How big China, how high the moon?
In the Financial Times this week, Martin Wolf poses an interesting question-- how best should Beijing use its massive economic clout to benefit the global economy? He offers some key points to ponder about China:
- [It is the] world’s largest exporter and second largest importer (after the US), unless the European Union is treated as a single unit.
- It has the world’s largest trade and current account surpluses and owns a third of world currency reserves.
- Its flow of savings is the world’s biggest.
- It is the largest importer of many commodities and the price-setter for many products.
A recent AAM survey found that a majority of U.S. voters believe the U.S. no longer has the world’s strongest economy. Instead, they see China on top.
Ironically, the U.S. has helped to fuel China's rise. Last year, America racked up a $273 billion trade gap with the People's Republic, and that money has been put to good use by Beijing.
Wolf suggests that since China is the "world’s rising trading power," it has an obligation to be the "guardian of the open trading system." This is of course problematic since Beijing continually operates with massively protectionist self-interest. Regarding global trade, Wolf is idealistic in his hopes that China will "abide by all the rules and principles of the system and play an important part in developing it further." However, nothing Beijing has done to date gives any suggestion that it could become this altruistic.
What's worrying, then, is that China's "financial system will be the hub of global finance." This is indeed a possibility. But is it one that open market economies will find desireable?
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