According to Guardian researcher Lisa Evans, America and China are changing. Whilst the former currently owns the largest deficit burden on the planet at $561 billion, the latter, runs the greatest budget surplus at $272 billion. In her words the traditional “balance of power” leaning West appears to be shifting East, supported by the 7% gap in GDP growth, once again in favour of China (2.6% USA-9.6% China, 3rd quarter 2010) (EVANS, 2011).
Prior to the First World War, the United States shifted from a simple agrarian nation to an industrial superpower. This was continued following the war until the Wall Street Crash of 1929 by such revolutionary industrialists as Henry Ford, rationalising the production process and creating the beginnings of a consumer society. Following the depression of the late 1920’s and 1930’s, the US found itself back on its feet. The Second World War further provided opportunity for work, and spending, beginning a period of prosperity that swelled throughout the 20th century. However, this wasn’t without cyclical recession (Stubbs, 2006).
Moving in to the 21st century, the United States’ economy had grown at a quicker rate than any other time throughout the 1990s, riding the dot-com bubble. Seven years later, and in the midst of another bubble, this time housing, the US economy was stretched too far. In the years between 1997 and 2005, housing prices in the US increased by 75% as banks lent money, without sufficiently safeguarding against the possibility of future defaults. The sub-prime mortgage, essentially lending over and above the value of a property, would eventually come to be a major part of what Lisa Evans describes as the shift of power from the US to China (Gamble, 2009).
China’s emergence into the world market began in 1978, when the ruling Communist party began implementing what it called “socialism with Chinese characteristics”. The mobilisation of China’s vast resources, both physical and natural meant that inception into the world market was both welcome and mutually fruitful. This integration continues today as China increases it’s stronghold with annual growth of around 9%. With a largely expanding population, currently at around 1.3billion, China has all the characteristics of a modern industrial revolution (Emerald, 2004, CIA, 2011)
However, it is believed by many that the size of China’s population may become it’s downfall. In order to compete with United States internationally, critics suggest that China will need to drastically improve quality of life for it’s citizens. The BBC reported earlier this year that whilst average incomes in urban areas have drastically increased annually, workers in China’s vast rural areas have remained on similar levels of income to that of twenty years ago (Tobin, 2011)
The elongated emergence of China is undeniable, as private wealth continues to increase, so does the nation’s desire to enter new markets. The very global nature of the Chinese economy means that it is highly susceptible to global fluctuations, a weakness that is by no means insignificant. However rising to be the world’s second largest economy in late 2010 proves that China is continuing to grow throughout a period of worldwide stagnation, and in many cases recession (BBC News, 2011).
As President Obama welcomed Chinese Premier Hu Jintao to the Whitehouse in January this year, he welcomed a bigger lender to the developing world than the World Bank. It is the activity of America’s opponents, namely China, in this period that will decide whether the US can remain as the world’s economic superpower (Rodgers, 2011).
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