Is China capable of challenging the US?

• Source: The Global Times
• [21:17 June 03 2009]
• Comments

By Ding Gang

A real powerful country is one that can not only create huge amounts of wealth, but also yield strong individual consumption. It is from this perspective that I say China is not yet capable of challenging the US.

Timothy Geithner, the US Treasury secretary, has come to China for a visit. It’s said that his main task is to “promote” US bonds. Unlike his predecessor, who appeared to be quite proud, this “CFO” of the US conducted dialogue with China in a reassuring manner instead of a demanding one. Hence, some Chinese people have started to think that it’s time for us to raise our demands to the US.

The fact is, we’re not quite confident to do so given the current situation of China. According to a recent survey by the Global Times Chinese version, 23 renowned Chinese economists polled voiced their concern on China’s large holdings of US debt. Yet only eight of them expressed support for substantially reducing the amount of US debt while 15 of them objected.

China is now like a diligent worker, saving all its earnings in the bank. However, in the modern consumption-oriented society, the real boss is the one who knows how to spend. It’s true that Chinese people have earned more money than ever over these years. But we cannot become confident enough to confront the US if we only transfer money from our wallet to others’. We can only achieve that once we learn how to spend the money and how to make the factories and shops to satisfy our consumption needs.

It’s O.K. for China to ask the US to be more responsible in handling its currency. But it remains only a request. It may sound like an order, but it’s more of a  plea. Can you imagine what we could do to avoid a loss if the US dollar truly devalued?

Why do we call the US a powerful country? Many people believe it’s the political organs, the economic mechanisms and the military that exert power. In fact, there’s more than that: the US is the top consumer in the world. What Americans buy, or don’t buy, as well as how much they buy, greatly affects the global economy, as well as world politics and diplomacy.  What’s more powerful about Americans is that they spend the world’s money, which they’ve borrowed. 

Wal-Mart, the retail juggernaut that has entered the Chinese market, serves as a fine example. Ranking first among the global top 500 companies in Fortune’s survey in 2007, Wal-Mart surpassed the petrol conglomerate Exxon Mobil with a yearly earning of $351.139 billion. About 80 percent of its revenue came from the 3,400 stores it operates in the US. Given the US’ population of 300 million, the average consumption for each American including the newly-born is worth up to $1,000 within a year. But have you ever thought about how much of it was created by the hard work of the Chinese laborers who received poor payment?

The example of Wal-Mart tells us that more than producing large amounts of wealth, a country’s power lies in its ability to consume. That’s why I believe that we’re not ready yet to challenge the US.

The author is a senior editor of People’s Daily. The article is translated by Wen Yufang