THE LAND THAT FAILED TO FAIL

Here is an interesting special report from the N.Y. Times on the amazing growth of the “Dragon Country.”

The Chinese economy has grown so fast for so long it is easy to forget how unlikely its metamorphosis into a global powerhouse was, and how much of its ascent was improvised and born of desperation.
China now leads the world in the number of homeowners, internet users, college graduates and, by some counts, billionaires. Not so long ago, three-quarters of its population endured extreme poverty. Not it’s less than 1 percent. An isolated, impoverished nation has evolved into the most significant rival to the United States since the fall of the Soviet Union.


Money helps China become a superpower

Under the muscular leadership of President Xi Jinping, China has cast off previous restraints, rejecting deference to an American-dominated global order.

Mr. Xi has sought to fill a vacuum. He has cast himself as the leader of the rules-based international trading system, even as China faces accusations of stealing intellectual property, subsidizing state-owned companies and dumping products on world markets at unfairly low prices.

Now, China is using its funds to make foreign investments, particularly in overseas infrastructure, with different terms from those offered by other nations.

Western money comes with rules. Investment from Europe, for instance, is conditional on protecting labor and the environment, and requires that projects be awarded to companies on the basis of competitive bidding.
China tends to distribute funds with simpler demands. Chinese companies must gain work, free of competition, while Beijing secures an international ally. In offering to finance infrastructure, China has positioned itself as an alternative to many Western development funds.

The renminbi is rebuilding the world

China is using its power and money to build a vast global network of investments and infrastructure that will reshape global finance and geopolitics.

Think of it as a modern-day version of the Marshall Plan, America’s effort to reconstruct Europe after World War II. But China’s strategy is bolder, more expensive and far riskier.

The NYT analyzed nearly 600 projects that China has helped finance in the last decade. Some highlights:

• 41 pipelines and other pieces of oil and gas infrastructure help China secure valuable resources.
• 203 bridges, roads and railways create new ways to move Chinese goods around the world.
• 199 power plants—for nuclear, natural gas, coal and renewables—open new markets for Chinese construction and equipment companies.
• Large ports in Malaysia, Pakistan and Sri Lanka—three countries along a major oil and commerce route from the Mideast and Africa—could someday double as naval logistics hubs.

China has financed infrastructure projects in at least 112 countries. Many of those initiatives have focused on neighbors—Pakistan in particular—to strengthen geopolitical relationships. Others, in volatile countries like Nigeria, Venezuela and Zimbabwe, involve risks that many other nations try to avoid.

Spinning up high-tech manufacturing from scratch

Now that it rivals the West, China wants to build homegrown champions in cutting-edge industries that stand up against companies like Apple and Qualcomm. That’s not just about powering growth: It’s also about national security and self-sufficiency.

But its approach has been unconventional:

• Instead of following the well-worn development playbook—first make shoes then steel, next cars and computers, and finally semiconductors and automation—China is trying to do all of them.
• By 2016, China had moved into more expensive good like cellphones and computers. And it was making even more of the cheaper stuff.
• The next step is vital, but difficult. China can’t make chips as small and as fast as the United States. Unless it catches up, it will remain reliant on other nations and vulnerable to global geopolitical pressures like a trade war.

China’s huge economy was built on its own terms

The nation’s explosive economic growth since the 1990s has been based on a heady mix of Western methods and its own, more authoritarian, approaches.

A prime example is the country’s membership in the World Trade Organization:

• To achieve the growth it desired, China had to join the W.T.O. In the process, it yielded to global demands—slashing tariffs, lowering trade barriers in finance and telecoms, and curbing subsidies.
• After it joined in 2001, exports doubled in three years, and almost tripled in four. Global manufactures moved entire operations to China; consumers around the world were able to buy cheaper stuff.
• But China didn’t really change. It has been slow to open up parts of its financial system. Other essential areas, like telecommunications, remain cut off. China has nurtured businesses aimed at meeting its own technological and political goals, and hasn’t fully relaxed its grip on the value of the country’s currency.

Next stop: conflict?

China’s rapid rise, and the acute sense of grievance and insecurity it has stirred in the United States, has led some to conclude that these two giants are destined for war, writes NY Times’s Mark Landler.

• For at least a decade, Americans have blamed China for shuttered factories and jobless workers. Public views of China swung from positive to negative in 2012, according to Pew Global Research, and have remained underwater since.
• But the current chill in the relationship seems different. It’s less a temporary rupture than a searching reappraisal of what a status-quo superpower should do about an ambitious, formidable challenger.

Now, amid an escalating trade war, tensions are ratcheting up:

• Conflict with China is intensifying amid unresolved concerns about American leadership and overreach that built up during the era of globalization, and in Afghanistan, Iraq, Syria and other distant battlefields.
• The Trump administration is torn over what comes next. Some of President Trump’s advisers, like Peter Navarro, cast the situation as an epic struggle over who will control the commanding heights of the 21st-century economy.
• Others, like Treasury Secretary Steve Mnuchin, Commerce Secretary Wilbur Ross, and the director of the National Economic Council, Larry Kudlow, have tried to put the brakes on Mr. Trump’s most belligerent trade moves.

How likely is it that trade war turns into real war?

Graham Allison, a Harvard professor who worked in the Defense Department to reshape relations with former Soviet nations after the end of the Cold War, argues that a rising power like China is likely to come to blows with an established one like the United States.

But some China experts note that other areas of dispute, like Taiwan, have not become more fraught in recent years. Whatever the issue, they argue, a disastrous miscalculation is more likely without persistent engagement.

There seems no question that America/China relations are in transition. Will we end up as friends, rivals, competitors or outright enemies?

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