America’s Loss of Its Hegemony Causes China to Face Greater International Pressure

The results of the G-20 Summit are widely interpreted as a 19-1 victory, with the one loss being the motion of stipulating the limits of trade surpluses. To counter enormous trade deficits and increasing domestic unemployment, the U.S. implemented currency easing, issuing currencies in great amount to practically weaken the dollar and to stimulate U.S. exports. U.S. policy caused dissatisfaction among many nations — not only developing nations like China, but also export superpowers like Germany. The U.S. appeared very isolated at the G-20 Summit and thus some media and commentators proclaimed that the U.S. is no longer holding on to its hegemony.

What does this situation tell us? It sent out a very important message: rather than saying that the U.S. is no longer a hegemony, we can say that the world economic order is in a disorderly state before a transformation, and other nations have yet to be able to replace the U.S. The world economy will increasingly be in a disorderly state. Undoubtedly, the emergence of such a situation has extraordinary significance for China, whether from an optimistic or a pessimistic perspective.

It is plain to see that the influence of the U.S. economic hegemony is not in its prime anymore. Though the U.S. remains the world’s largest economy without a real opponent for the foreseeable future, its influence in the world economic order has obviously started to decline — especially since the end of the Cold War, with the rise of emerging economies like China. The U.S. is of course also a realist, and it has begun to adjust the statuses of other nations within the world economic order. The transformation of the G-7 into the G-20, directed by the U.S., proved this point. It has also adjusted the weighing of the authority of nations like China in international monetary organizations. The G-20, however, is not the G-7 after all. The G-7 is centered on the U.S. It can impose great influence on other nations through various mechanisms, allowing the G-7 to manifest America’s will in the process. The G-20 is a different story. In the G-20, countries not only have economies varying in size and economic developments running on different levels, but their political institutions and values are also different. Even though the G-20 handles mainly economic affairs, all of these differences will affect the nations’ reaching of a consensus. Certainly, even as the largest economy, the U.S. would not be able to be like it used to be during the days of the G-7, persuading other nations to accept the U.S., or imposing its will easily on other nations.

China Is Still Unable to Challenge the Present Economic Order

So, what does this mean for China? From a positive point of view, with the relative decline of the U.S. as an economic power, the pressure it can impose on China is also weakening. At the same time, China already has the ability to find more common economic interests and support to resist America’s pressure. China itself is already the second largest economy, and other nations are beginning to have more common economic interests with China. Common interests with China have caused many nations to be incapable of simply engaging with China based on America’s standpoint.

However, in terms of foreign diplomacy, this situation points out at the same time that China’s external pressure is also rapidly increasing. It should be first pointed out that the U.S.’ loss of its hegemony does not mean that China is equipped with the ability to challenge the U.S. This is not merely because of the U.S.’ total economic volume and the technological standards and innovative capabilities it possesses, but also because the existing international economic system is established by the West, and led by the U.S. China’s choice to “bridge the gap” to rise up pointed out that China accepts this system, and is functioning within this system. As long as the U.S. remains at the peak of this system, it will continue to be the helmsman of the system. It is hard for China to have an effective mechanism to challenge the U.S. (However, it is not very clear as to whether it has been China’s intention to challenge the U.S. since its reform and opening up.)

With the U.S. no longer the hegemony, China will face increasing external pressure. This will be evident in two aspects.

First are the Sino-U.S. bilateral relations. To China, the challenge of the bilateral relations is seen mainly in economic trade and security. With the presence of huge deficits, the U.S.’ policy toward China may become increasingly selfish. The U.S. dollar’s currency war against the renminbi has already started through different means, and China has unavoidably been placed in a reactive position in this war. Though the renminbi is internationalizing, the main objective of its internationalization is in self-defense and to cut losses — not to challenge the dollar. In fact, if the existing international monetary system remains unchanged, it is hard for the renminbi to challenge the dollar.

It is very difficult to resolve the quandary of trade imbalances between China and the U.S. China maintains that the renminbi will not appreciate greatly, but it does not have enough political motivation to increase labor income, thus proving that China will continue to export cheap goods to the U.S. The U.S. will also not loosen its regulation on China’s export of high technological products. Additionally, China and some other nations continue to hold large amounts of the U.S. dollar. Such an unbalanced relationship between China and the U.S. led people to believe that the U.S. would score a victory. The U.S can issue large amounts of the dollar and technically “depreciate” it to boost exports. Even though this may damage the U.S.’ reputation, China should bear the material losses. More importantly, through importing cheap goods and “exporting” the U.S. dollar, the U.S. can effectively control the domestic inflation brought about by the issuance of the currency, or even push the inflation onto other nations. China and other nations, on the other hand, have to shoulder a high level of inflationary pressure.

In addition, the U.S. is working hard to reorganize its internal economic structure, especially in the area of re-industrialization. Of course, America’s re-industrialization has a big price to pay, but it can support re-industrialization through trade protectionism by increasing taxes on goods coming from China.

The U.S. Will Attack China Based on Security Considerations

In the area of international economic relations, the U.S. can also organize a trade bloc specifically targeted at China and establish other mechanisms to hold down or hold back China’s economic influence. This process has already begun, as seen mainly in the establishment of the “Trans-Pacific Partnership Agreement.”

The one thing that China has done most successfully since its reform and opening up is economic internationalization, especially in developing a substantial economic relationship with the U.S. Other than the economic relationship that can be interpreted as interdependent, the rest of the aspects are incompatible — that is, the U.S. has occupied the total leadership status. The interdependence of the economic relationship between China and the U.S. has a very positive effect on the security relations between the two nations. To a large degree, it can be said to have ensured that China has a peaceful international environment in which to establish economic infrastructure. To put it bluntly, China’s economic strength is influencing the U.S.’ security considerations.

Once the Sino-U.S. relationship weakens, the security relations between the two sides will become important. The U.S. is still the one and only military superpower today, unmatched by other nations. If the U.S. feels China’s challenge in the area of economics, it will then undoubtedly lean towards using force to restrain China. This sort of inclination is apparent. Since the Cheonan incident at the North Korean peninsula, the East Sea, Yellow Sea and the South China Sea have become the means by which the U.S. restrains China. The security alliance between the U.S., Japan and Korea is tightening. Nations like Japan and Korea have for a long time been taking two courses: the economic and strategic. They developed a close relationship with China on the economic end, and maintained or deepened their relationship with the U.S. on the strategic end. It seems that the security relations between the U.S. and nations like Japan and Korea have been highly institutionalized, and none of the other nations, be they Japan, Korea or any other, can change such a relationship. The fact that the Hatoyama administration tried but failed in the end proved this point sufficiently.

Also, even relatively stable factors today like Taiwan, Tibet and Xinjiang will once again become China’s challenges once the U.S. changes its strategy. The U.S.’ return to Asia was not to listen patiently to the opinions of Asian nations. The U.S. has, all along, been an action-oriented nation, and once it decided to return, it began to take all sorts of actions. This is very different from China. For the past many years, China has always allowed the ASEAN to play the leadership role in its relationship with the alliance. The U.S., however, will not do so. Once the U.S. has identified China as a “competitor” or an “enemy,” it will not show any mercy in dealing with China in full force.

Aside from the Sino-U.S. bilateral relations, China needs to face immense pressure on the international level. Whatever the case, the world needs an international economic order. As globalization continues, the need for this order grows. After World War II, the U.S.-led West constructed and maintained this order. After the Cold War, the U.S. has been both the advocate for this order and the one who has done its best to maintain it. Of course, the U.S. did this for its own interest. It is exactly because of this that the U.S., together with the other nations, forced the Japanese yen to appreciate and removed Japan’s economic challenge to itself.

Today, because the world economy has lost its balance, this order is in a state of chaos. Every nation should play a part in recovering this order. Because the U.S. was not able to achieve a “group effort” with the other nations, they have instead turned to using a very selfish method. We can reproach America’s methods, but at the same time we cannot overlook the existence of the problem. The American economy finds it hard to truly walk out of the shadows of the crisis in an unbalanced state, and the American economy’s lost balance would be a burden to the world economy’s progress towards equilibrium. If this imbalance continues, the U.S. will continue to take selfish actions. The other nations will not be happy, but they will have no ways to stop the U.S. from doing so.

China Cannot Satisfy the World’s Expectations

If an overly selfish America is incapable of maintaining this order, or it no longer wants to do so, who would take its place? It is hard to imagine a world economy that has completely lost its order. China is now the second largest economy, and all eyes would naturally be on it. Many nations, including the developed and developing ones, have requested China to shoulder more international responsibilities. China, however, has already expressed that it could only shoulder relevant international responsibilities. It is not wrong for China to say that. For its per capita GDP, China is an extremely poor country, and its own economy is also in a state of imbalance. Its circumstances are not any better than other economies, and it has to face endless domestic social problems that other economies do not.

Even if China has the economic ability to do so, it does not have an effective mechanism to shoulder this responsibility. The U.S. is accepted by the world because of its various strategic advantages in politics, economics, military and culture. But other than its economic rise, China today does not have strategic advantages that can be accepted by other nations. On the contrary, many nations refuse to accept China in other aspects while they requested it to shoulder economic responsibilities. What can China use to exercise its rights as a superpower? And how can China make other nations accept it?

China is obviously facing enormous international pressure. From the economy, to environmental protection, climate change and security, the focus is on China. In the process of its exchanges with the U.S., it is easy for China to be seen as the “leader.” The problem is that China is not yet equipped with the practical ability to resolve global problems, and it does not have such leadership ability. Under such circumstances, to whom will the nations pour out their grievances or even their anger? Many have already advised China that it has to be ready to be “scolded” if it is going to be a world leader. But China is not ready to be a leader — it is also not ready to be “scolded.” Therefore, how can China resolve this international responsibility that it is not able to or does not dare to shoulder?