The coming conflict with China
2008 was the last presidential election when voters didn’t know or care about the candidates views on China, argues political risk analyst Ian Bremmer.
Bremmer’s new book “The End of the Free Market” argues that the Chinese economic model — which he calls state capitalism — is so fundamentally different from Western free market capitalism that tensions and economic conflict are inevitable in the years ahead.
The main goal of China’s state-directed capitalism is to harness economic growth to ensure political stability and keep the Communist Party in power, Bremmer says. And since the financial crisis, China has seen the United States and the West as “less indispensable”.
Bremmer is not predicting a military confrontation, but an economic war, in which China reserves large parts of its domestic market to domestic firms, and elbows out Western multinationals — he explains Google’s withdrawal from China in terms of protecting China’s top internet search engine Baidu, which is already reaping the benefits.
The Obama administration, which often stresses the mutual interests of the two nations and talks in terms of partnership, sometimes underestimates some of the zero-sum games involved in the relationship, he says.
But there is no doubt the administration does see challenges ahead — last November, Obama told Reuters the two nations needed to address economic imbalances or risk “enormous strains” on their relationship.
There is talk of a yuan revaluation soon, but that alone is unlikely to make much of a dent on those imbalances or calm for long protectionist pressures in the U.S. Congress or elsewhere.
The U.S.-China Strategic Economic Dialogue looms at the end of this month, and the public mood music is likely to be soothing. But behind the scenes, if Bremmer is right, perhaps the United States should be gearing up for more of a fight.
Photo credits: Reuters/Jonathan Ernst (color guard of U.S. and Chinese flags awaits President Hu Jintao’s arrival in Washington), Reuters/David Gray (Chinese yuan banknote)