by Meg Kelly
Are the American people so afraid of China because of our countries¡¯ differences? Because we are insecure about out place in the world right now? Because of too much media attention on the subject? Or is it because the Chinese government is using its exported lead-filled toys to poison our minds?
China has become the center of international news in the U.S. since the economic recession began, and it has even played an important role in midterm political campaigns. While there has been plenty of media coverage and no lack of scare tactics, few have addressed exactly what we are supposed to be afraid of. Apparently, China is going to take over the world at some unidentified point in the future through some unclear means¡probably economic¡and it might have to do with communism, too.
China¡¯s rapid growth and the sheer size of its population have certainly made it an increasingly powerful force in the world in recent years. China is now the second largest economy in the world, the fastest growing economy, the most populous nation, the largest exporter and second largest importer. Perhaps even more important than its own economy, China now owns over 20% of U.S. Treasury Bonds.
The last fact alone is enough to make Americans uneasy, and rightfully so. Perhaps as a result of this, America¡¯s economic problems and the worldwide recession have been partly blamed on Chinese currency manipulation. Whether this is really contributing to the problem or not, it has certainly received a lot of attention, with almost-daily news updates (including today¡¯s story on CNN, for those a little behind the times, ¡°What is currency manipulation, anyhow?¡±). In addition, in late September, the House of Representatives managed to put aside its enormous partisan differences after months of fighting over the economy, healthcare, and anything else that came to the table, to unite in the war against China¡¯s currency manipulation.
The passing of this bill which paved the way for increased tariffs on Chinese goods was certainly not the only American political move involving China this year. The midterm elections were rife with smear ads–not just about candidates, but also about China¡¯s frightening prominence in the world. An ad from the Citizens against Government Waste depicted China in 2030 ruling over the United States because it had accumulated so much of our debt. Democratic and Republican candidates alike used China in different ways to place the blame for job losses and claim they held the solution.
Besides its startling economic prowess, China¡¯s human rights record seems to be another factor causing alarm for Americans and the rest of the world. The international community has expressed concern over China¡¯s treatment of Tibet and the Dalai Lama, workers¡¯ rights, and freedoms of speech and the press. As China moves into the spotlight, these issues are again being raised, most recently through the awarding of the Nobel Peace Prize to Liu Xiaobo, an outspoken Chinese academic whom the government considers a criminal. The struggle over censorship between Google and China this year was also one of the top-25 most followed news stories of the year, highlighting America¡¯s disapproval of China¡¯s lack of transparency.
Looking at these facts, it would appear that Americans are worried about China because it has become so economically powerful and is not considered one of the more responsible nations. However, these facts may be blown out of proportion and made purposely ambiguous to keep China as a scapegoat in the minds of Americans.
As for China¡¯s economic dominance, it may not be equal to all the hype. Looking at the World Economic Outlook Database compiled by the International Monetary Fund, China clearly lags behind the United States economically. Although China¡¯s GDP is now second to the United States, it¡¯s still not even half as large and its per-capita GDP of just $4,283 is less than one-tenth that of the United States. As for growth, there is no denying that China¡¯s GDP is the fastest-growing in the world. However, Americans sometimes forget that this is largely because they had so far so come from the extreme poverty of the Cultural Revolution. Following this time, in 1970, China¡¯s GDP growth was almost 20%, making today¡¯s 9% look rather tame. In addition, they are not the only country to be picking themselves up by the bootstraps recently. India is not far behind in growth or population, but seems to be keeping a lower profile and therefore has remained less of a threat in the American mind.
Yes, China does own about a fifth of U.S. debt. However, the likelihood of it being able to use this as political leverage is slight because, at least for now, most analysts believe that dumping U.S. debt would hurt China almost as much as it would hurt the U.S. This seems to be a problem we are stuck in together, making it difficult for either to really have the upper hand. In addition, Americans should see it as a relief that China is more interested in buying American treasury bonds than they are in investing in Euros. Although the recession has had a serious effect on the American economy, China still views the dollar as a more secure investment. By the way, it¡¯s not just China that¡¯s buying up all of our debt. This year Japan, the U.K., and many oil-exporting countries including Venezuela, Iraq, Iran and Saudi Arabia have also increased their holdings in American debt. Would we rather have a fifth of our debt in the hands of Iran? With so many countries buying American debt, I hate to point out the obvious, but maybe it¡¯s not the countries doing the buying that are at fault¡perhaps if we didn¡¯t have so much to sell¡
China has always been a mystery in the minds of Americans. When it was a poorer nation, it seemed like an intriguing, far-away land with polite people and mystical martial arts, like a scene out of ¡°Crouching Tiger, Hidden Dragon¡±. Now that China has become powerful, it has maintained its mystery, but because it is perceived as a threat to America, this lack of understanding has made it even more frightening. China was a very poor, underdeveloped nation in relatively recent history, and has had great success in recent decades economically. That doesn¡¯t mean that it¡¯s out to get America¡couldn¡¯t it be that American debt is simply a good investment? Countries have risen and declined in dominance throughout the twentieth century, and this phenomenon often causes great alarm. However, when scare tactics, political campaigns, and intimidating ads are taken away, the facts remain clear that the United States is still the top economy in the world and simply must learn to work with another emerging world power.
For further reading:
Bloomberg: Stop Blaming China
The New York Times
Eye on China, House Votes for Greater Tariff Power
What Midterms Mean for China
Public Radio International
China: The Midterm Election Boogie Man
Will China Dump US Debt?
China Still Has Appetite for US Debt
Economy In Crisis
China’s US Debt Holdings Hit 2010 High