The United States is full of anxieties about the rise of China.
Some fear that China will somehow use the large amount of U.S. government
debt it holds for malefic purposes.
Fears about China as a rapidly growing economic force are rampant in this
country.
Secretary of Defense Donald Rumsfeld has publicly fretted about China's
large military buildup given that, at least according to Rumsfeld, it faces
no security threats.
During the 2000 campaign, then candidate Bush derided the strategic
engagement policy of the Clinton administration. Instead, Bush asserted,
his administration would treat China as what it is, a "strategic
competitor."
That sort of language has been dropped by the administration, but it
doesn't really seem to have an alternative strategy to guide U.S.
interaction with China. During his recent visit to Asia, Bush made his
customary freedom and democracy lecture about China, but from the safe
shores of Japan. While actually in China, Bush had uncharacteristically
little to say.
Most of these anxieties are misplaced or exaggerated.
China has a grossly underdeveloped financial system. It needs a safe place
to park reserves and there isn't anything much more secure than U.S.
government debt. This would be a strategic concern only if no one else was
willing to loan the federal government the money. Persistent low interest
rates indicate that isn't the case.
China certainly has a fast growing economy, having averaged about 9 percent
annual growth in its Gross Domestic Product for the last two and a half
decades. But it is still far from overtaking or even reaching parity with
the U.S. economy.
Currently, China's GDP is less than one-seventh that of the United States.
Its GDP per capita is barely over $1,000, compared to over $37,000 in the
U.S.
Even if China continues its current pace of growth it would only have an
economy about a quarter the size of the U.S.'s by 2025. China's ambition is
to have per capita GDP in just the $3,000 range by mid-century.
To get even there, China has some fairly significant obstacles to overcome.
Right now, China's economic growth is largely export driven. To truly
develop the domestic economy will require extensive liberalization and the
establishment of a nonpolitical rule of law. Right now, China ranks very
low on the Index of Economic Freedom published by the Heritage Foundation
and the Wall Street Journal.
Because of its population control measures, China also has a developing
demographic problem of an aging population that makes the U.S.'s look like
a cakewalk.
More importantly, however, China should not be viewed as an economic
competitor. Companies compete against each other. In a free global economy,
countries provide markets for each other.
Much is made of the growing trade deficit with China. U.S. exports to
China, however, have increased by 284 percent over the last decade.
Moreover, Chinese imports have made a meaningful contribution to keeping
inflation under control in this country.
China is rapidly building up its military, increasing expenditures at an
estimated 11 percent a year over the last decade. But even the Pentagon's
highest estimate only has China's military spending at about a fifth that
of the United States.
Contrary to Rumsfeld's fret, the United States fully understands the need
to have a military capable not only of dealing with existing threats but
strong enough to deter potential ones as well. By the Pentagon's own
assessment, China does not yet have the military capability to protect its
own extensive coastline, much less the shipping lanes on which its economy
depends.
China has territorial disputes with its neighbors, but the only one that
concerns the U.S. is Taiwan. Yet, over the long haul, the fact that Taiwan
is the largest source of foreign investment in China is likely to serve as
more of a deterrent to precipitous Chinese military action than the
dwindling credibility of U.S. intervention.
None of this is to say that the United States should embrace China's rise.
It is lead by an authoritarian regime from which we should keep our
distance. But it is not, realistically appraised, a threat, economically or
militarily.
In fact, Bush's uncharacteristic relative silence while in China is a sound
diplomatic approach to U.S. relations with that country. As was something
Bush did while there: He attended a church service. Bush didn't say much
afterward, but it highlighted the suppression of religion in that still
benighted country.
Sometimes the eloquence of a simple act says more, and is more effective,
than the often futile posturing of diplomacy and military power.
