Could the global financial crisis mark the start of Chinese dominance?
Last week, David Cameron sent his best wishes to the people of China in celebration of their New Year: the year of the dragon.
This relatively new tradition hints at the growing influence that China is having on fellow sovereigns; Mr Cameron also travelled to China last November with the largest ever delegation of Cabinet Ministers in tow. The Chancellor echoed this sentiment as he journeyed east last month to discuss, amongst other things, making London a global hub for the burgeoning Yuan trade. In the media world, The Economist has just published its first edition featuring a regular section devoted solely to China. It is no secret that China is on the rise (savvy schools have included Mandarin in the curriculum for years) but 2012 could be the year in which we are all forced to sit up and take note.
China’s growth over the last twenty years has dwarfed any period of national economic expansion in recorded history: over 400 million people have been lifted out of poverty. China’s sovereign wealth funds and its state owned enterprises have made huge investments in the developing world in recent years, particularly in Africa, and are confidently striding ahead with a state-market hybrid model that has seen its own brand of quasi-Communism grow and evolve into the twenty-first century; though it should be remembered that its human rights record has unfortunately not followed the same trajectory.
As well as securing the raw materials necessary for continued growth, this model is attracting envious glances from Europe as repeated market crises force states there to become more intimately involved in the private sector than liberal economics would normally prescribe; meanwhile Europe’s longing gaze is returned by China.
The Chairman of China Investment Corporation, the country’s main sovereign wealth fund had already spoken of his desire to invest in infrastructure projects in the developing world before recently completing the purchase of nearly nine percent of London utility Thames Water.
Talking to the BBC recently, London Mayor Boris Johnson batted his eyelashes eastward when he mentioned sovereign wealth funds that he was sure would be willing to help finance a proposed airport in the Thames estuary. Europe’s open desire for Renminbi is not yet reflected in the United States although one wonders if further economic reversals would not make Congress reconsider it previous hostility to Chinese investment in national infrastructure.
Looking to the States provides an interesting parallel to the current situation if one looks to the position of the US seventy years ago. The Economist’s prescience back then predicted the rise to dominance of the USA in 1942, making it the first (and until recently, the only) nation to warrant its own section in its publication’s, then, one hundred year history. It was the post-war financial crisis in Europe, however, that consolidated America’s global leadership position as the Marshall Plan rebuilt Europe in its own image. There is much talk of China being today’s saviour of the ailing global economy; although it ought to be remembered that the Marshall Plan was not wholly altruistic, reviving a huge American export market.
As China’s growth shows signs of slowing, resuscitating the European Market would represent a solid investment. Could a collapse in the Eurozone this year (perhaps spurred by a Greek default) see China ride to the rescue and secure global financial dominance?
Further consideration of this comparison reminds us that US led reconstruction of Western Europe brought the formerly isolationist state permanently, and dominantly, onto the world stage. A similar effect on Chinese foreign policy could follow from a position of strength and could have positive repercussions for the international community, it could even bring to an end the strict policy of non-interference that hampers many of the international community’s most noble efforts.
Chinese growth may already have made it the world’s most powerful state and the global economic crisis could yet make this apparent to all. This transition need not be a negative one if dominance can be proven economically rather than militarily. In short, Mandarin teachers ought to keep their diaries open as 2012 may well be the start of the century of the dragon.
Daniel Bosley is a postgraduate in International Relations, although he likes to contribute to the debate on a range of subjects. He is admittedly left-leaning, but not so much that he falls over.