It was most ironic that US Vice-President Joe Biden arrived in China at a time when the Chinese media was hotly discussing America's decline. Not too long ago, leading establishment intellectuals and foreign ministry officials - not to mention its central bankers - were still very cautious about this subject; now the mood has turned. The earlier debate about whether America is in decline has become irrelevant as the 'declinists' are taking over. Some important commentators are even talking openly about the question of 'succession'. One key argument is historical inevitability. 'Thirty years on the east bank of the river, another thirty years on the west bank', as a popular Chinese saying goes.
The Americans are considerably alarmed about this gloating Chinese mood. But, a presumptive rising power talking about its predecessor's decline is nothing new in history. The American policy elite did it in launching the systematic process of 'succeeding John Bull' during the second world war when Britain was on the verge of bankruptcy. And so the Chinese elite are equally encouraged by the impact of the US sovereign debt crisis triggered by Standard & Poor's downgrading of American government bonds. Thus, Biden's visit could not have come at a worse time.
More importantly, there is a strong urge to make an explicit connection between the Chinese holding of US debt and US arms sales to Taiwan. It was widely assumed in Beijing that Biden would use the Taiwan arms sale as a major bargaining chip in exchange for better economic concessions from the Chinese, therefore bringing a golden opportunity for Beijing to use a monetary weapon for political purposes. The Obama administration has claimed China's unexpected toughness over the arms sale issue early last year was based on 'miscalculation'. That is no longer true.
Undoubtedly, the monetary weapon is an important foreign policy instrument. The United States has used it many times, most notably when it threatened to end market support for the troubled British pound in 1956 to force London to exit the Suez Canal adventure.
Even so, the Chinese elite seem to have underestimated the extent of America's decline since the financial crisis and also its consequences. The Chinese are, in fact, ambiguous about America's decline, since they are not yet ready to take over the many responsibilities now being shouldered by an insolvent America. A quick US decline does not serve China's interests. Therefore, it hopes for a process of slow and 'relative' decline.
Chinese central bankers are deadly afraid of an American default that would wipe out China's 'blood and sweat' money accumulation. Many of them argue that the American political system is the most resilient in the world, and individual initiatives remain the cornerstone of its society. According to this logic, compared with other countries, the US should have been the least rigid in terms of reforming its own system. The problem is, the US has created a lifestyle of overspending, and deeply entrenched interest groups within this system have proved to be hard nuts to crack.