Coming to Terms with China

Such a development promotes hostility between China and Japan, the two superpowers of East Asia, sabotages possible peaceful solutions in those two problem areas, Taiwan and North Korea, left over from the Chinese and Korean civil wars, and lays the foundation for a possible future Sino-American conflict that the United States would almost surely lose. It is unclear whether the ideologues and war lovers of Washington understand what they are unleashing -- a possible confrontation between the world's fastest growing industrial economy, China, and the world's second most productive, albeit declining, economy, Japan; a confrontation which the United States would have both caused and in which it might well be consumed.

Let me make clear that in East Asia we are not talking about a little regime-change war of the sort that Bush and Cheney advocate. After all, the most salient characteristic of international relations during the last century was the inability of the rich, established powers -- Great Britain and the United States -- to adjust peacefully to the emergence of new centers of power in Germany, Japan, and Russia. The result was two exceedingly bloody world wars, a forty-five-year-long Cold War between Russia and the "West," and innumerable wars of national liberation (such as the quarter-century long one in Vietnam) against the arrogance and racism of European, American, and Japanese imperialism and colonialism.

The major question for the twenty-first century is whether this fateful inability to adjust to changes in the global power-structure can be overcome. Thus far the signs are negative. Can the United States and Japan, today's versions of rich, established powers, adjust to the reemergence of China -- the world's oldest, continuously extant civilization -- this time as a modern superpower? Or is China's ascendancy to be marked by yet another world war, when the pretensions of European civilization in its U.S. and Japanese projections are finally put to rest? That is what is at stake.

Alice-in-Wonderland Policies and the Mother of All Financial Crises

China, Japan, and the United States are the three most productive economies on Earth, but China is the fastest growing (at an average rate of 9.5% per annum for over two decades), whereas both the U.S. and Japan are saddled with huge and mounting debts and, in the case of Japan, stagnant growth rates. China is today the world's sixth largest economy (the U.S. and Japan being first and second) and our third largest trading partner after Canada and Mexico. According to CIA statisticians in their Factbook 2003, China is actually already the second-largest economy on Earth measured on a purchasing power parity basis -- that is, in terms of what China actually produces rather than prices and exchange rates. The CIA calculates the United States' gross domestic product (GDP) -- the total value of all goods and services produced within a country -- for 2003 as $10.4 trillion and China's $5.7 trillion. This gives China's 1.3 billion people a per capita GDP of $4,385.

Between 1992 and 2003, Japan was China's largest trading partner, but in 2004 Japan fell to third place, behind the European Union (EU) and the United States. China's trade volume for 2004 was $1.2 trillion, third in the world after the U.S. and Germany, and well ahead of Japan's $1.07 trillion. China's trade with the U.S. grew some 34% in 2004 and has turned Los Angeles, Long Beach, and Oakland into the three busiest seaports in America.

The truly significant trade development of 2004 was the EU's emergence as China's biggest economic partner, suggesting the possibility of a Sino-European cooperative bloc confronting a less vital Japanese-American one. As Britain's Financial Times observed, "Three years after its entry into the World Trade Organization [in 2001], China's influence in global commerce is no longer merely significant. It is crucial." For example, most Dell Computers sold in the U.S. are made in China, as are the DVD players of Japan's Funai Electric Company. Funai annually exports some 10 million DVD players and television sets from China to the United States, where they are sold primarily in Wal-Mart stores. China's trade with Europe in 2004 was worth $177.2 billion, with the United States $169.6 billion, and with Japan $167.8 billion.