China’s Rising Economy
The debate on the rising economic power has been increasingly at center-stage in recent past and now (Blankert, 2009). Herein, we shall compare the arguments using case study articles that relate to the rising economy of China and the economy of the United States. The articles of reference are “Case Study: The Rise of China and the Global Economic Crisis,” by Graham Allison et al, and “US Economy” by EconomyWatch.
Article Summaries
The “Case Study: Rise of China and the Global Economics Crisis,” of May 6, 2006 reflects on the economic implications of the rise of Chinas’s economy in relation to that of the U.S. it starts with a summary of the meeting between Presidents Barrack Obama and Hu Jintao at Winfield House in London on April 1, 2009. Then it discusses the current political and economic situations and relations between the two countries, stressing on the bilateral relationships. The article concludes with an assertion that the current economic crisis will undermine China’s ability to take over as the World’s economic leader by 2025.
The “US Economy” article by EconomyWatch reckons that the United States is the largest and most important econmy in world, having contributed 20.22% of the World’s total GDP (US$ 14.624 trillion). It argues that the U.S. faces the greatest threat to its stature as the world’s greatest economy since the World War II due to both international and domestic factors. China is projected to take over that position by 2016 unlike earlier predictions of 2035. The article identifies Services industries, natural resources, massive labor force, economic growth policies as the strengths of the United States. The article summarizes the US economy as a mixed economy where the economic structure is upheld through the interplay between the public, private and international sector.
Statistics from the national accounts show that China is presently the second-largest economy in the world behind the United States of America. China’s rapid economic rise is believed to be because of several positive economic reform that have been undertaken by the government since 1978. there has been formation of rural enterprises, private businesses, and liberalization of foreign trade and investment (Biden, 2011). Government has also relaxed much of the state control over some prices, invested greatly in industrial production and education of its workforce.
The U.S. economy has struggled to recover from the 2008 financial crisis which has been termed the worst since the Great Depression. Consumer confidence is at all time low leading to the current slow economic growth since. US total contribution to the global GDP is expected to fall significantly by 2015 as a result of China’s rapid economic growth and the former’s slow recovery from the 2008 financial crisis. The aUS GDP (PPP) is projected to grow annually by 3.65 to 4.49 percent from 2011 to 2015. The United States’ great global buying power is bound to remain not threatened in the immediate future – the U.S. purchases far more products from overseas than China. Similarly, gradual improvement in unemployment rate is expected between from 2011 to 2015 for the U.S (Columbus, 2007).
Despite emerging economic and political threats like China, the U.S. remains the most heavily invested-into country in the world with about $3.259 trillion abroad and $2.398 trillion at home (year 2010). The U.S. still ticks besides the rising economic power of China because of a number of important factors (Song & Golley, 2011). First, the US is a market oriented economy in that federal government buys goods and services mainly from the private market while the private individuals and businesses make most of the decisions. On the contrary, China’s government has much influence in the decision making which creates much bureaucracy and limits free trade. US businesses have much more flexibility (IMF, 1997). US firms have also the advantage of superior technology that helps produce unmatched high quality products and services.
Formal relations between China and the U.S.
The relations between the United States and China have remained on a fairly consistent trend line in recent decades since the latter begun its policy of reform and opening. The Sino-American interdependence has reached unprecedented levels and it is international trade that has stirred Chin to economic blossom. By attending the 1999 WTO, China was able to secure export markets in the U.S. and beyond. China is currently a chief U.S. exporter of almost everything while in return China accumulates huge surpluses in U.S. treasuries. It is jinx of the world’s greatest debtor and creditor respectively (Song & Golley, 2011).
China has over time reiterated that its economic rise is a “peaceful one” in counter of the widespread thought that China seeks to replace the U.S. as the world’s economic and political power. On the other hand, America has made efforts to lure China into the existing order through the global trading system together with other international institutions while seeking to counter the Asian country’s increasing might. The United States is struggling to contend with accommodating China as an emerging power, insisting that the latter must transform itself into a “responsible stakeholder” in global affairs (Blankert, 2009).
The relation between the two countries has not been all that smooth because the U.S. perceives China as undemocratic arguing that it often violates basic human rights, hinders a free press besides unfairly dominating Tibet. However, given the stature of China economically and politically, both U.S. Democratic and Republican administrators appreciate that cooperation between the two countries is in the interest of the U.S. This is what has informed their working hard to maintain a cooperative and bilateral relationship with China (Biden, 2011). This has been said to come from the American’s admiration of China for lifting its millions of people from poverty as well the business perspective that acknowledge China as too big and significant market to risk.
In an economic arrangement equivalent to the Cold-War strategic phenomenon of Mutually Assured Destruction (MAD) between the U.S. and Russia, the two nations (China & U.S.) have grown vitally dependent on each other. The interdependence is widely acclaimed as an inherently stabilizing factor. As such neither country can attack the other because this would equal a decision to commit mutual suicide (Zhou, 2010). However, China stands vulnerable not only to decision of the United States government to limit the former’s imports, but also to an unintended global recession in which there would be a sharp decrease in the demand of its products as seen with the global recession of 2009.
it is believed that the recession will limit China’s ability to overtake the U.S. in terms of its GDP. This is because, according to the 2007 calculations by the World Bank economists, China’s purchasing power parities reveal that China’s GDP was indeed worth 40% less than initially thought. In this respect, the true picture as to whether China with its rising economic superiority is capable of overtaking the United States as a global economic and political power will truly show after the end of the current economic crisis (Zhou, 2010). This is due to the fact that the relative prospects of the two nations are bound to look different from what it is today at that time.
References:
Bergsten, Fred C., Freeman, Charles, Lardy, R. Nicholas, & Mitchell, J. Derek. (2009). China’s Rise: Challenges and Opportunities. Washington D.C., Peterson Institute.
Biden, R. Joseph. (2011). China’s Rise Isn’t Our Demise. The New York Times: Opinion Pages. Retrieved on March 9th, 2012 from: http://www.nytimes.com/2011/09/08/opinion/chinas-rise-isnt-our-demise.html
Blankert, Willem, Jan. (2009). China rising: will the West be able to cope? : the real long-term challenge of the rise of China. Singapore, World Scientific.
Columbus, Frank. (2007). Asian economic and political issues, Volume 11. New York, Nova Publishers.
International Monetary Fund. (1997). Why Is China Growing So Fast? Retrieved on March 9th, 2012 from: http://www.imf.org/external/pubs/ft/issues8/index.htm.
Song, Ligang & Golley, Jane. (2011). Rising China: global challenges and opportunities. Canberra Australia, ANU E Press.
Zhou, Jinghao. (2010). China’s peaceful rise in a global context: a domestic aspect of China’s road map to democratization. Kentucky, Lexington Books.
