As America falters and Europe declines, look east to see the future
Lord Green says a massive improvement in global well-being can accompany China’s ascension, and Hong Kong will be well-positioned to capitalise, provided potential regional minefields don’t blow up
In 2014, former US national security adviser Stephen Hadley spoke to the Lowy Institute in Australia. “The truth is there is no real alternative to the United States as the global leader,” he said. “China doesn’t want the role … And to be frank, China would not be trusted by many countries – particularly in the Asia-Pacific – to be the global leader.”
Now, just three years on, the landscape looks very different. America has not gone away, of course: the dynamism and creativity of its economy should never be underestimated, and it would be unwise to short America for long. Yet, the fact is that America has not found it easy to share leadership on the world stage. And where leaders step away, others step in.
Indeed, the American response to the shifting global order has been astonishingly unrealistic. This is not just the result of the actions of the Trump administration. It was, after all, Donald Trump’s predecessors who refused over the decades to push reform of the international economic order – and it was president Barack Obama who was so dismayed when China went ahead to establish the Asian Infrastructure Investment Bank.
Under Trump, unwillingness to let go of the reins has morphed into “America first”. The result has been a lurch away from an open trade strategy to a crude protectionism which has abandoned the Trans-Pacific Partnership and is seeking to undermine Nafta.
This is in stark contrast with China, the driving force behind Asia’s rise. Soon it will be the world’s largest economy once again. This much we are familiar with. But this is just a milestone: the best central forecast is that China will continue to grow rapidly for another generation. So as its income per head approaches Western levels, it will not just be the largest economy in the world – it will be by far the largest.
This new China is leading what could turn out to be the largest and most significant economic development programme in human history – the Belt and Road Initiative. It will take decades, of course, but the massive increase in connectivity across the whole of the Eurasian land mass – from the Pacific to the Atlantic and from the Arctic to the Indian Ocean – will drive commerce and create the potential for human well-being as never before.
Of all Asia’s trading hubs, none is more favourably placed than Hong Kong to capitalise on belt and road in particular, and Asia’s rise more broadly. Its wealth of professional and financial services and appealing market conditions, combined with its connectivity with mainland China and the Association of Southeast Asian Nations, should attract significant business to the city. Indeed, Hong Kong’s strong position to serve belt and road projects is something Chief Executive Carrie Lam Cheng Yuet-ngor has repeatedly emphasised.
Lam has consistently stressed the importance of looking beyond Hong Kong and the mainland and out into the world. The Hong Kong-Asean free trade agreement, signed earlier this month, will provide further access to a market of 650 million people – “a clear vote from all of us here for freer and more open trade”, as Edward Yau Tang-wah, the commerce and economic development secretary, put it.
Yet this is no time for complacency. There are plenty of risks and questions arising as the new global order takes shape.
Geopolitically, a miscalculation on the Korean peninsula could unleash catastrophe; the Middle East remains volatile and unstable; Russia is no more at ease with any of its neighbours than it has ever been. And how will an India made nervous by the Belt and Road Initiative fit in with a much more connected Eurasia? Economically, concerns around the imbalances in China’s economy, and emerging demographic pressures, are still to be resolved. Hong Kong is exposed to these risks.
There is also a more strategic risk which encourages us to see the shifting global order in its proper historical perspective. There have only been two periods in history when there was a single global superpower. The first began in 1815 with the defeat of Napoleon and ended in 1871 with the unification of Germany. For half a century in between, Britain ruled the waves and projected hard power around the world, more or less at will.
The second period began in 1989, with the collapse of the Soviet empire. But America’s time as the single global superpower has been even shorter than Britain’s. China’s extraordinary economic rise has ensured its position on the world stage. There are other actual or would-be participants on that stage too: India, soon to be the world’s largest by population; Russia, which remains determined to assert supremacy, at least in its backyard; Japan, still the world’s third-largest economy and led by a government which chafes at the limitations imposed by its post-war constitution.
As for Europe, it is now in long-term relative decline. It is no longer the energetic, ambitious and aggressive continent it was when the Portuguese, the Spanish, the Dutch, the French and the British set out over the oceans to plunder, trade and colonise. It is no longer the continent whose technical brilliance the Qianlong emperor so unwisely spurned when the British emissary Lord Macartney sought to open commercial dealings with China in 1793. Nor is it any longer the front line of a cold war between two nuclear superpowers.
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Europe has retreated from being the self-defined centre of the world to being what it had been before the 15th century – a corner of the Eurasian land mass. Asians look at Europe as a large market with some attractive investment opportunities. But it lacks cohesion. It is sclerotic, internally preoccupied and unsure of its identity. A former American secretary of state famously said that the British had lost an empire and not yet found a role. Brexit proves that this is still the case. But in a sense, this indictment applies to Europe as a whole.
In short, the world order is changing: China has joined the world stage, and America is increasingly wary but unsure in its response. Meanwhile, as they watch each other, both know Europe is losing significance. The importance of this geopolitical transformation for trade and investment is hard to exaggerate. In 19th century America, the mantra for the ambitious was “go west, young man”. For the 21st century, the equivalent should surely be “go east, young person”.
Stephen Green is chairman of Asia House. Lord Green will be speaking at the Asia House conference, Asia Trade in the New Global Order, in Hong Kong on November 27