“What is China’s alternative if it seeks a divorce from America? Call it the empire option…It’s not impossible that, at some point within the next five to 10 years, the Chinese will feel ready to remove their capital controls and allow their own currency, the renminbi, to develop as a freely convertible international currency. At that point, the Chimerican marriage will be over. Not too surprising, really. As the name implied, such an unbalanced relationship was always something of chimera.”
—Niall Ferguson in “’Chimerica’ is headed for divorce” (Aug. 15, 2009, in Newsweek)
If the “marriage” metaphor between China and the US is to be described further, it would be a bare-knuckled relationship of raw interests and not any true meeting of minds or hearts. The honeymoon in this marriage of convenience is long over, and the next stop may be dissolution.
So goes the current news analysis, just as Zachary Karabell’s “Superfusion: How China and America became One Economy and Why the World’s Prosperity Depends on It” is released for publication.
The essential contention of this book is that China and the US have fused into one symbiotic “hypereconomy,” whose trade exchanges, lending and borrowing, and mutual consumption have serious implications for the world economy. The recent economic meltdown in the US and serious government efforts to stave off a total economic disaster revealed the nation’s economic Achilles’ heel but also China’s mixed motives in buying up US debt.
While the financial shoring up was welcome, many in the American government and military establishment eyed this move with even greater alarm, as yet another piece in the accruing of Chinese power. Karabell describes the view: “The Chinese have a fetish for sovereignty and are susceptible to delusions of national grandeur and to an unrealistic sense of their own limitless potential.”
It certainly didn’t help when the Chinese have been using their new-found economic might to shore up their military, and particularly their naval capabilities, which are seen as having the potential to challenge US forces in the Pacific. Their space capabilities also have been causes for concern. There have long been rumors that a majority of Chinese intelligence assets have been deployed against US commercial, research, and military interests.
The author offers a cogent and brief overview of recent Chinese history and the prescience of the late esteemed pragmatist Deng Xiaoping in opening China to the West and to market reforms. The gradual movement from state-owned enterprises to more free-market enterprises was guided by the brilliant Premier Zhu Rongji, who also presided over the mass migration from the countryside to the cities of a large portion of the Chinese population. He also oversaw China’s ascension into the World Trade Organization, and also witnessed the launch of the domestic stock market. The Chinese reform was a controlled one, in direct contrast to the collapse of the Russian economy in its changeover from a government-controlled one to a free-market one.
Without the changes to information technology and the popularization of the Internet and WWW, the ability of “new economy” of such global close alliances would not be possible. The global supply chain of products that enable the lowest-cost, highest-quality production requires the real-time communications of the Net to mitigate distance and time.
Karabell described the start-and-stop challenges of some major American companies in entering the Chinese market—from the examples of KFC, Avon, Fed Ex, and other brand companies. He showed how these companies adjusted to unexpected shifts in the Chinese leadership and their policies and still managed to thrive. He argues that, contrary to the Japanese populace, the Chinese one is a nation of consumers—based on their attitudes towards gambling (pro) in contrast to the Japanese mentality.
This author does not play down the differences in cultures and values between Chinese and Americans. He offers a litany of flashpoints between the two nations in terms of politics (Taiwan, investments in Africa with despotic governments), culture (Chinese secretiveness vs. American “openness”), ways of doing business (a lack of respect for intellectual property in some cases in the PRC, the pervasiveness of corruption), and fairly recent clashes, often related to the military (the forcible downing of a US spy plane onto Chinese territory after a crash with a Chinese interceptor craft, the accidental NATO bombing of the Chinese embassy in Yugoslavia).
China has been criticized for its ramp-up in economy and evolution into a car-based society, which has led to further environmental degradations.
Still, China has come a long way in creating a safer business environment for global investments, with laws codifying and protecing property rights, for example, and some endeavors towards environmental health.
Not all are in agreement that China should invest in the US, which is seen by many Chinese to be an over-extended, hegemonic, and fading power. Some in the Chinese leadership are asking for a move away from the greenback as the global tender of choice.
This author, while he generally glosses over the strains in the China-US economic alliances, soberly points to the US need for credit as its potential future downfall. He suggests that this nation may have to give up its superpower status as a bargaining chip for cash to keep functioning, given its undisciplined fiscal policies and citizen spending beyond their means.
Karabell is president of River Twice Research and senior advisor for Business for Social Responsibility. He has authored several other books on socio-political issues. He worked for years managing an investment fund related to China-based companies.