The Post-American World - Fareed Zakaria [47]
China is also the world’s largest holder of money. Its foreign-exchange reserves are $2.5 trillion, more than double those of the next country (Japan) and three times the holdings of the entire European Union. Holding such massive reserves may or may not be a wise policy, but it is certainly an indication of China’s formidable resilience in the face of any shocks or crises. At the end of the day, it is this combination of factors that makes China unique. It is the world’s largest country, fastest-growing major economy, largest manufacturer, second-largest consumer, largest saver, and (almost certainly) second-largest military spender.* China will not replace the United States as the world’s superpower. It is unlikely to surpass it on any dimension—military, political, or economic—for decades, let alone have dominance in all areas. But on issue after issue, it has become the second-most-important country in the world, adding a wholly new element to the international system.
Central Planning That Works?
There are those who doubt China’s economic record. Some journalists and scholars argue that the numbers are fudged, corruption is rampant, banks are teetering on the edge, regional tensions are mounting, inequality is rising dangerously—and the situation is coming to a head. It’s only fair to point out that many of them have been saying this for two decades now, and so far, at least, their central prediction—regime collapse—has not taken place. China has many problems, but it still has one thing that every developing country would kill for—robust growth. An expanding pie makes every other problem, however grave, somewhat more manageable. One of the regime’s most intelligent critics, the scholar Minxin Pei, readily acknowledges that “compared with other developing countries, the Chinese story is far more successful than any we can think of.”
For a regime that is ostensibly Communist, Beijing is astonishingly frank in its acceptance of capitalism. I asked a Chinese official once what the best solution to rural poverty was. His answer: “We have to let markets work. They draw people off the land and into industry, out of farms and into cities. Historically that has been the only answer to rural poverty. We have to keep industrializing.” When I have put the same question to Indian or Latin American officials, they launch into complicated explanations of the need for rural welfare, subsidies for poor farmers, and other such programs, all designed to slow down market forces and retard the historical—and often painful—process of market-driven industrialization.
But Beijing’s approach has also been different from that advocated by many free-market economists—a program of simultaneous reforms on all fronts that is sometimes called the “Washington consensus.” Most significantly, it is different from Russia’s shock therapy approach under Boris Yeltsin, which Chinese leaders studied carefully and often cite as a negative example, probably agreeing with Strobe Talbot’s pithy description when he served in the Clinton administration: “Too much shock, too little therapy.” Rather than a big bang, Beijing chose an incremental approach, one that I would call a grow-the-denominator strategy. Instead of immediately shutting down all inefficient enterprises, ending bad loans, and enacting large-scale privatization, it adopted policies that grew the economy around these loss-making areas, so that over time