In the Asia Pacific Region, the US and China are having direct contacts through their territorial proximity (Guam) and the deployment of their various national military, naval and air assets. The emerging strategic and economic asymmetry in the US-China relationship will first manifest them in the Asia-Pacific Region. China’s strategy of competing with the U.S. in global finance and investment seems both prudent and shrewd, according to the editorial of the current ICCB News Bulletin of International Chamber of Commerce-Bangladesh released today (10 May 2015).
According to former Australian Prime Minister Kevin Rudd, the shifting balance of economic power is also beginning to be seen globally, where China’s economic presence in Africa, Latin America and Europe also challenges the long-standing US world economic primacy and political role will also begin to reshape international norms, rules and institutions. It will reverberate across geopolitics, global trade, investment, capital flows, reserve currency status, climate & other environmental challenges and global people movements. And it will also influence the great questions of war and peace in the decades ahead.
China has overtaken the US to become the world’s largest economy, according to IMF, using purchasing power parity (PPPs). The Monetary Fund now estimates China’s GDP at $17.6tn, against the US’s $17.4tn. In 1980, the country’s economic output was a tenth of the US which is now estimated that China’s economy will soon be 20 per cent larger than the US.
Experts have described the toppling of America, after nearly 150 years by China, even on the PPP measure, as a ‘symbolic’ moment for the global economy. This is the first time since George III that a non-Western, non-English-speaking, non-liberal democratic state has become the largest economy in the world.
The shift in economic power also comes inevitably with a shift in political power. This spectacular evidence in recent times is being seen with the last-minute stampede of political support from Western governments around the world to become founding members of China’s proposed Asian Infrastructure Investment Bank (AIIB), in defiance of Washington’s objections.
Earlier China has formed financial institutions that directly compete against those founded and dominated by the U.S. In the last two years, China has set up the US$50 billion Shanghai-based New Development Bank (NDB), US$40-billion New Silk Road Fund and a US$100 billion liquidity reserve.
Besides, China has put together massive bilateral aid packages for strategic allies and resource-rich developing countries designed to strengthen its economic ties. The latest manifestation of China on this front is the US$20billion and US$46 billion energy and infrastructure deal announced for Bangladesh and Pakistan respectively. And when President Xi Jinping visited Latin America in July 2014, he signed contracts worth roughly $70 billion.
On the other hand, US President Barak Obama’s proposed Trans Pacific Partnership (TPP) is in the final stage of negotiations and appears to be just around the corner. TPP would be the largest trade deal in American history, involving the U.S., Japan and 10 other countries, excluding Chin and India, that combined together make up 40% of the world economy. President Obama has made the proposed trade deal the centerpiece of his foreign policy in East Asia, where China is challenging America’s long-held dominant influence in the region. And in that sense, Obama’s legacy as the self-proclaimed Pacific president hinges on nailing down the TPP.
With the TPP, the U.S. wants to reduce tariffs and other barriers to open markets as well as establish standards on a range of issues affecting trade and commerce, such as intellectual property rights, government procurement and state-owned enterprises. The White House has estimated that the trade deal would boost American exports by $123.5 billion a year by 2025.
According to some political pundits, the main reason for US interest in passing the TPP is to inhibit China’s economic dominance. The TPP is also seen as rivaling the FTAAP (Free trade Area of the Asia Pacific), initiated by China. Experts told that reduced tariffs and higher quality standards among TPP states are likely to result in many Asian nations preferring to import from fellow signatories, rather than from China.
However, the future relationship between China and the United States is one of the mega-changes and mega-challenges of our age. China’s rise is the geopolitical equivalent of the melting polar ice caps: gradual change on a massive scale that can suddenly lead to dramatic turns of events.
Can this defining trend of the 21st century be managed peacefully?
