The global implications of China’s rise

1. The global implications of China’s rise

2. What are the global implications of China’s rise? • What are the two most significant ways in which China’s integration into the global community will impact on it ? • What is the most persuasive reason why China’s rise will present a threat to US interests? • What is the most persuasive reason why China’s rise will not present a threat to US interests?

3. China and Global Integration • Yan Xuetong, Tsinghua University • “We are business partners who share material interests” • Doug Paal, Carnegie Endowment for International Peace • “China will be likely at most a source of ‘problems’ for America, not a ‘threat’. And problems can be fixed.”

4. China and Global Integration • China’s rise benefitted greatly from current global structures—so why are we seeing a change • 1) Unprecedented integration into global order makes a passive stance less viable • 2) View of some that China is in ascendency and US is in decline • 3) China’s engagement has changed society bringing in new interests • Hu Jintao has promoted a more independent foreign policy to protect and promote China’s strategic interests

5. China’s Foreign Engagement • Two drivers for China’s foreign behavior • Emotional driver—linked to deep feelings of nationalism and often xenophobia • Pragmatic driver—trading and essentially status quo power. Economic growth as a primary goal. • Interact to establish main goals of foreign policy: ensuring that external policy helps sustain economic growth while maintaining domestic stability; trying to expand its sphere of influence without directly confronting US interests; and increasing international support for its attempts to “regain” territories that Beijing feels rightfully belong within the PRC. • Latecomer to intergovernmental organizations and thus not a rule drafter • Has perception that international governance is structured essentially to advance the agenda and interests of the West • China is essentially an empire anchored to a Westphalian concept of the nation-state trying to operate in an increasingly multilateral world

6. China’s Foreign Engagement • Clear that China’s participation is necessary to resolve many global issues • Former strategy of not being over pro-active and not interfering in the affairs of others is coming under increasing pressure • 1) Like others China prefers bilateral negotiations but increasingly realizing that multilateral organizations may promote their own interests; important for new global issues such as climate change and for reforming old institutions such as the IMF • 2) Will have to define national interest more clearly—acknowledge that other principles of foreign relations may be overridden • China has been more willing to join regimes that govern the international economy but is less enthusiastic about those regional or global frameworks that would place real restrictions on Chinese military capabilities

7. China and the USA • Most important bilateral relationship with many areas of interest in common with economies intertwined • Lieberthal and Wang– “strategic distrust” a central element in the relationship • US has pursued a two-track policy: • Engagement—continual theme of incumbent Presidents • Hedging strategy—often supported by the Pentagon and by realists • Not surprising China has emerged as an issue the Presidential election • Complicated economic relationship and little by way of solution has been offered • Romney—China a “currency manipulator” but punitive sanctions will lead to a trade war with negative impact n some US companies and consumers • Obama and Santorum promote stronger manufacturing sector but fears of protectionism where one person’s benefit from sanctions is another’s disadvantage

8. China and the USA • 2011, US trade deficit was $272 billion with US exports at an historical high of $94 billion BUT imports also a record at $367 billion • Case for import duties or pressure to revalue currency? • 1) Many imports are form US companies • San Francisco Fed: value of imported goods for US companies +workers = 55% of total value • Iphones– retail value $600, 60% to Apple and other US companies • 2) US consumers benefit from cheap goods produce in China. Will US consumers accept price rises to provide jobs for US workers?

9. China and the USA • Three emerging trends: • 1) States are promoting own policies of engagement: • US exports risen 468% since China entered WTO • 3rd largest market after Canada and Mexico • Oregon rise over 1,000%; South Carolina over 1,500% and Nevada over 5,000% • 2) China as potential source of foreign investment • $6 billion still low compared to Japan or Europe but is rising quickly (400% last two years) • 3) Will manufacturing come back to the US? • If it comes back will it bring back jobs?

10. Global Impacts of China’s Development • Six main impacts of economic development • 1) China’s export competitiveness and the volume of exports will severely affect trade prospects of other countries. Strong competitive pressures in consumer goods—future engineering products and services • 2) Attraction of FDI will force other countries to develop more hospitable environments • 3) Major impact on import of commodities, intermediate components, machinery and energy • 4) Setting up of China Investment Corporation can have a major impact on the global investment world • 5) Emission of carbon dioxide and other greenhouse gases will affect climate change • 6) Other environmental impacts

11. Impacts for Global Business • 1) If shift to domestic consumption is successful—will reduce CCP interest in export trade and FDI—more emphasis on rural/inland development and a shift to higher quality FDI. • 2) More economic nationalism and pro-China competition policies • 3) But will still be crucial needs and wants • Energy and raw materials security • Advanced technology • Help develop global brands • 4) Opportunities to serve new secondary markets, inland cities and new markets created by urbanization and improved infrastructure and logistics