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Competing for Global Economic, Political, and Military Superiority: The Case of China and the United States

Introduction

From the Made in China 2025 national strategic plan to the nascent cryptocurrency and Blockchain technology in which China has a decisive edge, it is increasingly feared that China could dominate the global economy overnight. China has since 2014 been leading other countries in developing national digital currency – the Digital Currency Electronic Payment (DCEP) (Kharbal, 2021). As such, observers, (Vincent, 2020), forecast that everyone across the world will one day use China’s digital currency in the place of the U.S. dollar, giving China a dominant economic power, and consequently a military power. Here, the pros and cons of this possible scenario as well the U.S. vulnerabilities and perceived outcomes are discussed.

Pros and Cons

China’s dominance over the global economic and political power will have various pros and cons as outlined by various international relations observers.

Pros

China accounts for more than 30% of the world population. This means that as the country continues to grow economically to become the global economic leader, its citizens will have more disposable income, and consequently generate a large market for products and services offered by companies from different parts of the world. Second, Chinese government elites created conditions, such as massive subsidies for new business ventures, that transformed China into a low-cost production platform (Breslin, 2005), making an attractive FDI destination for multinational companies (MNCs) based in the U.S. and elsewhere. As a result, China has become the world’s top exporting nation, and that’s why most products consumed around the world have the “made in china” inscriptions on them. Another important result is technology spillover to China where the country has been inspired by innovations and designs from foreign companies to develop novel technologies, for example, the DCEP and 5G network, and accordingly attain technological dominance. Thus, by attaining global economic and political power, this technical know-how is more likely to spill over to and benefit other nations, especially the developing nations, through outward FDI.       

Cons

China has an underdeveloped financial system that not only lacks credibility but is also influenced by government meddling (Kira, 2019), a dictatorial and brutal regime, and high levels of corruption. This means that by supporting China, through friendly international economic relations, to become a global economic superpower, the world will be only but “strengthening the power of the authoritarian CPP leadership” as Breslin (2005) aptly puts it (p. 738). Additionally, human rights violations have been well documented in China, which implies that such abuses will be transferred to other nations should China attain the economic and political superpower status. China has also been described as a ‘dissatisfied power’ state, and thus are many concerns around how a superpower China may behave or act in the international economic and political system. For instance, Johnston (2003) warns that China is a state that will use all means possible to reshape the global order so that it fits its national priorities and interests as soon as it has the needed power and capabilities.

Possible U.S Vulnerabilities

As aforementioned, China has maintained a decisive edge in cryptocurrency and blockchain technology, and this is seen in the digitization of the Yuan: development and planned launch of the DCEP. According to observers, the main motive behind developing a digital version of the Yuan and internationalizing it is to compete with the U.S. dollar. The Chinese government is convinced that it can break the monetary sovereignty held by the U.S. if other countries can use the DCEP (digital version of the Yuan) introduced by the People’s Bank of China. Although the U.S. is currently the leader of the world financial system, owing to the use of the U.S. dollar as an international currency, the country is less concerned about transitioning to a digital currency, which makes it more vulnerable to losing its current economic dominance to China.

Second, most of the U.S. leading companies, including Apple, Microsoft, and Walmart among other companies depend heavily on China as a destination of their foreign direct investment initiatives because the country offers a low-cost production platform. This makes the United States more vulnerable to projected China’s economic and political dominance since these companies will inevitably use the DCEP in their business transactions, including paying taxes to the U.S. government. 

Perceived Outcome

The rapid growth of China’s economy, fueled by export growth, has prompted some observers to conclude that the country is becoming a global economic hegemon that will soon challenge the U.S. monetary sovereignty and economic dominance. In fact, it is estimated that China will potentially overtake the U.S. and become the world’s largest economy by 2050 if the U.S does not compete it in developing and internationalizing a digital currency (Breslin, 2005). For many observers, however, China’s economic dominance, if it achieves one, will not be enough to make it a superpower and give it a global influence over other nations’ political and military spheres for various reasons.

First, China’s economy is supported primarily by export trade, meaning any disputes in bilateral trade relations with other nations or changes in transnational trade tariffs will cause the economy to slump. Second, China’s economy seems to be in crisis, and social and economic collapse is looming, as Gordon Chang once mentioned (Huchet, 2003), due to high rates of economic inequality. Despite many years of a steady upward trend in economic growth, for instance, China is experiencing abject rural poverty, which is worsened by endemic corruption, a high level of national debt (approximately 317%), and high unemployment rates. In conclusion, pronounced inequality in income and wealth distribution in china, augmented by a weak financial system, high national debt, and overreliance on export trade, will significantly delay or even thwart China’s ambition to become a global economic, political, and military superpower.