Will Western Economies Flourish by Inhibiting China?

Recently, a Western scholar wrote an article saying that China could have taken action to halt the West’s rise, but lost out on many opportunities; for example, in 1793 China could have refused the establishment of the British Embassy; in 1840, China could have won the Opium War, etc. Today, Westerners who have been used to leading the world would never miss the opportunity to muffle their rival’s rise. In fact, some Westerners have painstakingly come up with ways to contain China. Although there were lots of explanations about unrest in China’s rural areas in 2010, one couldn’t help wondering if the West was trying to restrain China.

In the second half of the 20th century, the West successfully suppressed two Asian economic miracles, Japan and Southeast Asia. In this view, today’s China is very much how Japan was then: economically strong, catching up with the U.S., experiencing skyrocketing real estate prices and facing the second Plaza Accord concerning the exchange rate issue. Therefore, some Western forces have employed similar approaches in trying to restrain China: tight joint efforts to force the RMB to appreciate in the hopes of forcing China’s economy into submission.

However, China is not Japan. Japan is a completely Westernized East Asian country; it is adept at imitating but cannot break away; the Japanese have adapted themselves to the Western model, but lack innovation to rise above it. China is not that. Thus, even though Western countries have pulled out all the stops in an attempt to contain China, none of them have succeeded. Nevertheless, Western countries have become increasingly uncomfortable these days: Europe is already crisis-ridden, and once the euro collapses, the U.S. will lose its only strong partner in forcing the RMB to appreciate. As the Chinese market increases in strength, the effect of international hot money on China’s economy has been weakened; the West has few moves to attack China’s economy directly, even the U.S. Federal Reserve’s only move is to print money. Under these circumstances, will the West desperately turn to its last resort in 2011? Some people worry that if the U.S. pumps dollars all over the world, it will lose the global market environment upon which it is based. This kind of conspiracy theory is too dangerous, but Chinese people should be more careful.

In fact, looking at the U.S.’ tendency to rely on a currency policy of quantitative easing, they have already been risking everything on a single bet. In 2011, Western countries may keep encouraging the quantitative easing strategy, forcing emerging economic entities like China to accept the cruel currency war and sign the Plaza Accord.

Facing the desperate situation in the West, we should first realize that the dumping of U.S. dollars into the world is also risky for the United States itself; the dollar’s dominance would be compromised in the event of a reshuffle. Faced with this circumstance, we should pay special attention to keeping the credibility of the RMB, but there’s no need to go too far in pursuing a money “package” or a high degree of internationalization. But we should focus on controlling the domestic and capital prices and maintaining the stability of the RMB itself.

Secondly, we should note that the bottleneck of China’s economic development will be at home rather than abroad in the near future; various problems in the urbanization process have already become the bottleneck of China’s development.

Thirdly, Westerners have been running global business for centuries, not only do they control the supply of major global strategic resources, but they also dominate the major global sea channels. Based on this, we should base our country’s natural resource security strategy on domestic food production and supply, and on resource exploration and development, in response to a possible food and resource crises.

(The writer is an associate professor at the China International Economic and Exchange Center.)