Who'd have thought, 30 years ago, that a country isolated from the rest of the world, woefully deficient in technology and infrastructure, with a poor agrarian-based population, and an often cruelly repressive, communist government, would today be striking fear in the world's economic super powers?
“If the last century was the American century, this one looks to be the Chinese century,” says agricultural economist Lester R. Brown in a recent report for the Earth Policy Institute.
China's rise to dominance in manufacturing and world trade has also resulted in its outpacing the United States as a consumer. Of the five basic food, energy, and industrial commodities, it now leads the United States in consumption of grain, meat, coal, and steel. Only in oil use does the United States hold a lead, but China is now in second place.
For years the Mideast nations and OPEC have had a stranglehold on a petroleum-hungry United States, and now China is rapidly getting in position to manipulate the American economy.
“It is now China, along with Japan, that is buying the U.S. Treasury securities that enable the United States to run the largest fiscal deficit in history,” Brown writes. “The United States, the world's leading debtor nation, is now heavily dependent on Chinese capital to underwrite its fast-growing debt. If China ever decides to divert this capital elsewhere… in the world, the U.S. economy will be in trouble.”
China held $191 billion in U.S. debt in 2004, according to Ted C. Fishman, writing in USA Today. This year, the U.S. trade deficit with China may top $170 billion, he notes — a 27-fold increase over the past 16 years.
A study by the U.S. China Economic and Security Review Commission links the loss of 1.5 million U.S. jobs directly to the growing trade deficit, Fishman says.
While China's upwardly spiraling consumerism represents a potential treasure house of marketing opportunities for the United States, it can also be a double-edged sword in that its competition for resources can push up prices of key inputs.
A prime example is steel, with China's industries and construction sector sucking up supplies from around the world. It now uses twice as much steel as the United States and leads in use of other metals such as aluminum and copper.
Among the “big three” grains, Lester Brown notes, China leads in the consumption of wheat and rice and trails the United States only in corn usage. Its use of fertilizer in 2004 was more than double that of the United States.
“Its voracious appetite… is driving up not only commodity prices, but ocean shipping rates as well. (Its) need for access to raw materials and energy is shaping its foreign policy and security planning,” leading to strategic relationships with resource-rich countries.
Still, says Ted Fishman, the United States' economic vulnerability may be “our greatest strength. China is far more dependent on U.S. consumers to buy its vast industrial output than on any others. Reining in our budget and trade deficits is a start.
“Conceding China's rise does not have to mean conceding to China,” he says. But if the United States “does not act forcefully to protect its economy… the damage may take generations to reverse.”