Will China's rise lead to the decline of U.S.?

10:48, April 28, 2011      

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The International Monetary Fund (IMF) recently made a bold prediction that China will exceed the United States and become the world's largest economy as early as 2016 in terms of purchasing power parity. This prediction seems to add new evidence to the popular statements made by some western analysts who believe China's rise is the main cause for the decline of the United States.

"Is the United States really on its wane?" "Will China's rise mainly lead to the decline of the United States?" Experts on international issues in Beijing pointed out that the proposition and judgment regarding the decline of the United States is controversial. Even if the United States is coming down, China's rise is not the main reason.

The IMF's prediction shows that according to the current growth rate, China's economic size will reach 19 trillion U.S. dollars in 2016 in terms of purchasing power parity while the U.S. economic size will reach 18.8 trillion U.S. dollars in 2016. Therefore, China will exceed the United States and become the world's largest economy.

"We will reach different conclusions from different angles regarding the proposition of the decline of the United States. I think, more specifically, U.S. power is now in the state of absolute growth and relative decline," said Ni Feng, deputy director of the Institute of American Studies under the Chinese Academy of Social Sciences.

Ni said that the United States showed a significant economic growth over the past decade, moving ahead of other developed economies such as the European Union and Japan, while the faster development of emerging economies indeed has brought the phenomenon of the relative decline of the United States.

However, Ni also stressed that the relative decline of the United States is mainly embodied in the economic field. The downward trend in fields such as politics, military affairs and science and technology is not obvious, and its performance in some fields has even become more outstanding.

Data shows that despite the severe economic downturns caused by the collapse of the Internet bubble in 2001 and by the international financial crisis from 2008 through 2009, the GDP of the United States, calculated at constant prices, was up 21 percent during a period from 2000 to 2010. Some economic indicators of the United States have dropped compared with other countries in the world. The proportion of U.S. GDP to the total GDP of the 19 other G20 countries stood at 61 percent in 2000 and dropped to 42 percent in 2010. The U.S. GDP was more than eight times that of China in 2000 and was less than three times that of China in 2010. "The U.S. GDP share of the world's total was once more than 50 percent after the second world war and stands at around 25 percent today. The strength of the United States by GDP has indeed comparatively declined, causing the United States to give up "the dominance of global economic affairs" and seek "multilateral cooperation" to deal with international economic issues."

The G20 including members such as the United States, Japan, China and India has become a major platform for managing the world economy. During the reforms of the World Bank in April 2010, developed countries shifted more than 3 percentage points of voting rights to developing countries. In October 2010, the IMF passed a reform plan transferring 6 percentage points of voting rights to underrepresented countries including emerging countries. With the continuous development of China-U.S. ties and in-depth changes in the international situation, the mechanisms such as the China-U.S. strategic and economic dialogue have emerged.

Yang Bin, an economist at the Chinese Academy of Social Sciences, said that the international financial crisis and the fall in the economic influence of the United States can be considered a reflection of the "decline" for the United States. However, the key reason behind the "decline" is not the "rise of other countries" but fundamental defects in its economic system and structure.

Yang said that the United States currently features a growing scale of financial monopoly capital, the deepening of economic "financialization," "virtualization" and "hollowing out," as well as the increasing share of speculation in economic activities, the excessive concentration of wealth to financial oligarchs and continued high unemployment rates. "The international financial crisis is just a warning. If the United States does not change its neo-liberal economic system and development mode, the deterioration in its economic strength will continue," Yang said.

The U.S. economy has been faced with increasingly deteriorating problems of high fiscal deficits, high trade deficits, and high debts for a long time. The United States has been the world's largest debtor nation since the 1980s, but has managed to maintain economic growth by overusing the dollar hegemony, running up huge debts, and printing bills beyond reasonable bounds, which led to a lopsided financial development and a declining manufacturing industry.

Manufacturing, the principal part of a real economy, only accounts for about 10 percent of U.S. GDP and corporate profits. By contrast, service industries, mainly consisting of the financial services industry, account for around 80 percent of the country's GDP. The financial and real estate services industries generate over 40 percent of U.S. corporate profits.

The "financialization" of the U.S. economy is in fact "virtualization" and "parasitism." The value of the dollar against other major currencies has dropped significantly. When the dollar falls below a psychologically important level and loses its privileged status, foreign capital will withdraw from the United States quickly, leaving the U.S. economy at risk of collapse.

"The United States' economic power and influence keep falling due to its own perennial problems and the rapid development of emerging economies. While GDP is a good measure of the size of the economy, it cannot reflect the comprehensive national strength of a country. The United States is not really in decline if we fully consider its innovative strength, amount of core technologies, military strength, and other aspects," said Zhu Feng, a professor at the School of International Studies under Peking University.

U.S. military spending has been almost as much as the combined spending of all other countries in the world for many years. According to the statistics recently published by the Stockholm International Peace Research Institute, U.S. military spending rose nearly 3 percent to 698 billion U.S. dollars in 2010, more than that of any other country in the world. Worldwide military spending increased by 20.6 billion U.S. dollars last year, and the United States alone accounted for 19.6 billion U.S. dollars of the increase.

Thanks to its enormous economic size and large lead in business and technology, the United States topped world competitiveness rankings over the past many years. According to statistics from the World Intellectual Property Organization, the United States remained the world's largest international patent applicant with 44,855 patent applications filed in 2010.

The "China's National Competitiveness Report" blue book released by the Chinese Academy of Social Sciences in 2010 pointed out that the United States still has a relatively large overall competitive advantage, and its advantages in aspects such as global connections and the human resource structure are even more outstanding.

The blue book said that in the context of globalization, China's development took the road of "inclusive growth" and needs a fair, cooperative and open environment. It is inadvisable to equate the prosperousness of China's economy and the enhancement of China's competitiveness with the so-called "China threat theory."

Zhu said that it will not bring substantive changes in the international security system even if China's GDP ranks first worldwide. Measuring the international security system needs to consider more on various aspects such as alliance, overseas troops, delivery capacity of military power, and the breadth and density of global security partners. China currently has no capacity and desire to change the existing international security system.

"China will unswervingly follow the path of peaceful development and continue to develop through striving for a peaceful international environment, and will also safeguard and promote world peace with its own development," said President Hu Jintao during his visit to the United States at the beginning of 2011.

By People's Daily Online

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