Thu, Oct 20, 2011 - Page 8 News List

China: the inevitable superpower?

By Sushil Seth

There is much talk that China will emerge in a decade or two as the next superpower. Indeed, Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics, has predicted that China is the inevitable superpower. In an article in a recent issue of Foreign Affairs magazine, titled “The Inevitable Superpower” and extracted from his forthcoming book, he says that China’s dominance is a given.

“The upshot of my analysis,” Subramanian writes, “is that by 2030, relative US decline will have yielded not a multipolar world but a near-unipolar one dominated by China. China will account for close to 20 percent of the global GDP (measured half in dollars and half in terms of real purchasing power), compared with just under 15 percent of the United States.”

“At that point, China’s per capita GDP will be about US$33,000, or about half of US GDP. In other words, China will not be dirt poor, as is commonly believed. Moreover, it will generate 15 percent of world trade — twice as much as will the United States,” he adds.

Therefore, “by 2030, China will be dominant whether one thinks GDP is more important than trade or the other way around; it will be ahead on both counts,” he writes.

Case closed, as far as Subramanian is concerned.

It is a pretty confident argument, with the author willing to stand by his thesis like a proven mathematical formulation. Indeed, the subtitle of his article is: “Why China’s dominance is a sure thing.”

He also asks whether the US will reverse this trend. His answer is, not likely.

“Its [the US’] economic future inspires angst: The country has a fiscal problem, a growth problem, and, perhaps most intractable of all, a middle-class problem ... High public and private debt and long-term unemployment will depress long-term growth,” he writes.

“The middle class is feeling beleaguered: It does not want to have to move down the skill ladder, but its upward prospects are increasingly limited by competition from China and India,” he adds.

Subramanian even conjures up a horrible future scenario in which China might be able to hold the US to ransom “by selling some of its currency reserves (by then likely to amount to US$4 trillion),” requiring the US to withdraw its naval presence from the Pacific Ocean as a condition of financial bailout, similar to the situations faced today by Greece and other vulnerable European countries.

In other words, China could use its economic dominance as a political tool to change the global strategic balance in its favor.

Against the backdrop of his racy predictions about China’s “sure” rise to the top, he does concede, in passing though, that “China can radically mess up, for example, if it allows asset bubbles to build or if it fails to stave off political upheaval.”

Undoubtedly, the US has serious economic problems of debt and sluggish growth, but to project that China will have a virtually smooth run to becoming the world’s new superpower is a gross simplification.

Subramanian’s thesis is too neat and predictive for a subject that does not lend itself to simple formulations. Generally speaking, economic forecasts are qualified to indicate that a certain outcome is likely if other factors remain equal.

Even though the author believes that China might still “mess up,” his comment is a throwaway line and is not supported by any serious discussion of other variables. However, it is exactly these variables that will eventually determine China’s path.

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