A couple of Reuters' pieces today remind us of just how important China has become to global markets and their expectations. First, any new economic forecast figures from China are momentous enough to shift IMF calculations for future global economic growth:
The International Monetary Fund cut its global growth forecasts for the third time in less than a year on Tuesday, as new figures from Beijing showed that the Chinese economy grew at its slowest rate in a quarter of a century in 2015.
To back its forecasts, the IMF cited a sharp slowdown in China trade and weak commodity prices that are hammering Brazil and other emerging markets.
The Fund forecast that the world economy would grow at 3.4 percent in 2016 and 3.6 percent in 2017, both years down 0.2 percentage point from the previous estimates made last October. It said policymakers should consider ways to bolster short-term demand. [emphasis mine]
Unsurprisingly, the Reuters pieces notes that "concerns about Beijing's grip on economic policy have shot to the top of global investors' risk list for 2016 after falls in its stock markets and the yuan stoked worries that the economy may be rapidly deteriorating." So, it's not just a matter of China's economic health but what Beijing intends to do about it. Frankly, until very recently in history, the only countries that registers at that level of impact has been the United States, Japan, and the EU as a collective. But come back with me to review the stimulus spending that unfolded in response to the global financial distress of 2008-09, and the numbers there previewed just how central China had become:
- US - 800 billion USD
- China - 600 billion USD
- EU - 220 billion USD
- Japan - 150 billion USD.
In other words, when push came to shove and big economies needed to pony up the money to shore up global economic demand, China outperformed the EU and Japan put together by making an effort bested only by the US.
This is why, per the second Reuters citation, just as many eyes are on Beijing as Washington right now:
Global equity markets on Tuesday snapped back from a rout at the start of the year after data showing weak economic growth in China prompted speculation Beijing would boost stimulus efforts, but a renewed drop in U.S. oil prices raised a cautionary flag.
China's rise from being a detached corner of the global economy - just four decades ago - to its status as second-most important pillar is akin to America's stunning, turn-of-the-20th-century rise to global prominence following our Civil War. And yes, the US of that era scared a lot of the world with its ambition, arrogance, and self-centeredness - just like China does today.
But we lucked out and picked up a mentor in the British, who, over time, had no choice but to encourage our rise as central to their own continued prosperity, security, and even national survival. The truth is, with all the world has on its plate right now with climate change, terrorism, technological leaps, and so on, the US is as likely to become as entirely co-dependent on China's national resilience in the 21st century as the British once became on US resilience in the 20th century.
Do I see any such recognition among our political and military leaders on this score? No I do not. And that worries me.
Do I see it across this country? It depends on your age, as in, the older you are, the more you tend to fear China. You also tend to fear China more if you are located in the interior and east of the US versus the Pacific-minded US West.
But I do see a different mindset among the Millennials, which, by all polling, appear to view China more as an ally in co-managing this world than an antagonist. And, based on my time in China, I spot enough of the same among China's youth to suggest that this co-dependent relationship will ultimate work out just fine.
What worries me most is getting from now to then.
The US spent decades after WWII working to spread and sustain an international liberal trade order that we now dub "globalization." We were enormously successful in this endeavor, triggering the greatest reduction in global poverty and the greatest upsurge in global development that the world has ever seen. But, in doing so, we created a host of economic "challengers" whom we must eventually come to accept as co-enablers of our own national resilience, as well as the resilience of the planet.
The hardest part for Americans seems to be this supposition that, if a foreign civilization joins this global trade order (as China has) and becomes highly capitalistic (as China has), it must rather rapidly become highly American as well (raucously pluralistic in politics). However, to our continuing bafflement, almost half a century after Nixon went to China, the Chinese are still Chinese.
I know, right? How dare they!
And that seems to upset a great deal of Americans to no end - but particularly older Americans, many of whom now seem to see, in China, a monster of our/globalization's making - a Frankenstein who cannot possibly be tamed (much less told what to do).
As suggested earlier, I expect generational change in both countries to solve this trust-divide that currently keeps the world's two greatest economies (and militaries) from realizing the full extent of their co-dependencies. For now, it's important enough for players - and citizens - on both sides to realize just how much we collectively rely on one another's national capacities for resilience in face of common threats and challenges, AND to remember just how different this relationship is from the one we once endured with the Soviet Union - an empire that was bound to our national survival in terms of its nuclear weaponry but not to our economic resilience to any appreciable degree.
And that is what makes China entirely different.