Intersecting Minds: Education, Business and Technology at the North Carolina State Jenkins Graduate School of Management

More on China | October 25, 2009

Following up on my post from a few days ago about China, none other than foreign affairs expert Fareed Zakaria penned a story seconding my opinion on China’s emergence during the global downturn:

China entered the crisis in an entirely different position. It was running a budget surplus and had been raising interest rates to tamp down excessive growth. Its banks had been reining in consumer spending and excessive credit. So when the crisis hit, the Chinese government could adopt textbook policies to jump-start growth…

And look at the nature of China’s stimulus… China will spend $200 billion on railways in the next two years, much of it for high-speed rail. The Beijing-Shanghai line will cut travel times between those two cities from 10 hours to four. The United States, by contrast, has designated less than $20 billion, to be spread out over more than a dozen projects, thus guaranteeing their failure. It’s not just rail, of course… Two out of the world’s three largest ports are Shanghai and Hong Kong.

China is also well aware of its dependence on imported oil and is acting in surprisingly farsighted ways. It now spends more on solar, wind, and battery technology than the United States does.

Zakaria is positively glowing about China and its prospects for joining the United States as a true global superpower. However, there’s another side to this argument. For all that China has accomplished in the last decade, and especially in the last 12 months, it still has a long ways to go to match the United States. The Economist articulates this position quite well in its special report on the Sino-American relationship. Key graph:

China may have growing financial muscle, but it still lags far behind as a technological innovator and creator of global brands. This special report will argue that the United States may have to get used to a bigger Chinese presence on its own soil, including some of its most hallowed turf, such as the car industry. A Chinese man may even get to the moon before another American. But talk of a G2 is highly misleading. By any measure, China’s power is still dwarfed by America’s.

While China may indeed be a long ways from matching American influence and power, there is no doubt that it has emerged as the nation most likely to make that attempt. Any attempt to battle climate change, prevent another global financial meltdown, contain rogue nations such as North Korea and Iran will have to start with the United States and China as the two main players. Everyone else will be following their lead.

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