US-China rivalry intensifies

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US-China rivalry intensifies

9 January 2010

Last year, it was fashionable to talk of an emerging “G2”. The US, the
world’s largest economy, and China, its rising rival, would come
together to resolve global problems—in particular, the international
economic crisis wracking capitalism.

Those illusions have rapidly evaporated this year, as the Obama
administration signals a far harder line toward China with a series of
provocative moves, including the sale of advanced weapons to Taiwan
and a planned meeting with the Dalai Lama. These significant symbolic
steps follow the imposition of hefty US tariffs on a range of Chinese
goods, from steel pipes and steel-grate to tyres.

Beijing has already protested over the Taiwan arms sale and will
certainly do the same if Obama meets the Dalai Lama. US officials
expect that Chinese President Hu Jintao will not attend Obama’s
nuclear security summit in April and may end bilateral military
dialogue with the US. Relations are likely to deteriorate further as
the US pushes ahead with new sanctions against Iran over its nuclear
programs—a move that Beijing has publicly opposed.

Washington is no doubt driven by a growing sense that its economic and
strategic interests are being increasingly blocked by Beijing. Obama’s
much-vaunted trip to China last November was widely regarded as a
failure: his call for an appreciation of the yuan against the dollar
was ignored and in return he received a lecture on the need for
financial rectitude to ensure China’s continued purchase of US bonds.
At the Copenhagen climate summit, the US was opposed by a bloc led by
China that pointedly snubbed Obama when he arrived to pull together a
deal.

These tensions are rooted in the rapidly changing relations between
the major economic powers, driven by the globalisation of production.
The US remains the world’s no. 1 economy but is confronted by a
dynamic rival. At the beginning of the twenty-first century, the US
GDP was eight times that of China; a decade later the figure was down
to four times. This year China is likely to overtake Japan to become
the world’s second largest economy. In 2009 China passed the US as the
world’s largest auto market and producer. Two decades ago, a car
industry barely existed in China.

The global financial crisis that erupted in 2008 has only served to
underscore the vulnerability of the US and the rise of Chinese
capitalism. While the US and European economies contracted in 2009,
China contributed more than 50 percent of global economic growth. Last
year China overtook Germany to become the world’s largest exporter.
While major Western banks had to be bailed out, the seven largest
Asian economies now hold $US4.6 trillion in foreign currency
reserves—greater than the rest of the world combined.

A free trade agreement between China and the Association of South East
Asian Nations (ASEAN) came into effect on January 1—overnight creating
the world’s third largest free trade zone after the EU and the North
American Free Trade Association. Washington is not only excluded from
this arrangement but has only a handful of bilateral deals of its own
with countries in the region.

Driven by the need for raw materials, energy and markets, China is
using its economic muscle to acquire assets, secure long-term
contracts and boost its political standing through loans and aid in
countries around the world. China’s outbound investment for mergers
and acquisition in 2009 rose to $46 billion, five times the figure of
$9.6 billion in 2005. In every region of the globe, from Central Asia
to Africa and the Pacific, China’s economic expansion is challenging
the US and European powers, and disrupting existing relations.

Barely hidden is the growing military rivalry. The US-led wars in Iraq
and Afghanistan, its proxy war in Pakistan and threats against Iran
are driven by Washington’s determination to dominate the key strategic
regions of the Middle East and Central Asia, to the exclusion of its
rivals, especially China. More broadly, the US has sought to encircle
China with a series of alliances and bases, stretching from Japan,
South Korea, Singapore, Australia and India to Afghanistan and Central
Asia. China is responding by building its own military capabilities,
including a blue-water navy to secure shipping routes to the Middle
East and Africa, and a de facto partnership with Russia to counter US
influence in Central Asia.

In a December 23 article, the Financial Times’s chief economic
commentator Martin Wolf warned of the far-reaching consequences of the
rise of China and the “disastrous loss of authority” of the US due to
the wars in Iraq and Afghanistan and the global financial crisis. “The
noughties of the 21st century,” he commented, “now have the same fin
de regime feeling as those of a century ago.”

The decline of Britain as world hegemon and the rise of rivals in the
early twentieth century—particularly Germany and the United States—led
to three decades of upheaval, including two world wars and the Great
Depression, before the US emerged as the new dominant power. “Now we
have a possibly even more difficult transition of power to manage,”
Wolf declared.

Wolf had no proposals to offer other than a general prescription for
international cooperation. He ended rather gloomily with an appeal for
all countries to recognise the value of Benjamin Franklin’s maxim: “We
must all hang together or assuredly we shall hang separately.” Wolf
concluded: “Will that happen? Alas, I rather doubt it.”

This pessimistic tone reflects a recognition among more astute
bourgeois observers that international rivalries are intensifying, not
lessening. In the midst of World War I, Lenin in his farsighted
pamphlet “Imperialism, the highest stage of capitalism” explained the
impossibility of a permanent agreement between the major powers to
stabilise global capitalism. Any arrangement made at one point in time
was necessarily upset by uneven rates of development among competing
capitalist economies. The competition between declining powers and
rising rivals was decided by war.

Today’s tensions are compounded by the fact that no country is in a
position to play the role that the US did in creating a new
equilibrium after World War II. China is an economic giant with feet
of clay, riven by economic and social contradictions. Its economy is
dependent on Western investment, technology and markets. China’s great
economic “strength”—its vast pool of cheap labour—inevitably produces
deep-seated social tensions. While its GDP is set to become second in
the world, its per capita GDP was just $3,259 in 2008, 104th in the
world, behind Iraq, Georgia and the Republic of Congo. It has the
second largest group of dollar billionaires in the world behind the
US, yet 150 million people live on less than $US1 a day. The abiding
fear of the tiny Chinese elite is that its police-state measures will
not contain the immense social explosion that is building up.

Amid the continuing global economic crisis, the rivalries will sharpen
sooner rather than later. The world has entered into a convulsive new
period of political upheaval and war. The only social force capable of
offering humanity a progressive solution is the international working
class. The same global processes that are exacerbating international
tensions and leading to conflict have enormously strengthened the
proletariat, whose historic task is the revolutionary overthrow of the
bankrupt capitalist system and its outmoded division of the world into
nation states, which is the root cause of war and the social
catastrophes afflicting mankind.

John Chan

http://wsws.org/articles/2010/jan2010/pers-j09.shtml

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