When China becomes No. 1, what then?

January 5, 2016

When China becomes No. 1, what then?

by Kishore Mahbubani*


In introducing this lecture, the Harvard Kennedy School said that for the first time in more than 200 years, a non-Western power, China, will have the largest economy in the world. China’s emergence will change our world order. To understand how China will behave when it becomes number one, this lecture by Kishore Mahbubani will introduce several questions: What are the priorities of the Chinese leaders? What impact have American policies had on China? Will China behave as America does when China becomes number one?

Kishore Mahbubani

It is truly a great honour to be invited to deliver the Albert H. Gordon lecture this year. The hardest part is deciding how to start. Asians always start with an apology. Americans always start with a joke. Sadly, I could not find a good joke, certainly not one as good as the joke that Richard Fisher started with when he delivered this lecture in February 2009.

This is what he said: “Yesterday morning, as I got on the plane to fly up here, I turned to Nancy and said, “In your wildest dreams did you ever envision me following in the footsteps of Mikhail Gorbachev, George H. W. Bush, David Rockefeller and Ban Ki-moon in giving the Gordon Lecture at the Kennedy School?” And she replied, “I hate to let you down, Richard, but after 35 years of marriage, you rarely appear in my wildest dreams.”

My wife Anne and I recently celebrated our 30th wedding anniversary in Greece just before coming here. I am sure she would say the same as Nancy. Anyway, as a good Asian, let me apologise for the fact that I have no joke.

It is also no joke that we are probably living through the greatest transformation in human history we have seen. This was the underlying theme of my two most recent books, “The New Asian Hemisphere” and “The Great Convergence”. However, to illustrate this point more clearly, let me cite three spectacular recent developments whose profound implications have not been adequately noticed. In the spirit of the Albert H. Gordon Lecture series, let me pick three examples from the financial sector.

We all know that the world experienced a global financial crisis in 2008-09. We also know that the Fed launched a series of unorthodox monetary policy measures, most notably quantitative easing (QE), to avert a deep recession. What few noticed was what the Fed’s decision meant for Beijing.

Until the onset of the crisis, Chinese leaders were happy that the US and China had settled into a comfortable pattern of mutual dependence. China relied on the US markets to generate exports and jobs. The US relied on China to buy US Treasury Bills to fund US deficit spending. Tom Friedman, in his usual brilliant way, captured this interdependence with a simple metaphor. He said, “We are Siamese twins, but most unlikely ones – joined at the hip, but not identical.”

This Chinese belief that the US government depended on China was further reinforced when President Bush sent an envoy to Beijing in late 2008 to request Beijing not to stop buying US Treasury Bills to avoid rattling the markets further. The Chinese leaders readily agreed and probably felt very smug as this confirmed that the US was also dependent on China.

This smugness was shattered when the US Fed announced the first round of QE measures in November 2008. The Fed’s actions demonstrated that the US did not have to rely on China to buy US treasury bills. The Fed could create its own money to do so. This decision had profound implications for the world. Axel Merk, the president of the investment advisory firm Merk Investments said, “The US is no longer focusing on the quality of its Treasuries. In the past, Washington sought to promote a strong dollar through sound fiscal management. Today, however, policymakers are simply printing greenbacks.” Merk said that by relying on the Federal Reserve’s printing press, the US has effectively told other nations that ‘it’s our dollar – it’s your problem’.

It was clearly a mistake for the Chinese leaders to believe that they had created a relationship of mutual dependence. When China decided to buy almost a trillion dollars of US Treasury bills, it had to do so from export revenues earned from the toil and sweat of Chinese workers. However, if the US wanted to repay this trillion dollars, all the Fed had to do was to increase the size of its balance sheet. This is why several leading economists have said that the US enjoys an “exorbitant privilege” in being able to repay its debts by increasing money supply. The term was coined by Valery Giscard d’Estaing and the French economist Jacques Rueff explained its workings. Barry Eichengreen famously wrote a book on the topic in 2010.

Let me quickly mention the two other developments whose implications have not been fully noted. It is well-known that in recent years, the US has prosecuted several foreign banks, including HSBC, RBS, UBS, Credit Suisse, and Standard Chartered. For example, Standard Chartered Bank was fined 340 million dollars for making payments to Iran. Most Americans reacted with equanimity to the fine paid by Standard Chartered Bank and thought it was just that the Bank was fined for dealing with the “evil” Iranian regime. However, few Americans noticed that Standard Chartered Bank, domiciled in the UK, had broken no British laws. Nor had they violated any mandatory sanctions imposed by the United Nations Security Council. However, since almost all international payments have to go through the United States payment mechanism, the Standard Chartered Bank was fined for violating American laws.

To put it simply, what the US was doing in this case was to say that American laws applied to non-American citizens and non-American corporations operating outside America. This is called extra-territorial application of domestic laws.

The third development was the threat of the US to deny countries access to the SWIFT system. Since all international payments have to go through the SWIFT system, any country denied access to the SWIFT is thrown into a black hole and denied access to any kind of international trading and investment. In a recent column, Fareed Zakaria described well the Russian reaction to the possibility of being denied access to the SWIFT system. In Western media commentaries, Putin is often portrayed as the bad guy and his successor as well as predecessor, Medvedev, is portrayed as the good guy. Yet, it was the “good guy” who went ballistic when he was told of this threat. This is what Medvedev said, “Russian response – economically and otherwise – will know no limits.”

I begin with these stories for a simple reason. Events such as these will have a deep impact in determining the answer to the biggest question of our time: what happens when China becomes number one in the world? Clearly, the answer to this question will determine significantly the course of the 21st century. Hence, we should study this question carefully.

Let me begin with what I hope you will agree are three incontrovertible facts. First, China will become the number one economic power in the world. Second, most Americans, like most Westerners, view China’s rise with great foreboding. Third, the role that China will play as the number one economic power has not been cast in stone. How the world, especially America, reacts to China’s rise will help to influence China’s behaviour in the future. If we make the right decisions now, China could well emerge as a benign great power (even though most Americans find this virtually inconceivable).

This is why it is timely to address the topic of what happens when China becomes number one. It is always better to prepare for the inevitable than to pretend that it will not happen. So far, on balance, America has reacted wisely to China’s rise. However, it is always easier to be wise when a power assumes that it will be number one forever. When the reality sinks in that the number one power is about to become the number two power, it is conceivable that fear may replace wisdom as the dominant driving force in American policy towards China. It would be perfectly normal for this to happen. My goal in this lecture is to try to persuade my American friends to continue to react wisely to China’s rise.

To achieve this goal, I will make a three-part argument. First, I will try to explain what I think are the goals and ambitions of China’s leaders as China emerges as number one. Secondly, I will explain how several wise American policies have so far managed to allow the relatively peaceful emergence of a new great power. Thirdly, I would like to conclude by recommending that America can protect its long-term interests by reacting even more wisely to China’s rise.

Let me begin with the first question: what are the goals and ambitions of China’s leaders as China emerges as number one? Since China is still run by the Chinese Communist Party (CCP), it is conceivable that the goal of China’s leaders could be the same as the leaders of the Soviet Communist Party (like Lenin, Stalin and Khrushchev): to prove the superiority of the Soviet Communist System. As Khrushchev famously said on November 18, 1956, “Whether you like it or not, history is on our side. We will bury you”.

One of the biggest sources of misunderstanding between America and China arises from China’s decision to retain the term “Communist” in the name of its party. This may clearly signify a commitment to Communist ideology. Yet, even a brief survey of China’s deeds rather than China’s words will show that China has effectively walked away from Communist ideology. Deng Xiaoping encapsulated this shift with his famous remark, “It doesn’t matter whether a cat is black and white. If it catches mice, it is a good cat.” Effectively, Deng was saying: “It doesn’t matter if the ideology is communism or capitalism. If it helps us, we will use it.” Effectively, China behaves more as a capitalist country rather than as a Communist country, but for complicated internal political reasons, it cannot abandon the term “Communist”.

So if the Chinese leaders are not defending or promoting Communist ideology, what cause are they trying to achieve? The answer is simple and direct: they would like to revive Chinese civilization. If there is one thing that motivates China’s leaders, it is their memory of the many humiliations that China has suffered over the past 150 years. If there is a credo that drives them, it is a simple one: “No more humiliation”. This is why they want to make China a great and powerful nation again. Xi Jinping explained this goal well in his address to UNESCO on March 27, 2014. He said, “The Chinese people are striving to fulfil the Chinese dream of the great renewal of the Chinese nation. The Chinese dream is about prosperity of the country, rejuvenation of the nation, and happiness of the people. It reflects both the ideal of the Chinese people today and our time-honoured tradition to seek constant progress. The Chinese dream will be realized through balanced development and mutual reinforcement of material and cultural progress. Without the continuation and development of civilization or the promotion and prosperity of culture, the Chinese dream will not come true.”

The revival of the great Chinese civilization is something we should welcome. If the CCP could change its name to ‘Chinese Civilisation Party’, it would do a lot to assuage Western concerns. It has already transformed itself into a meritocratic talent-seeking mechanism that is constantly searching for the best leaders to rule China. Despite the many ups and downs in the history of the CCP, this is what the CCP has become. If the Chinese have finally succeeded in finding the right mechanism to revive Chinese civilization, we should, in theory, welcome this development.

In practice, it is a fact that the West will not rest easy till China transforms itself into a liberal democracy. The Economist, a leading Western magazine, reflects these views. The Economist said in its issue of September 20-26, 2014 that Xi “has become the most powerful Chinese ruler certainly since Deng, and possibly since Mao.” It then calls on Xi to use this enormous power for the greater good and change the system.

The Economist assumes, as most Westerners do, that if China’s system is changed and a Western-style democracy emerges in China, this will be an unmitigated good. This is a dangerous assumption to make. A more democratic China is likely to be a more nationalist China. A more nationalist China could well be a more assertive and aggressive China. Such a China would launch a “popular” war against Japan and act in a far more belligerent fashion over territorial disputes, like those in the South China Sea.

In this sense, the CCP is delivering a major global public good by restraining nationalist forces and voices in China. From time to time, it has to allow some of these forces to be expressed; it has to allow its people to vent nationalist sentiments. However, the CCP also knows when to draw back from volatile situations, as it did with Japan, India, the Philippines and Vietnam in recent years. The West should be careful about wishing for early democracy in China. Its dream could become a nightmare.

At the same time, the West must recognise and respect that China is different; that it is not going to become “Western”. Therefore, the wisest course for the West to adopt would be to allow the present system to continue and to allow it to evolve and change at its own pace.

This brings me to the second part of my argument. As I said earlier, wise American policies have allowed China to emerge peacefully. Some of this wisdom arose out of historical necessity. At the height of the Cold War, when America genuinely feared Soviet expansionism, it reached out to China to balance the Soviet Union. Indeed, America reached out to China when China had emerged out of one of its most brutal phases. Human rights were not a factor in American policy towards China then. This paved the way for Deng to use America as an example to persuade Chinese people to switch away from central planning to free market economies.

In the 1990s, official US-China relations went through a series of ups and downs. Despite the efforts of President George H.W. Bush to keep the relationship on an even keel, the Tiananmen Square episode on June 4, 1989 assaulted American sensibilities and constrained his ability to improve relations. Tiananmen could have derailed US-China relations. When President Clinton took office in January 1993, after having described the leaders of China as the “butchers of Beijing”, one could easily have predicted a far bumpier road. Fortunately, Bill Clinton reacted wisely. I was present at the first Asia-Pacific Economic Cooperation (APEC) leaders meeting at Blake Island in November 1993 and saw with my own eyes how Bill Clinton and Jiang Zemin made an enormous effort to reach out to each other. By the end of the day, their mutual wariness was replaced by a significant degree of personal bonhomie. This episode demonstrated that the United States had been wise in welcoming China into the APEC in 1991. Such a move not only garnered the US diplomatic goodwill but also ensured that China adopted the membership of yet another international forum whose rules and regulations it agreed to abide by. Later, the US also worked with China in the East Asia Summit. In addition, the US and China collaborate daily in the UN Security Council to manage the “hot issues” of the day.

The tragedy of 9/11 further solidified US-China cooperation. Apprehensions about the rise of China were replaced by a focus on the War on Terror. East Asia stopped being a priority for the United States for several years. This allowed China to rise peacefully and for the two countries to avoid the “Thucydides trap”.

America made several wise decisions during this time. Firstly, America proceeded to admit China into the World Trade Organisation (WTO) in 2001. Although the admission was made on the basis of stiff conditions, these conditions ironically benefited China and forced it to open up to world trade – leading to its current pre-eminent position as the largest economy in the world in PPP terms.

Another judicious call was to pay attention to China’s sensitivities on Taiwan. China had always regarded Washington’s policy towards Taiwan with suspicion, as they feared that the US could use the Taiwan issue as a means to destabilise China. Instead, America reacted wisely when in late 2003, the Taiwanese President Chen Shui-bian suggested that a referendum be held to assess the views of the Taiwanese people on independence. In response, President George W. Bush made it clear that the United States did not approve of his move. He said: “The comments and actions made by the leader of Taiwan indicate that he may be willing to make decisions unilaterally to change the status quo, which we oppose.” This was wise statesmanship, even if it was partly the result of Washington’s dependence on Beijing’s support for other more pressing issues, such as Iraq and North Korea.

Some of these wise policies emerged out of America’s selfish interests, especially during the Cold War. However, it is possible that few Americans are actually aware how wise America has been. And even fewer Americans understand that it is in America’s national interest to continue these wise policies towards China. For example, since Deng Xiaoping opened up China in 1978 American universities have educated hundreds of thousands of Chinese students. In the years 2005 to 2012 alone, 788,882 Chinese students studied in American universities. This number has risen steadily – in the 2013-2014 academic year, 275,000 Chinese students were enrolled at American universities . This is an enormous gift from America to China. Future historians will be puzzled by this massive act of generosity as many of these students then return to China to build up the Chinese economy and to create innovations in many different spheres of science and technology that propel China forward in areas ranging from space exploration to defence.

China has also contributed to the maintenance of friendly relations between the two countries. Firstly, China has “swallowed bitter humiliation” time and again and has reacted prudently to America’s mistakes. These mistakes included the bombing of the Chinese embassy in Belgrade in 1999 and the downing of a US spy plane in Hainan Island in China in April 2001. The tact and restraint demonstrated by China in both situations averted military action between the two countries.

I have described these events in some detail as they help to explain a contemporary geopolitical miracle. Normally, when the world’s largest emerging power is about to pass the world’s greatest power, we should be seeing a rising level of tensions between the two (with the historical exception of one Anglo-Saxon power, the US, replacing another Anglo-Saxon power, the UK). It would therefore be perfectly normal to see rising tensions between the US and China today. Instead, we see the exact opposite: perfectly normal and calm relations between the US and China. This is a miracle.

However, miracles are by definition historical aberrations. They don’t last. Soon, we will revert to the historical norm and competition and tension could rise between America and China. To prevent this from happening, both sides will have to make a special effort to continue on their extraordinarily wise courses.

On the part of China, this means that it will have to learn lessons from the mistakes it has made in recent years in its dealings with its neighbours, especially Japan and Southeast Asia. For example, it completely mishandled an episode in which a Chinese fishing boat collided with Japanese Coast Guard patrols near the disputed Senkaku Islands on September 7, 2010. China unwisely demanded an apology from Japan after having publicly humiliated Japan into releasing the fishing boat. Similarly, China also mishandled the Korean crisis of 2010 by not condemning North Korea’s shelling of the South Korean island of Yeongpyeong. China also made aggressive statements and adopted more aggressive positions on the South China Sea in 2010 and 2011. When China submitted to the UN Commission on the Limits of the Continental Shelf a map including the nine-dotted-line territorial claim in the South China Sea on May 7, 2009, the Philippines lodged a diplomatic protest against China. Vietnam and Malaysia followed. Indonesia also registered a protest, although it had no claims on the South China Sea. In the face of this opposition, Chinese officials refused to back down.

China has also made mistakes vis-à-vis its relations with ASEAN as a whole. The lowest point in China-ASEAN relations occurred in July 2012 at the ASEAN Foreign Ministers’ Meeting. Until then, for every year since August 1967, ASEAN had always succeeded in issuing an agreed joint communiqué after each Foreign Ministers’ meeting. However, in July 2012, for the first time in forty five years, ASEAN failed to do so. They failed because they could not agree on the paragraph referring to South China Sea. Nine of the ten countries agreed that ASEAN should reiterate the previously-agreed paragraph on this issue. However, the host country, Cambodia, refused to do so. It later emerged that Cambodia had come under heavy pressure from Chinese officials not to agree to these previously-agreed paragraphs on South China Sea. Clearly, China’s rise had made some Chinese officials arrogant.

While China should learn from the mistakes it has made, America should study its own recent deeds through a simple lens: would it like China to replicate these deeds when China becomes number one? The reason for using this lens is that when China clearly becomes number one, it is likely to replicate abroad America’s deeds, not its words.

Bill Clinton saw this coming long before any other American did. In a significant speech at Yale in 2003, he said the following:

“If you believe that maintaining power and control and absolute freedom of movement and sovereignty is important to your country’s future, there’s nothing inconsistent in that [the US continuing to behaving unilaterally]. [The US is] the biggest, most powerful country in the world now. We’ve got the juice and we’re going to use it. . . . But if you believe that we should be trying to create a world with rules and partnerships and habits of behaviour that we would like to live in when we’re no longer the military political economic superpower in the world, then you wouldn’t do that. It just depends on what you believe.”

Actually, as I document in The Great Convergence, Bill Clinton wanted to prepare his fellow Americans for the day when America becomes number two and China becomes number one while he was President. However, all his advisers firmly told him it would be politically suicidal for any sitting American President to talk of America becoming number two. Hence, he could only speak about it after he left office. Sadly, he has not said more on this issue after raising it in Yale. Hence, I fear that Americans are not psychologically prepared for the day when America will become number two.

All this brings me back to the three stories that I began the lecture with. America was able to and could threaten to act unilaterally in all three cases because it is clear that America is still the reigning Emperor of the global financial system. Indeed, like many strong ruling monarchs, it enjoys absolute sovereignty in these areas and is not subject to any checks and balances.

It unilaterally controls the global reserve currency, the US dollar. In theory, the US dollar is a global public good, but in practice, it is an instrument of American domestic and foreign policies. As former Treasury Secretary John Connally said in 1971, “It’s our currency but your problem”. Clearly, global interests are not taken into consideration when the US manages the US dollar. This is why many countries, besides China, were troubled by the QE measures.

Similarly, America acted unilaterally when it applied its domestic laws in an extraterritorial fashion to foreign banks. Its threat to use SWIFT, another global public good, to unilaterally punish Russia could have had even more devastating consequences for the global order.

And what would the devastating consequences be? To understand this, I hope you will look at my latest book, The Great Convergence. One reason why the world has been remarkably stable and peaceful over the past few decades is that the rest of the world, especially Asians, who have been passive for almost two centuries, had agreed to accept and work with the Western-created family of global institutions, including the UN, IMF, and the World Bank. They agreed to do so because they believed that these institutions were serving global interests, not Western interests.

This is therefore the big danger of the US using global public goods, like the US dollar, international banking transactions, and the SWIFT system, for unilateral purposes and ends. It will encourage the world, especially China, to work towards creating an alternative global order. If that happens, the world will become a far messier place.

This is why I was happy to deliver this lecture at this time. We stand at one of the most important forks in human history. I hope America will continue its wise policies of strengthening a global order that serves global interests, not just American interests. If America does this, China will do the same. If this happens, nothing will change fundamentally when China becomes number one. We will continue to live in a safe and predictable world.

Therefore the final question I need to answer is, “Will China emerge as a responsible stakeholder?” – to use the famous words of Bob Zoellick. My simple answer is this “China could emerge as a stakeholder that is as responsible as the United States”. Since America is still the number one power in the world, the big question that America should ask itself is a simple one: would it feel comfortable living in a world where China behaves just as America did when it was the sole superpower?

*Kishore Mahbubani, Dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, is the author of “The Great Convergence: Asia, the West and the Logic of One World.”

Source: http://johnmenadue.com/blog/?p=3643

16 thoughts on “When China becomes No. 1, what then?

  1. China is number one in air pollution, having its senior officials hiding their money overseas and sending their spouses and children to live away from home. What then?

  2. Interesting perspective which may well happen in our lifetime.

    With regard to the lingering question at the end, I do not have positive views about the answer. Clearly, politicians in the US (as with anywhere else) will pander towards voter sentiments in the home country. With generations of Americans being made to believe that the Earth evolves around the US, anything that does not support that notion will be opposed in any manner, even aggressively. In other words, “fat hopes” that the US will give up its No. 1 position. Already, we are seeing steps being taken by the Obama administration to put a strait-jacket on China by empowering the surrounding countries to stand up to China …. and we can expect more …

    On the contrary, I think that China has a better chance of becoming a responsible No. 1 in future. There are millions of Chinese educated in the US and other Western countries, all of whom have been “soaked in Western values and practises”, and these are the upcoming leaders of China on all fronts. They are able to balance these Western ideals with the Chinese way of things, to run the country on an even keel …. so long as the 150-years of humiliation does not get in the way.

  3. “It’s our currency but your problem”, coupled with the arrogance of America’s forceful misdirected ‘’unilateralism’’, of ( what I term as) ‘’It’s our policy but your problem’’, only reinforced the notion of its irresponsibility and hypocrisy being practiced under the cover of the free world’s leading democracy and most powerful, peace loving nation, to not only, the detriments and untold miseries of disrupting the mutual trusts and benefits with China, BUT with the rest of the countries in the world.

    That is why America’s allies in the west, including Britain, France, Germany and others are QE-ing (meant queuing) up to join China’s initiation of the Asian Investment and Infrastructure Bank (AIIB), recently.

    …And wonder why an inexperienced, entertainer-politician, like Donald Trump, has attracted substantial support and become the Republican presidential front–runner?

    Because he is anti-establishment. Their own people simply could not trust their established leaders and would venture take a chance with Trump. Could that be their only card left?

    For 150 years of foreign occupations and humiliation, and notably, the ‘’ Betrayal in Paris”, China has accepted the reality in moving forward , even work harder with enemies of the recent past, the countries of different political ideologies and western (financial) institutions in serving world interests, without ever being a colonialist nation,

    What then, China would want when it did become No.1 but be more responsible to its 1.4 billion civilization and advance world peace and interests to higher level?

    But what matters most is how the people of USA want for themselves and how their leaders are chosen to behave in terms of correctness and mutual interests with China (as aptly pointed out by the speaker) and others around the world.

  4. The “quite american” or “the ugly americsn” wonder who kishore has in mind. Chinese humiliation? Amitav gosh says it lucidly.looks like cold war containment policy being regurgitated by uncle barrak obama and hegemons are circling above ASEAN.

  5. Quote : “the downing of a US spy plane in Hainan Island in China in April 2001.”

    That is not true. It was one of the two Chinese fighter jets that was downed.

    The American spy plane intended to spy on China. That is very clear, no doubt about it. What is not clear is whether it intentionally or accidentally flew into Chinese airspace is hearsay. Only the Americans has the answer. Having detected the spy plane, the Chinese scrambled two fighter jets from Hainan island to intercept. One of the Chinese jet flew too close the spy plane, apparently to scare off the intruder, only to find both the plane’s wings “touched”. The Chinese fighter jet lost all control and dived into the sea. His remains were found a few days later. The American spy plane however, needed emergency landing. The other jet reported this and asked for permission from ground to open fire on the American plane. Kudos to the command on the ground which has a cool head. The spy plane was given permission for emergency landing and it landed safely on Hainan Island.

    The Americans were lucky they were in Chinese airspace. If they are in Russian airspace, they would have been shot down, no question asked. Any spy plane flying along the West coast of America would suffer the same fate.

  6. We should not take these Deans too seriously. They have too much stuff in their head that they keep rambling on and on . Actually they are addressing their own kind, the think-tank luminaries to prove who is smarter and land themselves lucrative jobs as advisers and consultants. Governments will collapse without them!! – that’s what they think.

    Expressions like history repeats itself (coined by these smart guys) is as valid as history not repeating itself. For the first, the quiet subterranean growing relations between the US and China stands out as a good example. The Second Word War was fought mainly over spheres of influence. The Germans, for start , wanted to conquer entire Europe and Russia and the Japanese wanted the entire Far East including China. The US and its allies resisted this and they won. What we can expect in future is a similar scenario where the US and China come to an agreement not to fight and destroy each other but divide the world roughly into two parts in a peaceful way with each having influence and control over the half they have assigned themselves.

    As for history not repeating itself, the Russian President Putin was recently reported to have said that he can wipe out the US from the map in less than 30 minutes.

    Even if you mesh the two (history repeating and not repeating) what one will see is probably a world without the US and Russia. Champaign to China!

  7. I personal belief is that there will be a WWIII.

    It’s just a question of when.

    Kishore, representing the interests of a very small vulnerable city state having to chose sides when it happens, just couldn’t bring himself to mention and recognize the inevitable.

    Asking the US to be “wise” and “wiser” still in the immediate future is just another way of telling the US, please swallow your big white-man’s pride, humble yourself a little and let the Chinese lord over you for the next 200 years for the sake of world peace as it is no shame at all to be #2 for a change. For all you know the Chinese may do a better job in running the World.

    Ask Najib why he finds stepping down so difficult and you will see why the US has to stay #1 forever, even if it means Malaysia has to go through May 13 again and the world a WWIII.

    It is the “Two Tigers Trap”

  8. He should refrain from laughing at his own jokes. Apart from that, I was impressed with his lecture, both in content and in delivery.

    For me, the most amazing revelation was China’s increase in tourist numbers – from 0 to 100 million in 30 years. And, none of them sought asylum abroad. That fact alone spoke volumes for me in every aspect of what has happened in China.

  9. The Chinese Yuan is now legal tender in Zimbabwe. Will the Yuan be legal tender in Malaysia next?

  10. The Economist . . . then calls on Xi to use this enormous power for the greater good and change the system. . . . When President Clinton took office in January 1993, after having described the leaders of China as the ‘butchers of Beijing’ . . . It unilaterally controls the global reserve currency, the US dollar. . . in theory, the US dollar is a global public good, but in practice, it is an instrument of American domestic and foreign policies. . . . This is therefore the big danger of the US using global public goods . . . for unilateral purposes and ends. It will encourage the world, especially China, to work towards creating an alternative global order. If that happens, the world will become a far messier place.”

    An overweening urge to teach others what to do, how to behave and how they should be labelled defines American geopolitics at every point along the way since the end World War II. Allow me to explain.

    Even the affable Jimmy Carter couldn’t resist taking the high moral ground when it came to discussing with Deng Xiaoping about free emigration after the Jackson-Vanik Amendment was passed; the Amendment became law to facilitate, initially, the emigration Jews from Russia. Carter pressed Deng for the right of Chinese citizens to emigrate. Deng’s reply was simple and direct, “How many Chinese would you allow me to emigrate to United States? One million? 10 million? A hundred million? You can have as many as you want.” End of conversation on emigration – Carter didn’t push the point any further!

    “Japan was able to go into high growth after World War II in part because of the wide-ranging socio-economic reforms that General MacArthur imposed. No democratically elected Japanese government could have done what he did. By contrast, the failure of the United States to carry out similar socio-economic reforms in the Philippines is one reason why the economy of that country has not developed well in the postwar years. . . . While human rights campaigns are often portrayed as an absolute moral good to be implemented without qualifications, in practice Western governments are prudent and selective. For example, given their powerful vested interests in secure and stable oil supplies from Saudi Arabia, Western governments have not tried to export their standards of human rights or democracy to that country, for they know that any alternative to the stable rule of the Saudi government would very likely be bad for the West. . . . In the eyes of many Third World observers this . . . application of moral values leads to a cynical belief that the West will only advance democracy when it suits its own interests. . . . the coverage of the Tiananmen Square incident, a Chinese event that became a global media event. The essential Western media story is that it was a revolution by Chinese democrats against Chinese autocrats . . . Yet for all its massive coverage of Tiananmen, the Western media failed to explain how this event was seen through Chinese eyes. Few Chinese intellectuals believe that China is ready for democracy. Most are as afraid of chaos and anarchy (a persistent Chinese disease) as they are of a return to Maoist totalitarianism. It was a battle between soft authoritarians and hard authoritarians. The Western media . . . failed to tell the world the true aftermath: the soft authoritarians have come back to power. ¶ During Tiananmen, several Western journalists were blatantly dishonest. They would lunch with a student on a ‘hunger strike’ before reporting on his ‘hunger’. They were not all bystanders reporting on an event; several advised the students how to behave. None stayed to deal with the consequences that the students had to face. ¶ The biggest indication of how American journalists are affected by US interests in their portrayal of China is to compare their reporting of China in the early 1970s and the early 1990s. When Nixon landed in China in 1972, the US media had a virtual love-fest with a regime that had just killed millions in the cultural revolution. Yet, in the 1990s a much more benign regime that has liberated millions from poverty and indignity and promises to launch them on the road to development is treated as a pariah regime.” [p 48-68: Can Asians Think by Kishore Mahbubani – 1998]

    “More recently, since 2008 the Federal Reserve has printed over $3 trillion of new money, but without stoking much inflation in the United States. Still, the Fed has set an inflation target of at least 2.5 percent, possibly higher, and will not relent in printing money until that target is achieved. The Fed sees inflation as a way to diluted real value of U.S. debt and avoid the spectre of deflation. ¶ Therein lies a major risk. History and behavioural psychology both provide reason to believe that once the inflation goal is a achieved and expectations are altered, a feedback loop will emerge in which higher inflation leads to higher inflation expectations, to even higher inflation, and so on. The Fed will not be able to arrest this feedback loop because its dynamic is a function not of monetary policy but of human nature. ¶ As the inflation feedback loop gains energy, a repetition of the late 1970s will be in prospect. Skyrocketing gold prices and a crashing dollar, two sides of the same coin, will happen quickly. The difference between the next episode of runaway inflation and the last is that Russia, China and the IMF will stand ready with gold and SDRs, not dollars, to provide new reserve assets. When the dollar next falls from the high wire, there will be no net.” [p 8 – 9:The Death of Money – The Coming Collapse Of The International Monetary System by James Rickards – 2015]

    After kllau, is this QE-ing (meant queuing and quantitative easing) to financial betrayal and financial cataclysm in grand style?

    I have alluded to the “Thucydides trap” in my thread in this blog dated DECEMBER 16, 2015: Days of Revolt – The Militarism of U.S. Diplomacy – Days of Revolt – The Militarism of U.S. Diplomacy.

  11. First, LYW is absolutely accurate!

    “. . . defines American geopolitics at every point . . .” should read as “. . . defines Western geopolitics at every point . . .”

    The psyche of Chinese everywhere will always anchor on a few main issues which took place in the last century, namely: the Treaty of Versailles after Germany lost World War I, specifically, presenting Shantung, among other territories, to Japan when Germany surrendered the territories; The Treaty of Peace with Japan, or simply San Francisco Peace Treaty – in which China was singularly excluded, ostensibly because the United States could not determine the status of Taiwan (the presumption of course is, it had the right to decide on Taiwan’s status), and while Great Britain supported China’s entry to the treaty talks, the final decision to exclude both Taiwan and China was made by the United States.

    The pathetic response by the emasculated, corrupt Chinese government to the terms of the Treaty of Versailles gave birth to the May Fourth Movement of 1919. This was the defining moment, but China would still need to wait another sixty years for Deng Xiaoping to redefine China. In all this, the Chinese people would do well to remember the sacrifices made by the Australian George Ernest Morrison.

    It is also worth noting that, “Pakistan as a state had not existed at the time of the war but was invited anyway since it was a successor state to British India, a major combatant against Japan”, and also that, “The Soviet Union’s objections were detailed in a lengthy September 8, 1951 statement by Gromyko. The statement contained a number of Soviet Union’s claims and assertions: that the treaty did not provide any guarantees against the rise of Japanese militarism; that China was not invited to participate despite being one of the main victims of the Japanese aggression; that the Soviet Union was not properly consulted when the treaty was being prepared; that the treaty sets up Japan as an American military base and draws Japan into a military coalition directed against the Soviet Union; that the treaty was in effect a separate peace treaty; that the draft treaty violated the rights of China to Taiwan and several other islands; that several Japanese islands were ceded by the treaty to the United States despite the U.S. not having any legitimate claim to them; that the draft treaty, in violation of the Yalta agreement, did not recognize the Soviet Union’s sovereignty over South Sakhalin and the Kuril Islands; and other objections.” Needless to say the Soviet Union (including Czechoslovakia and Poland) refused to sign the Treaty. [from Wikipedia]

    For many ethnic Chinese, with a cultural bent, the “memory of the many humiliations that China has suffered over the past 150 years” go back even further—to the 19th century: to the eighth earl of Elgin and Kincardine, James Bruce “who has a central place in the gallery of foreign villains. It was this Lord Elgin who gave the order in 1860 to set fire to Yuanming Yuen, the Garden of Perfect Brightness, a vast complex of Qing dynasty gardens and buildings to the northwest of Beijing which were known in English as the Summer Palace.” [p 146: The Contest of the Century by GEOF DYER: 2014]

    It was James’ father the seventh earl, Thomas, “who dominates the family’s share of historical infamy. It was he who in 1801 removed the marble sculptures from the Parthenon that are still housed in the British Museum. For the last few decades, Greece has viewed Britain’s refusal the marbles as an acute form of post-colonial condescension.” [p 145: The Contest of the Century by GEOF DYER: 2014]

    All in all, China had been given a raw deal for a very long time, and if anything, the reason the more than one million Chinese students who have studied in the United States is to protect China from being continually dished with even more raw deals.

    The effect of the Treaty of Versailles on Austria:
    “Almost as soon as the Allied treaty terms had been presented to the Germans on May 7 in Versailles, the Austrian delegation . . . left Vienna for France . . . after spending two weeks cooling their heels. . . they learned the Entente’s terms for Austria. ‘It was a terrible document,’ Otto Bauer recalled. Large chunks of German-speaking Austria was parcelled out to the Czechs, Yugoslavia and Italians. . . The draft Treaty of Saint-Germaine acknowledged that the Austro-Hungarian Empire had broken up but penalized only Austria for its crimes. Three million German-speaking Austrians were to live under Czech rule. The private property of Austrian citizens was to be confiscated. Austria’s government was to pay reparations for thirty years. The coup de grâce, at least from Bauer’s point of view: union with Germany was expressly forbidden . . .¶ In Vienna, the reaction was shock mingled with disbelief. Shumpeter told a reported that “the Allies’ motivation can only be to destroy German Austria. On June 30, he said, ‘It is not easy to kill a people. In general it is impossible. But here we have one of the few cases in which it is possible . . . fiscal collapse inevitably brings it social collapse.’ When the foreign exchange market issued its verdict on the treaty, the krone collapsed once more. . . By treating Austria as harshly as Germany, the Allies not only destroyed the viability of the new state but also shredded what little was left of Shumpeter’s credibility.” [p 231-232 Grand Pursuit – The Story of Economic Genius by SYLVIA NASAR: 2011]

    All things considered I would treat TPPA as a gift horse from the United States – we need to look at it in the mouth before we put our signature on the document. My presumption is, first, not all the negotiations were plenary sessions, and that the many exceptions granted to Malaysia were the result of one-on-one contacts between the U.S. and Malaysia—no other party was involved.

    Question: what was the quid pro quo? Something or things had to give way. The U.S. more than any other nation wants “to avoid ‘losing’ a country to the other side, the cynical logic attributed to Franklin Roosevelt of ‘he may be a son of a bitch, but he is our son of a bitch.” [p 135: The Contest of the Century by GEOF DYER: 2014]

    Note: all emphases in bold are mine.

  12. Hey, you used to write excellent, but the last several posts have been kinda boring¡K I miss your super writings. Past few posts are just a little out of track! come on!

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