"The World is Big Enough for both China and the US to Thrive"

Janet Yellen, the current Secretary of the Treasury in the Joe Biden-led administration, spoke in Beijing, emphasising the need for good cooperation between the US and China

Column by Francesco Grillo for the Italians newspaper Il Messaggero e Il Gazzettino del Nord Est.

PANDA USA

 

The common sense of the words uttered in Beijing by Janet Yellen, Secretary of the Treasury in the Joe Biden-led administration, clashes with the theories of those who, on the other hand, believe that of the two giants of the world economy, only one can remain standing (as in a famous movie of the eighties). According to these sophisticated intellectuals, the two 'giants' would be destined for a final clash that would be preceded by a long freeze in trade relations, leading to the end of the troublesome globalisation.

The arrival in Beijing, within the space of a month, of three of the most important figures in the federal government (Yellen, precisely, but also Antony Blinken, Foreign Minister, and John Kerry, 'special envoy' on climate change) marks the end of the talk: pragmatically, Washington admits that this world cannot afford a 'new cold war'.

It is, without a doubt, China - and not Russia - the rival that contends with the United States for the role of leading country in the 21st century. China is already the world's largest economic power if we adjust Gross Domestic Product for purchasing power (a quarter larger than the United States).

GRAFICO EN GDP PPP

 

But it is, above all, on the most important level - that of technology - and, indeed, on that of the absorption of technology into a society, that China is overtaking. The country is home to two-thirds of the world's high-speed railways and half of the world's solar and wind power production. And this entails a control of critical skills and resources that is eluding the United States, which had based its leadership on scientific dominance.

Even more serious, however, is the idea that China could become a political-ideological model for the part of the world (the so-called 'global south') that still considers itself developing. In 1989, China was the poorest country in the world, poorer than India and Nigeria. Today it has sufficient resources to accompany the development of most of the countries of sub-Saharan Africa. And to build - in the Middle East - huge desalinators on which the survival of some of the richest nations on earth depends. The ultimate challenge, however, is an alliance with India, which would definitively change history.

In spite of the competition between China and the United States, Biden seems to have decided that China cannot be considered an enemy, and even less can one think of dividing ('decoupling') the world into two parts. It is right to reduce the risks arising from the dependence of raw materials and critical skills on one country, but a new 'cold war', like the one that pitted the Soviet Union and the United States against each other, is not possibile for one single, stupid reason: the economy.

In the 1980s, while Gorbachev and Reagan reached agreements on nuclear weapons, trade between the two superpowers was less than a billion dollars. Last year, US imports from China hit (despite much warmongering rhetoric) a new record, exceeding $700 billion. When Americans and Russians competed in space, they only exchanged Vodka for Coca-Cola. And the only major exception was FIAT, that built a huge plant in a city that the Russians dedicated to Togliatti.

Today, the American and Chinese economies are so integrated that 95 per cent of all the items (I-Phone) that have made Apple the world's largest company (by market value), are made in China. Moreover, in Wuhan (the city where the pandemic started) in an industrial site of a Taiwanese multinational (Foxconn). All this goes to show how, by now, our well-being is based on a mutual dependence that can literally turn the beating of a bat's wings into an environmental disaster that reaches as far as Rome.

If we consider the environment, climate change - never so dramatically evident as in these days - offers another strong reason for Biden to seek dialogue with Xi Jinping. The US presidency is characterised by a huge spending programme with two objectives: to reduce inflation and to combat climate change. The US, without China, would be faced with inflation that no central bank can tame. In addition, there would also be no hope of avoiding the heat strokes that will send even the national security apparatuses into a tailspin. In turn, China, without constant trade with the Americans, would find itself without the rival that inspired - step by step - its development.

This is why the future will continue to be - as Apple's famous phrase goes - designed in the US and manufactured in China. Or, conversely, the future will be improved in China and adopted in America. If anything, it would be time for Europe to wake up and play that 'cultural mediator' role that made it great in the past.

 

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