Having
maintained an astonishing pace of economic growth even through the financial
crisis[1], the
continued growth of China’s economy has become essential to the recovery of the
world economy. Giles Chance’s “China and the Credit Crisis: The Emergence of a
New World Order” gives readers a wide, encompassing picture of China’s role in
the lead up to and the aftermath of the global financial crisis. In this book,
he posits that China’s economic resurgence had a substantial influence on the
precipitation of the financial crisis and that the continued growth of China in
combination with the decline of the U.S. through the course of the global
recession will force China into an even more influential role in the
international political and economic community.
The book’s opening chapter outlines
the ensuing chapters covering China’s influence on the economic conditions
preceding the crisis, China’s admittance into the World Trade Organization
(WTO), China’s international relations, the suggestions of China assuming a
global leadership role, especially among developing countries, and many other
subordinate topics.
Following this, he begins with
China’s effect on the Global Financial Crisis of 2008. While he argues that
China did not cause the crisis, the massive supply shock to global markets
stemming from the emergence of China as a global economic force set in motion
the lowering of interest rates, allowing for huge over-borrowing, which
eventually brought down the global financial system. The unexpected effects of
China’s emergence coupled with the United States’ penchant for a low
regulatory, free-market environment and high liquidity levels caused the
catastrophic breakdown of the global financial system.
The effect of the global financial
collapse eventually ended up hurting Chinese exports, which had served as the
growth machine of China’s economy. Recognizing that their economy relies
heavily on foreign markets, the Chinese government has attempted to refocus the
Chinese economy to be more reliant on domestic consumption by reducing the
savings rate. As Chinese domestic consumption has not fulfilled the buoy that
the Chinese economy needs, the Chinese government has launched huge public
spending programs, but it can only use so much of the huge pool of Chinese
savings. China will also have to look for places other than the U.S. in the
international community to help continue the country’s development.
Chance notes that China has a unique
challenge in that it must rely on other countries to reach its full potential,
and because China has claim over a number of firsts and seconds such as the
largest population, second largest gross domestic product, etc. China has a
“strong-yet-weak international position” (73). Because of the decline of the
influence and credibility of the U.S. financial system, China is in the
position to assume greater involvement in the international community. Consequently,
China is pushing for fundamental reform of the global financial institutions
the IMF and the World Bank, and along with other major emerging countries,
China will begin to play an increasingly large role in world affairs.
This ascension to global influence
has not come without the decline of the United States, however. As the dollar
grows weaker and the credibility of the U.S. financial system recedes, the
attention to the issue of the dollar as the world’s reserve currency grows.
Here, Chance lays out China’s position on the U.S. dollar as the world’s
reserve currency, and he shows that China would like to have a new reserve
currency as others such as economist John Maynard Keynes have suggested. In the
meantime, China has taken matters into its own hands by establishing the Chinese
yuan (China’s currency) as a reserve currency for Southeast Asia.
China’s attempts to affect a change
in the world’s reserve currency are part of the larger scope of Sino-American
relations. In the sixth chapter, Chance describes the history of relations
between the two countries from Communist China’s inception through the rise in
global terrorism and the growth of China’s export industry to the ongoing shift
in global power from the United States to China today. While they have had a
history of mutual suspicion, the two countries are by far the most powerful and
influential in the world, and as a result, they must learn to cooperate in this
new, increasingly bipolar post-financial crisis world.
The rise of China has also altered
Asian politics and economics. The three competing countries, China, India, and
Japan all struggle for the leadership role in Asia. However, China’s strong
economic growth has surpassed the other two countries, allowing China to draw
more power in the region. Since America has played a key role in
counterbalancing China’s growing political and economic influence over the
region, the retreat of U.S. influence allows China to assume greater influence.
Resultantly, India and Japan will have to yield to China’s regional goals.
Chinese growth paired with the
U.S.’s decline has also allowed for a larger Chinese role in aiding developing
countries around the world. Ever since the inception of Communist China, the
country has assumed that all other emerging countries are partners with China
pursuing a common goal. Now that China is in a better position to aid
countries, it has developed many ties with Africa and Latin America despite
some of the objections by Western countries. While many Western countries may
look down on China for assisting undemocratic countries, they cannot avoid
their own history of colonial imperialism that affected many developing
countries. China on the other hand is aiming only for economic development as
opposed to economic development with political restraints.
China assumes a greater role in
developing countries because it wants to resist a G2 between itself and the
United States. China hopes to develop to its full economic capacity, and in
order to do this, it must carefully manage relations with the United States,
which has been on the decline economically and politically in the global
community. China is ready to become the next global superpower by the numbers,
having the largest population and having the potential to succeed the U.S. in
GDP within a few decades. However, countries are reluctant to trust China, and
China must carefully persuade other countries of its peaceful intentions in
order to show leadership.
In the last chapter, Chance
describes the changed feelings of Chinese people. Today, more people identify
themselves as middle class by having a high level of education and a
white-collar job or perhaps they are starting to have consumption-driven class
standards. Either way, the global financial collapse initiated by the United
States has called into question the ascription of economic success to Western
practices. China has a wealth of history to look back on, in which they had
long periods of global dominance, and consequently, Chinese people are more
frequently looking inward for a resurgence of Chinese methods and ideas.
In conclusion, Giles Chance’s book
on China provide a firm background for readers that are new to the economic and
political developments of the past sixty years during which China has gathered
more and more influence and power in the international community. His depiction
of relations between China and the U.S., the global financial system, and other
international players shows China as a reluctant, but ready leader in the
global community. China has influence the global economy, and it will continue
to as U.S. power declines and China’s influence rises.
[1] The World Bank. "GDP growh (annual %)." 2012. <http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG> Accessed 11/5/2012
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