Stop asking if China or the US is No 1 economy
Tom Plate says the far more important question is how they get along
One of the sillier and least useful quarrels in world economics these days is whether China or the United States has the larger economy. The question is like having two huge elephants looking about the same size and weight getting on the bathroom scales to weigh themselves, down to the last comparative ounce.
For a further laugh, take a look at who's asserting what. Rather than denying it has become the No 2 economy, many US experts are agreeing that China is No 1. But not China: many of its officials and experts are insisting the US is still in first place because of this statistical reason or that.
The reality is that China gains some benefits by presenting itself in trade talks as a still relatively poor developing economy.
By many measures, this is technically accurate (it is far more poor than rich). But, with each successful year, its assertions become less believable even as they remain statistically true.
As for the US, it is extremely helpful to the anti-China crowd aiming to sell military containment as the best China policy to be able to overstate or at least dramatise Beijing's roaring economic growth. Remember the great fear in the 1980s about Tokyo - that the booming Japanese economy would soon take over the world? Now we have a new Asian peril from across the Pacific.
I am actually rooting for Beijing to sell the China-as-No-2 argument because it will help feed its many millions of its poor.
Reports of the demise of Chinese economic growth are at best premature. As investment economist Kenneth Courtis puts it: " Has the world gone completely mad? A 7.4 per cent growth for a US$11 trillion economy is not bad. And it represents about 40 per cent of total world growth in 2014! Plus, as China's trade surplus has crumbled from 10.6 per cent of GDP to 2.5 per cent over the last six years, it is exporting vast amounts of growth to the region."
So, rather than fighting over whose tusk is bigger, we should agree that there is an Asian elephant and a North American elephant, and right now they are the two biggest animals in the jungle.
Viewed in this way, the question then becomes who has the smartest perspective. Might both be smart enough to realise that it's a global jungle out there and the challenge is how they navigate all the dangers without adding to them with foolish bilateral policies.
One way to go wrong would be to paint each other as giant piranhas aching to take a bite out of each other. This attitude would provide the emotion for the next big war in the Pacific.
But, logically, China and the US have no irreconcilable differences, as long as each side gives the other room to breathe, each does not insist on getting its own way on everything, and each allows its inner angels to get the better of its ideological devils.
Over time, China's rise will make it predominant in Asia, its enthusiasm kept from excesses by India and Japan. And the US, while staying in the Pacific and reassuring Japan, will remain predominant in North America. But note that China declines to patrol off America's West Coast even as the US hovers constantly and annoyingly over China's East Coast.
If the Sino-US environment in the Pacific turns out to resemble something this sensible, then the hard part will be the bilateral relationship itself. How low can it sink; how high might it be allowed to soar?
Factors within each nation will determine that, not the political environment of Asia itself. Thus, the most dangerous enemies of peace between Beijing and Washington are within China and the US themselves.
