The Perceived Chinese Strength

Today a heated discussion was raging in my office on the position of strength the Chinese have vis a vis US because of the large amounts owed by the latter to the former. The point being made was that the old order was crumbling with China owning billions of dollars worth of American paper, effectively giving it a large manipulating power and limiting US foreign policy options to those approved and blessed by the Chinese.

Though at first look the evidence is overwhelming in support of the above view but a deeper, more historical and some scenarios analysis throw up other interesting propositions which don't make China look all that strong.

The leverage China has is the huge amounts of American debt it owns and based on which it can try to arm twist US to postures more suited to it's interests. To a certain extent this is true and the leverage can and will work in China's favor inducing Americans to tow the Chinese line as they say it. But there are limits to the influence exerted by the Chinese. On certain policy and financial matters yes but anything more important and influential, specially those  which are contrary to important American economic and geo-political interests, then no.

Ever since America's rise post world war 2 there has been a strong Anglo – European – American axis which has served and propagated its interests which has brought prosperity and power to these regions. They have acted in unison under the NATO umbrella on political, economic and military fronts. They have furthered their combined sphere of control wherever and whenever it has been to their combined advantage. If one looks at major policy decisions one is excused to believe that they have been taken by one country and then religiously followed by others behind a sham of free foreign and monetary policy. The point being whether it be the Iraq war, the Afghanistan war, pressurization of Iran on the nuclear issue, economic bailouts or any other issue this group has spoken and acted as one.

There is no reason to believe that the future stores anything different when this policy has worked out so well for all the members of the coalition.

Consider a hypothetical scenario that China really does come to loggerheads with US and tries to bring the Americans down by putting financial pressure on them, what stops the Americans from cutting all relations with Beijing branding them a Communist (we know how they hate them Commis), human rights abusing, un-democratic and repressive regime with which US is breaking all political, diplomatic and financial ties to pressurize them to usher in democracy and freedom of thought, speech and action. There, behind these lofty goals will wither away all inkling of Chinese power, real or perceived. Other nations would shudder to take such a step fearing what this would mean to their debt rating and their capacity to raise further money in the international market but then there are some perks attached to being the lone financial or otherwise superpower, will Moody's or S&P even in their wildest of dreams degrade American debt, not in my current dreams.

Now who will come to the Chinese rescue? Europe, don't think so based on all the facts and actions we have seen before. Russia, maybe but then again Russia is a mere shadow of its former self and though they have started flexing their muscles again, based on their huge oil reserves, they are still nowhere close to snubbing this powerful axis.

Let us now look at the Chinese contribution to the western economies. Apart from their penchant for collecting American debt China is also the manufacturing plant for the entire western world. So we need to build a new plant, how tough is that? First it was Mexico which was the manufacturing hub  backdoor, then China, after China it can be India, Brazil or Russia or a host of other nations which on the back of some IMF provided funding will be glad to replace the Chinese. The truth is manufacturing hubs constantly keep moving, sometimes the trigger are economic realities but political realities too have the same effect.

Though unlikely some may argue for a scenario in which an escalation happens and China decides to get its dough back by flexing its military might. Personally I don't believe this is a possibility what with the American bases in Japan, the 5^th fleet in the South China Sea, a more than eager India to act as a forward base to settle its own score, the war will primarily be fought on and around Chinese soil rather than anywhere close to US. Any ICBM's on their way will be neutralized by the missile protection shield around Europe and I am sure the debris will fall over Iran (they have been out of favor for long).

The Chinese know and understand this and that is why they may show their displeasure and get irked by Obama meeting Dalai Lama or military hardware being sold to Taiwan, they never take it to the next level because they know well that the current international power setup has been carefully coordinated by the western powers which works to further their cause and interests. Any country whose interests aligns with them gains while if one find itself at the wrong end then the full force of international community falls on it.

History shows that nations rise, rule the world and then fall as others step up to take their place, as time progresses we may see genuine alternatives to the current power coterie, maybe China itself backed by its allies in Africa, but as of now the sun still shines on the Anglo – European – American power axis.