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China: The New Lone Superpower?

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China: The New Lone Superpower?

China’s presidential visit to the United States revealed an apparent reversal of roles, with financially burdened Washington having to cater to rising superpower Beijing.

Learn the why behind the headlines.

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As Chinese President Hu Jintao stepped out of a black limousine onto the White House’s South Lawn for his January state visit, it was clear something in the relationship between the two countries had changed.

With a warm smile and slight head bow, United States President Barack Obama, joined by the first lady, extended his hand to Mr. Hu, and escorted him to meet the vice president and several heads of state. A 21-gun military salute and official ceremony, including the anthems of both nations, followed the meet-and-greet.

Later, Mr. Hu was treated to a black-tie state dinner—the first formal event held for a Chinese official in more than 13 years—and was even presented with a 68-by-86-inch painting to represent the symbiotic relationship between East and West. It was the third official state visit conducted since the start of Mr. Obama’s presidency, following Indian Prime Minister Manmohan Singh in 2009, and Mexican President Felipe Calderon in May 2010.

The red-carpet treatment was a far cry from Mr. Hu’s less ceremonious 2006 visit, during which he briefly met with the U.S. president and several other leaders over lunch.

“Analysts have called Hu’s state visit the most significant by a Chinese leader in 30 years given China’s growing military and diplomatic clout,” Reuters reported.

But the visit was not all roses for the United States. International newspapers repeatedly printed stories detailing China’s increasing role on the world scene—and America’s decline. Headlines declared, “World Faces Chinese Dawn as Sun Sets on U.S. Economic Leadership” and “America Meets the New Superpower”—forcing Washington to realize it no longer solely holds the reins of influence. Adding fuel to the fire, during the visit, a Chinese pianist played the tune of an anti-American ballad to a White House audience.

Jewel Samada/Getty Images
White House visit: U.S. President Barack Obama (L) shakes hands with China’s President Hu Jintao after a press conference in the East Room at the White House in Washington, D.C. (Jan. 19, 2011).

China’s economic clout is a large part of why the U.S.—once the world’s lone superpower—desires to show the utmost fanfare to its number-one trading partner, especially in the midst of the Western nation’s worst financial crisis in decades. With economists speculating that the yuan could replace the dollar in the next 20 years, the fading nation naturally desires to affirm its relationship with the rising Asian force.

While the developing nation gains international prominence, Europe and the United States appear to be grasping for the last vestiges of their diminishing power.

As with any transfer of power, however, China’s rise has implications. What does the nation’s newly acknowledged superpower status mean for the average American—and the rest of the world?

Newfound Friendship

While the U.S. president has met with several leaders during his term in office, not every visiting official has been treated with the same grandeur accorded Mr. Hu.

Take, for example, the visit of United Kingdom Prime Minister Gordon Brown in March 2009. After being denied the usual formalities given a British premier, such as a welcome ceremony, formal press conference with the U.S. president, and state dinner—Mr. Brown was presented with a case of 25 movie DVDs as a formal gift. This was a shocking move given the UK has been the United States’ most-important ally and has shared a special relationship with the Oval Office for decades.

French President Nicolas Sarkozy’s reception was similar, although the White House announced that the two men had a “shared commitment to solving problems.”

According to the Pew Research Center, almost half of all Americans believe that U.S. trade interests should focus on the Asian region in general—and China in particular.

“Nearly half (47%) say Asia is most important, compared with just 37% who say Europe, home to many of America’s closest traditional allies,” Pew revealed.

The report also stated, “This shift reflects changing perceptions about the economic balance of power in the world. Almost half (47%) of Americans say China is the world’s leading economic power, while just 31% name the U.S.”

A similar ABC News poll revealed that more than 60 percent of Americans consider China an imminent economic threat.

China’s latest visit seemingly evidences that Washington views Beijing as more of a crucial economic partner than either the United Kingdom or France. Yet the U.S. is not necessarily viewed the same way by the ascendant Asian country, as reported by Der Spiegel:

“When US President Barack Obama took office two years ago, among the many hopes riding on him was an improvement in US relations with China. There was much talk of the ‘Group of 2’ (G-2) that the two countries would form, which would supposedly shape the new world order.

“But instead of a new era of harmony between the major powers, the opposite has happened. US-Chinese relations are currently tenser than they have been in years. Chief among the many bones of contention is bilateral trade. American politicians accuse China of keeping its currency undervalued against the dollar to make its exports artificially cheap. Meanwhile Beijing, which has huge foreign currency reserves, has been flexing its burgeoning economic might by buying up European sovereign debt, ostensibly to help the euro zone overcome its current woes. Observers believe that China is keen to diversify its investments as a result of economic trouble in the US; it already owns massive amounts of American debt.

“Washington is also eyeing China’s ongoing military expansion with concern. Beijing’s recent unveiling of a new stealth plane was just the latest sign that China’s armed forces are becoming increasingly powerful. America’s ally Taiwan, which Beijing considers a breakaway province, also remains a contentious issue between the two countries.”

During his stay in Washington, the Chinese president consistently stressed what his country had done for the U.S.

“In 1979, when we firmly established diplomatic ties, our two-way trade was less than $2.5 billion U.S.,” President Hu said while attending a roundtable discussion with business leaders. “But the figure for last year was $380 billion U.S., which is more than 150-fold increase. Our mutual investment also started from virtually nothing to an accumulation of $70 billion…According to figures, our total trade has brought about $60 billion U.S. of benefits to U.S. consumers.”

Throughout Mr. Hu’s visit, this theme was repeated, sending a clear message: America needs China in order to move ahead economically, but China does not necessarily need America.

U.S. Dominance Soon Gone

Economists agree with Mr. Hu’s rhetoric.

“In the long run, the United States must face up to inevitably being overtaken by China as the world’s largest economy,” Reuters reported. “And it may have missed a chance to rein in its largest financial institutions, many of whom remain too big to fail and are getting bigger.”

The news agency quoted Harvard economics professor Dale Jorgenson, who said that by 2020, the Chinese economy will be on a par with the United States.

“The United States will need to come to terms with the fact that its prevalence in the world is fated to come to an end,” Reuters stated, paraphrasing Mr. Jorgenson. “This will be difficult for many Americans to swallow and the United States should brace for social unrest amid blame over who was responsible for squandering global primacy...”

“MIT’s Simon Johnson put it more bluntly, saying the damage from the financial crisis and its aftermath have dealt U.S. prominence a permanent blow.

“The age of American predominance is over,” he told a panel. “The (Chinese) Yuan will be the world’s reserve currency within two decades” (ibid.).

While U.S. exports to China have been growing, they pale in comparison to what the U.S. imports from the more populous nation.

In his address during Mr. Hu’s visit, Mr. Obama said that currently $100 billion a year in goods and services is exported to China, supporting more than half a million U.S. jobs. The White House announced that dozens of deals to increase the amount of U.S. exports to China by more than $45 billion had been cemented and China agreed to increase investments in the U.S. by several billion dollars.

But widespread skepticism still exists about China’s actual need of American exports.

“Over the past decade real GDP growth averaged 10.5% a year in China and 1.7% in America; inflation averaged 3.8% and 2.2% respectively,” The Economist reported. “Since Beijing scrapped its dollar peg in 2005, the yuan has risen by an annual average of 4.2%.”

In addition, China’s ties to other continents with more natural resources, such as Africa and South America, has allowed the nation to become less dependent on the United States’ market.

In December 2010, China’s Information Office of the State Council released a report that stated that in the first 11 months of 2010, China’s trade with Africa rose to $114.81 billion. This is compared to a bilateral trade volume of $22.4 million in 1950.

Beijing, which is the continent’s largest-trading partner, also signed agreements with 45 African countries.

And even though both President Hu and Mr. Obama stated during diplomatic discourse that both countries’ cooperative relationship was good for the United States, Mr. Hu himself has stated the dollar system is “a product of the past.”

Fallen Economy

As China finds its footing as the next superpower and its currency becomes more widespread, what does it mean for the U.S. and its historic allies, Great Britain, Canada, New Zealand and Australia?

Consider the example of Ecuador, which dollarized its economy in January 2000 in hopes of dragging itself out of high inflation and the devaluation of its currency, the sucre.

Although the move helped the economy, the country faced certain foreign relations challenges.

“Dollarization was largely responsible for the debt renegotiations, the renewal of official flows of loans, and new foreign investment projects,” the Journal of Economic Issues reported three years after the switch.

The country did, however, face certain policy changes, which put it at the whim of the nation whose currency it held.

“When Ecuador dollarized its economy, it essentially accepted the monetary policy of the Federal Reserve,” Robert Carbaugh wrote in his book, International Economics.

If the world were to accept another currency, it would experience many of the same effects. In the case of the yuan, its holders would be answerable to China’s national bank—and certain of the communist country’s policies.

This could have the effect of dramatically altering the lives of those who hold the new currency!

Although Ecuador never experienced the same standard of living as certain Western nations, Great Britain, which declined in the 1900s after the U.S. snatched away its reins of power, is an example of a country that experienced—and continues to experience—a decline in its status since losing its title as world superpower.

“Even in the decades after it lost its empire, Britain strode the world like a pocket superpower,” a Newsweek editorial stated. “Its economic strength and cultural heft, its nuclear-backed military might, its extraordinary relationship with America—all these things helped this small island nation to punch well above its weight class. Now all that is changing as the bills come due on Britain’s role in last year’s financial meltdown, the rescue of the banks, and the ensuing recession. Suddenly, the sun that once never set on the British Empire is casting long shadows over what’s left of Britain’s imperial ambitions, and the country is having to rethink its role in the world—perhaps as Little Britain, certainly as a lesser Britain.”

“Britain’s bout of reflection on its last gasps of empire comes at a natural point in its history,” the editorial continued. “The Great Recession came as a surprise and has accelerated the trend, but the rise of China, India, and Brazil, and the changing ties to a declining America, have been visible for many years. As America turns to building new ties with the advancing powers of Asia and Latin America—even sending its top envoys to promise its creditors in China that the U.S. will handle its debts responsibly—Britain can only feel less special. The nation is in the totally predictable grip of the ennui and general grumpiness that accompany the end of a political era.”

This too will one day happen to America. Yet there is a reason this will take place, as well as a reason the country’s current standard of living will be dramatically affected—all in your lifetime!

To learn why America rose to great prominence, but is now sharply declining—and what coming government will ultimately gain superpower status—read David C. Pack’s book America and Britain in Prophecy.

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