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Supremacy of Chinese Is No Sure Thing

Irwin M. Stelzer

Europe rattled its begging bowl, and the Chinese walked on by. Mendicants who can’t control their spending, with family members who refuse to put up their own cash, don’t make for attractive borrowers.

But the very fact that euro-zone nations were turning to China rather than to the U.S. for a handout at the G-20 meeting is grist for the mill of America’s declinists, who see the U.S. in permanent decline, China in uninterrupted ascent, and the time for America to adjust to a lesser role in the world.

Unfortunately for the declinists, it’s not quite clear that America is doomed to become subordinate to China, any more than it was so doomed when the purchase of Rockefeller Center by Japanese interests unleashed a wave of declinist literature right before Japan lost a decade or two of economic growth.

There is little doubt that in the not-too-distant future China’s output of goods and services will exceed that of the U.S. After all, it is hardly shocking to contemplate a world in which a nation of 1.3 billion people will be able to produce as much as America’s 300 million. But a nation in which per capita income is a quarter that of the U.S. can hardly be said to have “caught up with America.”

China’s workers certainly don’t think they have. Most are miserably paid, with none of the health care and other benefits to which we have become accustomed in America. Some are not being paid at all. A sharp drop in the cash flow of Chinese companies and a government-ordered squeeze on bank lending have left many companies too short of cash to pay their blue-collar workers. And those that are paid are demanding higher wages, driving businesses to lower-cost Asian countries. The Li & Fung Research Centre reports a contraction in new export orders, and a further slowing is likely as the EU, China’s biggest export market, slips into recession.

At the other end of the income spectrum are China’s one million millionaires, disciples of former Communist Party leader Deng Xiaoping. Deng taught “To be rich is glorious,” and they believed him. Now they want out. A report by the Hunan Research Institute and the Bank of China finds almost half of Chinese millionaires want to emigrate, many out of fears for their safety. Preferred destination: the U.S. No similar movement of American millionaires to China has been detected.

Many of these millionaires made their money in property, rather than as daring innovators, a result of deference to hierarchy and a disinclination to challenge existing ways of doing business. Premier Wen Jiabao used his state of the union speech to deplore China’s “insufficient innovation capabilities” and to announce that the government would make China an “innovation nation” by 2020, as if a central government determined to maintain caution-generating political control can decree such a result. Meanwhile, China relies on theft of American firms’ intellectual property, and on forcing U.S. firms to turn over technology secrets as the price of being allowed to build factories in China.

Then there are the limits against which China’s growth is bumping. China may lead the world in the manufacture and export of solar panels, wind turbines and energy-saving fluorescent bulbs slated to replace incandescent bulbs. But it is also the world’s largest producer of carbon emissions. The authorities are considering adopting cap-and-trade to reduce emissions, which would put communist China ahead of capitalist America in at least one important area: the application of market-oriented methods of reducing emissions.

What does all of this tell us about the rise of the East and the decline of the West? That the East is getting relatively richer, and becoming more consequential in world affairs. That China has a long way to go before its citizens can attain the living standard of the average American. That its growth is by no means certain as rising production costs shift competitive advantage to other countries, a weak banking system and environmental issues put a brake on growth, and cultural and government forces operate against the development of an innovative business sector.

America’s decline is relative but not absolute. And the declinists miss two important points. First, the relative positions of America and China are the result of policy choices, not some mysterious historical forces. Second, as Standpoint editor Daniel Johnson recently put it, they attach too little weight to America’s demonstrated “powers of recuperation and renewal.”

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