When China Rules the World

Deficits and Surpluses

China is leading an historic change as world power shifts from the West to the developing nations. Just contrast the deficit-ridden financial empires of the West with “an East Asia” that is “cash-rich from decades of surpluses.” The US no longer dominates manufacturing or exporting. East Asian nations, with China foremost, have taken that role. Western nations seem to assume that China will become more westernized as it rises and that it will allow the West to dominate as it has done for the last three centuries. Such assumptions are incorrect.

Modernization

Westerners may think of Japan’s economic history as a prism through which to study China’s growth, but the two nations share little commonality on their disparate paths to modernization. In the 1860s, Japan’s “existing elite made a voluntary and calculated decision to westernize in order to preserve...the national essence” and to become more industrialized. After World War II, Japan experienced an exponential growth rate. In barely two decades, it shifted from a pastoral farming economy to a “fully industrialized” system. As Japan’s economy grew, it turned its back on Asian markets...