Tue, Oct 08, 2013 - Page 8 News List

China should flex its soft power

By Ian Inkster

If China does not extend its soft-power reach through commercial means it will be culturally confined by development elsewhere in East and South Asia, and there will be greater danger of China-US tensions evolving into a dramatic new cold war set up, replacing the multipolar world emerging since 1989. There can be little doubt that the absence of Chinese soft-power could spark major global crises in a context of declining US commercial soft power, but continued military dominance.

The obvious objective solution is for China to spend large amounts of money in extending its commercial soft power skillfully and to maximum effect. The latter depends not just on money spent, but on choice of tactics.

So far, China has pursued commercial soft power mostly in Africa and other areas where its interests in securing vital raw materials or markets are obvious. This can only lead to cynicism, distrust and possibly fear in the West, particularly among power brokers and political cliques.

China has instead been crowing about how the US federal government shutdown has exposed the weakness inherent in US-style democracy, claiming that partisan politics has led over a period of time to irresponsible public spending policies — this is very reminiscent of Western commentary on Japan during its financial problems in the 1990s, prior to the disasters of Western-led recession since 2008.

An obviously superior soft power tactic would be to address the US problem positively; one technique would be to very publicly allow the yuan to appreciate.

Currency appreciation has tended — in most nations, including all present major powers at some time — to reflect strength (not weakness) of the political economy, and anyway, as Japan found in the 1970s, severe appreciation of currency can lead to huge benefits through external capital investments. If your currency is appreciating you can buy foreign assets more cheaply.

Through forcing modernization and cost savings in all export industries, which would certainly now act as a cost corrective in many Chinese industries. In other words, there is a case to argue that appreciation of the yuan would not harm the Chinese economy much in the longer view. However, it might result in two other things.

It would reduce the Chinese purchase of US government debt and ease pressure on the US Federal Reserve pouring of cash into the money market (“quantitative easing”) in an effort to keep the value of the dollar down. This would take great pressure away from US public policy. Second, it would instantly provide China with a vastly improved image, a driver for increases in soft power at a global level.

Of course such actions would need backing in order to collect the potential rewards. So, at the same time China could liberalize and broaden its investment portfolio in Africa and other poorer areas of the world, liberalize its trading relations with smaller systems generally and public policy could be used to encourage Chinese enterprises to export technologies and experts in aid of development projects.

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