Given
the difficulties its economy has faced recently and its huge public
debt (104.17%
at the end of 2015 and predicted to hold steady in 2017-18 and then
start rising again*),
some commentators argue that the US has now begun an inevitable
decline as the dominant superpower, a decline that may soon erode not
only its economic position but also impact its military dominance.
However, according to other experts the relative decline of US power
is at least partially exaggerated and can better be seen as an
opportunity for Washington to redefine its strategic commitments,
renegotiate alliances with its partners and free up resources to
relaunch its economy.(update
Q3 2016: 104.80, https://fred.stlouisfed.org/series/GFDEGDQ188S)
With the ongoing economic crisis, fragile economic global recovery and the continuing concern of the rating agencies about the effectiveness of the fiscal package agreed in Congress to really reduce the US debt (following the downgrading by the agencies of the economies of several of Washington’s closest EU allies in 2012-13 (and the EU itself in December 2013), the debate between pessimists and more sanguine observers has grown. The former predict a serious and rapid decline in US influence and the advent of a multipolar world strongly influenced by China, while the latter are confident that for the foreseeable future the US will maintain its leadership role in international relations. Moreover, they argue that if we consider the West as a whole, rather than the US alone, then, despite Europe’s enormous economic difficulties, China cannot really hope to achieve dominance in terms of economic and military power. In addition, the world’s principal global institutions are all expressions of the West’s value system and China seems basically to be in the process of joining this system, adapting to it and trying to gain more influence within it, rather than wanting to overturn it or see it collapse as the Soviet Union did.
Moreover, in spite of the economic crisis which has hit the US hard, forecasts of absolute decline seem premature. There are signs that the US economy is at the start of an economic recovery, and the US remains the principal power at the center of the international stage In 2014 China’s GDP in nominal terms was $10.36 trillion was still much less than that of the US ($17.35 nominal), although it was bigger than it in terms of GDP Purchasing Power Parity (China $18.09 trillion, US $17.35 PPP). The EU was even larger $18.53/18.64).The American economy was still much larger than those of its other closest competitors, India ($2.05/$7.41) and Japan ($4.60/$4.77) even in PPP terms. US GDP represented about 22% of global nominal GDP in 2014 and 16% of global GDP PPP. https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29
As for military power, the US military budget still represents 36% of total global military spending. Despite recent cuts the US still spends 50% more than China, Britain, France, India, Japan and Russia combined. Moreover, NATO, the US-led alliance, accounted for more than 52% of global military spending in 2015 (down from 60% in 2013). However, if the military spending of other US allies (e.g. Japan, Australia etc…) is added, this figure rises and suggests that the US easily remains the dominant power.** The US has 38 major military bases around the world compared with 30 for Russia, France and Britain combined (China has one).
http://www.businesswire.com/news/home/20151216006109/en/Growing-Security-Fears-Boost-Defence-Budgets-IHShttp://www.politico.com/magazine/story/2015/06/us-military-bases-around-the-world-119321
With the ongoing economic crisis, fragile economic global recovery and the continuing concern of the rating agencies about the effectiveness of the fiscal package agreed in Congress to really reduce the US debt (following the downgrading by the agencies of the economies of several of Washington’s closest EU allies in 2012-13 (and the EU itself in December 2013), the debate between pessimists and more sanguine observers has grown. The former predict a serious and rapid decline in US influence and the advent of a multipolar world strongly influenced by China, while the latter are confident that for the foreseeable future the US will maintain its leadership role in international relations. Moreover, they argue that if we consider the West as a whole, rather than the US alone, then, despite Europe’s enormous economic difficulties, China cannot really hope to achieve dominance in terms of economic and military power. In addition, the world’s principal global institutions are all expressions of the West’s value system and China seems basically to be in the process of joining this system, adapting to it and trying to gain more influence within it, rather than wanting to overturn it or see it collapse as the Soviet Union did.
Moreover, in spite of the economic crisis which has hit the US hard, forecasts of absolute decline seem premature. There are signs that the US economy is at the start of an economic recovery, and the US remains the principal power at the center of the international stage In 2014 China’s GDP in nominal terms was $10.36 trillion was still much less than that of the US ($17.35 nominal), although it was bigger than it in terms of GDP Purchasing Power Parity (China $18.09 trillion, US $17.35 PPP). The EU was even larger $18.53/18.64).The American economy was still much larger than those of its other closest competitors, India ($2.05/$7.41) and Japan ($4.60/$4.77) even in PPP terms. US GDP represented about 22% of global nominal GDP in 2014 and 16% of global GDP PPP. https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29
As for military power, the US military budget still represents 36% of total global military spending. Despite recent cuts the US still spends 50% more than China, Britain, France, India, Japan and Russia combined. Moreover, NATO, the US-led alliance, accounted for more than 52% of global military spending in 2015 (down from 60% in 2013). However, if the military spending of other US allies (e.g. Japan, Australia etc…) is added, this figure rises and suggests that the US easily remains the dominant power.** The US has 38 major military bases around the world compared with 30 for Russia, France and Britain combined (China has one).
http://www.businesswire.com/news/home/20151216006109/en/Growing-Security-Fears-Boost-Defence-Budgets-IHShttp://www.politico.com/magazine/story/2015/06/us-military-bases-around-the-world-119321
http://www.businessinsider.com/us-military-spending-remains-massive-compared-to-the-rest-of-the-world-2016-4?IR=T
2016
figures show the US military budget still 2.5 to 4 times bigger than
that of China before Trump's proposed increases in 2017.
Finally,
the US is still the world leader for investment in research, and in
the list of the top 20 universities worldwide, between10 and 16 are
American according to which list you choose to
believe.http://www.topuniversities.com/university-rankings/world-university-rankings/2015#sorting=rank+region=+country=+faculty=+stars=false+search=https://www.timeshighereducation.com/world-university-rankings/2016/world-ranking
http://www.usnews.com/education/best-global-universities/rankings
However, over the last decade, the US share of global GDP (PPP) fell from 23% to 16 %, while China´s share of global GDP PPP increased from 7% to 17% ( however the EU also accounts for 17% of global GDP). At this pace of growth China may overtake US nominal GDP by as early as 2020-5. So, although US strength is evident, its relative decline is real
In fact, at the start of the 21st century, the country´s reliance on imports, combined with low taxes and the then high cost of borrowing in order to fund the public debt, together with Washington’s soaring military expenditure after 9⁄11 as it expanded its military and counterterrorism operations around the world, inflated its annual budget deficit which stood at 8.6% of GDP for the 2011 fiscal year. Since then after significant spending cuts it has returned to its historical average relative to the size of the economy (around 3% of GDP) registering 2.7% in Dec 2015.
The annual growth rate of the US economy was 2.3% in 2012, 2.2% in 2013 and 2.4% in 2014 and estimated at 2.4/2.5%% for 2015.http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG
http://knoema.com/qhswwkc/us-gdp-growth-forecast-2015-2019-and-up-to-2060-data-and-charts
http://www.tradingeconomics.com/united-states/gdp-growth-annual/forecast
The US trade deficit for 2012 was -2.8% of GDP (perhaps -2% with China alone), -2.2% in 2013, -2.2% in 2014 and -2.4% in 2015.http://data.worldbank.org/indicator/BN.CAB.XOKA.GD.ZS
On the other hand, GDP PPP per capita clearly indicates that American citizens are still far richer than their Chinese counterparts (more than 4 times richer).https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita
Per capita income is a good indicator of how much money governments can generate in taxes for government projects at home and abroad. Furthermore, the Chinese authorities face a series of obstacles that could hamper economic growth at a time (2015) when it is trying to steer the economy away from a model where growth is based on exports to one where domestic consumption will play a much greater role. These problems include a slow-down in its growth rates and the consequences of this both for Chinese companies and workers, growing debt within the Chinese economic system, potential domestic unrest, continuing high levels of savings and relatively low domestic consumption, an ageing population which will become a significant factor in the next 20 years, a still relatively weak health care system and widespread corruption. As China moves to respond to these challenges its labor costs are likely to begin to rise. http://www.theguardian.com/world/2015/aug/27/china-small-time-recyclers-down-on-their-luck-amid-stock-market-turmoil
http://www.bloomberg.com/news/articles/2015-05-01/chinese-consumers-cling-to-saving-suppressing-spending
http://www.forbes.com/sites/kenrapoza/2015/05/09/chinas-total-debt-load-now-over-280-of-gdp/#1535393467ab
http://www.economist.com/blogs/freeexchange/2015/03/china-s-local-government-debt
http://www.theguardian.com/world/2015/feb/06/china-one-child-policy-problems-ageing-population
http://www.japantimes.co.jp/news/2015/08/26/business/china-struggles-control-shift-lower-growth-based-domestic-consumption/#.Vrw4M0DJZdh
http://thediplomat.com/2015/05/chinas-health-care-reforms/
https://en.wikipedia.org/wiki/Healthcare_reform_in_China#Recent_changes
https://en.wikipedia.org/wiki/National_debt_of_the_United_States
http://useconomy.about.com/od/worldeconomy/p/What-Is-the-US-Debt-to-China.htm
However, China holds very large foreign exchange reserves (although they fell in 2015). It holds about 8 % of the US public, with Japan holding slightly less at 7%. The U.S. debt to China was $1.2645 trillion, as of November 2015. That's less than in November 2013, when China owned a record $1.317 trillion in Treasury bills, notes and bonds. It gradually lowered its U.S. debt holdings after that to allow its currency, the Yuan, to rise in response to global accusations of manipulation. However, China reversed course in February 2014 and began weakening its currency again. That was because it had pegged the Yuan to the dollar, which rose 25% in 2014 and 2015. China needed to lower the Yuan to remain competitive with other emerging markets, whose currencies were free-floating. It is slowly loosening the Yuan's peg to the dollar and allowing market forces to determine its value since, in the long-term, China would like the Yuan to join the US Dollar as the leading global reserve currency.
Moreover, China is the principal stake-holder in the BRICS’ New Development Bank and the Asian Infrastructure Investment Bank (AIIB). China is also the main trading partner for Africa and an important investor in Africa (but behind the EU and US), although its investments fell 40% in the first half of 2015 compared with the same period in 2014. It’s imports fell 13% in the 12 months to October 2015.http://www.ft.com/intl/cms/s/0/c53e7f68-9844-11e5-9228-87e603d47bdc.html#axzz3zqHD78R2
http://www.brookings.edu/blogs/africa-in-focus/posts/2015/09/03-china-africa-investment-trade-myth-chen-dollar-tang
http://www.ft.com/intl/cms/s/3/fea83f20-6c2d-11e5-aca9-d87542bf8673.html#axzz3ywkCgv9R
http://qz.com/552412/chinese-investment-in-africa-has-fallen-40-this-year-but-its-not-all-bad-news/
The slow pace of domestic consumption and the high levels of savings represent one of the most striking characteristics of the Chinese economy. While consumer spending still only amounted to 36.5% of GDP in 2014 (compared with more than 68.% in the US and 59.3% in India) investments have reached a level estimated at between 46% of GDP (World Bank for 2014). Along with these massive investments in industrial infrastructure (a good indicator of future competitivity) there has also been a continual rise in property prices in urban, industrial areas with significant social consequences. Moreover, the Chinese government is now having to to try to cope with the rising demand for social services by shifting resources from other kinds of investments to welfare. As mentioned above, another crucial issue looming ahead is that related to its currency, the Yuan, and the rate of exchange on financial markets. In fact, the Chinese authorities have been confronted again with expensive interventions carried out by the People´s Bank of China to keep the exchange rate artificially low and the currency undervalued. If China is eventually forced or chooses to allow the Yuan to really float freely without interventions by the state this may drastically increase the Yuan/Dollar exchange rate, increase the cost of its Chinese goods for buyers in other countries, while at the same time boosting domestic consumption and imports, and thus reduce the Chinese trade surplus. http://data.worldbank.org/indicator/NE.GDI.TOTL.ZS
China is rapidly increasing investment in technology, particularly in IT, and education. US companies operating in China have registered very high productivity levels while benefitting from much lower labor costs. However, there are now signs that as labor flows from rural areas begin to slow and demand for skilled workers rises, labor costs in China are now beginning to rise though they obviously remain well below levels in the US and Europe.
The US is not retreating from world affairs, but in the face of economic constraints and its huge debt, resources for defense and foreign policy will inevitably shrink (with cuts in defense spending in 2014) although these are cuts starting from very high levels and with the US holding huge accumulations of existing military assets). This will mean a re-evaluation and reduction in US strategic commitments in some areas in order to continue the ongoing shift of resources towards the Asia-Pacific region. After the fall of the Berlin wall and the collapse of the Soviet Union, the European continent lost relevance in the eyes of America as the threat level was reduced. However, recent events in Ukraine and growing tension with Russia are forcing a partial review of this policy. Moreover, the US withdrew its last combat troops from Iraq in December 2011 and from Afghanistan in December 2014. (However, the US has not disengaged from the area since it gave its support to the Free Syrian Army in 2012 and began bombing raids against IS in September 2014.)https://en.wikipedia.org/wiki/American-led_intervention_in_Syria
However, this overall shift will allow a growing American presence in the Asia-Pacific region as part of a containment strategy towards China. This policy has been developed through a series of agreements with those countries which are most affected by the rise of China, its neighbors. The political, economic and strategic relations that the US has created with Japan, South Korea, India, Vietnam, Australia, Indonesia and other countries in the region, over the last 15 years highlights the scale of the encirclement strategy pursued by Washington. Furthermore, the recent deployment of 2,500 soldiers to Australia, added to the 50,000 US military personnel deployed in South Korea and Japan shows how the containment strategy is moving forward. China is aware of the policy being carried out by the US and clearly sees it as an attempt to undermine its influence in the region. Tensions over developments regarding Taiwan are also indicative of the frictions which are perhaps inevitable as a rapidly growing regional power challenges a global power whose resources, while vast, are now limited. If China continues to grow at current rates but fails to democratize and develop towards the Western model then a strengthening of security ties between China’s neighbors, many of which are democratic states is a likely response to safeguard independence and shared values.
More importantly, the combined economic resources (in terms of GDP) and military resources of the West (NATO in its narrowest sense, perhaps the OECD in its widest sense) as a whole is and will remain far beyond the capacity of China to challenge. US military spending alone is 3 times that of China (2015). Certainly China’s power and influence is going to grow both regionally and globally, perhaps in partnership with Russia at the UN and through the BRICS group. However, there is a more likely scenario than confrontation. China is a major stakeholder in the international liberal order, as a permanent member of the UN Security Council, an important WTO and IMF member, and, above all, as a state holding vast foreign currency reserves (e.g. US Treasury bonds) estimated at more than 1.25 trillion dollars, and one which also has growing overseas investments (estimated to reach $1-2 trillion by 2020). So even though China may continue to stand on its sovereignty and use nationalist rhetoric that defines international comment (on issues such as human rights in China, the lack of democracy and the situation in Tibet) as interference in its domestic affairs, it is probable that its stake in the existing global order will continue to grow and that it will thus have good reason to adopt a policy of accommodation and cooperation rather than one of confrontation.
In the end perhaps it is the definition of what we mean by ‘West’ that is of paramount importance in today’s world. Once that meant Europe and North America, plus countries like Australia and New Zealand. It would be difficult today not to include Japan. And then there is the OECD. More importantly, it is the core liberal democratic values enshrined in the main global institutions from the UN down which best define the West. These are values which many countries (Brazil, India, but many more in Latin America and Africa and Southern Asia) and not only the richer, developed ones but developing ones too, have invested in, or are investing in, and which increasingly represent the normative political expectations (how things should be) for ordinary people all over the world. The wave of democratization since the 1990s and at least part of the political hopes expressed in the early days of the Arab Spring suggest that the West in this sense is very much alive and flourishing, with or without US leadership. And a ‘West’ which is global and multipolar, rather than simply a US-led NATO, may be a very positive evolution. Strangely, al-Qaeda and Islamic State, in describing the UN and other international agencies as agents of Western cultural imperialism may simply be acknowledging the extent to which once Western values are now becoming universal.
Those who doubt the attraction of the West’s cultural model should perhaps pay more attention to the vast number of migrants and refugees for most of whom the West remains the preferred destination in terms of their hopes for prosperity, security and freedom.
Note – the West in modern English is not normally used as a synonym for European colonialism (I think this is mainly because European colonialism – often based on slavery and doctrines of racial superiority – is now seen as something clearly in contrast with many basic Western values) . It is mainly used in international relations to refer to those countries evolving towards liberal democracy and a free (today usually mixed) market economy, from the late 18th century, through the 19th century and up to 1945. Since the end of the Second World War it has been used to describe first NATO and other allies outside NATO (like Australia) and then gradually to include all those countries which generally embrace Western values.
See also on this site:
What role will the BRICS countries play in international affairs?
http://www.ituassu.com.br/china_ikenberry_fa.pdf
http://data.worldbank.org/indicator/NY.GDP.MKTP.CD
http://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD
http://en.wikipedia.org/wiki/List_of_countries_by_projected_GDP_%28PPP%29_estimates
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29
http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures
http://en.wikipedia.org/wiki/National_debt_of_the_United_States
http://en.wikipedia.org/wiki/Economy_of_the_United_States
http://en.wikipedia.org/wiki/List_of_countries_by_public_debt
http://www.ihavenet.com/World-United-States-The-Wisdom-of-Retrenchment-America-Must-Cut-Back-to-Move-Forward-Foreign-Affairs.html
http://blogs.reuters.com/bernddebusmann/2011/03/11/a-final-goodbye-to-superpower-america/
http://www.guardian.co.uk/business/2011/dec/21/fitch-theatens-credit-dowgrade-usa
http://money.usnews.com/money/business-economy/articles/2011/07/22/meet-3-ratings-agencies-that-have-already-downgraded-the-us http://www.washingtonpost.com/business/economy/sandp-considering-first-downgrade-of-us-credit-rating/2011/08/05/gIQAqKeIxI_story.html
http://www.ogilvy.com/News/Press-Releases/May-2011-Asia-Society-Study-on-Chinese-Direct-Investment-Abroad.aspx
http://europe.chinadaily.com.cn/epaper/2011-05/06/content_12457731.htm http://www.ft.com/intl/cms/s/0/25f1c500-ff14-11e0-9b2f-00144feabdc0.html#axzz1qdKaAFo0
http://www.globalissues.org/article/75/world-military-spending
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29
http://www.huffingtonpost.com/2011/10/07/china-manufacturing_n_1000305.html
http://www.nytimes.com/interactive/us/politics/debt-reckoning.html
http://en.wikipedia.org/wiki/List_of_countries_by_gross_fixed_investment_as_percentage_of_GDP
http://data.worldbank.org/indicator/NE.CON.PETC.ZS
https://www.imf.org/external/pubs/ft/wp/2012/wp12277.pdf
https://www.bondvigilantes.com/blog/2014/01/24/chinas-investmentgdp-ratio-soars-to-a-totally-unsustainable-54-4-be-afraid/
http://www.weforum.org/news/global-economy-2013-fragile-and-timid-recovery
http://en.wikipedia.org/wiki/List_of_countries_by_future_GDP_%28PPP%29_estimates
Where the Action is: America’s Pacific Shift, Edoardo Febbrazzani, Longitude February 2012
Superpower by Default, Alessandro Merola, February 2012
* On January 26, 2016, the debt held by the public was $13.62 trillion or about 75% of the previous 12 months of GDP. Intragovernmental holdings stood at $5.34 trillion, giving a combined total gross national debt of $18.96 trillion or about 104% of the previous 12 months of GDP. $6.2 trillion or approximately 47% of the debt held by the public was owned by foreign investors, the largest of which were the People's Republic of China and Japan at about $1.3 trillion each for the two countries as of November 2015Source: http://en.wikipedia.org/wiki/National_debt_of_the_United_States
http://www.treasurydirect.gov/NP/debt/current
http://www.tradingeconomics.com/united-states/government-debt-to-gdp
Washington’s fiscal position is even more alarming if viewed as an ongoing trend. Over the last few years, the US public debt as a percentage of GDP rose rapidly, from 56.4% in 2001 to 100.8% in 2012, 100.9% in 2013 and 103.2% in 2014. As indicated before, it then fell to 100.5 as of Q3, 2015 but is forecast to start rising again after a 2-year period of relative stability).Update Q3 2016: 104.80%,
http://www.usnews.com/education/best-global-universities/rankings
However, over the last decade, the US share of global GDP (PPP) fell from 23% to 16 %, while China´s share of global GDP PPP increased from 7% to 17% ( however the EU also accounts for 17% of global GDP). At this pace of growth China may overtake US nominal GDP by as early as 2020-5. So, although US strength is evident, its relative decline is real
In fact, at the start of the 21st century, the country´s reliance on imports, combined with low taxes and the then high cost of borrowing in order to fund the public debt, together with Washington’s soaring military expenditure after 9⁄11 as it expanded its military and counterterrorism operations around the world, inflated its annual budget deficit which stood at 8.6% of GDP for the 2011 fiscal year. Since then after significant spending cuts it has returned to its historical average relative to the size of the economy (around 3% of GDP) registering 2.7% in Dec 2015.
The annual growth rate of the US economy was 2.3% in 2012, 2.2% in 2013 and 2.4% in 2014 and estimated at 2.4/2.5%% for 2015.http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG
http://knoema.com/qhswwkc/us-gdp-growth-forecast-2015-2019-and-up-to-2060-data-and-charts
http://www.tradingeconomics.com/united-states/gdp-growth-annual/forecast
The US trade deficit for 2012 was -2.8% of GDP (perhaps -2% with China alone), -2.2% in 2013, -2.2% in 2014 and -2.4% in 2015.http://data.worldbank.org/indicator/BN.CAB.XOKA.GD.ZS
On the other hand, GDP PPP per capita clearly indicates that American citizens are still far richer than their Chinese counterparts (more than 4 times richer).https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita
Per capita income is a good indicator of how much money governments can generate in taxes for government projects at home and abroad. Furthermore, the Chinese authorities face a series of obstacles that could hamper economic growth at a time (2015) when it is trying to steer the economy away from a model where growth is based on exports to one where domestic consumption will play a much greater role. These problems include a slow-down in its growth rates and the consequences of this both for Chinese companies and workers, growing debt within the Chinese economic system, potential domestic unrest, continuing high levels of savings and relatively low domestic consumption, an ageing population which will become a significant factor in the next 20 years, a still relatively weak health care system and widespread corruption. As China moves to respond to these challenges its labor costs are likely to begin to rise. http://www.theguardian.com/world/2015/aug/27/china-small-time-recyclers-down-on-their-luck-amid-stock-market-turmoil
http://www.bloomberg.com/news/articles/2015-05-01/chinese-consumers-cling-to-saving-suppressing-spending
http://www.forbes.com/sites/kenrapoza/2015/05/09/chinas-total-debt-load-now-over-280-of-gdp/#1535393467ab
http://www.economist.com/blogs/freeexchange/2015/03/china-s-local-government-debt
http://www.theguardian.com/world/2015/feb/06/china-one-child-policy-problems-ageing-population
http://www.japantimes.co.jp/news/2015/08/26/business/china-struggles-control-shift-lower-growth-based-domestic-consumption/#.Vrw4M0DJZdh
http://thediplomat.com/2015/05/chinas-health-care-reforms/
https://en.wikipedia.org/wiki/Healthcare_reform_in_China#Recent_changes
https://en.wikipedia.org/wiki/National_debt_of_the_United_States
http://useconomy.about.com/od/worldeconomy/p/What-Is-the-US-Debt-to-China.htm
However, China holds very large foreign exchange reserves (although they fell in 2015). It holds about 8 % of the US public, with Japan holding slightly less at 7%. The U.S. debt to China was $1.2645 trillion, as of November 2015. That's less than in November 2013, when China owned a record $1.317 trillion in Treasury bills, notes and bonds. It gradually lowered its U.S. debt holdings after that to allow its currency, the Yuan, to rise in response to global accusations of manipulation. However, China reversed course in February 2014 and began weakening its currency again. That was because it had pegged the Yuan to the dollar, which rose 25% in 2014 and 2015. China needed to lower the Yuan to remain competitive with other emerging markets, whose currencies were free-floating. It is slowly loosening the Yuan's peg to the dollar and allowing market forces to determine its value since, in the long-term, China would like the Yuan to join the US Dollar as the leading global reserve currency.
Moreover, China is the principal stake-holder in the BRICS’ New Development Bank and the Asian Infrastructure Investment Bank (AIIB). China is also the main trading partner for Africa and an important investor in Africa (but behind the EU and US), although its investments fell 40% in the first half of 2015 compared with the same period in 2014. It’s imports fell 13% in the 12 months to October 2015.http://www.ft.com/intl/cms/s/0/c53e7f68-9844-11e5-9228-87e603d47bdc.html#axzz3zqHD78R2
http://www.brookings.edu/blogs/africa-in-focus/posts/2015/09/03-china-africa-investment-trade-myth-chen-dollar-tang
http://www.ft.com/intl/cms/s/3/fea83f20-6c2d-11e5-aca9-d87542bf8673.html#axzz3ywkCgv9R
http://qz.com/552412/chinese-investment-in-africa-has-fallen-40-this-year-but-its-not-all-bad-news/
The slow pace of domestic consumption and the high levels of savings represent one of the most striking characteristics of the Chinese economy. While consumer spending still only amounted to 36.5% of GDP in 2014 (compared with more than 68.% in the US and 59.3% in India) investments have reached a level estimated at between 46% of GDP (World Bank for 2014). Along with these massive investments in industrial infrastructure (a good indicator of future competitivity) there has also been a continual rise in property prices in urban, industrial areas with significant social consequences. Moreover, the Chinese government is now having to to try to cope with the rising demand for social services by shifting resources from other kinds of investments to welfare. As mentioned above, another crucial issue looming ahead is that related to its currency, the Yuan, and the rate of exchange on financial markets. In fact, the Chinese authorities have been confronted again with expensive interventions carried out by the People´s Bank of China to keep the exchange rate artificially low and the currency undervalued. If China is eventually forced or chooses to allow the Yuan to really float freely without interventions by the state this may drastically increase the Yuan/Dollar exchange rate, increase the cost of its Chinese goods for buyers in other countries, while at the same time boosting domestic consumption and imports, and thus reduce the Chinese trade surplus. http://data.worldbank.org/indicator/NE.GDI.TOTL.ZS
China is rapidly increasing investment in technology, particularly in IT, and education. US companies operating in China have registered very high productivity levels while benefitting from much lower labor costs. However, there are now signs that as labor flows from rural areas begin to slow and demand for skilled workers rises, labor costs in China are now beginning to rise though they obviously remain well below levels in the US and Europe.
The US is not retreating from world affairs, but in the face of economic constraints and its huge debt, resources for defense and foreign policy will inevitably shrink (with cuts in defense spending in 2014) although these are cuts starting from very high levels and with the US holding huge accumulations of existing military assets). This will mean a re-evaluation and reduction in US strategic commitments in some areas in order to continue the ongoing shift of resources towards the Asia-Pacific region. After the fall of the Berlin wall and the collapse of the Soviet Union, the European continent lost relevance in the eyes of America as the threat level was reduced. However, recent events in Ukraine and growing tension with Russia are forcing a partial review of this policy. Moreover, the US withdrew its last combat troops from Iraq in December 2011 and from Afghanistan in December 2014. (However, the US has not disengaged from the area since it gave its support to the Free Syrian Army in 2012 and began bombing raids against IS in September 2014.)https://en.wikipedia.org/wiki/American-led_intervention_in_Syria
However, this overall shift will allow a growing American presence in the Asia-Pacific region as part of a containment strategy towards China. This policy has been developed through a series of agreements with those countries which are most affected by the rise of China, its neighbors. The political, economic and strategic relations that the US has created with Japan, South Korea, India, Vietnam, Australia, Indonesia and other countries in the region, over the last 15 years highlights the scale of the encirclement strategy pursued by Washington. Furthermore, the recent deployment of 2,500 soldiers to Australia, added to the 50,000 US military personnel deployed in South Korea and Japan shows how the containment strategy is moving forward. China is aware of the policy being carried out by the US and clearly sees it as an attempt to undermine its influence in the region. Tensions over developments regarding Taiwan are also indicative of the frictions which are perhaps inevitable as a rapidly growing regional power challenges a global power whose resources, while vast, are now limited. If China continues to grow at current rates but fails to democratize and develop towards the Western model then a strengthening of security ties between China’s neighbors, many of which are democratic states is a likely response to safeguard independence and shared values.
More importantly, the combined economic resources (in terms of GDP) and military resources of the West (NATO in its narrowest sense, perhaps the OECD in its widest sense) as a whole is and will remain far beyond the capacity of China to challenge. US military spending alone is 3 times that of China (2015). Certainly China’s power and influence is going to grow both regionally and globally, perhaps in partnership with Russia at the UN and through the BRICS group. However, there is a more likely scenario than confrontation. China is a major stakeholder in the international liberal order, as a permanent member of the UN Security Council, an important WTO and IMF member, and, above all, as a state holding vast foreign currency reserves (e.g. US Treasury bonds) estimated at more than 1.25 trillion dollars, and one which also has growing overseas investments (estimated to reach $1-2 trillion by 2020). So even though China may continue to stand on its sovereignty and use nationalist rhetoric that defines international comment (on issues such as human rights in China, the lack of democracy and the situation in Tibet) as interference in its domestic affairs, it is probable that its stake in the existing global order will continue to grow and that it will thus have good reason to adopt a policy of accommodation and cooperation rather than one of confrontation.
In the end perhaps it is the definition of what we mean by ‘West’ that is of paramount importance in today’s world. Once that meant Europe and North America, plus countries like Australia and New Zealand. It would be difficult today not to include Japan. And then there is the OECD. More importantly, it is the core liberal democratic values enshrined in the main global institutions from the UN down which best define the West. These are values which many countries (Brazil, India, but many more in Latin America and Africa and Southern Asia) and not only the richer, developed ones but developing ones too, have invested in, or are investing in, and which increasingly represent the normative political expectations (how things should be) for ordinary people all over the world. The wave of democratization since the 1990s and at least part of the political hopes expressed in the early days of the Arab Spring suggest that the West in this sense is very much alive and flourishing, with or without US leadership. And a ‘West’ which is global and multipolar, rather than simply a US-led NATO, may be a very positive evolution. Strangely, al-Qaeda and Islamic State, in describing the UN and other international agencies as agents of Western cultural imperialism may simply be acknowledging the extent to which once Western values are now becoming universal.
Those who doubt the attraction of the West’s cultural model should perhaps pay more attention to the vast number of migrants and refugees for most of whom the West remains the preferred destination in terms of their hopes for prosperity, security and freedom.
Note – the West in modern English is not normally used as a synonym for European colonialism (I think this is mainly because European colonialism – often based on slavery and doctrines of racial superiority – is now seen as something clearly in contrast with many basic Western values) . It is mainly used in international relations to refer to those countries evolving towards liberal democracy and a free (today usually mixed) market economy, from the late 18th century, through the 19th century and up to 1945. Since the end of the Second World War it has been used to describe first NATO and other allies outside NATO (like Australia) and then gradually to include all those countries which generally embrace Western values.
See also on this site:
What role will the BRICS countries play in international affairs?
http://www.ituassu.com.br/china_ikenberry_fa.pdf
http://data.worldbank.org/indicator/NY.GDP.MKTP.CD
http://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD
http://en.wikipedia.org/wiki/List_of_countries_by_projected_GDP_%28PPP%29_estimates
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29
http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures
http://en.wikipedia.org/wiki/National_debt_of_the_United_States
http://en.wikipedia.org/wiki/Economy_of_the_United_States
http://en.wikipedia.org/wiki/List_of_countries_by_public_debt
http://www.ihavenet.com/World-United-States-The-Wisdom-of-Retrenchment-America-Must-Cut-Back-to-Move-Forward-Foreign-Affairs.html
http://blogs.reuters.com/bernddebusmann/2011/03/11/a-final-goodbye-to-superpower-america/
http://www.guardian.co.uk/business/2011/dec/21/fitch-theatens-credit-dowgrade-usa
http://money.usnews.com/money/business-economy/articles/2011/07/22/meet-3-ratings-agencies-that-have-already-downgraded-the-us http://www.washingtonpost.com/business/economy/sandp-considering-first-downgrade-of-us-credit-rating/2011/08/05/gIQAqKeIxI_story.html
http://www.ogilvy.com/News/Press-Releases/May-2011-Asia-Society-Study-on-Chinese-Direct-Investment-Abroad.aspx
http://europe.chinadaily.com.cn/epaper/2011-05/06/content_12457731.htm http://www.ft.com/intl/cms/s/0/25f1c500-ff14-11e0-9b2f-00144feabdc0.html#axzz1qdKaAFo0
http://www.globalissues.org/article/75/world-military-spending
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29
http://www.huffingtonpost.com/2011/10/07/china-manufacturing_n_1000305.html
http://www.nytimes.com/interactive/us/politics/debt-reckoning.html
http://en.wikipedia.org/wiki/List_of_countries_by_gross_fixed_investment_as_percentage_of_GDP
http://data.worldbank.org/indicator/NE.CON.PETC.ZS
https://www.imf.org/external/pubs/ft/wp/2012/wp12277.pdf
https://www.bondvigilantes.com/blog/2014/01/24/chinas-investmentgdp-ratio-soars-to-a-totally-unsustainable-54-4-be-afraid/
http://www.weforum.org/news/global-economy-2013-fragile-and-timid-recovery
http://en.wikipedia.org/wiki/List_of_countries_by_future_GDP_%28PPP%29_estimates
Where the Action is: America’s Pacific Shift, Edoardo Febbrazzani, Longitude February 2012
Superpower by Default, Alessandro Merola, February 2012
* On January 26, 2016, the debt held by the public was $13.62 trillion or about 75% of the previous 12 months of GDP. Intragovernmental holdings stood at $5.34 trillion, giving a combined total gross national debt of $18.96 trillion or about 104% of the previous 12 months of GDP. $6.2 trillion or approximately 47% of the debt held by the public was owned by foreign investors, the largest of which were the People's Republic of China and Japan at about $1.3 trillion each for the two countries as of November 2015Source: http://en.wikipedia.org/wiki/National_debt_of_the_United_States
http://www.treasurydirect.gov/NP/debt/current
http://www.tradingeconomics.com/united-states/government-debt-to-gdp
Washington’s fiscal position is even more alarming if viewed as an ongoing trend. Over the last few years, the US public debt as a percentage of GDP rose rapidly, from 56.4% in 2001 to 100.8% in 2012, 100.9% in 2013 and 103.2% in 2014. As indicated before, it then fell to 100.5 as of Q3, 2015 but is forecast to start rising again after a 2-year period of relative stability).Update Q3 2016: 104.80%,
https://research.stlouisfed.org/fred2/series/GFDEGDQ188S
https://www.cbo.gov/publication/49892
US current account deficit was 2.7% of GDP in Dec 2015http://www.bea.gov/newsreleases/international/transactions/transnewsrelease.htm
from 2.4% in 2014http://www.tradingeconomics.com/united-states/current-account-to-gdp
For US public debt and annual deficit, see also:http://www.usgovernmentspending.com/federal_deficit_chart.html
For China’s spending on household consumption see:http://www.tradingeconomics.com/china/household-final-consumption-expenditure-etc-percent-of-gdp-wb-data.html
http://data.worldbank.org/indicator/NE.CON.PETC.ZS
http://www.cnbc.com/id/100774903
http://www.tradingeconomics.com/china/consumer-spending
For the debate on the accuracy of these figures, see:http://www.reuters.com/article/2014/01/22/china-economy-consumption-idUSL3N0KW33X20140122
** In 2015, the most recent year for which complete data is available, global defence spending was $1.65 trillion in 2015 according to IHS Jane’s Defence Budgets Annual Report. The U.S. defence budget was $595.3 billion (36% of global spending). This compares with China’s defence budget of $191 billion and Russia’s of $54.1billion. Other US allies: Japan’s defence budget was $49.3 billion. The UK’s was 66.5 billion, France’s 56.4 billion, Germany’s 43.8 billion, South Korea’s was 35.7 billion, Australia’s 34.3 billion, Italy’s 29.0 billion and Canada’s 17.1 billion. Other significant defence budget’s were: India’s 49.7 billion, Saudi Arabia’s 46.3 billion, Brazil’s 30.7 billion and Turkey’s 15.9 billion (a NATO ally).So in 2015 the US spent three times more than China, 10 times more than Russia (in 2012 the US spent 27 times more than Iran and 33 times more than Israel). Though China is often cited as the country’s next great military adversary, U.S. military spending is currently larger than the next nine countries together. NATO represents more than 52% of global spending (871.0 billion). NATO together with other long-term US allies, such as Japan, South Korea and Australia represent over 60% of global spending. With the fall in the price of oil, Saudi Arabia, the Gulf states and other oil-rich nations are expected to reduce some of their military spending.http://www.businesswire.com/news/home/20151216006109/en/Growing-Security-Fears-Boost-Defence-Budgets-IHS
https://www.cbo.gov/publication/49892
US current account deficit was 2.7% of GDP in Dec 2015http://www.bea.gov/newsreleases/international/transactions/transnewsrelease.htm
from 2.4% in 2014http://www.tradingeconomics.com/united-states/current-account-to-gdp
For US public debt and annual deficit, see also:http://www.usgovernmentspending.com/federal_deficit_chart.html
For China’s spending on household consumption see:http://www.tradingeconomics.com/china/household-final-consumption-expenditure-etc-percent-of-gdp-wb-data.html
http://data.worldbank.org/indicator/NE.CON.PETC.ZS
http://www.cnbc.com/id/100774903
http://www.tradingeconomics.com/china/consumer-spending
For the debate on the accuracy of these figures, see:http://www.reuters.com/article/2014/01/22/china-economy-consumption-idUSL3N0KW33X20140122
** In 2015, the most recent year for which complete data is available, global defence spending was $1.65 trillion in 2015 according to IHS Jane’s Defence Budgets Annual Report. The U.S. defence budget was $595.3 billion (36% of global spending). This compares with China’s defence budget of $191 billion and Russia’s of $54.1billion. Other US allies: Japan’s defence budget was $49.3 billion. The UK’s was 66.5 billion, France’s 56.4 billion, Germany’s 43.8 billion, South Korea’s was 35.7 billion, Australia’s 34.3 billion, Italy’s 29.0 billion and Canada’s 17.1 billion. Other significant defence budget’s were: India’s 49.7 billion, Saudi Arabia’s 46.3 billion, Brazil’s 30.7 billion and Turkey’s 15.9 billion (a NATO ally).So in 2015 the US spent three times more than China, 10 times more than Russia (in 2012 the US spent 27 times more than Iran and 33 times more than Israel). Though China is often cited as the country’s next great military adversary, U.S. military spending is currently larger than the next nine countries together. NATO represents more than 52% of global spending (871.0 billion). NATO together with other long-term US allies, such as Japan, South Korea and Australia represent over 60% of global spending. With the fall in the price of oil, Saudi Arabia, the Gulf states and other oil-rich nations are expected to reduce some of their military spending.http://www.businesswire.com/news/home/20151216006109/en/Growing-Security-Fears-Boost-Defence-Budgets-IHS
Economies
and GDP
http://en.wikipedia.org/wiki/Economy_of_the_United_States
How is the relationship between China and the West developing?
How is the relationship between China and the West developing?
A
few aspects of China’s changing role in international relations
(with thanks to Luigi!)
Signs
of a trend towards stronger cooperation
That
China is starting to get more involved in international relations is
demonstrated by various diplomatic initiatives launched by the
Chinese government in the economic field. First of all, China joined
the a project aimed at establishing a free trade zone with various
Asian-Pacific countries, namely the Free Trade Area of the
Asia-Pacific (FTAAP). The goal is to increase its exports in the
Asia-Pacific area in order to boost its economic growth and forecasts
suggest that this initiative could lead to an increase in China’s
GDP of one percentage point. This initiative could be seen as an
attempt to counter the Trans-Pacific Partnership initiative, backed
by the US and Japan and signed on 4th
Feb 2016, but China has publicly backed the Trans-Pacific Partnership
showing itself to be a promoter of free trade agreements.
Simultaneously, China is carrying out a diplomatic initiative in
Central Asia with the goal of reestablishing the old “Silk Road”.
This initiative has led to wider cooperation with many countries,
such as
Kazakhstan,
Uzbekistan, Turkmenistan and
Kyrgyzstan,
aimed at creating a safe-area for international trade and at ensuring
gas and oil supplies to China, which are extremely important to
China’s industrial production. This initiative has also led to
competition between China and the EU for influence in the region and
for gas and oil supplies. However, this competition may actually lead
to cooperation between China and the EU in Central Asia, in terms of
building new pipelines, which could have both Europe and China as
final delivery points.
As China has become
more involved in the international community from an economic point
of view, political cooperation has followed. A good example is
China’s participation in various military missions carried out by
the United Nations (UN). In fact, China is currently involved in the
peacekeeping operation in Mali and in the UN mission in Lebanon.
Above all, China’s navy is actively participating in the
anti-piracy mission of the UN in the Gulf of Aden. Basically the
expansion of China’s economic interests around the world has led to
growing political awareness among the Chinese leadership of the need
to protect those interests and engage on international issues,
especially those closely related to international security. This has
resulted in China playing a more active role within the international
community. This trend culminated with the agreement signed with
Djibouti concerning the creation of China’s first real military
base abroad in order to secure trade between China and Africa.
China’s concerns about international security, aggravated by the
participation of Uyghurs in the campaign waged by the self-proclaimed
Islamic State, could be an opportunity for Western countries to
persuade China to take on an increasingly active role in sharing some
of the international community’s responsibilities, especially in
the security domain. However, in the Middle East region, China has
taken a carefully balanced position in the dispute between Sunni and
Shia Muslims and between their main sponsors, namely Saudi Arabia and
Iran. In fact, the recent publication of China’s Arab Policy Paper
shows that the China wants to adopt a global approach to the Islamic
world without taking sides. Such a policy will makes it possible for
China to deal with both Saudi Arabia and Iran to obtain from both
parties an agreement on oil supplies agreement, which is fundamental
for China’s economic growth. It also explains China’s willingness
to act as a mediator between the US and Iran (which resulted in the
5+1 Nuclear Agreement with Iran and in the lifting of economic
sanctions) and in the Syrian civil war.
Potential areas
of disagreement between China and the West
As mentioned above
China’s neighbours are worried about its expansionist ambitions in
the East Asian area e.g. the dispute over the Senkaku Islands,
located in the South China Sea and claimed by both China and Japan.
China is the world’s
biggest polluter in terms of CO2 emissions. Although China took part
in a series of international conferences and welcomed the agreement
at the Climate Conference, CoP21 in Paris in December 2015, many
countries remain doubtful about China’s real commitment to making
real changes given that the agreement is not binding in any practical
way.
China’s domestic
human rights record, including the use of the death penalty and
repression of political and religious opposition leaders, critics and
dissidents and discrimination against minorities (e.g. Tibetans and
Uyghurs.
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