We have entered one of those rare historical periods that is characterized by a shift in global hegemony from one great power to another.
The last such was between 1931 and 1945, and marked the end of Britain’s financial ascendancy and its replacement by that of the US. It might be argued that the Cold War represented a similar period, but that is a fallacy. The Cold War was an ideological struggle between two powers that were always hopelessly ill-matched.
This new period is marked by the rise of China and the decline of the US. Arguably the process started around a decade ago, but at that stage it was barely noticed, such was the West’s preoccupation with Sept. 11 and its after-effects. Indeed, the Bush administration was thinking in exactly the opposite terms: The world was entering a golden age of US global power.
It is more appropriate, however, to date the beginning of the new era from last year. First, the election of President Barack Obama signaled a recognition by the US of the limitations of its own power and the need for it to cooperate with other nations.
Second, China has reached a point where it is now clearly prepared, on the basis of the advances of the last three decades, to assume a more active global role.
And third, the onset of the global financial crisis provides the context for the decline of US economic power and illustrates the extent to which it has become dependent on China for the continuation of its global financial hegemony.
Such periods of transition are profoundly unstable, deeply uncertain and fraught with danger. The world is fortunate — for the time being, at least — that it has an American president in Obama who is prepared to take a conciliatory and concessive attitude toward the decline of the US, and that it has a Chinese leadership that has been extremely cautious about expressing an opinion, let alone flexing its muscles.
The picture, however, is changing rapidly; indeed, this year has already witnessed a marked change in Chinese attitudes.
Ever since the late paramount leader Deng Xiaoping (鄧小平), the Chinese approach has been based on taoguang yanghui (韜光養晦) — hide one’s capabilities and bide one’s time. But a succession of statements and initiatives suggest that Chinese policy has now entered a new phase.
Premier Wen Jiabao (溫家寶) expressed strong confidence at the Boao Forum in Hainan on Saturday that China was successfully weathering the effects of the global economic crisis. During his visit to Europe for the Davos meeting, he made clear that reckless Western economic policy, especially by the US, was responsible for the crisis. He also declared that China would not give funds to the IMF unless the latter was subject to major reform.
Later he expressed strong concern about US financial policy and its impact on the dollar, seeking reassurance that the value of China’s US treasury bonds would not be prejudiced. In a carefully staged run-up to the G20 summit, Vice Premier Wang Qishan (王岐山) set out a vision of a new monetary order, while most dramatically of all, central bank Governor Zhou Xiaochuan (周小川) called for a new global currency based on using the IMF’s special drawing rights, an idea immediately rejected by the US.
Meanwhile, a meeting of the finance ministers and central bank chiefs from China, India, Russia and Brazil that preceded the G20 summit called for greater voting rights for developing countries in international financial organizations.