China Will Pass US, But Not Yet

     Two recent stories highlight the changing relationship between the U.S. and China, the superpower and the rising power.
First, there was the  story in the New York Times relaying how a confident Chinese President Xi Jinping planned to use an upcoming summit with President Obama in Los Angeles to press for “a new type of great power relationship.”  Various analysts interpreted the vague phrase to mean that Xi wants the U.S. to recognize that China is growing in economic and military clout, and will be taking a more active diplomatic role.
Or, read another way; China’s days of sitting by passively — mostly abstaining in controversial United Nations votes, for example — are over.  The July 2012 U.N. vote on Syria sanctions, which was vetoed by China and Russia, may be a harbinger of things to come.  China is no longer going to roll over; it has global interests, and intends to act in pursuit of those interests.
The second story this week only served to underscore that shifting power relationship.  China’s Shuanghui International announced a $4.7 billion takeover of America’s Smithfield Foods, the world’s largest pork producer, in a deal that must still get the federal government okay but would be the largest acquisition ever of an American firm by a Chinese company, and the first involving a well-known U.S. consumer brand.
For those of us who have been talking about China’s inevitable rise, these two stories taken together say the waiting is over; China has already arrived.
China’s rising global dominance was in many ways predestined long ago.  With 1.3 billion people and growing, China accounts for more than a fifth of the world’s population, and is four times as populous as the United States.  So by sheer numbers alone, China’s economy, in total GDP terms, is destined to one day surpass that of the U.S.  The only thing surprising about China’s rise has been the speed.
That has surprised even Chinese themselves, many of whom still see their country as struggling, underdeveloped, lagging behind the U.S., and stricken by poverty, uneven development, corruption, and a host of other problems.
In Beijing a year or so ago, I asked young people gathered on a Saturday afternoon at a “leftist,” Mao-themed bookstore in the university district to react to the prospect of China surpassing the U.S. on the world stage.  Their reaction took me aback; they laughed at the very premise of my question.
How can we be equal to, or pass, the U.S. when we can’t even find affordable housing, they asked me.  When we can’t be guaranteed our food is safe to eat, or when we can’t breath the air?  China has developed enormously since Deng Xiaoping introduced market-based reforms in 1979 — but only a few have benefited, they told me.   China still has a long, long way to go, they said.
It’s a sentiment I’ve heard expressed over and over in China, including in the official media; while China is getting richer, there are still myriad internal problems to be addressed.  I heard it most loudly, for example, when China two years ago passed Japan as the world’s second largest economy.  Rather than celebrate or feeling triumphant, most Chinese officials and analysts were cautious.  Yes, overall GDP was higher than Japan’s, they said to me.  But average living standards in Japan were still much higher than in China.  The GDP growth had not yet tricked down to all the cities, towns and provinces in China.
Put another way; China is getting rich, but many of its people remain poor.
I tend to agree.  China is a rising power.  And after the body blows of the 2008 housing crisis, the financial crisis and the Great Recession, America is certainly seeing its long era of global dominance entering a waning period.  But the America era is far from over, just as China still has a long way to go.
A view of the dysfunction in Washington may lead to pessimism.  But I’m looking at a longer-term time horizon.  Some recent economic statistics bear out my view;  housing prices are rebounding, stock prices (which generate wealth for pension funds and 401Ks) are at an all-time high, the deficit has dropped thanks to tax cuts, higher tax receipts and the effects of the sequester, and American consumer confidence is slowly rebounding.  America is clawing its way back, despite the depressing partisan gridlock in Washington.  Meanwhile, Europe remains mired in low growth or recession, high unemployment and much deeper structural problems.
Reports of America’s demise seem to me greatly exaggerated.  And stories of China’s emergence as the next superpower may be spot on, if just a bit premature.
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