In the longer term, as Chinese companies relentlessly climb the technology ladder, the US economy will face ever-widening competition from Chinese goods, no longer just at the low-value end, but also increasingly for high value-added products as well, just as happened earlier with Japanese and Korean firms. [1182] In that process, the proportion of losers is likely to increase rapidly, as will be the case in Europe too. Such a development could undermine the present consensus in support of free-trade globalization and result in a turn towards protectionism, the most important target of which would be Chinese imports. [1183] The impact of the depression, however, suggests that this process may already be happening. If the United States did resort to protectionism, one of the key planks in the Sino-American relationship since the early eighties would be undermined. It would also signal a more general move towards protectionism worldwide and the end of the phase of globalization that was ushered in at the end of the 1970s. The failure of the Doha round is a further indication that this kind of scenario is possible. [1184]

This brings us next to East Asia. There is clear evidence, as discussed in the last chapter, of a fairly dramatic shift in the balance of power in what is now the most important economic region in the world, East Asia having overtaken both North America and Europe. Nothing decisive has happened but nonetheless China has palpably strengthened its position, with even established US allies like Singapore and the Philippines now hedging and seeking a closer accommodation with China. Only two countries, in fact, have tried to resist being drawn closer to China — Japan and Taiwan, though both have become deeply involved with China economically. Furthermore, it is clear that, notwithstanding the presence of a large number of its troops, the American position on the Korean Peninsula has weakened as South Korea has moved much closer to China and the US has been forced to depend on China playing the role of honest broker in defusing the nuclear crisis in the North. The wider significance of these developments in terms of Sino- US relations is that East Asia has, ever since the last war, been a predominantly American sphere of influence, threatened only by a relatively isolated China during the Maoist period and, of course, the US’s defeat in the Vietnam War. This can no longer be presumed to be the case. East Asia is now effectively bipolar. The fact that the US ’s position in East Asia has declined could well have knock-on effects for its commitment to Taiwan, potentially even undermining it. [1185] The waning of American influence in East Asia also has implications for its position globally, on the one hand serving to embolden China and on the other acting as a marker and signal for other nations. As yet, there is little sign of any clear American response to these trends, although the Obama administration seems to recognize their importance. The US has been hugely distracted by its entanglement in the Middle East and, as a consequence, has neglected its position in East Asia. [1186]

China, meanwhile, has slowly begun to emerge as an alternative model to the United States, a view which the Chinese have cautiously promoted, though in a manner very different from the kind of systemic competition that characterized the Cold War. The growing American emphasis on hard power, especially since 2003, has made it increasingly unpopular in the world and created a vacuum which China in a small way has started to fill, not least with its embrace of multilateralism and its emphasis on its peaceful rise. [1187] China ’s pitch is essentially to the developing rather than the developed world, with its offer of no-strings-attached aid and infrastructural assistance, its respect for sovereignty, its emphasis on a strong state, its opposition to superpower domination and its championing of a level playing field. As a package these have a powerful resonance with developing countries. [1188] The main plank of American soft power is the stress placed on the importance of democracy within nation-states: China, by way of contrast, emphasises democracy between nation-states — most notably in terms of respect for sovereignty — and democracy in the world system. [1189] China ’s criticism of the Western-dominated international system and its governing institutions strikes a strong chord with the developing world at a time when these institutions are widely recognized to be unrepresentative and seriously flawed. Most powerfully of all, China can offer its own experience of growth as an example and model for other developing countries to consider and learn from, something that the United States, as the doyen of developed countries, cannot. East Asia apart, there has been a significant shift of power and sentiment away from the United States and towards China in Africa and Latin America. This should not be exaggerated — it remains embryonic — but it is, nonetheless, significant. Meanwhile the spectacular collapse of the neo-liberal model in the financial meltdown has seriously undermined the wider appeal of the United States, notwithstanding the exhilarating and uplifting effect of Barack Obama’s election as president. And the fact, more generally, that the American-run international economic system has been plunged into such turmoil as a result of a crisis which had its origins in the United States has served further to accentuate the loss of American power and prestige. [1190]

Finally, there is the question of China ’s military strength. This has been persistently highlighted by the United States. The Americans attach greater emphasis to military power than anything else, a position which is reflected in their continuing huge military expenditure and the importance they place on maintaining overwhelming military strength in relation to the rest of the world. In the 2002 National Security Strategy of the United States of America, such massive military expenditure is advocated in order to ‘dissuade potential adversaries from pursuing a military build-up in hopes of surpassing, or equalling, the power of the United States ’. [1191] The fact is that American unipolarity is overwhelmingly a military phenomenon. [1192]

The American argument that China is determined to develop a strong military capacity of its own, beyond what is needed in the context of Taiwan, plays on the fears of many nations, especially in East Asia. China ’s size and cohesiveness, together with its history of authoritarian rule, arouse doubts enough in the minds of others, so the suspicion that China is also embarked on becoming a military superpower could help to tip the balance of perception towards something closer to paranoia. The political purpose behind the annual Pentagon statements on China ’s military spending, as well as the not infrequent warnings from members of the Bush administration, [1193] has been to create a mood of doubt and distrust, playing in part on old Cold War fears about the Soviet Union. [1194] In fact China, as we have seen, has hitherto opted for a different path, one that emphasizes economic growth rather than military capacity. Although it has undertaken a major modernization of its armed forces, the twin objects of this have been to ensure that China can respond by force if necessary to any declaration of independence by Taiwan, and to pose a sufficient deterrent to any external power that might otherwise contemplate attacking China. [1195] Both of these are long-established concerns, the first a product of the civil war, the second a function of China ’s ‘century of humiliation’ and its overriding concern for its national sovereignty. China ’s ability to develop a powerful military is also seriously constrained by the fact that its own technological level remains relatively low and that its only source of foreign arms, given the EU embargo and the US ban, is Russia. [1196] As a result, China is much weaker militarily than Japan. It still does not even possess an aircraft carrier, a crucial means of power-projection, unlike ten other countries in the world that do — including the UK, which has three. [1197] True, as China ’s power grows in East Asia and it acquires new responsibilities and commitments there and elsewhere, its military strength is likely to expand in tandem, but how much and in what ways is difficult to predict. [1198]