EoW March 2008

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The world of the 21st Century will be
shaped by the ‘Big Three’ – China,
America, and Europe – and signs are
strong that China has no intention of
letting itself be eclipsed by the other two.
Already strong, the People’s Republic of
China is getting stronger all the time, a
trend with immense significance for the
countries in its geopolitical force field.
Some China-watchers hold that the
country is intent on regaining its position
as the world’s Middle Kingdom — an
impulse with roots in ancient history.
Possibly; but, if so, there is nothing
old-world about China’s pursuit of its
objective, and no hint of isolationism in
its method. While it prudently concedes
trouble-spots like the Middle East to the
US, China has been faster than any other
big power to grasp the possibilities of
globalisation, and to act on them.
Today, China operates in the West with
as much ease as in the East. It has cut
major resource and investment deals
in countries from Canada to Cuba to
Venezuela. Not content to secure energy
supplies in Africa, it is also heavily
invested in the financial sector of that
growth region.
Tens of thousands of Chinese engineers
are deployed in works projects across
the globe. And the overseas involvement
does not come at the expense of the
home front. While other nations’
economies struggle to expand even a
little, China’s chronic problem with its
economy is to avoid a shift from rapid
growth to overheating.
Closer to home, China has a concentrated
comfort zone in the Greater Chinese Co-
Prosperity Sphere, within which some 35
million ethnic Chinese live and work in
the rising economies of East Asia. Not to
neglect its Southeast Asian neighbours,
China has slashed tariffs on their goods
and increased its loans in the region. This
local collegiality has generated broader
benefits. Trade within the China-centered
triangle of India-Japan-Australia now
surpasses trans-Pacific trade.
In another development of very great
potential for the entire Pacific Rim,
Asian countries plan to launch their
own regional monetary fund. When
it is formed, China and the countries
in its orbit will have declared an end
to their reliance on the US-sponsored
International Monetary Fund with its
Western-style qualifications for loan
applicants.
A striking aspect of China’s ascendancy
is the extent to which small Asian nation-
states, instead of seeking to slow the
Chinese rise, are rallying toward their
big neighbour. Everyone loves a winner,
especially if it helps the economy even
as it gratifies Asian cultural pride;
and economic growth is the No 1
concern in countries from Thailand to
Indonesia to Korea. Not only is China the
acknowledged leader of this pack, it also
has towering stature among the ‘Stans’
of Central Asia — countries like oil-
rich Kazakhstan as well as microstates
like Kyrgyzstan and Tajikistan, whose
contribution to the Chinese project is
less immediate. But China Inc, like any
well-diversified investor, can afford to
wait.
Meanwhile, the Shanghai Cooperation
Organisation (SCO), the economic
co-operation and mutual security
confederation founded in 2001, is in
place.
Taken together, its full members (China,
Russia, four ‘Stans’) and observer
members (India, Iran, Mongolia,
Pakistan) comprise not only the world’s
biggest producer and consumer of
energy, but also its biggest economic and
military power. The SCO has introduced
measures to improve the flow of goods
in the region, and a long-term objective
is the establishment of a free trade area
within the membership.
Can anything stop China from going
up, up, up — and pulling its friends
along with it? Well, yes. For all its
coiled strength, vaulting ambition, and
boundless energy, China can be knocked
seriously off-course — and by dangers
other than the obvious ones that come
of building too much, too fast.
As any reader of the business pages of a
current newspaper will know, the US is in
difficulties, stemming from unwise loans
in the housing sector and intensified
by the weak dollar and fears about the
extent of losses facing banks as the sub-
prime-mortgage crisis spreads. American
manufacturers are suffering. But Asian
exporters are feeling the pain, chief
among them the Chinese.
Last year, China overtook Canada as the
largest exporter to the United States.
But year-over-year growth in Chinese
exports to the US slowed sharply in
the autumn. November’s gain of just
7% from the same month in 2006 only
slightly exceeded the appreciation of
the Chinese yuan against the American
dollar over the same period, suggesting
stagnation in the actual volume of
Chinese goods entering the United
States. For ‘the countries around China’
— Japan, Malaysia, Thailand, Australia,
Bangladesh, Sri Lanka, Cambodia,
Indonesia — exports to the US dropped
in actual dollar terms in November.
China is a member of the ‘Big Three.’ As
such, it is in a three-legged race, with all
that that signifies of mutual dependency
— for better and for worse.
By Dorothy Fabian
EuroWire – March 2008 209