The Rise of China

After the fall of the British Empire the world began a process of power relocation. The British were entangled in conflicts across the globe, riddled with government debt, and were relying on imports to feed their increasingly consumer based society. Their tenure as world superpower had been long and fruitful, but the end of their dominance had arrived. Across the Atlantic a new country, the United States, began to prosper. It had cheap labor costs, booming industrial production, and a massive trade surplus (Workman, 1). This country used increasingly free global markets to ship its cheaper, more efficient products to over developed countries like Britain and France (Workman, 1). The United States, at this time, was truly unified with a sense of patriotic collectiveness that perpetuated the ideals of sacrifice and hard work (Denoon, 67). The United States used these redeeming characteristics, coupled with a little bit of luck, to rise to power over a 40 year span. After an extended period of world dominance the United States is at a crossroads. Its society and culture have begun to mirror the ones that they seized power from hardly a century ago. In Asia, a new country is beginning to emerge, one that alarmingly mirrors the early successful model of the United States. This does not bode well for the United States as the coexistence of two powers is not a long-term solution. The rise of modern China will be coupled with a decline in the United States global dominance.
China’s massive trade surpluses, coupled with American trade deficits, are relocating the economic epicenter to the Asian superpower. Over the past two decades China has seized control of the global trade markets, dictating the highest trade surplus of any country in the WTO (Workman, 1). Not only do they have the highest trade surplus, they also are the number one recipient of United States dollars with the total coming in around 162.9 billion dollars a year (Workman, 1). This means that every year the United States is losing 162 billion of its own currency to a foreign competitor. This allows China to take foreign dollars and invest it in domestic infrastructure while modernizing their industry. These innovations are at the expense of the foreign dollar which allows them to become even more competitive on the global level. Over the past 20 years China’s export to GDP ratio has increased 48 percent- a miraculously quick rise in the modern market (Haugen, 83). This ratio is well beyond the ones in the United States and even China’s Asian counterpart, Japan. The significance of these trade numbers are only reaffirmed when looking back at modern history. When the United States began its rise the trade numbers were leaning in their favor (Workman, 1). America was able to funnel British money into their economy, through this trade, which led to the rise of the nation as a whole. This is exactly what China is doing with the United States today. That type of continuous trade deficit will eventually catch up with the United States, and will drive them out of their position as top nation.
China’s ability to use its cheap labor to produce quality, inexpensive goods will make the United States manufacturing sector obsolete and drive production towards China. The key to producing cheap goods is having low production costs. The largest component of production cost is labor. Being able to pay your workers a fraction of the competitor’s workers is a defining advantage. It allows them to put more money into their product which means higher quality and profit. This is exactly what is going on in China and this labor development is the foundation of all other economic expansions. When American companies first began courting China as a possible production outpost they saw an under developed country with a communist form of government. The one redeeming quality of the country was its incredibly cheap labor expenditures. American companies, such as Wal-Mart, realized that producing goods in China and shipping them to the United States would still put their prices significantly below the competitors. The companies that opened plants in China realized amazing returns and forced the people within their industry to follow their lead if they wished to maintain competitive. This snowball effect began to drain jobs from the United States economy and put them in the hands of hard working Chinese civilians who thought of dollar an hour as a good wage. The United States loses hundreds of thousands of jobs every year to China and this rate is only increasing (Haugen, 81). Even with increased demand the salary of the average Chinese worker has not risen due to the large applicant pool (Haugen, 82). Additionally, China has begun to allow women into the workforce as their total employment has risen by 30 percent which is very similar to the increased amount of women in the American workforce during the early 1900s (Denoon, 45). Since workers generally have few rights, the amount of unions in China is low. Workers are not encouraged to stay in one job and are able to move between industries with fluidity. This fluidity is vital for the workforce as the ability to swiftly relocate to a booming industry benefits both the individual worker and the economy as a whole. These labor advantages are the foundation of a successful economy and are found in abundance in China.
China’s ability to move capital swiftly with limited government interference or regulation allow for it to adapt to increasingly frequent market realignments. In order to make money off an investment one must have initial capital. They also must have the financial mobility to get that capital to the right place at the right time without having to worry about government interference. Since China’s economy is in the early stages of development, its financial regulations are lenient (Denoon, 129). China has this vital ability and is learning how to use it to their full advantage. This has led to a remarkable growth of 9.8 percent a year on average. In order to cement their position as a global leader they must improve their tier four economic involvement. This entails learning to evaluate and choose which markets and companies are going to succeed. With the loss of manufacturing jobs in America accelerating this tier is one area where the United States clings to their dominance. Many of the countries brightest minds go into the investment sector and have the potential to earn millions of dollars. This allows America to produce large amounts of wealth since they are still seen as the global leaders in this field. If China is able to expand into this industry, they will be in control of both the upper and lower rungs which will lead to expanded economic prosperity (David, 67). Although they are not to that point yet, China is making sound economic decisions and understands the loan industry very well (Denoon, 93). China’s ability to locate and relocate capital will aid in their global ascension.
The Chinese cultures’ emphasis on key values has aided in the nations rise to economic power. In any society the effectiveness of governmental policies is contingent on civilian cooperation and enthusiasm. Without public support and dedication, attempts at change and innovation will be unsuccessful. That is why China’s cultural values of self-sacrifice and responsibility are so important (Denoon, 72). After the oppressive Mao era Chinese civilians were eager to be free and fought for their right to work and keep their wages (Denoon, 78). Since this oppression was a mere 40 years ago, the majority of the population remembers the period or has a parent who does. The memory of the regime is fresh in their heads and motivates them to work hard and seize the self-reliance they desire. The importance of this value cannot be overstated. Many critics of modern America claim that the general public is to far removed from the revolutionary roots and have forgotten how valuable freedom truly is (Mueller, 1). This has made the public blasé towards their work and unwilling to put forth the effort that is necessary to be successful individually, and as a nation. On the other hand the Chinese are the complete opposite of this; they are in a partially communist government and long for the full benefits of democracy. They recognize the value of that system and are willing to make personal sacrifices in order to achieve their goals. This value and general conviction are central parts to Chinese culture, and help to explain why their labor force is willing to get paid less, and still be efficient making them extremely competitive on the global level.
China’s increasing ability to be resource self-sufficient will allow it to remain immune from the resource conflicts crippling the United States economy today. In today’s modern society access to vital resources at an affordable price is a necessity. Without this a nation can be placed at the whim of a foreign supplier and have their economy potentially manipulated. The Chinese have sizable amounts of two key natural resources located within its borders: coal and oil. China has over 20 oil fields and produces, on average, 200 million tons of oil a year (Perkins, 1). This amount is enough to keep China’s oil purchases from outside their country at a relatively low level. It also protects them from the UAE and OPEC who are known to limit the supply of oil in order to drive up prices. China also has a rich abundance of coal. The total coal supply within the country’s borders is estimated to be 900 billion metric tons which is roughly three times the amount in the entire United States (Perkins, 1). Coal is a major resource used in electricity production and is vital in fueling China’s increasingly electric society. This large amount of coal also attracts more refining companies increasing both the jobs in the country and the taxable income levels for the government. This is another area where Chinese domestic reliance insulates their country from the ups and downs of electric and oil prices while the United States is forced to rely on the good will of South American and Middle Eastern nations. Fortunately for the United States, China will not be able to maintain their self sufficiency much longer. China’s SEPA director, Mr. Pan, is worried about the consequences of increasing city populations and usage, “Our natural resources will soon be unable to support our population.” (Haugen, 46). Mr. Pan is not overly alarmed as he believes that even once their consumption exceeds their production the exposure to foreign energy markets will remain limited. He is also pleased to see emerging Chinese cities, such as Beijing, adopting energy efficient forms of public transportation (Haugen, 47). This will help China remain as self sufficient as possible. Although China may have to start purchasing resources from other countries, their reliance will be nowhere near the dangerous addiction levels displayed by the United States.
The establishment of China as a legitimate military superpower forces other nations to respect them and legitimizes their economic position. In order to maintain global respect and obedience from surrounding countries, China had to develop an assertive army. So far the country has been successful in this endeavor using its massive population and nuclear proliferation exemption to develop a strong military and nuclear arsenal (Denoon, 98). Although the Chinese military has developed to a point where it can compete on a global scale, the government is being very conservative when it comes to involving itself in foreign conflicts (Denoon, 43). Although China supports the United States’ war on terror it has yet to commit any type of military aid in either Afghanistan or Iraq (Denoon, 51). China is choosing to take an isolationist route and focuses its resources on internal issues. It tries not to concern itself with petty conflicts and remains relatively popular in the eyes of all countries (Denoon, 53). It has this luxury, in part, because of its relatively secure borders with no major threats surrounding China on any side. During some of the United States most prosperous economic periods, like the roaring 20s, the country’s foreign policy was isolationist (Haugen, 134). In times when the country drifted from that policy the economic climate was much more foreboding. With the recent conflict in North Korea it will be interesting to see how the young country handles a threat with the potential to impact China at home. If China is able to maintain the neutral precedent it has effectively set they will not be looked at to handle global disputes. The burdens of that job will continue to fall in the lap of the United States, forcing the country to ship its resources across the globe and ignore their domestic situations.
China’s immense holding of United States debt gives them the power to potentially ruin the American economy. In September of 2008 Chinese investment in United States Treasuries surged to 585 billion dollars up from 48.5 billion putting the total Chinese investment in the United States government at roughly 800 billion dollars. This makes China far and away the leading holder of United States debt surpassing Japan’s total of 585 billion (Faiola, 1). Chinese investment in the United States government is propping up the value of the dollar while making the Chinese currency, the Yuan, weaker. This allows for the trade balance to remain tipped in the Chinese’s favor as the Yuan is not strong enough to purchase expensive United States goods. The Chinese take in the strong dollar and use it to purchase more treasuries to keep the process going. This is slowly reallocating the wealth to China as the Americans send dollars to pay for goods while also paying off the interest rates on the Chinese loans. Eventually China will get to the point where it is able to rely on domestic spending to finance its country and will begin scaling back its investments in treasuries in order to strengthen its own currency (Faiola, 1). China will have the option of either ceasing to purchase treasuries or even worse, selling of United States debt. Both options will cause massive inflation as the market will be flooded with U.S. treasury notes. With the increased supply will come a decreased demand which will force the United States into offering higher interest rates on new treasuries in order to pay off debtors who will demand repayment from the increasingly weak looking country (Faiola, 1). By the time the dust settles on this economic war the Chinese government will have emerged as supreme and the Yuan will have become the new standard for global currency. The United States will appear weak and unreliable and will find a hard time receiving the loans necessary to maintain the current Stimulus package and defense budget (Faiola, 1). Hopefully the Chinese will chose not to flood the market and will sell off its holding slowly. Even in this scenario the results would not be good as the United States would be losing a major client in its bond buying market. This potential threat is one that looms large and is central to the Chinese’s global ascension.
Every day the United States maintains their policies, while China continues to expand puts American one step closer to global decline. The Chinese economy is expanding in seemingly every area, while the United States economy is contracting across the board. The Chinese are dependent on United States for their consumer market at the moment, but are showing cultural and economic signs of increased self- reliance. The United States has a small window of opportunity to stop this vicious cycle before it is too late. Americans must realize that the only way to preserve their countries standing is by committing to the nation as a whole and electing to sacrifice when necessary. The United States Federal Government must stop onerous spending, regain control of the deficit, take back control of its currency, and begin repaying its debtors. By bucking the flow of interest back to China the United States will force the Yuan to rise which will unleash the massive potential of the Chinese consumers and allow American industry to regain its competitiveness in the global trade market. Without the swift implication of the stated policies the United States will continue down the slippery slope and watch as history repeats itself while China takes the throne as global superpower.