Global economics continues to shake by the rising rivalry between America and China. Even though the global recession of 2008 has hit the US and Europe particularly badly and China has continued to grow apace, Western-based analysts cannot resist the temptation of criticizing China’s attempt to restructure its economy against the steep drop in demand for their goods and services and the redrawing of global supply chains with the emergence of China plus re-distribution of global capital.
Banks in China are instructed not to reduce credit availability to Chinese companies. This has prevented layoffs on the one hand but has led to rising in inventories. Analysts expect this will lead to the piling of bad debt with banks failing the banking system as in the West. This analysis stems from a lack of understanding of the Chinese economic management system. People cannot figure out how an export economy like China can continue to grow when the importing western economies are in a bind. They expect the Chinese economic bubble to burst in the future with massive global shock waves.
I somehow cannot subscribe to this theory. Chinese policymaking is based on realpolitik and has shown to be highly adaptable to changes. The change from a pure-play socialist development model to a command and control-based capitalist model has happened seamlessly. New changes will result in greater demand for goods and services in the Chinese domestic market space. The inventories will slowly be consumed locally, and a new growth model will emerge. I am afraid western analysts’ fears of a Chinese implosion will not come true, and they will have to get used to the Chinese economic resurgence in the future. Global economics and geopolitics will continue to be rocked by this rivalry between the two largest economies of the world.
The Chinese economy is rapidly emerging from the shadow of the West. It is no longer dependent on capital and technology from the West. Home-grown multinationals, a vibrant research and development ecosystem, and a growing domestic consumer base are reducing this economy’s dependence on exports. Chinese influence on the economies of Asia and Africa has expanded to large parts of Europe.
The rise of China has disturbed the global status quo and challenged the dominance of America. China is now competing for global economic and geopolitical space with America. The Chinese economy is now in the consolidation phase, turning from a fast-growing emerging economy to a mature, steady-growth state. Even though tensions with its largest neighbor India continue unabated, both countries will learn to live as neighbors, with one getting into the hair of the other. China will continue to compete with America, which it regards as its main rival. The tension between the two powers will continue, and an uneasy relationship and distrust will endure for a long time. Global economics in the next twenty years will be driven by efforts of the world to manage the rise of China and its efforts to dominate the world.