China's rise: an unlikely pillar of US hegemony.

The rise of China is perhaps one of the most discussed topics in current scholarship on international politics. In many ways, it is actually an over-analyzed concept. Within Chinese political dialogue, China's return to eminence is often bandied about as a goal of national development and is expressed frequently in the speeches of Chinese leaders and documents such as CCP National Congress Reports and Government Work Reports. In addition, foreigners often worry that China's rapid economic development will present a threat to the stability of the current world order.

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Because of this, other countries, especially a United States increasingly anxious about losing its preeminence, are often even more outspoken than Chinese pundits in proclaiming the imminent rise of a Chinese pole on the global power-map. According to the 2006 report of the Chicago Council on Global Affairs, 61 percent of US citizens believe that within the next 20 years, Chinese GDP will surpass US GDP. Yet interestingly, only 30 percent of Chinese citizens hold this view. The "China threat theory" has proliferated across the globe, while Chinese people remain bewildered as to why their country is suddenly the cause for so much international concern.

Thus while Chinese citizens may revel in the glories of China's rise, from the 2008 Olympics to Shanghai's nosebleed skyscrapers, they are also seeing its side effects. Externally, they confront an increasingly hostile international community that has become critical of everything from China's development strategies to its political policies. Domestically, they confront the usual bedbugs of globalization and rapid development: rapidly increasing housing prices, traffic, pollution, and problems with product safety. Not least are the social consequences of development: people are working harder and longer, and there is a frenetic pace to urban life in China that has only arisen in the past few years. Thus, Chinese citizens have complex attitudes toward development and the rise of China. Domestically, the benefits of development are bittersweet, and criticism from the international community has led to a good deal of domestic discomfort with China's apparent rise.

Rethinking the Implications of China's Rise

There are two common views regarding Chinese development: first, that it will result in the revitalization of the Chinese nation, and second, that it is a consequence of globalization. The former is often called nationalism by Western alarmists, and has been called so since the imperial powers applied this moniker to China following the Opium War of the 1840s. The latter holds that China correctly implemented liberalization and reform policies and embraced globalization and market liberalization. One could say that Chinese development is a result of successful US policies to bring China into the world market. Regardless of whether the main catalyst was Franklin D. Roosevelt's construction of an international order based on a police force of "the Big Four" or Nixon's conception of an order based on a balance between the five great powers, the fact is that today the United States is China's principal trading partner and investor, and more importantly, Chinese reform and liberalization was conducted in an international system supported by US hegemony. Objectively, then, the United States is aiding Chinese development and helping China achieve a new position of significant power.

But how should we measure this power? Economically, GDP is not useful as a measure of overall Chinese economic strength. This is not only because Chinese per capita GDP is ranked 110th in the world, but also because there is little Chinese investment abroad and a great deal of foreign investment in China. Thus, in comparison with other developed countries, there is a large amount of "hidden wealth" in China that skews the GDP calculation. China's foreign currency reserves are huge because foreign investment in China must be made in RMB. Because of this, China is not able to make full use of its own economic strength.

A Bifocal World

Currently the world is undergoing profound and complex changes. The traditional world order is gradually unraveling, and its replacement has not yet coalesced. The 2006 World Bank report "Global Economic Prospects: Managing the Next Wave of Globalization" reported that "developing countries, once considered the periphery of the global economy, will become main drivers. Overall, developing countries' share in global output will increase from about one-fifth of the global economy to nearly one-third. Their share of global purchasing power would surpass half ... Roughly half that increase [in global trade in goods and services] will come from developing countries. This means that a growing share of global production of goods and services will be performed in those developing countries able to take advantage of new opportunities."

The theme of the 2007 World Economic Forum is "The Shifting Power Equation." The inspiration for this stems from the idea that the rising BRIC countries (Brazil, Russia, India, China) are changing the global power structure. The implication of such a theme is that the United States is in relative decline, as it is no longer the sole leader of economic development and globalization. As journalist Nathan Gardels commented in the International Herald Tribune, "globalization is no longer an American-led phenomenon. Globalization now belongs to everyone who can figure out how to take advantage of its opportunities and minimize its dislocations. American-bred technology may be its midwife, but Americans are no longer solely the parents."

China's rise is taking place in this context. That is to say, Chinese development is merely one facet of Asian and developing states' economic progress in general. Historically, the United States has provided the dominant development paradigm for the world. But today, China has come up with development strategies that are different from that of any other nation-state in history and are a consequence of the global migration of industry along comparative advantage lines. Presently, the movement of light industry and consumer goods production from advanced industrialized countries to China is nearly complete, but heavy industry is only beginning to move. Developed countries' dependence on China will be far more pronounced following this movement.

As global production migrates to China and other developing countries, a feedback loop will emerge and indeed is already beginning to emerge. Where globalization was once an engine fueled by Western muscle and steered by Western policy, there is now more gas in the tank but there are also more hands on the steering wheel. In the past, developing countries were often in a position only to respond to globalization, but now, developed countries must respond as well. Previously the United States believed that globalization was synonymous with Americanization, but today's world has witnessed a United States that is feeling the influence of the world as well. In the past, a sneeze on Wall Street was followed by a downturn in world markets. But in February 2007, Chinese stocks fell sharply and Wall Street responded with its steepest decline in several years. In this way, the whirlpool of globalization is no longer spinning in one direction. Rather, it is generating feedback mechanisms and is widening into an ellipse with two focal points: one located in the United States, the historical leader of the developed world, and one in the China, the strongest country in the new developing world power bloc.

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Combating Regionalization

It is important to extend the discussion beyond platitudes regarding "US decline" or the "rise of China" and the invective-laden debate over threats and security issues that arises from these. We must step out of a narrowly national mindset and reconsider what Chinese development means for the United States.

One of the consequences of globalization has been that countries such as China, which depend on exporting to US markets, have accumulated large dollar reserves. This has been unavoidable for these countries, as they must purchase dollars in order to keep the dollar strong and thus avoid massive losses. Thus, the United States is bound to bear a trade deficit, and moreover, this deficit is inextricably tied to the dollar's hegemony in today's markets. The artificially high dollar and the US economy at large depend in a very real sense on China's investment in the dollar. Low US inflation and interest rates similarly depend on the thousands of "Made in China" labels distributed across the United States. As Paul Krugman wrote in The New York Times, the situation is comparable to one in which "the American sells the house but the money to buy the house comes from China." Former US treasury secretary Lawrence Summers even affirms that China and the United States may be in a kind of imprudent "balance of financial terror."

Today, the US trade deficit with China is US$200 billion. China holds over US$1 trillion in foreign exchange reserves and US$350 billion in US bonds. Together, the Chinese and US economies account for half of global economic growth. Thus, a fantastic situation has arisen: China's rise is actually supporting US hegemony.