Asia's Global Influence Grows
While Europe and the US face continuing economic difficulties and are fighting to preserve their unity and credit ratings respectively, over in the East many Asian countries are surprising observers with their sound finances and strong growth rates. Now China and its neighbours want to extend their political and economic influence in the world.
After rating agency Standard & Poor‘s downgraded its credit rating for the US at the beginning of last August, Washington received a stern letter from Beijing. The Chinese government reprimanded the US for its “debt addiction” and called into question the US dollar’s status as a leading currency. There was no gloating among Europeans, though: they, too, received a dressing down from China for failing to get a grip with their debt problems.
The brash tone adopted by China may have been surprising, but it illustrates a shift in global economic and political influence – away from the West and towards the East. China‘s growing self-assurance in its dealings with the rest of the world is being fuelled by a number of factors.
First, there is its role as the US’s biggest creditor. Second, China has consistently posted above-average economic growth for a number of years. Even though its growth rate has started to slow down, the figure for 2011 was a still impressive 9.5%.
Thirdly, this growth is feeding through to China’s population of 1.35 billion. The country’s middle class is growing and is participating in the upturn. This reflects the dramatic change that China has brought about in the space of just a few years. For a long time the country had a reputation as a workshop for Western companies, which had their goods manufactured there cheaply (and sometimes under dubious conditions). Now, Chinese consumers are increasingly coming to the fore.
More Chinese people are earning more money, consuming more and are able to afford more goods, including luxury items from the West. Their purchases range from household basics such as fridges and televisions to expensive Bulgari handbags and Audi limousines with huge price tags. By international comparison, China‘s per capita income is still small. But it is rising steadily.
No let-up in China‘s appetite for raw materials
Another advantage that China enjoys is that its central bank is keeping down the value of its currency, the renminbi. This has for a long time allowed China to sell its exports cheaply – despite continuing demands from the West to finally let the currency appreciate to its “true” level. Following the recent weakening in the US dollar, there have been signs lately that the Chinese government is no longer completely ignoring the calls for an appreciation of the renminbi.
Another factor contributing to China‘s geopolitical importance is its high level of direct investment in neighbouring ASEAN nations and in emerging countries with large reserves of raw materials. China needs these raw materials to feed its appetite for growth. It is by some distance the world’s biggest consumer of iron ore (59% of global consumption), steel (44%), zinc (43%) and copper (36%). For many experts, given its sheer size, the question is not whether China will one day become the dominant force in the global economy, but when.