to pose a sufficient deterrent to any external power that might otherwise contemplate attacking China. [1195] Both of these are long-established concerns, the first a product of the civil war, the second a function of China ’s ‘century of humiliation’ and its overriding concern for its national sovereignty. China ’s ability to develop a powerful military is also seriously constrained by the fact that its own technological level remains relatively low and that its only source of foreign arms, given the EU embargo and the US ban, is Russia. [1196] As a result, China is much weaker militarily than Japan. It still does not even possess an aircraft carrier, a crucial means of power-projection, unlike ten other countries in the world that do — including the UK, which has three. [1197] True, as China ’s power grows in East Asia and it acquires new responsibilities and commitments there and elsewhere, its military strength is likely to expand in tandem, but how much and in what ways is difficult to predict. [1198]

  The danger is that at some point the United States and China will be drawn into the kind of arms race that characterized the Cold War and which produced such a climate of fear. There is no doubt that the United States feels rather more comfortable on the terrain of hard power than China, first because its military superiority is overwhelming and secondly because the language of hard power is deeply inscribed on the American psyche — partly as a result of the Cold War and partly as a consequence of the violent manner of the country’s birth and expansion, as exemplified by the frontier spirit — in a way that it is not on the Chinese. [1199] But there are dangers here for the United States too. The fundamental problem of China for the US is not its military strength but its economic prowess. This is what is slowly and irresistibly eroding American global pre-eminence. [1200] If the US comes to see China as primarily a military issue then it will be engaging in an act of self-deception which will divert its attention from addressing the real problems that it faces and in effect hasten the process of its own decline. [1201]

  These four issues — the United States ’ attitude towards globalization; the shift in the balance of power in East Asia; China ’s emergence as an alternative model to the US; and the issue of military power — do not lie at some distant point in the future but are already beginning to unfold; nor do they exhaust the likely areas of friction. As China ’s power and ambitions grow apace, the points of conflict and difference between the US and China will steadily accumulate. Such is the speed of China ’s transformation that this could happen more rapidly than we might expect or the world is prepared for: China-time passes rather more quickly than the kind of time that we are historically accustomed to. It is not difficult to imagine what some of these points of difference might be: growing competition and conflict over the sources of energy supplies — in Angola or Venezuela, or wherever; an intensifying dispute over the expanding strategic partnership between the United States and India; Chinese firms, awash with cash, threatening to take over American firms and provoking a hostile reaction (as happened in the case of the oil firm Unocal); the Chinese sovereign wealth fund, its coffers filled with the country’s huge trade surplus, seeking to acquire a significant stake in US firms that are regarded as of strategic importance; [1202] and a pattern of growing skirmishes over the militarization of space. [1203] Moreover, China being culturally so different from the United States, in a way that was not nearly as true of the USSR, only adds to the possibility of mutual misunderstanding and resentment. Furthermore the fact that China is ruled by a Communist Party will always act as a powerful cause of difference as well as an easy source of popular demonization in the US, with memories of the Cold War still vivid. [1204] Any serious, protracted depression could serve to heighten the prospect of friction as countries, in the face of stagnant living standards and rising unemployment, become increasingly protectionist amidst a rising tide of nationalist sentiment. [1205]

  Potentially overshadowing all these issues in the longer run is the growing threat of climate change and the need for the world to take drastic action to reduce carbon emissions. Under the Bush administration the United States
adopted a unilateralist position on this question, refusing to be party to the Kyoto Protocol or accept the near-universal body of scientific opinion. As a developing country, China was not required to sign the Kyoto agreement, but now that it is the largest emitter of greenhouse gases its exclusion is unsupport able from a planetary point of view. [1206] Any new climate treaty will be meaningless unless it includes the United States, China and India. But any agreement — involving inevitable conflict between the interests of the developed countries on the one hand and the developed on the other, with China the key protagonist for the former and the United States for the latter — will be very difficult. [1207]

  If relations between the US and China should seriously deteriorate, any attempt that might be entertained to exclude China from the present international economic system would simply not be an option. China has become so deeply integrated into global production systems that it would be well-nigh impossible to reverse that process. Chinese manufacturing has become a fundamental element in a complex global division of labour operated by the major Western and Japanese multinationals, which presently account for a majority of Chinese exports. The fact that the value added in China (30 per cent or less) is only a small proportion of the total value added because of the extremely low cost of Chinese labour means that any attempt to impose sanctions on Chinese exports, for example, would inflict far greater economic harm on the many other countries involved in the production process, especially those in East Asia, than on China itself. [1208] Powerful evidence of China ’s integration has been furnished by the global recession: from the outset its involvement was regarded as fundamental to any solution and its continuing rapid growth has been seen as vital in limiting the severity of the recession. One might add that the US ’s options are also limited in East Asia. If it decided to start pressurizing its East Asian allies — such as the Philippines, Singapore and Indonesia — to move away from China, it is not at all clear that it would meet with a positive response; indeed, it is conceivable that such a move might even be counter-productive because, in the event of being forced to choose, these countries might opt for China as the rising power in the region. Finally, if the United States chooses to become more confrontational with China and engages it in an arms race, this could well harm the US ’s global standing rather more than China ’s, which is what happened in the case of the invasion of Iraq; and China, for its part, might simply refuse to be drawn into such a military contest. [1209] The problem for the United States, meanwhile, is that China ’s relative economic power, on which all else depends, continues to grow in comparison with that of the US.