China and the US: Toward a New Kind of Duopoly

The General Secretary of the Chinese Communist Party, Xi Jinping, has cast aside Deng Xiaoping’s 1978 warning — “hide your capabilities and bide your time” — after 30 years with the highest and most sustained rate of growth (an average 9.9 percent annually) in the history of capitalism since the Industrial Revolution. And now he has placed China at the forefront of world politics after a strategic agreement with the United States.

The reinvention of Xi Jinping suggests that the time has come for China, in collaboration with the United States, to sketch the main features of a new world order, one that assures the manageability of the system and lays the foundations for a world state.

The current structure of world power offers the following conclusions: The hegemony of the United States is over, but there is no sign of multipolarity, given the recession in Europe and Japan that is rendering them irrelevant. Meanwhile the world, more interconnected and unified than ever, opens into a new configuration which is clearly split between two power-sharing protagonists: China and the United States.

Xi Jinping has set out China’s strategic aims for the next 10 years as “making the dreams of the Chinese people come true.” There is only one other country in the world which defines its national identity in such oneiric terms: the United States. The most salient characteristic of the American people is an extraordinary level of self-esteem.

In order for this to be the case, then, the “American Dream” is not just the promise of climbing the ladder of society, but also the assurance that their political order is extraordinarily legitimate, with meaningful roots and a global calling.

This level of confidence is part and parcel of being American; as Chesterton put it, “The American people have no ideology; they are one.” This self-assurance is directly linked — and has its roots in — a key element of its makeup: Ever since its very beginnings, the United States has enjoyed the highest levels of productivity in the modern world, starting with those aboard the Mayflower right up to the likes of Steve Jobs.

China has now decided to float the renminbi/yuan earlier than anticipated, with the aim of attaining full exchangeability within three to five years, if not less. To that end, it has started to free up its interest rates and is doing away with the repression of its economy to assure the complete internationalization of its stock markets, integrating them with Wall Street, Frankfurt and London according to common rules.

This economic reform is absolutely central to Xi Jinping’s plans for his fifth generation. It implies China’s complete integration into advanced capitalism and represents the culmination of the process to globalize this system that began in the 1970s. The acceleration of this process is because the yuan is no longer devalued for competitive advantage. Its value, when compared with the currencies of its competitors, would grow by over 30 percent — a direct result of the Chinese government opening up its capital to the outside world. This is happening when commercial surplus has fallen to 2.1 percent of GDP — the lowest level for 30 years — and which, based on experience, will continue to fall.

The Yuan closed at 6.12/$ on May 27, a nominal rise of 35 percent from June 2003; this month it has grown more against the dollar than in the rest of the year put together. If this is added to the rise in labor costs (up 20 percent per year since 2008), its value is 50 percent higher than 10 years ago.

In the 21st century, the world can only be led, not dominated. It is a constant state of flux, which can change in an instant, and in which crises are becoming ever more common. Only through hopes and dreams can one lead in this system: This Chinese cultural strategy is not based on its government’s sentimentality, but on its perceptiveness.