CHINA VERSUS AMERICA
A week of global economic peril, concluded late last week with a sigh of relief that reverberated around the world. America’s Republican Party zealots finally backed down following President Obama’s steadfast refusal to compromise on his signature healthcare bill. Life in Washington has returned to what passes for normal, but for the risk and uncertainty of a U.S. default deferred until January.
Late last week, too, came the news that China’s economy – the world’s most important locomotive – has recovered from two lacklustre quarters to report annual growth figures of 7.8 per cent. The good sense of the UK Chancellor, George Osborne, to engage as keenly as possible with China should be self-explanatory.
Yet, these two different events portray in the simplest terms the widening gulf and relative performance of the world’s two most powerful states. That in turn is reflecting the rather expeditious way in which global power is shifting. The Obama administration made a pivot to Asia a central tenet of its term in office, a policy that was made in response both to the economic opportunities on that side of the world and the brisk growth in China’s economic muscle. China’s geopolitical ambitions are a direct threat and challenge to the United States.
Mr Obama’s tactical approach was a sound one. The fact that Washington’s bitter political stalemate has led the president to cancel two planned Asian summits this month speaks loudly for the limits on the actual power of the man – often described, erringly, as the most powerful in the world.
China, meanwhile, continues to surge ahead, its peculiar and atypical political architecture proving to be more than adequate in hauling the rest of the world out of recession.
The economic data released from Beijing has received a muted greeting from many economists: the wild and extraordinary years in which China’s economy grew at double figures are undoubtedly over, and China’s new leadership certainly does not want them back. The Chinese challenge is to keep the economy growing fast enough to maintain a strong employment market and to avoid any prospect of incomes stagnating. Protecting domestic consumption on which future growth will inevitably depend is an important factor. Dramatic growth figures, however, will make it much harder for the Chinese government to push through their plans to curb inefficient and highly polluting industries. They need just enough growth to allow the economy to become leaner and more contemporary, but not much more to allow the unreformed parts to inflate more than they already have.
In achieving this, China has the advantage, and one that is shared by all authoritarian regimes, that all the political controls and levers are in their own hands – at least notionally. And it has to be said they are managing them with impressive competence: Xi Jinping’s self-congratulatory tune that China’s economy is basically doing very well, and that the slowdown was the result of its own adjustment initiative, is largely correct.
China is still growing, and the geopolitical power is increasingly pivoting to the East. The U.S. has tied itself in knots which it will struggle to untangle if a clear budget blueprint is not now delivered.
The implications may be stark enough, but this does not necessarily mean that we should resign ourselves to a new kind of dominion in our dealings with the Far East. For centuries, foreigners who have lived in awe of China’s size and revered age performed a pandering act. We should be careful in repudiating the idea that anyone should not be nervous about doing business with say the Chinese firm Huawei, a company that is frequently accused of industrial espionage, or by embracing Chinese management of our nuclear power stations, and saying nothing of a controversial nature. Dictatorial regimes have brutal histories, and in the case of China persecuting religious minorities and suppressing Tibetan autonomy are well documented.
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