Duelling dynasties

Will Washington and Beijing choose mutual economic benefit over political and ideological conflict? The jury is still out.

By Michael Schuman

We all think we know how world history will play out over the next 50 years. China, bursting with nationalistic energy, will overtake the United States as the world’s largest economy and dominant superpower. The US, burdened by debt, stretched by imperial obligations and hamstrung by political infighting, will continue its relentless and inevitable decline. If the 20th century was the American Century, the 21st will be the Chinese century.

I don’t doubt that China will eventually ascend to superpower status. It’s already pretty close. But I also don’t believe China’s rise will be as smooth or effortless as so many analysts seem to believe. China is bound to suffer a few bumps and bruises along the road to global greatness. When the US was becoming a superpower, it passed through recessions, setbacks, crises, panics, even a civil war. Why would China be immune from similar ups and downs? China could be entering such a rough patch right now, as it struggles with a property bubble and potential damage to its banking sector caused by the gargantuan stimulus plan Beijing implemented to combat the Great Recession.

And the US, for all its flaws, isn’t likely to just hand the world over to China and retire from the global scene. It will fight to preserve its global influence and defend its interests. The US remains the world’s unrivalled military power and its largest and most innovative economy, a dynamic force capable of attracting the best and brightest from around the world. America has been counted down and out many times before but has repeatedly defied the doomsayers. It’s not unreasonable to assume that the US will continue to find ways to adapt and compete. China’s rise inherently means the US will undergo a relative economic and political decline, but that doesn’t mean the US will cease to be a global power.

The next 50 years, therefore, will likely be a much more muddled and complex era than the concept of a Chinese century suggests. It could very well be a time of transition, when the world is dominated by two somewhat equally matched giants, each attempting to pursue its own interests while striving to cope with the other. In my opinion, the course of the coming decades will be determined not by China’s rise alone, but by the relationship that emerges between a rising China and the US.

It is impossible to predict at this moment in 2010 which way this crucial relationship will turn. Will it be one based on mutual respect and cooperation, a partnership capable of resolving the world’s stickiest problems? Or will it descend into distrust and discord, a new Cold War between two contending powers with contradictory agendas and goals? The nature of US–China relations will affect everything and everybody: the foreign policies of every nation in the world, the structure of the global economy, and the resolution of pressing international issues such as climate change and nuclear proliferation.

The early signs don't look promising. In recent months, Washington and Beijing have sparred over a wide range of issues: the value of China's currency, trade, human rights, internet freedom and regional security. Americans generally hold a negative view of China, as a country that abuses dissidents and minorities, steals American jobs, makes shoddy merchandise and gets ahead by flouting the rules of fair play in international trade and business. Some of those perceptions are true; some are not. But in international relations perception is often more important than reality. The result is an emerging unease, even fear, among Americans about China's rise.

Those jitters have been intensified by Beijing's new assertiveness in world affairs. China's leaders have publicly questioned American economic policy, defiantly ignored US opinion on, for example, China's currency regime, and proffered reforms to the US-led international financial system, such as the replacement of the dollar as the world's premier currency. More fundamentally, to American eyes, China increasingly appears not just as an alternative centre of global power to the US, but as an alternative economic, political and ideological system. Americans believe capitalism and democracy are inseparable, and that their ideals of human rights and personal freedoms are a universal good; China disagrees on both counts. To Americans, China looks like a threat not just to US military, political and economic dominance, but also to their vision of the world.

There is some unfortunate irony in the dismay felt in the US over a rising China, since the China we know today is, to a great degree, a creation of deliberate US policy. Washington's Cold War-inspired decision to back the economic reforms of China's Deng Xiaoping in the 1980s was a key turning point in modern history. By opening up the rich US market to Chinese-made exports, Washington underpinned the success of Deng's market-oriented policies and jumpstarted China's economic miracle. China simply could not have alleviated poverty, built industry or gained its current global economic position without the support of US politicians, businessmen, consumers and investors. The US has also benefited greatly from a reformed China. American firms were able to achieve huge gains in cost savings and productivity by tapping China's vast pool of low-cost labour. That allowed American consumers to enjoy low prices for important consumer goods and an enhanced standard of living. Over the past decade, the China–US relationship has become oddly symbiotic. China has depended on exports to the US consumer to raise growth and incomes at home. In return, the US has been aided by China's reinvestment of its resulting trade surpluses back into American assets such as government debt, which has supported the value of the dollar and financed US deficits.

The result of 30 years of close economic ties is a significantly different relationship between the world's two great powers than the one that existed during the Cold War of the 20th century. Unlike the US and the USSR which formed contesting blocs that had hardly any economic connection, the economies–and thus the destinies–of the US and China are so intertwined today that economists have come to refer to the two countries in one word: Chimerica.

Here, in their shared economic interests, is where I hope the US and China will find the common ground to forge a positive relationship for the future. The fact is they have far more reason to cooperate than compete. The two nations need to work together to reduce the huge imbalances their relationship has created: excessive savings in China matched by excessive debt and spending in the US. Despite China's burgeoning bravado, it still requires American consumer spending, corporate investment and technology to uplift the hundreds of millions of Chinese still trapped in poverty and upgrade its industry to compete on a global scale. The US, too, needs a growing and accessible China for its own economic future, as a source of new customers and profits for American business.

Will Washington and Beijing choose to pursue mutual economic gain over political and ideological conflict? So far, they have. Though their leaders give each an occasional joust, the realities of their economic ties have generally resigned their contests to the background. Both sides have tried to maintain cordial, if not necessarily warm, relations. Yet I wonder if that can continue as the balance of power between China and America continues to shift. Will the two great powers find a way to share the top of the global power pyramid, or will they fight over it? The answer to that question will determine whether the Chinese century is one of prosperity or poverty.