Why it is in US interests to accept China as an equal in the Asia-Pacific
Rick Tang says that, given China’s growing heft in global commerce in a changed world order, the US must accept it as a co-leader in steering the global economic ship
The traditional world of trade and commerce was built on a system of developed nations buying cheap products exported from developing ones. Low labour costs in the emerging economies made it possible for families in the West to own affordable washing machines and dryers, microwave ovens, refrigerators and TV sets. The savings from buying these cheap products were ploughed into their own economies to create healthy domestic consumer markets.
Emerging economies also benefited; they increased their employment, eased poverty and improved the quality of life for ordinary folk. China is a notable example. It has lifted half a billion people out of poverty in less than 40 years and created a vibrant middle class that can today afford to not only buy imported products but also travel overseas. They have become the new demand in overseas markets.
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But now, leaders in emerging economies are questioning the assumptions that underlie the traditional model, especially after the 2008 global financial crisis. The biggest question is: is the traditional model fair?
It is worth noting that while a major share of production has been outsourced to developing countries, multinationals from the West continue to transfer lower-grade technology to their outsourced factories but keep sophisticated technology in their home countries.
Then came the 2008 crisis. How could a scam that started in the United States spread like wildfire to the rest of the world? Isn’t the US a land of sophisticated financial institutions and vigilant regulators?
America put its credibility further at stake with its rescue plan. The Federal Reserve’s quantitative easing effectively meant printing money, and printing lots of it. Low interest rates have kept the US economy afloat but created new problems for the rest of the world. Cheap money has flowed to emerging economies in search of better returns and created asset bubbles.
The world has now become a tri-polar economy, the poles being America, China and the EU