*/. It also suited the thinking in Washington, where in the wake of Bill Clinton’s watershed trip to China in 1998 an optimistic new consensus was summed up in Thomas Friedman’s 1999 book The Lexus and the Olive Tree, which popularised the “Golden Arches theory of conflict prevention” whereby “no two countries that both had McDonald’s had fought a war against each other since it got its McDonald's”. A similar situation can be identified in China where HSR is seen as one of the elements in the long-term national economic integration and a catalyst for economic growth. The pulling apart of the world's two biggest economies, often dubbed a "decoupling", could prove at least as decisive for the following decades of world affairs as the integration was for the past four. Trans-Eurasian networks will be more stable. Some projects envisaged for the "one belt, one road" program will be financially attractive or made so. Still, if these initiatives work at all, they will have enormous geopolitical impact. This is an area with a population of 4.4 billion and a current economic output of $21 trillion. Â. With Beijing "relying less on exports to the US market, caring less about its currency’s peg to the dollar”, he theorised, "the end of Chimerica would have arrived, and with it the balance of global power would be bound to shift… China would be free to explore other spheres of global influence.”, [see also: Why a Joe Biden win is unlikely to improve relations between the US and China]. One study estimates, for example, that a relatively modest five percent growth rate in such assets from their current base could create 137 million tons of demand for Chinese steel. While it remains relatively low as a percentage of China's GDP, continuing rapid urbanization and the concomitant growth of China's middle class promise to correct this. Chinese firms got the message: there has been a precipitous fall in Chinese investment in the US, and while US investment in China remains flat overall, it has fallen in crucial areas such as information and communications technology, machinery and financial and business services. Reflecting on Chimerica in 2009, Ferguson wondered whether it would speed up China's rise and delink it from American consumption. As one example of what China has in mind, consider the economic corridor that is to link Kashgar, in Xinjiang, with the port of Gwadar, in Pakistani Balochistan, 1,800 kms. It tells a complicated story, of US-China entanglement in some fields but not in others. It is promoting the Chinese yuan as a medium of trade settlement and public borrowing throughout Eurasia. From left to right: Mr Lye Liang Fook, Mr Joergen Oerstroem Moeller, Dr Francis Hutchinson, Dr Hoe Ee Khor, and Dr Chaipat Poonpatpibul. This is an area with a population of 4.4 billion and a current economic output of $21 trillion. They now contribute almost half of Chinese GDP, up from less than one-third ten years ago. The initiative is also a way of developing Xinjiang and other parts of western China by making them key connectors to Central Asia, Russia, Europe, and the Middle East. The purpose of the "one belt, one road" project is to promote its economic integration with what has been called the "world island" – the conjoined continents of Asia and Europe. Economic integration, or regional integration, is an agreement among nations to reduce or eliminate trade barriers and agree on fiscal policies. Various elements of CITIC have just announced commitments to fund 300 projects from Singapore to Turkmenistan totaling $113 billion. By some estimates, a one millisecond advantage could be worth up to $100 million a year to a single hedge fund company. The Rise and Future of China as an Economic Power As the People's Republic of China turns 70, its leader focuses on hyper-growth. China will become the center of economic gravity of a vast, loosely integrated region that already has 55 percent of world GNP, 70 percent of global population, and 75 percent of known energy reserves. China has set a goal of $2.5 trillion in trade with Silk Road countries by 2025. This suited the thinking in Beijing, where the “new security concept” that took hold in strategic circles in the years following the end of the Cold War preached the benefits of mutual security, cooperation, trust and common interests. $40 billion has gone into the Central Asia-focused Silk Road Fund. Ambassador Chas W. Freeman, Jr. (USFS, Ret. Our own decade’s Big Idea about US-China relations is yet to emerge but if I had to predict one I would invoke either “decoupling” pure and simple, or something related like “spheres of interest”. The availability of credit does not guarantee the availability of financially attractive projects, however desirable they may be in terms of their overall impact on China's economy and its relations with the other societies in Europe and Asia. If Biden wins, the Democrats too are more wary of China’s rise. Meanwhile, the past year has also seen the country’s diplomats (some of whom have taken a newly belligerent tone dubbed as “wolf warrior diplomacy” after a trashy action film) and its military (which has taken harassment of Taiwan and neighbours around the South China Sea to new heights) adopt a newly aggressive stance towards the US and its allies. In the US, legislation responded by stripping privileges from Hong Kong and gave the administration the power to impose sanctions on Chinese officials. But China's main impact on world affairs has been and will continue to be politico-economic. The creation of the SEZ in 1980, when today's futuristic metropolis of 13 million inhabitants was a fishing village, was an early landmark in the opening up of the Chinese economy under Deng Xiaoping, and with it came probably the biggest economic story of our time: the integration of the Chinese and US economies. Investors are willing to spend hundreds of millions of dollars to gain a few milliseconds in highly profitable "high frequency trading" – the automated buying and selling of financial instruments by computers. They are additive and do not supplant them. [CDATA[/* >
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Meanwhile Beijing too is pursuing the logic of decoupling: recent manoeuvres by the People’s Liberation Army suggest Beijing may be mulling an invasion of Taiwan in the event of an inconclusive result at the US election on 3 November. individual US states' tortured relationship with China, factor in the presidential election campaign, Why a Joe Biden win is unlikely to improve relations between the US and China, whether Covid-19 has delivered a death blow to US-China FDI, Devi Sridhar: The UK needs a zero-Covid strategy to prevent endless lockdowns, Ban Donald Trump’s Twitter account – for good, "The social movements of our time are explosive": Aaron Benanav on robots and revolution. Beijing in June imposed a new Security Law in Hong Kong that cracks down on the protest movement and other freedoms in the very city that has often acted as the economic portal between the US and China; Xi has made it clear that he wants Shanghai to eclipse Beijing as Asia’s pre-eminent financial centre. All of these concepts – peaceful rise, responsible stakeholder, Chimerica, the balance of financial terror – speaks to a “what if?” 2000s in which the optimistic old assumptions of the 1990s, like the Golden Arches theory, were being questioned on both sides of the Pacific, and the risks of alternative realities were being tacitly acknowledged. Economics Biden, Like Trump, Will Deepen Integration With China Over the past four years, economic ties between Beijing and the rest of the world have only strengthened. But, in the longer term, "one belt, one road" is a strategy to use Chinese resources to tie Europe and Asia more closely and efficiently to each other and to China.  The added efficiencies of its planned railroads, highways, pipelines, power grids, fiber optic cables, and air and sea ports respond to real market requirements and opportunities. This website uses cookies to help us give you the best experience when you visit our website. Meanwhile, China continues to leverage its membership in the Asian Development Bank (ADB), the World Bank, and other U.S., Japanese, and European-dominated institutions to the cause of improving Eurasian infrastructure. The primary goals of AIIB are to address the expanding infrastructure needs across Asia, enhance regional integration, promote economic development and improve public access to social services. They are more concerned by Beijing’s human rights abuses, especially against the Uighurs in Xinjiang, than the Trump administration has been. The U.S. concerns that underpi… In January, China agreed an FTA with south Korea. These communities include ASEAN, the Russian-led Eurasian Economic Union, the Shanghai Cooperation Organization, the EU, the South Asian Association for Regional Cooperation (SAARC), and the Organization of Islamic Cooperation. Debates about the US-China economic relationship usually come down to one core question: what is the relationship between the geopolitics and the economics? A second will cross the Karakorum Mountains and branch into two lines: one reaching Pakistani ports on the Arabian Sea; the other crossing Iran to Turkey, the Mediterranean, the Black Sea, and Southeastern Europe, with a branch connection to the Arabian Peninsula. It now has the world's largest broadband network. What return on investment can China and its partners reasonably expect from "one belt, one road" projects? This gathering has featured lively discussions of investment in various forms of infrastructure, logistics management, and natural resources. Still, given China's emphasis on collaborative planning with foreign partners, a good deal of it seems certain to be used actually to build things. Investment Monitor has dug into the numbers to explain how and where the decoupling is taking place. Some segments of the network also have the objective of promoting development and integration within a particular region. But China's leaders are betting that the "one belt, one road" project can bring about a second major advance in their country's long march toward wealth and power. America recognises China is now a challenger power. Perhaps the key to accomplishing this is partnership with foreign companies and lenders with greater experience in risk-based lending and turning a profit outside home markets. For the past two decades, China has devoted about 9 percent of GDP to the enhancement of domestic infrastructure. Jeremy Cliffe is International Editor of the New Statesman. But, for the program to succeed over the long term, the planning process that is getting under way will have to begin to develop new models for Chinese investment that empower private enterprise along the Silk Road as well as in China itself. China’s Visions of Future East Asian Economic Integration East Asia has been the fastest growing area in the world in recent decades. Chinese state-owned enterprises have more money for infrastructure build-out than they can profitably deploy in China, where returns on such projects are very low at present. Starting with Japan in the 1950s, East Asian countries have consecutively taken part in the global economic system and have become connected with each other through the market economy. A large part of the work on these projects – as much as 70 percent, if past practice is a useful guide, but far from all of the work – will be done by Chinese companies. But the implications of the "one belt, one road" project are not in any way limited to geopolitics. This crisis is about China’s economic future and whether or not it can manage the structural transformation necessary to propel the economy into the … In this context, China's initiatives amount to a tectonic shift in the global monetary systemÂ, China's organizational initiatives incorporate, complement, and build upon numerous existing institutions. Supply chains for computers and other electronic products criss-crossed the Pacific – a large part of Apple's production takes place at the Longhua complex on the edge of Shenzhen – and as China became wealthier, more investment started to flow in the other direction, into the US economy, where Chinese investors hoovered up stakes in car makers, technology firms and energy generation. It will culminate in 2049, the 100th anniversary of the People's Republic. Investment Monitor has dug into the numbers to explain the declining trade and investment flows between the US and China, and individual US states' tortured relationship with China. China is every country in TPP's biggest trading partner and greatest potential source of future foreign investment. It will be shaped in large measure by what happens under China's Silk Road initiatives and in the institutions China is organizing to support them. China is in the process of becoming the world's preeminent economy. The rapid rise of China and India, and the growing economic integration between them, has clear implications for US, European, and Japanese multinational corporations. Get the New Statesman’s Morning Call email. The same, for other reasons, is true of China and Russia, and of China and Iran. In the short term, on the macro level, even under conservative assumptions, investment in Asian and European infrastructure looks like a good bet. But it is only fair to note that the events of 2020, this opening year of a new decade, point heavily towards the decoupling narrative. The U.S.-China economic relationship has reached a critical juncture.  But the initial emphasis on state-owned enterprises replicates the infrastructure-investment-led approach to development that has run out of steam in China's domestic economy. The China Economic Review publishes original research works on the economy of China, and its relation to the world economy. Regional Economic Integration Benefits All China's rapid economic development is going to deliver real benefits rather than pose threats to its … A majority of Chinese private sector and state-owned enterprises in the construction, mining, and telecommunications sectors have already built utilization of "one belt, one road" credits into their business plans. By continuing to use this website, you consent to our use of these cookies. John Tkacik Former Senior Research Fellow John is a former Senior Research Fellow. $34 billion of this will go into new power plants, with the goal of almost immediately (that is three years from now) generating an additional 10,400 MW of electricity for power-hungry Pakistan. US capital streamed into Shenzhen and other manufacturing centres and the output of their factories streamed back across the Pacific and into the hands of US consumers, a process particularly accelerated when China joined the World Trade Organisation in 2001. To do so, companies can: 1. China has its act mostly together. In support of this, China seeks to inspire mergers, acquisitions, and green-field investments to create what might be called "multinational companies with Chinese characteristics," some with headquarters in Europe or elsewhere outside China. Beijing has indicated a willingness to commit as much as $1.4 trillion to its "one belt, one road" strategy. Those who stand aside from these initiatives will not. In an era when so much about politics and production is determined in the digital space, this is leading not only to a stalling or a reversal of aspects of the trade and investment integration between the two powers, but also a “splinternet”, whereby the hardware and software elements of the next step forward in the communications revolution is being bifurcated into an American-led system and a China-led system. Having won the 2016 election in Midwestern states whose economies have been particularly affected by the economic integration of the two countries, the president imposed tariffs on Chinese goods in 2018, on some $250bn of imports. But others, especially those relating to strategic sectors, will continue to decline. China Eyes Further Northeast Asian Economic Integration in RCEP When the Obama administration focused its efforts on a pivot to Asia, the Trans-Pacific Partnership (TPP) served as a key economic pillar of the strategy. Chinese investment abroad exceeded $100 billion for the first time in 2014. Internationally, most attention has focused on Beijing's ambition to build 81,000 kilometers (about 50,000 miles) of high-speed railways connecting itself to everywhere else in Asia and Europe. So now, as the US approaches an important presidential election on 3 November and questions about its wider future abound, the New Statesman Media Group is joining forces to tell that story. And China is indeed rising, but is most concerned with establishing a clearly demarcated zone of influence. In addition to its impressive physical dimensions, the "one belt, one road" project seeks to build institutional linkages and to break down barriers to cooperation between China and the various economic communities that populate the "world island." The spectrum of conceivable possibilities ranges from a new affirmation of mutual dependence and a de-escalation of tensions, probably focused on a common commitment to decarbonisation, to some form of localised war (especially if China invades Taiwan) threatening to spill over into global conflict. The "one belt, one road" program includes no military component, but it clearly has the potential to up-end the world's geopolitics as well as its economics. In many ways, the U.S. and Japanese responses to China's increasing role in global economic affairs remind me of the dysfunctional reactions of an entrepreneur as the private equity boys reorganize the company he founded, change its management, do transformative mergers and acquisitions, and deprive him of all pretense of control over his company as they take it public. That’s likely to continue. What is less well known in the West, but also significant, is that China too – while protesting Trump’s trade war measures and playing the “responsible stakeholder” – has also shifted its attitude towards the economic interdependence of the two powers. It has a vision of reform and opening of itself to its neighbors to the west that is potentially transformative on many levels. China's private sector companies are very good at exploiting opportunities for investment fueled by credits from the Chinese state. Companies must decide how best to leverage the growing power and economic integration of these two economies. The Middle East Policy Council is a nonprofit organization whose mission is to contribute to American understanding of the political, economic and cultural issues that affect U.S. interests in the Middle East. It aims at massive development of economic corridors traversing the entire Eurasian landmass and all its major peninsular extensions. The purpose of the "one belt, one road" project is to promote its economic integration with what has been called the "world island" – the conjoined continents of Asia and Europe. 1. /*-->*/. It also suited the thinking in Washington, where in the wake of Bill Clinton’s watershed trip to China in 1998 an optimistic new consensus was summed up in Thomas Friedman’s 1999 book The Lexus and the Olive Tree, which popularised the “Golden Arches theory of conflict prevention” whereby “no two countries that both had McDonald’s had fought a war against each other since it got its McDonald's”. A similar situation can be identified in China where HSR is seen as one of the elements in the long-term national economic integration and a catalyst for economic growth. The pulling apart of the world's two biggest economies, often dubbed a "decoupling", could prove at least as decisive for the following decades of world affairs as the integration was for the past four. Trans-Eurasian networks will be more stable. Some projects envisaged for the "one belt, one road" program will be financially attractive or made so. Still, if these initiatives work at all, they will have enormous geopolitical impact. This is an area with a population of 4.4 billion and a current economic output of $21 trillion. Â. With Beijing "relying less on exports to the US market, caring less about its currency’s peg to the dollar”, he theorised, "the end of Chimerica would have arrived, and with it the balance of global power would be bound to shift… China would be free to explore other spheres of global influence.”, [see also: Why a Joe Biden win is unlikely to improve relations between the US and China]. One study estimates, for example, that a relatively modest five percent growth rate in such assets from their current base could create 137 million tons of demand for Chinese steel. While it remains relatively low as a percentage of China's GDP, continuing rapid urbanization and the concomitant growth of China's middle class promise to correct this. Chinese firms got the message: there has been a precipitous fall in Chinese investment in the US, and while US investment in China remains flat overall, it has fallen in crucial areas such as information and communications technology, machinery and financial and business services. Reflecting on Chimerica in 2009, Ferguson wondered whether it would speed up China's rise and delink it from American consumption. As one example of what China has in mind, consider the economic corridor that is to link Kashgar, in Xinjiang, with the port of Gwadar, in Pakistani Balochistan, 1,800 kms. It tells a complicated story, of US-China entanglement in some fields but not in others. It is promoting the Chinese yuan as a medium of trade settlement and public borrowing throughout Eurasia. From left to right: Mr Lye Liang Fook, Mr Joergen Oerstroem Moeller, Dr Francis Hutchinson, Dr Hoe Ee Khor, and Dr Chaipat Poonpatpibul. This is an area with a population of 4.4 billion and a current economic output of $21 trillion. They now contribute almost half of Chinese GDP, up from less than one-third ten years ago. The initiative is also a way of developing Xinjiang and other parts of western China by making them key connectors to Central Asia, Russia, Europe, and the Middle East. The purpose of the "one belt, one road" project is to promote its economic integration with what has been called the "world island" – the conjoined continents of Asia and Europe. Economic integration, or regional integration, is an agreement among nations to reduce or eliminate trade barriers and agree on fiscal policies. Various elements of CITIC have just announced commitments to fund 300 projects from Singapore to Turkmenistan totaling $113 billion. By some estimates, a one millisecond advantage could be worth up to $100 million a year to a single hedge fund company. The Rise and Future of China as an Economic Power As the People's Republic of China turns 70, its leader focuses on hyper-growth. China will become the center of economic gravity of a vast, loosely integrated region that already has 55 percent of world GNP, 70 percent of global population, and 75 percent of known energy reserves. China has set a goal of $2.5 trillion in trade with Silk Road countries by 2025. This suited the thinking in Beijing, where the “new security concept” that took hold in strategic circles in the years following the end of the Cold War preached the benefits of mutual security, cooperation, trust and common interests. $40 billion has gone into the Central Asia-focused Silk Road Fund. Ambassador Chas W. Freeman, Jr. (USFS, Ret. Our own decade’s Big Idea about US-China relations is yet to emerge but if I had to predict one I would invoke either “decoupling” pure and simple, or something related like “spheres of interest”. The availability of credit does not guarantee the availability of financially attractive projects, however desirable they may be in terms of their overall impact on China's economy and its relations with the other societies in Europe and Asia. If Biden wins, the Democrats too are more wary of China’s rise. Meanwhile, the past year has also seen the country’s diplomats (some of whom have taken a newly belligerent tone dubbed as “wolf warrior diplomacy” after a trashy action film) and its military (which has taken harassment of Taiwan and neighbours around the South China Sea to new heights) adopt a newly aggressive stance towards the US and its allies. In the US, legislation responded by stripping privileges from Hong Kong and gave the administration the power to impose sanctions on Chinese officials. But China's main impact on world affairs has been and will continue to be politico-economic. The creation of the SEZ in 1980, when today's futuristic metropolis of 13 million inhabitants was a fishing village, was an early landmark in the opening up of the Chinese economy under Deng Xiaoping, and with it came probably the biggest economic story of our time: the integration of the Chinese and US economies. Investors are willing to spend hundreds of millions of dollars to gain a few milliseconds in highly profitable "high frequency trading" – the automated buying and selling of financial instruments by computers. They are additive and do not supplant them. [CDATA[/* >