When China Rules the World (66 page)

There is plenty of evidence that China is steadily climbing the technological and scientific ladder. At present it is still a largely imitative rather than innovative economy, but the volume of serious scientific research is rising rapidly, as is expenditure on research and development. China is already the fifth leading nation in terms of its share of the world’s leading scientific publications and it is particularly strong in certain key areas like nanotechnol ogy.
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In 2006, according to the OECD, China overtook Japan to become the world’s second largest R & D investor after the US.
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With 6.5 million undergraduates and 0.5 million postgraduates studying science, engineering and medicine, China already has the world’s largest scientific workforce.
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In 2003 and 2005 it successfully carried out two manned space missions,
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while in 2007 it managed to destroy one of its own satellites with a ballistic missile, thereby announcing its intention of competing with the United States for military supremacy in space.
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In due course, it seems highly likely that China will emerge as a major global force in science and technology.

One of the more fundamental economic effects of the rise of China will be to transform and reshape the international financial system. By 2007, for the first time since 1918, when the dollar began to replace the pound as the world’s leading currency, it found itself with a new rival in the form of the euro. After 2002 the value of the dollar was steadily undermined by the effects of the United States’ twin deficits (namely the balance-of-payments deficit and the government’s own deficit) combined with the slow long-term decline of the American economy discussed in Chapter 1. The decline in the dollar’s external value was precipitous: against the euro, by the end of 2007 it had depreciated by 40 per cent since its peak at the end of January 2002.
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It recovered significantly in late 2008, but this is likely to be a temporary respite. The financial crisis triggered in September 2008 suggests that the US is no longer economically strong enough to underwrite the present international economic system and sustain the dollar as the world’s premier reserve currency. The significance of the dollar’s decline, moreover, is not confined to the financial world but has much larger ramifications for Washington’s place on the international stage. Flynt Leverett, a former senior National Security Council official under President George W. Bush, has argued that: ‘What has been said about the fall of the dollar is almost all couched in economic terms. But currency politics is very, very powerful and is part of what has made the US a hegemon for so long, like Britain before it.’
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Similarly Kenneth Rogoff, former chief economist at the International Monetary Fund, wrote: ‘Americans will find global hegemony a lot more expensive if the dollar falls off its perch.’
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The consequences of a falling dollar could be manifold: nations will prefer to hold a growing proportion of their reserves in currencies other than the dollar; countries that previously pegged their currency to the dollar, including China, will choose no longer to do so; the US will find that economic sanctions against countries like Iran and North Korea no longer carry the same threat because access to dollar financing has less significance for them; countries will no longer be so willing to hold their trade surpluses in US Treasury bonds; US military bases overseas will become markedly more expensive to finance; and the American public may be less prepared to accept the costs of expensive overseas military commitments. To put it another way, the US will find it more difficult and more expensive to be the global hegemon. The same kind of processes accompanied the decline of the pound, and Britain’s position as an imperial power, between 1918 and 1967.

The decline of the dollar, meanwhile, will coincide with the rise of the renminbi. As yet, the role of the renminbi is fundamentally constrained by the absence of convertibility. But over the next five to ten years that will begin to change, and by 2020 the renminbi is likely to be fully convertible, enabling it to be bought and sold like the dollar. By then, if not earlier, most, if not all, of East Asia, perhaps including Japan, will be part of a renminbi currency system. Given that China is likely to be the main trading partner of every East Asian nation, it will be natural for trade to be conducted in the renminbi, for the value of their currencies to be fixed against it rather than the dollar, which is largely the case now, and for the renminbi to be used as the reserve currency of choice. As the dollar continues to weaken with the relative decline of the US economy and the emergence of developing countries like China and India, it will steadily lose its global pre-eminence, to be replaced by a basket of currencies, with power initially being shared by the dollar and the euro, and perhaps the yen.
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When the renminbi is made fully convertible, it is likely to become one of the three major reserve currencies, along with the dollar and the euro, and in time will replace the dollar as the world’s major currency. This is a likely scenario within the next fifty years, more probably twenty to thirty years, perhaps even less.
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As I discussed in the last chapter, the present international financial institutions could well, in time, be superseded by new ones. Of course, it is possible that the IMF and the World Bank will be transformed into something very different, with, for example, China and India eventually usurping the role of the US, but a new institutional architecture may be more likely, operating alongside a progressively marginalized IMF and World Bank in which US influence remains predominant. Both the IMF and the World Bank enjoy rather less power and influence than was the case even a decade ago, and this process may well continue.
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In their heyday the major European nations sought to impose their designs on the rest of the world. Expansion by means of colonialism was at the heart of the European project, wedded to an aggressive mentality that stemmed from Europe’s own seemingly perpetual habit of intra-European wars. Not surprisingly, the United States inherited important parts of this legacy, though its very different geopolitical circumstances, ensconced as it was in its own continent, also bred a powerful insularity. The United States, which was founded on the missionary zeal of the Pilgrim Fathers and their contemporaries, and later articulated in a constitution that embodied an evangelizing and universalistic credo, was possessed of a belief in its manifest destiny and that its spiritual purpose was to enlighten the rest of the world.
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This history of manifest destiny (an expansionist ideology that dates from the original settlers), the destruction of the Amerindians, and the restless desire to expand westwards, helps us to understand the behaviour of the United States as a global superpower. What, then, of China, whose origins and history could hardly be more different?

There are two factors that have to be considered. The first, associated with the so-called realist school of international relations, lays emphasis on the importance of interests and therefore stresses how great powers tend to behave in a similar fashion in the same circumstances.
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‘Rising powers,’ as Robert Kagan argues, ‘have in common an expanding sense of interests and entitlement.’
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Accordingly China will, in this view, tend to behave like any other global superpower, including the United States. The second factor, in contrast, emphasizes how great powers are shaped by their own histories and circumstances and therefore behave in distinct ways. As in the case of the United States, these two different elements - the one convergent and the other divergent - will combine to shape China’s behaviour as a superpower. The convergent pressure is obviously a familiar one, but the divergent tendency, a product of Chinese particularism, is less knowable and more elusive.

The historian William A. Callahan argues, in this context, that there are four different narratives present within Chinese civilization.
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The first is what he describes as
zhongguo
, or China as a territorial state. The obvious metaphor for this is the Great Wall - the desire to keep barbarians out - linked to the nativist sentiment, a constantly recurring theme in Chinese history, as evident in the Boxer Rebellion and continuing resentment towards foreign influences, notably American and Japanese. This view appeals to a defensive and inward-looking sense of Chineseness. It might crudely be described as China’s equivalent of American insularity. The second is
da zhongguo
, a metaphor of conquest. This has been intrinsic to the expansion ary dynamic of the Chinese empire, as we saw in Chapter 8. In the conquest narrative, Chinese civilization is constantly enlarging and annexing new territory, seeking to conquer, subdue and civilize the barbarians on its borders. In the contemporary context, the conquest narrative aims first at restoring the ‘lost territories’ and then seeking to reverse the ‘century of humiliation’. Yan Xuetong, a leading Chinese intellectual cited earlier, sees this in relatively benign terms: ‘the Chinese regard their rise as regaining China’s lost international status rather than obtaining something new . . . the Chinese consider the rise of China as a restoration of fairness rather than as gaining advantages over others.’
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However, the conquest narrative also clearly lends itself to a much less benign and more expansionist and imperialist interpretation. The third narrative is
da zhonghua
, or conversion. This strand is as fundamental as that of conquest: the belief in the inherent superiority of Chinese civilization and the desire to convert others to its ways. To quote Mencius, the disciple of Confucius: ‘I have heard of the Chinese converting barbarians but not of their being converted by barbarians.’
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The key issue here is neither conquest nor recovery but rather defining and spreading the characteristics of Chinese civilization. As we have seen, this is implicitly, sometimes explicitly, linked to race. Cultural China, as Callahan describes it, is an open and expansive concept, resembling the notion of soft power but not reducible to it. The fourth and final narrative is that of the Chinese diaspora, of the notion of Greater China as reflected in the continuing sense of Chinese identity embodied in the diaspora. Each of these narratives is present in, and serves as a continuing influence on, contemporary Chinese attitudes. Which of the first three - which are the relevant ones here - might predominate in the future, or at any one time, is a matter of conjecture.

It is important to bear in mind the difference historically between Western and Chinese patterns of behaviour. The former have long sought to project their power overseas to far-flung parts of the world, commencing with the Portuguese, Dutch and Spanish; the Chinese, in contrast, have no tradition of expansion other than continental-based territorial incremental-ism. The Europeans, perhaps conditioned by the maritime experience of the Mediterranean, were, from the late fifteenth century, seeking to expand across the oceans. China, in contrast, has always seen itself as a land-based continental power and has never regarded itself or sought to become a maritime power with overseas ambitions. The very different purposes of the voyages of Zheng He on the one hand and the great European explorers on the other are an illustration of this. To this day, the Chinese have never sought to project themselves outside their own land mass.
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Even now, the Chinese have failed to develop a blue-water navy. This does not mean that the Chinese will not seek in future to project their power into distant oceans and continents, but there is no tradition of this. It is reasonable to assume that China, as a superpower, will in due course acquire such a capability but, unlike the West, it has hitherto not been part of the Chinese way of thinking and behaving.

There is another factor that may reinforce this historical reserve. Although the ‘century of humiliation’ is often seen as a reason why China might seek to extract some kind of historical revenge - one might recall Germany and the Treaty of Versailles - it could also act as a constraining factor. The experience of invasion and partial colonization, the fact that China suffered for so long at the hands of the Western powers and Japan, is likely to counsel caution: the German example, in other words, is entirely inappropriate - including the timescales involved, which are of an entirely different order. China will be the first great power that was a product of colonization, the colonized rather than a colonizer. As a result, China may act with considerable restraint for long into the future, even when its own power suggests to the contrary. The evidence for this lies in the present. The Chinese have gone to great lengths to act with circumspection and to reassure the world that they do not have aggressive intentions, the only exception being their attitude towards Taiwan. It is true that over the last half-century China has been involved in wars with the Soviet Union, India and Vietnam, but the first two were border disputes. This relative restraint touches on another dimension of the Chinese mentality, namely a willingness to be patient, to operate according to timescales which are alien to the Western political mind. This is eloquently summed up by former Chinese premier Zhou Enlai’s reported response to Henry Kissinger’s question in 1972 about the consequences of the French Revolution: ‘It is too early to say.’ Such thinking is characteristic of a civilization-state rather than a nation-state. And it is clearly reflected in Figure 47.