The World Awakens to China

January 18, 2010

As China's economic engine continues to hum and scale newer and newer heights, it is interesting to see a number of commentators especially in the western world begin to get worried. Worried they are, as China overtakes them in metric after economic metric. China is now the biggest market for passenger cars in the world surpassing the US. It is the largest exporter in the world surpassing Germany. Of course, it is also the holder of more than $2 trillion dollars of American debt. With a billion-plus population China is only just beginning. Clarion calls have been sounded around the world in the past few weeks, some merely cautioning to some advising economic sanctions and tariffs. While much of this may be simply nervousness in having to share the bed with an upstart, the fire behind all that smoke is quite revealing.

The fact of the matter is that in 2009 China has realized that it is the foremost economic engine in the world. This acknowledgment by the world has given the Chinese the confidence to junk Deng Xiaoping's advice to "Keep a cool head and maintain a low profile". It now thinks that it has achieved the aim of proving to the world what China can do. It appears to have decided that it is no longer necessary to keep its ambitions and aims close to its chest but to further it as openly as necessary. This appears to be a strategic change to the direction in which the country had been going so far. Several recent events give credence to this fact.

1. China continues to peg its yuan to the dollar at devalued rates to further its exports to the rest of the world defiantly telling the world that it will adjust the rate only when it thinks fit. In another era of lopsided power equations, perhaps China could not have been so belligerent.
2. China has kept the border issue with India on the front burner in recent months while professing Asian unity just to keep India second-guessing and to remind her of who is more powerful if there was a need for a backyard brawl.
3. China's relentless pursuit of natural resources including oil, minerals, farm produce etc especially in African countries often by arming and supporting tin-pot dictators has been brazenly upheld despite international criticism. It has decided that it will seek what it needs, international obligations be damned. A lot of people in African countries who signed up for such largess are beginning to realize the negative effects but can't do a thing about it.
4. China has openly indicated that it does not need a Google to operate within its borders, if it does not comply with its draconian rules about dissent and openness. In an earlier era, China may have compromised (it may still reach a negotiated settlement with concessions from both sides) but the new resurgent country wants things done on its own terms.
5. There are several indications on the ground too where some have reported how business proposals have been shot down or supported according to the new rules even though none exist on the statute.
6. The Copenhagen summit was deftly steered into a do-nothing conclave at China's behest because it was not ready to commit to any numbers on paper.

These seem to point to a new belligerent attitude of the Chinese who are ready to flex their muscles to indicate that they have arrived on the global stage, and will run their business the way they like it. At this stage it does appear that it is going to descend into a fight between a wounded Bald Eagle and a "fresh-from-slumber" Dragon. China is well aware that the Americans have studied their Great Depression books well and understand that tariffs and sanctions are what did them in during the 1930s. The Americans are dead against protectionism for now and so China will play the brinkmanship game for some time to come.

It is instructive to remember the words of the late French hero Napolean who once said "Let China sleep, for when she wakes, she will shake the world". If his words turn out to be prophetic, the shake is not going to be very comforting. Definitely not for India who may have a lot more to lose than just parts of its territory.

An experienced profesional of more than 20 years. Enquiring into the context of the big issues of the day so as to understand them is a quest I pursue all the time. As Niall Ferguson said "To understand something, you need to understand its history". Hoping to bring some much needed multi-layered perspective into the burning issues of our country and the world by looking at ourselves from the outside rather than from within.
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