How long can China postpone the economic recession?
On the way to the top of the world
Commentators refer to the exchange of blows between the United States and China as the "new Cold War" based on the earlier systemic conflict between East and West. The conflict is about trade, resources, spheres of influence and the creation of a global environment that is favorable to the respective national interests. But above all it is about the technologies of the future.
But the comparison with the "Cold War" that lasted until the end of the 1980s does not fit the description of this conflict that will shape the next few years and decades. The "Cold War" between the former Soviet Union and the United States and its allies was about a rival universal vision of the future of humanity. At least that is not what China is about in the dispute. The People's Republic does not want to export its own political and economic system of "socialism with Chinese characteristics". Nor does it want to shape the world according to its model, does not want any ideological conversion, does not want to export the revolution and no regime change.
What China wants is more international influence and more respect for Chinese interests. Above all, it is about protecting its economic goals and securing the unity and national sovereignty of the country. This has been endangered time and again in the long history of China. The world-famous Great Wall was a construction project that lasted several centuries to protect the unity of the country against invaders and barbarians. So unity and sovereignty are core parts of the Chinese narrative. In view of the increasing open hostility of the USA and the West towards China, it should not surprise anyone that this is also being nationalistically charged.
For decades, the country has made clear its territorial claims to parts of the South China Sea, where US warships still cruise today. From the Chinese perspective, the US bridgehead Taiwan has always belonged to China; a decade ago, this was also the official position of the Taiwanese government. Since its return by Great Britain in 1997, Hong Kong, annexed as a colony by the British Crown in the 1st Opium War in 1842, has once again undisputedly been part of the People's Republic under international law. Also in the autonomous region of Xinjiang in the far west of the country and in Tibet, these huge, sparsely populated areas are primarily a matter of national sovereignty from a Chinese point of view.
The project of the “New Silk Road”, the maritime variant of which includes the expansion of ports along the coasts of Southeast Asia and the Indian Ocean financed by China, also aims to secure the export routes and the supply of raw materials to what will soon be the world's largest economic power. This also applies to the terrestrial routes of the "New Silk Road". The land routes will not only significantly accelerate China's movement of goods to and from Europe and thus the turnover of capital, but can also stimulate economic development in the countries of Central Asia and the Middle East.
The project can thus trigger a boost in development and a stabilization of societies in these regions, which have been partially "forgotten" by the West and are covered with war, which in this country are often associated with civil war, terrorism and refugees. For example, there is hardly any reports in Germany that China is planning major infrastructure projects in Afghanistan for the time after the imminent withdrawal of US troops, while the USA and the other NATO countries leave the divided and war-ravaged country mainly military bases and weapons arsenals.
China is economically a world power and politically and militarily a great power. Due to the size of the country and its population, this position in the world is more or less inevitable. It would only be different if the country were largely isolated from the rest of the world. In addition, the market economy reforms have set in motion an extremely dynamic capital accumulation. The Chinese capital groups have long since left the national barriers to their profit making behind them. But is the People's Republic a new imperialist superpower?
China's approach, especially in Asia, can be described as an attempt to preventively control the regional environment in order to protect its territorial integrity and its own economic development. It is a defensive influence aimed at maintaining close ties with neighboring countries. Just because the country is much larger than most of the countries in its vicinity and has a much higher economic power, that inevitably entails dependencies. But to construct an aggressive Chinese imperialism out of this misses the realities. Because China has so far made no attempts to make countries in other parts of the world economically, politically or even militarily compliant. According to Western analyzes, the only military base outside the country in Djibouti, Africa, serves solely to protect Chinese merchant ships from piracy at the entrance to the Red Sea.
The People's Republic is a great power that acts responsibly, said a spokesman for the Chinese Foreign Ministry at the presentation of various Chinese initiatives in the summer of 2020, according to which the countries of Asia, Africa and Latin America should soon be supplied with Covid-19 vaccines developed in China Were in the crucial test phase in autumn 2020. China, certainly not the US, is likely to be the winner in the global vaccine race when it comes to expanding global influence.
Because of its size and economic strength alone, China is a much more dangerous competitor for the US than any other great power has ever been. At some point in the next few decades, China's per capita economic output could approach that of the United States. Then the Chinese economy would be several times larger than that of the USA. That would be a historic shift in power in the world. In this respect, it is appropriate to speak of the Chinese century.
The free trade zone agreed in autumn 2020 between 15 Asian and Pacific nations, but currently without the participation of India, is another signal of China's growing influence. A third of global economic output is already generated in this new free trade area. For goods that are traded within this block, uniform rules on origin will apply in the future. This allows companies to make their supply chains more flexible and the People's Republic as a supplier could more easily circumvent new US sanctions. As the EU has long demonstrated, this new economic bloc can also lead to a unification of internal norms and technical-industrial standards, which could have practical effects far beyond the participating nations.
While many countries in the world were facing a second wave of the corona pandemic in autumn 2020 and thus a second economic slump, China and other countries in East Asia have coped with the crisis much better in comparison. The financial markets have an unmistakable nose for this. The appreciation of the Chinese currency shows that the currency markets are relying on a further strengthening of the Chinese economy and thus on more demand for the renminbi. The international auction of Chinese government debt securities in early October 2020 was several times oversubscribed.
However, developments in the financial markets are only the tip of the iceberg. Long before the outbreak of the pandemic, there were signs of a shift in the global economic balance of power - away from the west towards Asia. The global economic crisis triggered by the corona pandemic only accelerated this trend.
The management of the pandemic by the Chinese and other governments, especially in East Asia, has shown that combating viruses can be combined with successfully combating recession. A short, radical, centrally coordinated lockdown with strict contact restrictions has contained the virus in the country. The number of cases and deaths in relation to the population are low in an international comparison. Thanks to better crisis management, the economy has recovered much faster. China was the only one of 48 countries surveyed to report economic growth in the second quarter of 2020. Taiwan, Vietnam and South Korea follow in the ranking. In China, private consumption has also recovered in recent months. All of this happened without much stimulus. China and other Asian countries are reaping the dividend from successfully managing the corona pandemic.
So far, the economic war that the US instigated against China has not seriously affected the Chinese economy. On the contrary: the crisis triggered by the corona pandemic has further strengthened China's position. But this also means that the tensions between the previous supremacy, the USA, and the economic superpower, China, will continue to intensify. The election of Joe Biden as the new US President will not change that. Because US Democrats and US unions have positioned themselves even more sharply against China than the previous administration.
Not all elites share the US position. Ray Dalio, founder of the US hedge fund Bridgewater Associates, has warned in a comment in the Financial Times of the blindness in the West to China's rise, which is marked by a persistent anti-China bias. Despite all the criticism of the Chinese variant of capitalism, one could not say that it did not work. That is why he himself is not only investing in the USA, but also in China in particular. “Empires rise when they are productive and financially sound, when they earn more than they spend, when their assets grow faster than their liabilities. That happens when the people are well educated, work hard and behave civilly. If you compare China and the USA by these standards, ... the fundamentals clearly speak for China. «Amen! That is the credo of a representative of global finance capital.
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