China, using the pandemic as a red herring to perhaps conceal larger and greater intentions, has (not so silently) grown from an emerging market into a powerful and influential global economy.
One of the 21st century’s fastest-growing economies, Beijing has leveraged momentum reaped from one of the most ambitious infrastructure projects ever conceived, the Belt and Road Initiative, to leapfrog perennial global powers Japan, Germany, the UK, and India.
It has now set its eyes resolutely upon the world’s number one: the United States.
The country, valued at a GDP of $14.72 trillion, is playing an increasingly influential role in the global economy. It has been the largest contributor to international growth since the 2008 global financial crisis.
So, the question is no longer whether China can be a global superpower. Rather, the question is how long before it challenges the United States as the world’s biggest economic power.
China as Leading Economic Power
The repercussions of China becoming the world’s leading economic power are, of course, significant.
In addition to attracting international investment that would boost domestic infrastructure development and technological expertise, China’s rise could create uncertainty and worry in the global financial markets. This could well be a spark signaling the end of the US dollar as the world’s dominant currency.
Furthermore, as other superpowers perilously continue to balance on the knife edge of a recession, China continues to project mid-single-digit growth numbers that will widen the gap with those behind it while closing the gap with the US.
US Dollar as Global Currency
The dollar’s global status has held substantial global influence since 1944, when government representatives met in Bretton Woods, New Hampshire, to establish a monetary system that would encourage international trade after World War II.
During this time, the financial weight of a country’s currency depended almost exclusively on how much gold it had. In 1944, the US controlled two-thirds of the world’s gold reserves, meaning the US dollar was the most desirable global currency.
The Bretton Woods system of fixed exchange rates ended in the summer of 1971 when President Richard Nixon announced a policy that suspended the dollar’s convertibility into gold. This would, in theory, induce America’s major trading partners to adjust the value of their currencies upward to eliminate trade barriers.
These forward-thinking financial initiatives have allowed the US to maintain global economic dominance since 1944.
However, with China’s calculated and methodical fiscal strategy, we must question whether America’s global economic dominance will be short-lived, particularly given that Washington struggles to offer international trade partners a more appealing competitive option than China’s.
Wake Up Call
In another power move designed to weaken the influence of the US dollar, China in 2017 launched a crude oil futures contract priced in yuan and convertible into gold, an eye-popping game-changer in the financial market that allows exporters to circumvent US sanctions by trading in the yuan.
So, while President Xi Jinping is providing sound and comprehensive economic opportunities for potential trade partners — including creating a vast network of railways, energy pipelines, highways, and streamlined border crossings to the former Soviet republics, Pakistan, India, and the rest of Southeast Asia — the US continues to bog itself down with political squabbling, partisan backbiting, and social media committee hearings.
To potential economic trade partners, China comes out looking like the adult in the room, while the US congressional representatives behave like toddlers who just had their iPhone privileges revoked.
It’s both a real and alarming picture of the global economic situation. As China is bearing down on the US by establishing an infrastructure network that will expand the international use of its currency, US politicians remain asleep at the wheel, hanging on to an ill-conceived belief that they are leading the world like a drunkard hangs on to a corner lamppost.
The exact spot where they will be when China rages past them sometime in the next decade.
