As Number One, China to Face Hour of Choice

Exterior of the Bank of China

Recently the International Monetary Fund confirmed what the average Chinese has long anticipated: China will soon have the world’s largest economy, surpassing the United States. There may be quibbles about measuring sticks and low per capita GDP, so timing is imprecise. But the trend is clear. In terms of gross domestic product, China will become number one in this decade or the next and the United States will become number two. Yet rankings do not automatically confer power and influence. More important is how a major country chooses to use its power, for good or ill.

That China will have the world’s largest economy is a remarkable achievement. In 1949, when the Chinese Communist Party came to power, China was a very poor country, the result of more than a century of decline. Thirty years later, it was still a poor country, wracked by continual political turmoil. But China’s leaders then abandoned central planning and autarky in favor of export-led growth fueled by external investment and local initiative. They stuck to that strategy while adapting skillfully to changing circumstances. They improved the living standards of hundreds of millions and transformed the face of the country

This milestone is as important psychologically as it is economically. Chinese take pride in their civilization.They believe that their country, in its weakened state, was victimized for more than a century by the countries of the West plus Japan. To restore China to its past glory and position as one of the world’s great powers would right those wrongs. That this growing power is coming at the expense of the United States, with which China at best has had a difficult relationship for much of the last 60 years, is particularly sweet.

Some Chinese believe that passing this milestone will have automatic consequences for international politics, giving China more international influence. In their view, other countries should then confer more deference on China and accommodate to it on issues that China regards as important, rather than China continuing to accommodate them. At some point, Beijing will likely insist that the head of the International Monetary Fund or World Bank be a Chinese.

Discussions of China’s having the largest GDP come with a subtext – that rapid rise of a new power can destabilize the international system and even lead to conflict. Economic power can be translated into military power and political influence.

But as history shows, the path may not have a single destination. According to the conventional narrative, Germany challenged Great Britain’s dominant position in the international system and World War I was the result. Yet this narrative is at odds with the economic rankings at that time, according to estimates of the late Angus Maddison, a prominent economic historian.

In 1913, the year before the outbreak of World War I, the United States had the world’s largest GDP, with just more than $500 billion in 1990 prices. Next, four countries were bunched together, each with $225 to $240 billion. Germany and Great Britain were in this group but so were Russia and, surprisingly, China. France was at $144 billion and Japan only had a GDP of $71 billion.

China’s second-tier economy is not surprising. In 1913, as today, it had the world’s largest population. More people can produce more stuff. But China then was also politically weak: divided internally and vulnerable to external imperialism.

While, of course, the world today is very different from what it was a century ago, the 1913 configuration is instructive.

First of all, the 1913 rankings demonstrate that a large economy itself does not automatically translate into global political influence. In 1913 the United States may have had the world’s largest economy, but was virtually irrelevant in Europe’s gathering storm. Great Britain, on the other hand, “punched above its weight” to preserve stability in the international system.

Second, a large economy does not necessarily result in a robust military. The United States had a comparatively small military establishment in 1913, despite having the largest GDP. Relative to their economic size, Germany and Japan had large armies and navies.

Third, the emergence of a new economic number one doesn’t mean that international conflict is inevitable. By 1913, the United States was the dominant power in the Western Hemisphere, but Great Britain accepted this decline in its global influence. Japan, on the other hand, had fought and won wars against two countries three times its economic size: China in 1894-95 and Russia in 1904-05. Despite their commercial and colonial interests, however, Britain and the United States chose to accommodate Japan rather than challenge it.

Fourth, when conflict occurs, it is not necessarily because a rising power is bent on aggression. Germany’s decision to go to war in the summer of 1914 was driven by rigid alliance commitments and anxiety, probably misplaced, that Russia was growing stronger. Berlin opted to strike preemptively to preserve its security. Russia was caught in the same dilemma.

In short, the choices that major powers make are more important than their economic rank. As number one, China may assume that it has the right to extend its influence at the expense of others. Its expansion of its strategic perimeter in the East and South China seas is a case in point. Or it may continue to focus on its economy and create a prosperous life for most of its people, letting the United States continue to bear the burden of international leadership. If so, it will remain a country that has global impact, as Kenneth Lieberthal, director of the John L. Thornton China Center, puts it, but is not a global player. Or it may opt to work with other major powers to meet the critical challenges to the international system – that is the Obama administration’s hope. Or it can read the worst into what others do, particularly the United States, and act on its fears. Which choice China makes will have profound consequences for East Asia and the world.

The United States has choices too. It can regard becoming number two as another sign that of permanent decline and retreat from international leadership. It can choose to rebuild the pillars of national power that have been neglected – government finance, education, science and technology, and so on. It can conclude – without justification – that China is sure to become America’s adversary and base policy on that fear, producing a dangerous vicious circle. Or it can forgo the temptation to read the worst into China’s revival and instead seek to influence China’s trajectory in the direction of cooperation rather than conflict.

And for each country, not making conscious choices about future direction is also a choice.

China is going to be number one, but that’s no reason for Americans to head for the hills.

YaleGlobal is the flagship publication of the Yale Center for the Study of Globalization, published since 2002.