No rush for China

2010-08-20Asia Times

BEIJING - The angry youths who used to shout anti-Japanese slogans were silenced, their older chauvinistic mentors behaved as if they had received a gag order. Newspapers ignored the news or exiled it to a corner, while senior officials tried to dodge the subject in talks with foreigners.

Figures released this week by the Japanese government indicate that China has replaced Japan as the world's second-largest economy, after the United States. The figures show that Japan's gross domestic product (GDP) for the second quarter of this year, seasonally unadjusted, totaled US$1.28 trillion. That compares with $1.33 trillion for China.

As the world looks on with astonishment, admiration and fear, Beijing, however, is not swollen with pride, there is no public chest-thumping.

Overtaking Japan in fact removes the last fig leaf for the true economic comparison - ongoing openly for years - between China and the United States. The natural question now is: What will happen next? When will China's GDP surpass that of the US?

The answer primarily depends on the method of accounting that is adopted, with dozens of variants. If you consider purchasing power parity in overtaking the US, China could rise within 10 years. If the present value of their respective currencies is considered, it could happen in over 20 years. But if the Chinese yuan is revalued against the dollar, it will happen sooner.

If the US economy recovers, it may be a matter of 40 years, if it crumbles, it could be tomorrow, and if the Chinese economy collapses, it may never be.

Think-tanks across the world work full-time on various assumptions and predictions, but the results they churn out, seen with Chinese eyes, often seem more like reflected fears and psychoanalytic explorations than realistic scenarios.

Overtaking Japan, however, provides evidence that after more than 30 years of running the economy with a growth of about 10% per year, China did not collapse, and indeed may continue to run for many years.

So China really could return to being the center of the world. And then truly European culture and its "appendix" transplanted to the New World would be supplanted. In this, Japan would not have it so bad, since it could rediscover, as it is already rediscovering, its power in Asia by aligning with the new course.

However, China's impetus and the fear that sooner or later America really could become "number two" will change the mental and cultural reference points of the Americans, Europeans and many other countries.

China is afraid of this new climate, realizing, that like two cars fast approaching one another, an accident is more likely to happen. The point is, China is not desperately trying to become the world’s largest economic power; it is in no hurry and would be comfortable in second position for some time. Partly for this reason, China resists pressure to revalue the yuan, which would shorten the time it would take to overtake the US.

Government officials explain that news on China overtaking Japan as not being worth the paper it is written on, as it will take perhaps another 100 years for Chinese per capita GDP to reach the levels of Western countries.

Academics say that over 80% of all important patents are still produced in Europe and America, and as long as Beijing does not generate true technological innovation, everything is fake.

"Is it worth that much development if the air and water are the dirtiest in the world?" greens in China ask.

An important general, Liu Yazhou, only last week warned against the current Chinese race to "count money" and said the most significant thing was the primacy of the system, and here Beijing should learn from Washington.

All of these reactions possibly reflect ancient Confucian modesty, and reflect a desire not to turn economic comparison with the US into a threat or a confrontation. Beijing fears that growing numbers of foreigners would prefer that China collapsed and did not overtake the US, regardless that in this event millions of Chinese would be sent back into poverty.

The financial crisis that broke in the US in 2008 and then spread around the world pushed China into the international arena. Any new tremors in the West could take China to the very frontline, forcing it to make decisions with global implications, and Beijing is not prepared for this.

If the America economy were to crumble and it were then not able to keep troops in Iraq and Afghanistan, what would China do? If China replaced America, would it continue with a policy that kills many troops and overstrains the economy? Or would it stand back and accept destabilizing outbreaks on its doorstep?

The alternatives are all painful, and that is why China today, although hoping one day to overcome the US, wants this to happen much later rather than sooner.

All the same, with China overtaking Japan, it is much closer to our doorstep. (2010-08-20 Asia Times)


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