~ by Dev Lewis
From the 1st until the 18th of March, Shanghai is hosting the 10th edition of the annual Shanghai International Literature Festival. Held at the elegant “M on the bund”, this festival brings together intellectuals from a wide variety of fields, as they present their books, altogether a fine showcase of ideas and a literary feast for all those in Shanghai, and an easy route to go bankrupt with all the books for sale. Not willing to pass up such an opportunity then, I spent my Saturday afternoon attending a talk by Mr.Arvind Subramanian, named by Foreign Policy magazine in the top 100 thinkers of 2011, he held an assistant director position at the IMF, who presented his book titled “Living in the Shadow of China’s Economic Dominance”.
In the current period of Chinese rise, and the relative decline of the United States, literature that proclaim and emphasize the Chinese rise are fairly common, and well within the mainstream of political and economic thought, yet Mr. Subramanian seemed to go above and beyond and stick his neck out with bold predictions, backed by a collection of Polsci-econ “Wonk” theory. His book begins in striking fashion, depicting a shift of power between the US & China in a futuristic scenario in 2021 where a newly elected US president makes his way to the headquarters of the IMF as the US is in need of 3 trillions dollars, and a Chinese president of the institution is willing, providing the U.S withdraw its naval presence from the pacific, which a downbeat president signs of too. Starting with this futuristic scenario, and through out his hour long talk, Arvind continuously and explicitly challenged the current Washington consensus that the current relative decline of the U.S is a mere blip and China will fall into its place eventually, like the Russians and the Japanese after them. A Washington resident, and having advised president Obama on Asian affairs, Mr. Subramanian is writing from within the belly of beast. Yet, for any such power shift to occur, it always comes down to the control of the money, and he suggests the Renminbi will become the dominant currency in the next 10 years, providing the Chinese undertake the necessary regulatory reforms. Using IMF statistics, he argues that in the next 10 years China will account for more than 20 percent of the world’s GDP and be the worlds largest economy. He brings up the example of Great Britain, and how the Suez Canal crises of 1956 put immense pressure on the British leading to the dollar to eventually take command. Based on currency reserve rates, the Renminbi is currently equal to the dollar, and 2020 will be similar to the US and Britain in 1920.
The second half of his talk focused more on living with China as the largest actor in a unipolar system. He did say that so far China has failed to take up a leadership role, which leaves the rest of the world much in the dark of what a Chinese led world would be. I asked him if internet censorship might become a more plausible model of governance (see Pakistan’s latest announcement on creating a firewall), but he seems to think that will not be the case. He said current trends seem to indicate that China will continue to promote the open systems that exist in the current international system, although history offers no guarantees. Lastly, he said the world should embrace China’s rise as it would be to the benefit and not the detriment, and by pinning China to multilateral systems that exist today, rather than forcing it out, is a strategy that would promote the general welfare in the international system.
Overall it was a very captivating talk by Mr. Subramanian, captivating enough for me to buy the book, and have it autographed. Henry Kissinger said it is a book everyone in the world must read. While I would have to read the book to have a more detailed and factually sound understanding of his argument, I do think that more caution must be taken into consideration, especially regarding the strength of the Renminbi and Chinese stability. A Chinese housing bubble is very close to bursting, whilst the Chinese financial sector is in dire need of reform, a fact recognized by Beijing itself, as reform is first on the agenda at the People’s National Congress that is set to convene at the capital for the next week. However, what Mr. Subrananiam seemed to emphasize is that China’s rise to pole position is in their hands, rather than a result of U.S failure. What will this mean to India? Based on the current gridlock this would not be an ideal scenario, however, if India’s economic rise continues, which it should, then India should be well placed to maintain and achieve its own interests, with the two countries cooperating to get richer together. Overall, it was a great afternoon, and I enjoyed sharing words with Shanghai’s expat literati, young and old, evidence that China, despite a world view of being closed to ideas, to be actually very open and global indeed.