Canada Aiding And Abbetting China's Global Ambitions...Dummies

Does China really aim to take over the world? [YES]

September 26th, 2011

Author: Peter Drysdale, Editor, East Asia Forum
If you ask the average punter in most countries around the region, from Canada through Asia to Australia, upwards of three quarters, it would appear, nominate China as the nation that will wield the most power ten years down the track.

 
 
The Chinese economy will almost certainly overtake that of the United States to become the world’s biggest economy in aggregate, though not in per capita terms, somewhere in the next 10 to 20 years, although there are few who suggest that it will match America’s military might any time soon. But does that mean that China can use its economic size to dominate the international economic system? What does China, already the world’s second-biggest economy, really want to do with its growing economic power?

The history of the rise of new economic powers, such as when the United States overtook Britain as the world’s largest economy, recommends caution about assuming that China’s size will quickly lead to its dominating the world economic system, let alone the world’s political system. It was half a century or so after the United States became the world’s largest economy that it became the dominant player in the international economic system, following the Second World War.

Yiping Huang, in this week’s lead essay, argues that what China wants is reform, not radical change, of the international economic system. This established system is a system that has delivered the opportunity for China to escape from poverty, and an unprecedented level of prosperity to more than half its 1.3 billion people. 

Far from wishing to tear down the institutions and rules which underpin the current economic order, China shares many of the economic values of the nations that uphold it, including values that relate to free trade and investment, and China’s interests are in working with the established economic powers in building what it calls a ‘harmonious world’. While some of the rules are in urgent need of reform, as the current economic turmoil underlines, there is every indication that China wants to improve the existing international economic system, not to abandon it. China has been among the biggest beneficiaries of the existing system.

The United States remains at the centre of the current global economic order. It is the leader in designing and enforcing its rules; the dollar is the cornerstone of the international monetary system; and the United States’ supremacy underpins the three institutions (the IMF, the WTO and the World Bank) that help to maintain order in the international economic system. China has made it clear that it has no intention of upsetting that system. But the world is now evolving into a multi-polar system, with a number of large economies having significant influence within the world economy. And China is one of the players that is now shaping reform of the system to deal with that circumstance, preserving United States’ centrality, but beginning to share some of the burden of making it work.

Until the global financial crisis hit in 2008, leadership burden-sharing with the United States was the prerogative of the G7 industrialised economies. The assembly of the G20 group to deal with the crisis marked a watershed in global governance, incorporating as it did China and five other Asian economies including Australia as well as important players from Latin America, the Middle East and Africa.

‘China’, Huang  observes, ‘sees the G20 as the best compromise between representativeness and efficiency for dealing with international economic issues and is interested in making it a permanent institution. The Sino–US partnership will remain a cornerstone for China’s international economic relations, but China is not ready to formalise the institutional arrangement of a Group of Two (G2) for global economic affairs. China promotes collaboration among the BRICs countries (Brazil, Russia, India and China) but regards the association more as a platform for formulating policy positions among key emerging market economies, not as a parallel organisation alongside the G20′.

China does not want to formalise the institutional arrangement of a Group of Two (G2) for global economic affairs. China promotes collaboration among the BRICs countries (Brazil, Russia, India and China) but sees the association more as a platform for formulating policy positions among key emerging market economies, rather a parallel organisation alongside the G20′.

The path towards a new global economic order is not short: it is a tortuous road that will take not years but decades to traverse. Change in the system requires others beyond, like China, to assume burdens that have long been carried by the United States. 

There is no way, for example, that the Chinese currency (the renminbi) can become part of a multiple international reserve system, smoothing transition from reliance on the US dollar, until China has liberalised its capital markets and capital account. These and other reforms will take time. China will have to work with the US and other G20 members to provide this and the other public goods that the world economy needs. China and the other emerging economies can ask for more rights, but, as Huang says, ‘they will also need to share more of the responsibility in maintaining a stable global economic environment, enforcing the international economic rules and assisting countries temporarily struck by adverse economic shocks’. This is a reality, it appears, that Chinese leaders understand, perhaps too well.
Peter Drysdale