Opinion

The Great Debate

Forget G-Zero, it’s China that’s leading the world

By Aldo Musacchio
May 3, 2012

This is the third in a series of responses to Ian Bremmer’s excerpt of Every Nation for Itself: Winners and Losers in a G-Zero World. The first response can be read here and the second here.

Ian Bremmer is launching his new book with an eye-opening observation above the uncertain future of global order. This time he is warning us of the dangers of having a world with no clear leader. In his view, the United States and Europe are in a weak position to sustain any hegemonic position. In particular, their focus on austerity measures can complicate their role as military leaders of the world (e.g., NATO’s role). Moreover, multilateral organizations, such as the G7 or the G20, will not do the trick either. The G7 is in the middle of the worst crisis in almost a century, and the G20 has members with preferences that are hard to aggregate. BRICS, the organization supposedly coordinating the efforts of Brazil, Russia, India, China and South Africa, is too young and preoccupied with other issues to act as the new hegemon. What, then? Where is the world going? Who will emerge as the new leader?

The obvious candidate is China. I have not read the entire book, so I do not know precisely what Bremmer’s position is on China. But because the book’s argument is that there is no real global leader now, I assume he believes China will not be taking that role in the future either. I want to argue, in contrast, that China has begun to play that role and has the potential to become a hegemon. Yet, if China rises to be the global leader, there will be major tensions in the institutional foundations of global capitalism as we know them today. As China’s leadership role grows, the global institutions that have ruled the world in the last 20 or so years will have to change.

Bremmer argues that the most important tools for establishing global power and leadership today are the traditional economic levers and the cyber-capacity to conduct industrial espionage and protect or control information and communication across borders. I would argue that China’s proven track record in both of these areas makes it an ideal candidate for world leader. It is the champion of cyber-censorship and the only country that has tamed large global corporations, compelling them to share user information with the government. Moreover, any major company doing business in China already has bent over backwards to share information and intellectual property with its “forced” local partners (i.e., partners that are the product of mandatory joint ventures dictated by the government of Beijing or any of the Chinese provinces).

China is champion when it comes to using economic tools to impose global discipline, induce countries to do what it wants, and change global conditions. China indirectly determined interest rates in the United States for years, acting as the largest buyers of Treasury bonds. It also uses conditional loans to get African governments to do what it wants, including favoring Chinese companies over locals or Western companies. Furthermore, China has increased its power within the IMF and other multilateral organizations and has been sought after by the EU to participate in its bailout fund.

In addition, China has already been challenging the power of Western countries and organizations for years. It is emerging as a superpower on the sidelines, securing access to natural resources and exercising soft as well as military power in its backyard and beyond. In Africa, China has filled the void left by international organizations, acting as a development agency and as a soft (sometimes hard) imperial power. Many criticize the means, but nobody questions the results, e.g., new roads, bridges, buildings, ports, railways, etc. A similar phenomenon is beginning in Latin America, especially in natural resources. In particular, Chinese investments in oil exploration in Cuba are part of this trend and show another important dynamic as well: China likes to play in the U.S.’s backyard. In fact, China, more often than not, works against U.S. wishes, whether by not supporting efforts to impose tight sanctions on Iran, or pushing the boundaries of the South China Sea, or not being as active as it could be when it comes to North Korea.

So, what if China does become the next global hegemon? There will be three major changes in the global diplomatic and economic equilibrium. First, multilateral organizations, as well as the United States and Europe, have been exporting democracy and human rights as universal values. Many times they have imposed democracy or human rights provisions as part of conditional agreements tied to loans or foreign aid. China does not believe in those values and does not play by those rules. Chinese interference in Sudan, basically promoting its own investments, weakened Western efforts to impose sanctions on the Sudanese government for its human rights violations and support for terrorism. In 2004 China also rescued Angola and its autocratic leaders with a credit line when the IMF was about to impose tough conditions, mostly focused on opening the books of the country and its oil company, tied to a loan package.

Second, China’s system of state capitalism, especially after the resilience it showed during the financial crisis of 2008-2009, is questioning the American model of economic liberalism – the paradigm that has been almost universally accepted since the creation of the so-called Washington Consensus in the 1990s. Now, state capitalism has come of age (as Bremmer highlighted in his previous work) and is threatening many of the global institutions we take for granted. How is the WTO going to deal with state-owned enterprises? Can the world regulate sovereign wealth funds and their actions? Perhaps some of the rules, as we know them, will have to change.

Finally, China will have a hard time establishing its own reserve currency, but in practice the People’s Bank of China has become an important monetary authority in the world. The capacity it has to control inflation in China allows it to manipulate global currency markets, lower interest rates worldwide and determine the cost of debt for the richest countries. In a nutshell, the world will eventually have to understand that the PBOC is as important as the Federal Reserve, and we will learn to live with it. Still, people in the West will not trust the PBOC, or the Chinese government for that matter, because they do not understand its objectives and values.

PHOTO: Chinese special forces personnel stand on the deck of the Chinese naval guided missile frigate Yuncheng during a welcome ceremony as the ship docks at the Ngong Shuen Chau Naval Base in Hong Kong, April 30, 2012. REUTERS/Tyrone Siu

Comments
9 comments so far | RSS Comments RSS

I think China has its own problems eg the difficulty of setting up independent companies. Government influence can cause them to make decisions that are detrimental to them.

Has anyone read will Hutton’s book “The Writing On The Wall: China And The West In The 21St Century”

Posted by Alistair2 | Report as abusive
 

The CCB has power becasue it is running a huge surplus and using that money to buy debtor nations debt, thus leveraging it’s influence. I would suggest you look to the trajectory of that balance and think how much longer before China is asking other creditor nations to buy it’s debt, that is also close to the time that it’s currency will begin to be taken seriously as a global trade exchange. Without massive internal debt the Renmimbi will never be a global currency, regardless of the numerical value of China’s GDP. If you want in the cool kids club you have to put on the cool kids clothes. Regardless of public opinion, the G7 and the western powers are not democracies, just more free in publicated opinion.

Posted by savannah05 | Report as abusive
 

All this has been made possible by the artificially low value of the Yuan. Year after year, China continues to manipulate it’s currency to gain an unfair advantage in world trade.

Obama has done nothing about this. In contrast, Romney has at least *promised* to get tough on this issue. Too bad there is no viable third candidate.

Posted by DifferentOne | Report as abusive
 

Mr. Musacchio: Surely you jest! You seem to suggest that we install a communist country; the dictatorship of a nine-member Party, a known cheat in business dealings, an advocate of “state capitalism,” who is officially atheistic in terms of belief, to be the “hegemon” of the world. You could only believe that China is “the ideal candidate” for this role if you don’t know much about its government or you choose to have rosy ideas about some “China” that in reality these days, doesn’t exist. Your ideas about censorship are idiotic. Have you ever lived in China? I have, and I pray that you are wrong — or that someone will ride herd on your silly ideas, because you obviously don’t.

Posted by dwilliams3 | Report as abusive
 

This article states the truth, that China is taking over. It is now their time to rule…….

Posted by KyleDexter | Report as abusive
 

There’s no doubt China is a global power and it’s action reverberates every corner of the globe. But to say China will become a hegemon is rather fantastical. Sure China will throw its weight around the world to enrich its country and people but so is every other nation. But the day when a global super power dictates major decision is over because I think the return on being a global leader is diminishing. With so many rival power around the world it no longer makes sense for one or two super power hence we now approach zero. Zero global power with super powers in their sphere of influence working with each other to better the world and their people.

Also I just don’t think China’s culture will become universally accepted. Sure the next Hollywood block buster will be produced and finance by China, but can you imagine the Chinese government condoning the kind of script and story lines in a Hollywood movie? Imagine a Harry Potter interpreted by the Chinese government and you can see why it will never work. And with no such soft power China will flame the perception of “they do not understand its objectives and values.”

Posted by MegaChan | Report as abusive
 

It’s all about soft power. Everyone wants Chinese money, sure. But no one says “I wish our country was more like China!” People in Africa are hardly clamoring for more state-run enterprises and media censorship.

Posted by Andao | Report as abusive
 

Andao. The difference between China and America is that America seeks to propagate its values and systems, and be imitated. It’s a missionary culture. China seeks no such thing. China’s values, systems, and development strategies are its own. They know that just because it is working for them so far, that doesn’t mean it’ll work for anyone else. Customized solutions for different cultures, peoples, and regions. Belief in Universal solutions is the symptom of intellectual laziness.

Posted by RichardLam | Report as abusive
 

China may be developing into a world player in the near future but it is not going to be a dominating power or a “hegemon” like the US of today or the GB of yesterday. This is because as a continental nation (as opposed to an island nation like GB or Japan) with a long history of both good and bad times the people have settled into a set of values unlike that of the western nations. For a western scholar to think that China will behave like the US today is because few makes any attempt to understand the language and even less so to study Chinese history and culture.

China had a world class navy in the Ming dynasty long before GB ruled the waves. Even the all powerful emperor at that time found that effort not sustainable. China learned the lesson well after the emperor grounded all war ships and banned all adventure overseas.

China also learned that the many occurrences of bad times in its history were with a weak central government. Starvation and deaths were rampant at those sorry days. Thus it is the ingrained human values in Chinese culture to have sufficient food, clothing and lodging for all. This is fundamental and all else are secondary.

China has also learned that human nature as it is, the western election tools did not bring in democratic or even good government as the losers in the election would do everything in their power to bring down the government regardless of the urgent need to achieve those fundamental human values. Good governance (as opposed to good government) may be an ideal like communism that is impossible to achieve.

China understood it could not be a world cop nor a charity to all nations. Its primary target is to meet the fundamental values for its people. Unlike Christian religion of a “god” making “people” look like Him, China believe in good leadership to achieve those fundamental values by exploring different components of political systems that suit itself more. It is still “work-in-progress”. Thus China is no “god” and in no position to tell other nations what system they must adopt for their own development now or in the future as it is no doubt different for different nations. The Mao’s era has long gone.

Could China be a “hegemon” in the same manner as the US of today? The chance is less than 0.1%. Could China lead the world? History has shown that it has done that in the past and may well do so again in some respect but not in the way many western nations feared.

Posted by ExRA | Report as abusive
 

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