The Indomitable Rise of the Sleeping Dragon
The United States engagement with the Asia-Pacific region is due to economic reasons, and not military aggression. It is imperative for the United States to strengthen regional security among China’s neighbors in the South China sea. The inevitable economic rise of China as a global super power brought about a multi-polar world. As a result, the Asia-Pacific region is a strategic priority. The U.S. seeks to re-establish hegemonic dominance by rebuilding its economic strength as its main pillar.
The global community should understand the historical context how China developed into an economic powerhouse. Mao Zedong, influenced by Russia, established communism in China. During the Cultural Revolution, Mao Zedong shaped a Chinese-style communism based on a Confucian dynamic—a philosophy that maintained society through hierarchy and collectivism. During the Great Leap Forward, Mao Zedong policies made the intellectuals devote time to agricultural production and industrialization to modernize China, followed by Deng Xiaoping economic liberalization. This established the People’s Republic of China as the most effective foreign policy initiative established by Russia during the early 19th Century. Then, Mao Zedong closed its doors to Russia.
Henry Kissinger’s “Open Door” policy under Richard Nixon later developed China into a major player on the global stage. The “indomitable rise of the sleeping dragon” brought redistribution of power among nations displaying hegemonic dominance also known as a major geopolitical realignment. However, China rise created problems for the United States. After WWII, the United States benefited from exorbitant privilege: the dollar status as the world’s reserve currency.
The United States Dollar as the reserve currency allowed the United States to borrow cheaply, by selling its assets in return for goods, mostly obtaining resources from the global periphery, and purchasing exports from China, a developing country. The rise of the developing world shook the foundations of the West. Taken by surprise, the imperialist model became unsustainable. America based its economy on the Keynesian model of consumption, outsourcing jobs overseas, resulting in the general decline of a once robust manufacturing & export industry. The standard of living declined for the American middle class. Americans could no longer afford home mortgages and job security, due to changes in the U.S. labor market. The 2007-2009 U.S. financial crisis was the worst recession seen in over a decade.
The core problem at the U.S.-China adversarial relationship is China exploitation of a symbiotic relationship, coined by Niall Ferguson as “Chimerica”. China ran a trade surplus, selling goods in return for financial claims. Firms, households, and government saved more than they were willing to invest at home and played this game for a very long time. Described in the exact words published by Daniel Griswold from the CATO Institute, “China manipulated its currency.” Griswold discussed how the global markets resorted to protectionist measures that spurred a trade war.
The United States and China played a very dangerous game of competitive devaluations that allowed worldwide inflation to hurt domestic economies. Because China used the least acceptable means at maintaining a fixed currency rate by not trading at a floating exchange rate. The U.S. Federal Reserve under Ben Bernanke pushed hard for the rise of the Yuan due to China’s government monopoly over the currency conversions.
According to HSBC Economist report, decades from now, China may strengthen and internationalize the Yuan, allowing it to compete among the world reserve currencies. The most practical thing the United States could do is set the game for multi-polarity in the G-Zero world as coined by Ian Bremmer, the CEO of Eurasia Group, on geopolitical risk analysis. Winners take all. In this G-Zero world, we are all connected by each other rise and fall.