Burgess COMMENTARY

Peter Burgess

China’s New Global Leadership

NEW YORK – The biggest economic news of the year came almost without notice: China has overtaken the United States as the world’s largest economy, according to the scorekeepers at the International Monetary Fund. And, while China’s geopolitical status is rising rapidly, alongside its economic might, the US continues to squander its global leadership, owing to the unchecked greed of its political and economic elites and the self-made trap of perpetual war in the Middle East.

According to the IMF, China’s GDP will be $17.6 trillion in 2014, outstripping US output of $17.4 trillion. Of course, because China’s population is more than four times larger, its per capita GDP, at $12,900, is still less than a quarter of the $54,700 recorded in the US, which highlights America’s much higher living standards.

China’s rise is momentous, but it also signifies a return. After all, China has been the world’s most populous country since it became a unified state more than 2,000 years ago, so it makes sense that it would also be the world’s largest economy. And, indeed, the evidence suggests that China was larger (in terms of purchasing power parity) than any other economy in the world until around 1889, when the US eclipsed it. Now, 125 years later, the rankings have reversed again, following decades of rapid economic development in China.

With rising economic power has come growing geopolitical clout. Chinese leaders are feted around the world. Many European countries are looking to China as the key to stronger domestic growth. African leaders view China as their countries’ new indispensable growth partner, particularly in infrastructure and business development.

Similarly, economic strategists and business leaders in Latin America now look to China at least as much as they look to the US. China and Japan seem to be taking steps toward better relations, after a period of high tensions. Even Russia has recently “tilted” toward China, establishing stronger connections on many fronts, including energy and transport.

Like the US after World War II, China is putting real money on the table – a lot of it – to build strong economic and infrastructure links with countries around the world. This will enable other countries to boost their own growth, while cementing China’s global economic and geopolitical leadership.

The number of Chinese initiatives is staggering. In just the past year, China has launched four major projects that promise to give it a greatly expanded role in global trade and finance. China joined Russia, Brazil, India, and South Africa in establishing the New Development Bank, to be based in Shanghai. A new Asian Infrastructure Investment Bank, to be based in Beijing, will help to fund infrastructure projects (roads, power, and rail, among others) throughout the region. The New Silk Road land belt seeks to connect China with the economies of East Asia, South Asia, Central Asia, and Europe through an expanded grid of rail, highways, power, fiber, and other networks. And the new 21st Century Maritime Silk Road is aimed at boosting ocean-based trade in East Asia and the Indian Ocean.

All told, these various initiatives are likely to leverage hundreds of billions of dollars in investment over the coming decade, speeding growth in the counterpart countries while deepening their production, trade, and financial linkages with China.

There is no guarantee that all of this will succeed or proceed smoothly. China faces huge internal challenges, including high and rising income inequality, massive air and water pollution, the need to move to a low-carbon economy, and the same risks of financial-market instabilities that bedevil the US and Europe. And if China becomes too aggressive toward its neighbors – for example, by demanding rights to offshore oil or territory in disputed waters – it will generate a serious diplomatic backlash. No one should assume smooth sailing for China (or for any other part of the world, for that matter) in the years ahead.

Still, it is striking that just as China is rising economically and geopolitically, the US seems to be doing everything possible to waste its own economic, technological, and geopolitical advantages. The US political system has been captured by the greed of its wealthy elites, whose narrow goals are to cut corporate and personal tax rates, maximize their vast personal fortunes, and curtail constructive US leadership in global economic development. They so scorn US foreign assistance that they have thrown open the doors to China’s new global leadership in development financing.

Even worse, as China flexes its geopolitical muscles, the only foreign policy that the US systematically pursues is unceasing and fruitless war in the Middle East. The US endlessly drains its resources and energy in Syria and Iraq in the same way that it once did in Vietnam. China, meanwhile, has avoided becoming enmeshed in overseas military debacles, emphasizing win-win economic initiatives instead.

China’s economic rise can contribute to global wellbeing if its leaders emphasize investment in infrastructure, clean energy, public health, and other international priorities. Still, the world would be better off if the US also continued to lead constructively, alongside China. The recent announcement by Presidents Barack Obama and Xi Jinping of bilateral agreements on climate change and clean energy show the best of what’s possible. America’s perpetual war-making in the Middle East shows the worst. PREVIOUS The Fed’s Culture War Mark Roe NEXT Creativity, Corporatism, and Crowds Robert J. Shiller Hide Comments Please login or register to post a comment SIGN IN REGISTER EXPERTS USERS Reply

J. VON HETTLINGEN NOV 23, 2014 The IMF states that China has overtaken the US as the world's largest economy, 'outstripping US output of $17.4 trillion' by 0.2 trillion. There is no sense of excitement about it in the US and the news would have gone unnoticed. Gauging China's rise as a geopolitical power, Jeffrey Sachs accuses the US of 'doing everything possible to waste its own ecnomic, technological and geopolitical advantages'. He also puts the blame on the government for squandering 'its global leadership', due to the greed of the country's elites and its involvement in a 'perpetual war in the Middle East.' While China's clout grows steadily, allowing the country to cement its 'global economic and geopolitical leadership', Sachs points out the enormous challenges and pitfalls that the leadership in Beijing may face - both at home and abroad. Indeed, China has a one-party system and its leaders dont rely on popular vote to be elected. So far it has been focusing on economic growth and prefers to stay out of other countries' domestic affairs. For decades the US has been taking on the ungrateful task of a global cob and has 'wasted' much of its resources to protect the global common-good. It's true that the 'wealthy elites' in the US have hi-jacked the 'political system' for their own goals - 'to cut corporate and personal tax rates, maximize their vast personal fortunes, and curtail constructive US leadership in global economic development.' China has also its own cronyism. Although state capitalism had brought millions of people out of poverty and the leadership does everything to maintain this order, the formula may soon be past its sell-by date. The economic system is in a crossroad between status quo or reform. Amid all the problems that the leaders have to tackle, cleaner energy and better environment, fighting corruption etc are obviously their pressing issues. The impression China makes on the international community, is that it doesn't seem to care where the US stands and just minds its own business. RIK RIJS NOV 24, 2014 You are right when you write that 'It's true that the 'wealthy elites' in the US have hi-jacked the 'political system' for their own goals - 'to cut corporate and personal tax rates, maximize their vast personal fortunes, and curtail constructive US leadership . That is indeed a major factor in the demise of the US. Apart from that it's the USA's unreliability. Lying in the UN about Irak's WMD and spying on its NATO allies has turned many Europeans away from the US. Real allies don't spy on you and don't ly. Europe must go for another alliance. Reply

JOHN JAMES NOV 23, 2014 Adjectives and personal perspectives to the side, I think the most important issue is that China is the first real competitor to the United States. With both absolute economic power, a large population and geographic base, unlike previous competitors manque, China has all of the elements necessary to present a real alternative. Reply

PAUL FRANDANO NOV 23, 2014 A needless, silly, wayward, dilettantish little piece that might have been written a year or two ago and pulled out of a file drawer but seems today to be well behind the curve, what with China's growth slowing, population issues mounting, neighboring countries worrying anew about a stumbling, hubristic, hypernationalistic China overplaying its hand and running over one of them by accident, and on and on. As far as we can see, Sachs adds not a syllable to the waxing power/ waning power discussion he seems to be addressing, which is now entering its third decade. I suppose the essence of a know-it-all is to have a say on everything. Here, though, the author trips over that low bar and fails to say much of anything while sounding a familiar declinist alarm. Feh. Reply

COMMENTEDJOHN JONES NOV 23, 2014 The world is not governed by global giants - China, the US, etc. In fact, of course, the world is not governed. This is good news for Arms Traders but who else? We need to make a quantum leap in our thinking if we are to shake off all the antiquated ideas which have fostered war. Only so can we focus our energies on halting the meltdown of our planet whilst there is still time. The main thing is to get away from the idea that our national defence and security depend on having our own armies. We know this is the reverse of the truth. Just because we have strong armies we are willing to take on rival armies belonging to nations we have come to regard as ‘the enemy’. So we go to war, cheerfully doing all the things we are not allowed to do at home, killing and maiming and all the whole sorry story. Of course we lose a lot of our own people, but what does that matter so long as we win? This is so pathetically stupid it is hard to believe it is still happening, but it is. Wouldn’t it be nice if the armies were peacekeepers, not wagers of war, controlled by the UN and the Human Rights charter, not national politicians? How could this happen? See http://www.garrettjones.talktalk.net

DAVID LLOYD-JONES NOV 23, 2014 John Jones writes 'We need to make a quantum leap in our thinking if we are to shake off all the antiquated ideas which have fostered war. ' John, A quantum jump is the smallest motion physically possible, and such a leap in ideas would be imperceptible. Everything moves that much anyway just from thermal vibration, and such leaps would pale into insignificance on as little as the thinker saying 'Hmmm.' -dlj.

ENRIQUE WOLL BATTISTINI NOV 23, 2014 Absolutely right; lunacy at its best! Reply

C JARED NOV 23, 2014 Like most, Sachs mis-understands democracy and it’s benefits. It does not matter if the leadership in the US government is weak or strong. This is supported by studies that show presidents don’t matter. The leadership in America is still infinitely stronger than any other, including China. And that leadership is now in transition from people like Moore (Moore’s Law)… to the new leadership, such as Zuckerburg. Centuries of economic history have shown, weak democratic governments mean strong countries. We want our democratic government to follow society, not lead. If for no other reason, they are simply too dumb.

FABIO SOUZA NOV 23, 2014 It is not only in US. The PCC is carried by few bilionaries holding some powerful decision on how to use the State money. And China has a lot to drive throu markets globally. Powerful elites need and share the space in running the benefits of States. Reply

COMMENTEDFABIO SOUZA NOV 23, 2014 Some older projections put China` GDP growth passing US until 2020. This growth was inevitable and more than ever China will have more responsabilities around the world. Reply

TRUONG CHUNG NOV 23, 2014 This article avoids discussing more detail on the appropriate action of US to the security issue of China with its immediate neighborhoods (Vietnam, Korea, Philippines, Japan...). 'US should lead constructively alongside China', does it mean an acceptance of US to a new 'status quo' and keep doing very least to the recent aggressive action of China to make their sovereignty? It seems that Prof. Sachs believe US should negotiate with China to divide regional influence in Asia. I'm afraid that's actually behind of all the good saying 'the world would be better off if the US also continued to lead constructively, alongside China'. Reply

JAN SMITH NOV 23, 2014 'The US political system has been captured by the greed of its wealthy elites, whose narrow goals are to cut corporate and personal tax rates, maximize their vast personal fortunes....' China transfers resources from households to the state, vastly increasing national saving and investment. The USA transfers resources from 99 percent of households to 1%, also vastly increasing national saving and investment. (For differing reasons, the NIPA misses a large fraction of both trasnfers.) The aggregate result is a capital glut, which slows and destabilizes growth. But the Chinese and American transfers are dissimilar in a critical respect. The bulk of the Chinese transfer ends up in export production and infrastructure construction. The bulk of the American transfer ends up in either luxury or leveraged consumption, both private and public, and in organized swindling, both private and public. Have fun while it lasts, you silly Americans.

CARLOS ZAPATA NOV 23, 2014 Well said. Perhaps more important to understand the scope and the conspicuous approach difference between China and US can be seen on the declared intentions of the chinese leadership: “As its overall national strength grows, China will be both capable and willing to provide more public goods for the Asia-Pacific and the world, especially new initiatives and visions for enhancing regional cooperation” (Xi Jinping at the APEC, November 2014). Therefore the GDP differences are nothing when we compare the approaches. Reply

RICHARD S. STONE NOV 23, 2014 What amuses me in this analysis is the sense of inevitability, both of the virtue of such external engagement and the reservations about success. What we see on this international scale is similar to the corporate mergers and acquisitions of the large multi-national businesses on an economic stage. Most simply fail, some spectacularly, most just quietly. Or we could compare it to the incorporation of the weaker countries surrounding Russia into and as part of the USSR, and the subsequent idea of somehow converting all the various weak and failing economies of the world to global communism. This is a recipe for “success?” By what definition? To what end? Of course there is great enthusiasm by the weaker “partners’ in the relationships, as the weaker partner seeks to find the best teat to suck on and grow fat, most always to the out-size benefit of the ruling elite. Which elite then takes its money and deposits it in a US based bank. How can these weak partners encourage such attempted feeding other than by some sort of competition for “influence?” This influence is nothing but an attempt at bribery for resources, probably cheaper than and more effective than outright subjugation by war. The problem is that it is not exactly market based. It is nothing but an attempt to get resource prices reduced and stabilized for growth of the larger “partner” by paying off the elites of the weaker partner. And there is a social aspect to this as well, as the various “rulers” and elites of these countries meet and socialize with each other, praising and thanking each other as we see on the Hollywood and music awards shows on television. How charming it all is. And underneath this is the same petty but powerful self-aggrandizement that drives the billionaire plutocrat businessmen to buy up smaller companies for the benefit (they say) of the shareholders. But as compared to shareholders, who can at least divest themselves of the corporate stock and end their participation in the ego driven fiasco, the citizens of the country cannot easily end their participation. And this is particularly true in China, etc. I think the US, although misguided in its past involvement in the Mid-east, and although it may be squandering its goodwill now, has at least ceased the dramatic outflow of real resources to that area, and is probably more than content, if not actually pleased, to let China, like Russia before it, take the lead in helping these weaker and smaller countries. For myself, as a US citizen, before I do too much to help the foreign counties do better I want to see more spent at home, and see real benefits to actual (or potential) citizens and residents. Reply

HARI NAIDU NOV 22, 2014 After G20 summit in Australia, President Xi is right now – this weekend – on his first state visit to Fiji (3days!). Besides bilateral talks on assisting Fiji’s national economic & infrastructure development, Xi has provided Fiji the financial means to invite other Islands leaders of the region to meet and discuss issues of climate change and their respective national development priorities. People’s Daily is front paging the event with a special review of PRCs development cooperation with Fiji and rest of the South Pacific Region. PM Modi (India) one-day state visit preceded Xi – early this week - and he also met with Fiji Government leaders and addressed the Fijian Parliament. There is an ethnic Indian diaspora in Fiji (c300.000). Besides tourism, Fiji offers sectoral economic development opportunities for FDI from both emerging Asian powers. The competition for power and influence in South Pacific Region has now turned a new political chapter by simultaneous state visits by India and China. Meantime US and its allies are watching the *new invaders* in their strategic region. Reply DEREK LOUDEN NOV 22, 2014 Prof Sachs is right to point out that the US has to some extent handed over global leadership, maybe more than he realises. Thanks in part to President Putin and in part to Senator McCain we have a de-stabilised Ukraine threatening to descend into chaos. The sanctions on Russia will have the effect of damaging the Russian economy. They have other effects as well, for Ukraine there will be a winter fuel crisis and a budgetary crisis as more expensive alternatives are (if possible) sourced. For the EU energy costs will be pushed up and EU competitiveness vis-a-vis the US will be seriously damaged. Go McCain! For China security of energy supplies will be enhanced and costs reduced as Russia diverts oil & gas from Western to Eastern markets. This will boost China's global competitiveness vis-a-vis Europe and the US. Go McCain! Many people around the world are confused to see a nation with the best-funded and highest ranked universities on earth producing a foreign policy agenda so consistently contrary to their own and most other nation's interests that it beggars belief. Hopefully some thought will go in before the new Chair of the Senate's Armed Services Committee starts shipping arms to Ukraine. Foreign Policy in the US seems given over to ad hoc-ery. As we know, 'where there is no vision, the people perish'. There is no benevolent vision in the modern US to match their past kindness to Europe and to the World. We all hope it is recovered, and recovered soon. Reply

YOSHIMICHI MORIYAMA NOV 22, 2014 It is amazing how poor people of the West are at interpreting and understanding non-Western culuture. They are all Hegelians in the sense that they take it for granted that all human history moves relentlessly and inexorably toward democracy. All people of all the world asre not united in admiring democracy and individualism. Even when they say they admire, they mean different things; they cannot help meanig different things. China cannot be well understood unless we read its more than three thousand years' history. Histroy does not repeat itself, but when we read Chinese histroy we have the impression that it is repeating in China over and over again; we feel as if we see in present China a coelacanth. The Chinese people, like Chinese ruling elites, have been soaked in Chinese dictatorial authoritarianism too deeply and too long to have a suspicion of themselves. Prof. June Teufer Dreyer/China's Tianxia: Do All Under Heaven Need One Arbiter? /Oct. 30, 2014, available at www.yaleglobal.yale.edu/ was interesting to me. China had lived in the slumber of being at the center of the world, but it has been making the unsual experience since about one hundred and fifty years ago; no matter how hard it has tried to fall back into that bliss, it has felt in frustration it cannot let its ego have its way. For one thing, Chinese national life has never been so dependent on what is going on outside its realm. Reply

JAGJEET SINHA NOV 21, 2014 Just like the US displaced Britain's Empire, the Renminbi-Rouble and the Petro-Euro waiting to displace the Dollar. Romes that conquer to create slave Constantinoples eventually find them challenging Rome one day. The litmus test of any Rome perhaps 1000 years. For America to be remembered as New Rome or New England, perhaps the US has to KNOW THYSELF, KNOW THY ENEMIES. Then a THOUSAND BATTLES, THOUSAND VICTORIES will follow. Otherwise tactics without strategy is noise before defeat. Britain got embroiled in European internecine warfare, after having consciously escaped the embrace of Rome in 1688. Bretton Woods in 1945 marked the transition from UK to US. Within 25 years, DeGaulle made it history. Perestroika 1989 is history within 25 years. All battles are won before they are fought. All Empires collapse from within - friendly fires. Rome is history yet all roads lead to Rome. London may be history but English remains the world's primary lingua franca - The Anglosphere. America can be New Rome or New England - but it is for America to decide. The world's governance architecture will change to reflect the historical normal - China or India or both cannot be consigned to The Third World forever. Reply

FETEWEI TEWOLDEMEDHIN NOV 21, 2014 Prof.Sachs, while it may be true that the us is having a tough time through political infighting from the inside and wars in middle east in the outside it is due to US Global leadership that the rest of the world trades in open seas and using us made technology to communicate, educate and build consensus day to day .. the trouble now is that unless there is fundamental shift towards developing countries.. the influence that Chinese has will grow from day to day and will become an inflexible source of power for China .. the Us must strive to do more in what it knows best .. building soft infrastructure and capacity building .. that way it will have secured the future of global leadership and paved way for a democratic rise of continents like Africa the way it as in east Asia Reply

KEN PRESTING NOV 21, 2014 Prof. Sachs is right (as he usually is) about China, both in his general optimism as well as his reservations. I would also recall how moderately the recent protests in Hong Kong were handled. We would all like to see more freedom of speech and democratic institutions in China. I think there is hope we will see more in our lifetimes, but it is certainly a challenge. On the other hand, I think Sachs should be praising Obama's 'turn toward Asia' instead of criticizing the present efforts in Iraq. If anyone can echo the classic Godfather line, 'I tried to get out, but they keep pulling me back in' it is surely Barack Obama. Every Western country is horrified to see their own young men falling for the jihadi cult propaganda. Moreover, the UN has accepted an explicit 'duty to protect' against mass atrocities, and the developed world would be culpable to stand aside. The most culpable agents of chaos in the mideast are the regional governments who finance and harbor the terror groups for their own local ends. The Pakistanis are notorious for supporting the Taliban and Haqqani. Now there is evidence the Saudis and Qataris are playing the same game. And there is no excuse for propping up Assad, for which both the Iranians and Russians are responsible.

It's true that China is one of the bright spots on the world's horizon, and the mideast one of the darkest. The USA has tried leaving the Arab world to itself, but that didn't work. It is sobering to recall the comparison to Vietnam. But let us not forget the examples of Korea and Cambodia. We can be helpful.