How China and the United States Balance their Economic Power - Literature review Example

China is already shaping the global economy, even if the United s is still the hegemon. Discuss. Introduction China is undoubtedly one of the fastest growing economies in the world today. The rapid growth of China is because of the success of the five-year plans ideologies. The five-year plans started in 1953 with the objective of enhancing industrial growth and socialization (Ibibilio 3). The five years plans have succeeded putting China to the second largest economy currently. China’s focus is mostly on economic growth, rather than military growth. The Chinese leaders understand that economic growth brings in more money, which can support many initiatives including military operations. China’s rapid economic growth has encouraged the country to expand its economic interests to other countries in Africa, Latin America and Asia. Chinese economic strategy is other countries are on development loans and expertise. This strategy seems to be working as many of the Latin America, Africa and Asian countries prefer to work with China rather than the United States and European Union. The advantage of China is she has vast resources, which are cheaper than those from the other large economies are. Although United States is the largest economy now, China will replace the United States position sooner than most people think. According to Kenneth Rapoza, the United States will no longer be the number one economy by the time President Barrack Obama’s term ends (1). The 2008 recession indicated that China is already taking its position. It was the only country growing at that time and prevented a worse global financial crisis. The United States and China complete for economic markets in the world. Each has its own strategy to compete with the other. China has its focus on low cost sophisticated technology manufacturing. On the other hand, the United States has its focus on diplomacy and smart power as a Chinese re-balancing strategy. The United States has been the global economic hegemon, but the tables seem to have been turned by China, whose economy has grown exponentially in the last few decades and is already taking its place as the world leader and will bypass the United States sooner than expected to become the next hegemon. Chinese Economy Strategy in Africa Chinese economy strategy for Africa and Asia is time-honored friendship and the need for development. In Africa, China has played an important role in the development of infrastructure in many African Countries (Asia Society 5). According to Brendan O’Reilly, the major Chinese impact in Africa is economic development (13). Brendan further confirms the Chinese government has provided huge loans to African States (16). By the third Sino-Africa forum in 2012, Chinese government loans to African States quadrupled. Chinese loans to African nations were 20 billion dollars in 2012 compared to just five billion dollars in 2006 (O’Reilly 10). The loans provided by China are specifically for infrastructure development and economic growth. Experts believe China invests heavily in especially infrastructure for seamless transport or raw materials (Tull 470). China imports raw materials worth 93 billion dollars from Africa alone. On the other hand, Africa receives about 15 billion worth of imports from China alone (O’Reilly 11). With that in mind, it would be logical for the Chinese government and executives to invest in infrastructure to enhance transportation. The Chinese strategy seems to be working quite well in Africa compared to the American economic strategy (Carmody and Owusu 17). A BBC world poll survey quoted by O’Reilly indicates most people in Africa embrace what China is doing. According to that survey, 82% of Nigerians and 77% of Kenyans believed Chinese investments in Africa are positive. In most of the countries where the BBC did the survey, more than half of the people believed Chinese investments have a positive impact. It is probably because Africans themselves benefit from the developments funded by China. In addition, most Africans believe the Chinese t5rade practices are fair. Only about 5% of the people believed the Chinese trade practices are unfair. This is a very small percentage compared to other large economies (O’Reilly 21). Chinese Economy Strategy in Asia Chinese economic strategy in Asia is not any different from that of Africa. In Asia, China also provides loans for development of infrastructure and economic growth. A report by Agencies indicates that the main strategy for the Chinese leaders is economic dialogue, investment, high-level support and development (4). According to Agencies, this is a typical win-win strategy. China and the countries she trades with have benefited mutually. The Chinese-Thai modern railroad project is a good example. For this particular project, the agreement was China to provide finance and develop the project in exchange for Thai rice. Looking at this project critically, Thailand would benefit by having a modern railway system. China on the other hand would get Rice imports from Thailand. In the end, both countries benefit. The major focus of the Chinese government is to benefit and for the trading partners to benefit as well. Under this principle, Chinese government tries to establish good relations with the other countries initially. Once China and the other country have a common ground, they establish win-win interests. The current Chinese leadership believes that the world should share to have a common destiny. As such, countries should cooperate to have a common goal. The common goal of the Chinese government is common development. However, the common goal should not bar any country from pursuing its own individual interests. China claims that each country should have its own individual objectives in addition to common interests with other countries. No country has the right to interfere with another country’s interests and objectives no matter what. This is the primary distinguishing factor between China and other western nations. Why China Focuses on Asia and Africa Chinese focus to Asian and African countries is multifaceted. First, China has grown to be an industrialized country. It is probably the country with many vast industries. The many industries need raw materials to be in business. Nowadays, raw materials are abundant in Africa and Asia only (Auty 652). Resources in the developed and industrialized countries are little to support the need. As such, China has to focus on these regions to get the much-needed raw materials (Auty 652). Resources in Africa and Asia are in plenty, much more than the developed countries ever had. The Chinese demand for raw materials and other products is only sustainable by imports from African and Asian countries. Currently, China is one of the largest consumers of crude oil, petroleum, cement and electronics. Secondly, China is focusing to have good relations with the Asian and African countries. This is only possible if China gives back in a sustainable way. In this case, China provides financing for development projects in exchange of raw materials from the Asian and African countries. Although this did not seem workable at first, the cooperation between China and Asian and African countries has proved this right (Brautigam 449). China is financing and providing expertise for the development of many projects in Asian and African countries. Noah Tucker provides an example of the investments made in some Asian countries recently. In the first quarter of 2013, the Tajikistan President Emomalli Rahmon went to China on a state visit. By the time Rahmion was leaving China, he had secured deals worth 200 million dollars from China for energy and infrastructure developments. In the second half of 2013, Kenya secured deals worth 5 billion dollars for energy and infrastructure (Macharia 7). China trading with Africa and Asia could be a sustainable economic strategy. African and Asia countries collaborating with China will become more developed and industrialized in the near future. There will be more roads, railway systems and ports in these countries, enhancing better transportation of goods and services. This is definitely good for these countries, which seemed behind yet unable to develop fast. From these corporations, China benefits by getting raw materials for its industries and food to sustain its huge population. At the end of the day, China and its trading partners benefit (Brautigam 452). Why China focuses on economic expansion rather than military Chinese diplomacy has proved unique, compared to the known diplomacy strategies used by the western powers. China’s objective is to grow economically and for the trading partners to benefit as well (Thompson 7). For this to happen, China has to establish good relationships with the countries. Such relationship calls for dialogue among the parties involved. In such dialogues, the parties are free to state their objectives in the partnership and discuss how that can work. In soft diplomacy, there are no ultimatums. Rather, the parties involved discuss and work towards a common ground, in which all the parties benefit from the relationship (Moss 16). Soft diplomacy in most cases ends in unlimited benefits to both parties. Looking at the cooperation between China and trading partners in Asia and Africa, China gets raw materials and the Asian and African countries get finances and expertise for development. Under this arrangement, China gets materials for its industries and food to feed the large population. On the other hand, there are unlimited opportunities in the African and Asian countries with upgraded infrastructure and industrialization. The local communities benefit much more compared to what they export to China. Both countries are happy as they benefit at the end. On the contrary, the United States diplomacy is hard diplomacy. In most cases, the United States issues ultimatums, in which the recipients of the conditions have to do or else military action is enforced. The media reports such case scenarios all the time. In the last one year, the United States threatened to use military force in North Korea and Syria (Mendel 17). The United States participates in hard diplomacy across the world as a way to instill democracy. However, it emerges that United States interest is not democracy in the target countries. Rather, the United States uses hard diplomacy for economic interests (Mandel 13). This theory spurred a never-ending debate. Some people believe United States plays a critical role in ensuring democracy across the world. Others believe United States take advantage of the lawlessness in the countries they go to and siphon resources (Mandel 19). While the United States lawmakers distance themselves from this argument, it holds water. The Iraq and the recent Libya case scenarios confirm these allegations (Mendel 15). In the case of Iraq, the United States and allies claimed they wanted to remove a dictator from power. This fact is true, but the events that came after were different from the initial objectives. United States and allies siphoned oil and transported to their respective countries. In the Libya case, the United States and allies claimed they wanted to assist in removing Muammar Gadaffi, the then leader of the country (Mendel 17). The help turned to be a fully-fledged war in the following months. Many lives were lost and cities destroyed as a result. The events that took place after Muammar Gaddafi died were shocking. There are claims that the United States and allies siphoned oil from the country. The United States has a lot of interest in the Middle East because of oil. Conn Hallinan claims that as of 2009, the Middle East oil and natural gas reserves accounted for 65% of the global reserves (Klare 39). The United States are concerned that it has higher oil demand than what it produces (Klare 39; Klare and Volman 300). The country used about 21 million barrels of oil a day yet it produces only 7.5 barrels a day in 2009. As such, the United States has to look for ways to sustain its high demand. Some people believe this is the major reason United States looks for reasons for military action in some countries. How China and the United States balance their economic power with each other China’s economic strategy to compete with the United States The United States and China are in an intense competition. Each of the two wants to be the global leader in economy and in leadership. The two countries are employing different strategies to compete with the other. China focuses on economic development and growth in its own case and in the partners’ case (Thompson 7). As such, China and the other trading partners have to come up with a way for both to benefit. In most cases, China provides financial aid and expertise for development projects for infrastructure and mining minerals and natural resources. The recipient country reciprocates the aid by exporting products agreed upon with China. The trade deals China has with the developing countries in Africa and Asia is huge. The country invests billions of dollars every year on infrastructure and energy sectors in the developing countries (Thompson 12). China does not involve much with other country’s interest. In this case, China does not have any problems even if a country wants to make a nuclear weapon or anything else. The Chinese government, foreign policy clearly states that their trading partners are free to do anything they would like to for their own interest. The policy also states that no country should intervene in another country’s interest. After all, each country’s government knows what is best for the people that elected them to office. This has led to the influence of the Chinese soft power like a charm (Kurlantzick 32; Nye 8). United States economic strategy to compete with China On the other hand, the United States focuses on security and democracy (Carmody 27). In Africa, for example, the United States established military installations to address the high insecurity in the region. The same goes for Asia, Europe and Latin America. United States has over seven hundred military installations in 60 countries (CBS 5). United States believes the economic activity is only possible with good security system. It is for this reason the country has so many military installations across the world. The United States also uses the military installations to prefect on other countries. The administrations of the United States believe they are the leaders and other countries have to follow strict guidelines to safeguard human life and their rights. According to Hills, the United States government points out clearly in its Africa Agenda that countries need strong institutions to enhance democracy (632). The United States believes it has the right to intervene in another country for the sake of democracy (Krahman 537). In such cases, the United States have been usually very tough on the country that infringes the rights of its people. The United States gives an ultimatum to such countries; either the country’s government does what is right or the United States and allies launch military action to remove the bad government. The United States has done this many times (Art and Cronin 361). In the past, the United States launched military action in Iraq and Libya. Most recently, the United States threatened a military action in Iran and Syria. Another strategy the United States use in especially Africa, to compete with China is collaborative partnerships and investments. The core objective in this case is to have a good economic environment and governance. As such, the United States invests billions of dollars every year for security and governance (Hills 634). How the Chinese and United States economic strategies vary and work The Chinese economic strategy and the United States strategy vary a lot (Gibbon 99). Looking at the two strategies, the Chinese economic strategy seems better compared to the United States strategy (Eigen 3). Chinese economic strategy improves development much more. After all, the primary objective of the Chinese economic strategy is to develop infrastructure for easier transportation of goods and services. These developments have made the United States look as if it never invests in Africa and other developing countries. In the end, the Chinese economic strategy has more impact, according to the recipients. In addition, the Chinese strategy revolves around negotiations and agreements, which creates friendship between China and the other countries (Moss 6). The fact that China does not intervene in another country’s governance builds even better relationship with other countries. It is no wonder most developing countries prefer to work with China rather than the Western powers. United States and other western powers intervene in some cases, especially when they believe that a country’s interest may infringe the security of the world. For example, the United States constantly states that some countries should not have nuclear weapons because they would be a threat to the entire world. While this theory holds water, it also raises many questions. Why would the United States have nuclear weapons and prevent other countries from having them. Some experts believe this could be the reason some countries would try to smuggle nuclear weapons components (Macleod 3). At the same time, countries interested in nuclear weapons and other thing the United States is against look for other options like cooperation with countries like China. Recently, China confirmed it would fund a new atomic nuclear plant facility in Pakistan to the tune of six billion dollars (Shams 6). China does not see anything wrong with this project. On the contrary, the United States and western powers stated this Sino-Pakistan deal was a dangerous one, despite the fact that it is for safe energy production. They claimed that Pakistan has a history of proliferation and is likely to use the deal badly. It emerges that Pakistan had approached the United States for the same deal, but the United States refused to finance the deal (Sham 9). The North Korea and Iran case scenarios indicate the distinct variations between the United States and China. While the United States is against these two countries having nuclear weapons, China has no words on the case. As stated above, China believes each country has the right to do whatever it deems best for its people. For these reasons, the United States is losing ground as the best financier of development projects. United States still the global economic leader Many people in the United States, China and the world over think that China has overtaken the United States as the global economic leader (Areddy 1; Chu 1). Although there is intense competition between the United States and China, the United States is still the global economic leader. A number of factors fail to make China the global economic leader (Chu 4). One, average earnings per household and individual in china is very low in comparison to that of the United States (Chu 4). Data indicates the average household earnings in China are about ten thousand dollars compared to an average of forty seven thousand dollars per year in the United States. Poverty in China is another obstacle to global economic leadership (The World Bank). A large population in especially rural China lives in absolute poverty. A large Chinese population lives under the World Bank Standard of 1.25 dollars a day and the Chinese standard of 6.5 Yuan a day (The World Bank 3). China to be a global economic leader Despite these factors, it is evident the Chinese economy is a force to reckon with. In the last thirty years, the Chinese economy has grown by around thirty times compared to just about five times growth in the United States (Keller and Lawski 1). In addition, China has managed to reduce the poverty rate percentage from a high of 50% below poverty line in 1970s to just 13% below the poverty line as of 2010 (Keller and Lawski 1). Assuming China keeps that pace, it will bypass the United States as the largest economy in the next two decades at most. Simon Palamar points out the gap between the United States and China in terms of wealth, political influence, economic growth and military spending and modernization has shrunk significantly in the last three decades (3). This signifies China is catching up with the United States in many fronts. At the same time, the United States is getting a fair share of financial challenges. The external debts are soaring and unemployment rates are increasing. Financial challenges in the United States are probably the greatest threat to its global economic leadership. In 2009, during the recession, the United States economy was on the brink of collapse. At that time, the Chinese economy was growing, probably the only economy that was growing at the time. In the recent years, the dollar protection system introduced in the 1980s seems to be collapsing (James and Lombardi 11). The dollar challenges experienced in the last half decade confirms these fears. The dollar index has soared and many executives across the world have been requesting for the replacement of the dollar as the major universal currency (James and Lombardi 16). These facts in addition to the large Chinese economy are likely to change the goal posts (Scissors 7). Internal factors affecting global United States economic leadership The financial woes in the United States put China ins a better position to claim the world title of economic leader (Charles 41). The NATO review online magazine questions whether the financial crises in the United States and Europe will make China the new super power. This theory is at work because China has the largest foreign dollar reserves. In addition, the country lent United States and other western countries loans to the tune of trillions of dollars (NATO Review 7). The Chinese primary goal is to be the global economic leader (Arrighi 45). The economic strategies China has put in place seem to be working. The country is now involved in many economic developments across the world. The China’s soft diplomacy strategy is working and has brought a good reputation to China. Many developing countries now prefer to work with China. Even countries that worked with the United States in the past have switched their interests to China (Krugman 5). The hard diplomacy of the United States and allies has lost ground. In fact, it has become an avenue to criticize the United States. In addition, many people desist from this ideology because in the end, many people suffer. Although the hard diplomacy ideology is for helping the majority, the death of few people indicates the strategy is faulty. This is a clear indication that China could be heading to be the new world economic leader. Many people in the world are already claiming China is the world economic leader (Global Attitudes Project 9; Dadush and Stancil 3). Conclusion China has emerged as the global leader in the last three decades. The country’s GDP has grown by more than 30 times in the same period. China uses the soft diplomacy strategy, which has made it a preference by many developing countries. The United States, which has been the primary trading partner of many countries, is losing ground. This is because of the hard diplomacy strategy, which in the end hurts many families. In addition, the Chinese economic strategy has more impact in the recipient countries. Chinese economy strategy in especially Africa and Asia focuses on infrastructure and opening interiors. On the other hand, the United States strategy focuses on security and investments. In the United States strategy, the money spent on security alone is higher than the investments. Although this is good for economic growth, it does not have much impact to the local communities. The preference of the Chinese economic strategies makes the United States to lose its ground. The financial issues in the United States like the high foreign debts increase the losing potential. While the United States has internal and external issues that strain its relations with other countries, China is harnessing good relationships with other countries and its population livelihoods improve. With this, it is evident that China is already shaping the global economy, although the United States still holds the position and China will pass the United States sooner than expected. Works Cited Agencies. News Analysis: Chinas economic diplomacy a win-win strategy. Global News Times, 21 November 2013. Web. 29 January2014. Areddy, James. U.S. Seen Losing to China as World Leader: Global Survey Finds Economic Shifts are Changing Perceptions of the Two Nations. 19 July 2013. Web. 29 January 2014. Arrighi, Giovani. “Hegemony unravelling.” New Left Review. 32 (2005): 23-80. Print. Art Robert and Cronin, Patrick. The United States and Coercive Diplomacy. Washington D.C: US Institute of Peace Press, 2003. Print. Asia Society. China’s Africa Strategy. Asia Today, n.d. 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