Wednesday, May 04, 2011

We Should NOT Be Worried About China

Reference previous post "We Should Be Worried About China."

Just as there are folks out there arguing that the US should be worried about the rise of China and its challenge to US hegemony, there are plenty others who think the fear-mongering is overblown.

Economically, China has recently become the world's second largest economy. China is set to overtake the US economy within just a few decades and this should gravely concern the US according to the China-feardom camp. However, such calls for worry fail to consider the vast population difference between the US and China, 313 million compared to 1.3 billion, respectively. China has been modernizing its economy for decades and its market capacity (measured by population) is roughly 4 times that of the US. With a market 4 times a large and poised to grow in important consumer sectors as millions of Chinese are lifted out of poverty each year, it is expected and entirely unsurprising that China would overtake the US in terms of GDP eventually. Further to this, GDP only tells part of the story. Once Chinese GDP per capita surpasses the US while maintaining an manageable Gini Coefficient, then it might be time to worry. Further, as the world's second largest economy, China is still almost $5 trillion behind the US in terms of GDP (2010 numbers), no small amount to make up by any measure.

Continuing on with economic topics, yes, China is a currency manipulator and yes, this makes US exports less competitive within the global marketplace, but the US has numerous policy options to deal with the situation and is currently doing so. While currency exchange situation is not favorable for the US at the moment and should garner US attention and action, it certainly is not a crisis as many would have us believe.

Because of China's fast growth over the past decade, it has greatly expanded its search for natural resources, especially into Africa. The Chinese feardom camp would have us believe this will hurt the US across the board and call for a US energy policy that doesn't give China an inch. However, this fails to consider that oil is fungible and Chinese investment in the world's energy structure can be a good thing for everyone. Also, greater demand for energy increases China's vulnerability to global events and markets, which could mean that as China expands, it will be increasingly forced to become a more responsible global actor. This is already the case with the US/Chinese debt/savings situation. Globalization at work.

Militarily, the China feardom camp argues that the PLA is undergoing a modernization process that will allow it to challenge the US militarily and limit US ability to project power. However, a modern Chinese military could do just that, project power, and thus take on more responsibility in world events, easing the burden on the US. Instead of a military competitor, China could be a partner. We are already seeing this off the coast of Somalia.

Many fear that the development of the DF-21D "carrier-killer" missile hurts the US ability to project power in the South China Sea and even upsets the global power projection dominance of the US. However, the US Navy isn't all that concerned and questions whether the missile could really even sink a carrier.

And of course, there has always been concern about whether the US would go to war with China over Taiwan because of the US/Taiwan defense agreement. However, the Taiwan Relations Act, the legislation which has governed US interaction with Taiwan for over 30 years, contrary to popular belief, does not commit the US to Taiwan's defense should China decide to attack.

Finally, the reality of China's domestic situation suggests that it will have more problems to overcome at home than it would ever be able to cause for the US abroad. If you think health care legislation is next-to-impossible to deal with here in the US, imagine how it feels to be in the shoes of China's leadership. China's population has a significant section that is aging without a plan for how to care for it. China's human rights abuses, committed at home and voted for abroad, do not indicate state strength, but deep-seated weakness. Some say that the autocratic centralized Chinese government is better at making decisions than America's messy democracy, but, while there may be some truth to such a notion, history would suggest otherwise. And it is important to note the country outside of the Middle East that is most concerned about the domestic response to the Arab Spring is not the US, it's China.

So it is for these reasons that fear should not be our response to the rise of China. The US should enthusiastically accept any challenge China may present, align America's significant capacity and unparalleled ingenuity with the proper incentives to beat China in the global marketplace, and then do what Americans do best: win. Boom.

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