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CHINAS NEW GLOBAL ORDER: FOUNDATIONS FOR THE FUTURE

OF THE WORLD ECONOMY


By Arsh Shah
Lake Forest College Class of 2016
December 22nd, 2015
ASIA 493
Advisor: Professor James Marquardt

Table of Contents
I. Introduction

A. Layout and Exploration of Topics

B. Thesis Statement

II. East versus West: Chinas Neoclassical Global Order Theories


A. Ancient Tianxia Theory

7
7

B. International Foundations in the Westphalian Model

11

C. Modern Harmonious World Theory

14

III. Chinas Emergence as a Global Economic Power

18

A. Neo-Liberal Economic Perspectives

18

B. Alternative Viewpoints on the Washington Consensus: The Beijing Consensus

20

B. Deng Xiaopings Transformative Economic Reform Period: Foundations for Growth 23


C. The Post-2007 Economic Climate: A Crisis?

26

D. Issues in International Trade and Financial Markets

31

IV. The Future of Economic Relations Between China and the United States 33
A. Theoretical and Cultural Analysis of the Relationship

33

B. Main Events: China on the TPP, Economic Cyber Espionage, and the G-20 Summit 36

V. Conclusion

38

Figures

42

Figure 1.

42

Figure 2.

43

Figure 3.

44

Figure 4a

45

Figure 4b.

46

Figure 5.

47

Figure 6.

48

References

49

I. Introduction
China, in recent years, has undergone multiple economic advancements, bringing it to the
forefront of the international relations arena. The rise of China as a global economic power
proved noteworthy in 2014, as it took the lead in purchasing power gross domestic product
(GDP) with $17.6 trillion compared to a close $17.4 trillion in the United States, according to the
International Monetary Fund (IMF).1 Regardless of this occurrence, China has faced a multitude
of issues in 2015, harshly impacting its chances to remain an economic contender to the United
States.
From a historical standpoint, China has undergone cyclical economic fluctuations since
the beginning of its rise in the 1980s, as we will examine throughout this paper. Two lesser
known order theories create a lasting effect on Chinas economic past and present: the
harmonious world (smile diplomacy) idea, and modern tianxia theory (both of which were used
in modern times by Harvard international security scholar, Shi Yinhong2, and Professor of
Philosophy at the Chinese Academy of Social Sciences, Zhao Tingyang, respectively).3 These
affected visions that China has of itself as a global actor have changed its policies throughout
history and further created the Chinese economic power that we see today. Evidence can be
found in relation of these ideologies back in the 1980s leadership of Deng Xiaoping (a vital

Halbert, Gary. "China Surpasses US As World's Largest Economy [ANALYSIS]." ValueWalk.


May 27, 2015. Accessed December 20, 2015. http://www.valuewalk.com/2015/05/china-worldlargest-economy/.
1

"Smile Diplomacy." The Economist. March 31, 2007. Accessed December 13, 2015. http://
www.economist.com/node/8880901.
2

Feng, Zhang. "The Tianxia System: Chinese Order in a World Utopia." China Heritage
Quarterly. March 15, 2010. Accessed December 16, 2015.
3

statesman and in the economic rise of China, contributing policy shifts to a majority of Chinas
famed GDP increase), although his predecessor (PRC founder, Mao Zedong) did not view him as
entirely favorable. The bleeding through of these ideas can also be seen in the policy-making
activities of more recent Chinese leaders, specifically the orders of Hu Jintao (2002-2012) and Xi
Jinping (2012-current). Also, the international security relationship between the United States
and China in terms of economic power will be examined, in consideration of the past
relationships between these great countries throughout history, as well as speculations for the
future of both countries as well.

A. Layout and Exploration of Topics

The topics included in this document will hereafter be laid out as follows in three major
areas - implications of Chinas harmonious world and tianxia theories, a synopsis of Chinas
economic rise from the 1978-1992 reform period under Deng Xiaoping (which followed the
1950s PRC political climate under Mao Zedong, and preceded the modern economic policy
decisions (2002-current) under Hu Jintao and Xi Jinping), and lastly, the international
perspectives of a variety of thinkers on the state of US-China relations from now (2015) into the
future.
Put more descriptively, we will enter a brief foray of Chinas definitive global order
theories of international relations (tianxia and harmonious world) in regards to the PreWestphalian model). Following this, we will indulge in the current contentions on the
Westphalian model (post 1648), in the eyes of both the United States and China. These theories

of international relations will be applied in the following sections of information regarding


Chinas economic history as well. Finally, a prominent analysis of David Kangs (an
international relations scholar and PhD holder from University of California - Berkley) thoughts
on China as a regional actor will be expressed.
Thereafter, neoliberal economics will be defined in relation to Chinas economic
viewpoints, after which an investigation of historical data (from Deng Xiaoping to Xi Jinpings
leadership) on Chinas economic indicators from 1980-2015 (GDP-growth rate, consumer price
index, fiscal and monetary policy initiatives, and PPP (purchasing power parity), among others)
will take place. Corresponding viewpoints on the Washington Consensus (a common Western
economic policy) will occur in regards to Chinas view on the matter. After this section, we will
examine the current, post-2007 format of Chinas economy (often described as a socialist-hybrid
state market economy, with democratic influences), and conduct investigations of the domestic
and international issues that China faces (overvaluation of the Chinese Renminbi/Yuan or
devaluation of currency, and international trade import problems with the United States. After
this, some speculations on the hypothetical realizations of Chinese economy in the future will be
exposed as well (such as the effects of an eventual American economic decline, as well as
Chinas famed consumer spending hypothesis ($6.4 trillion dollars in consumer expenditure as of
2025).4
Lastly, we will reflect on current events that have occurred in the international economic
area between the United States and China - more specifically viewpoints on the the Trans-Pacific
Partnership (TPP), actions of co-operation in economic cybersecurity and espionage, and lastly
"China's Consumption to Hit $6.4 Trillion by 2025." - Xinhua. November 20, 2015. Accessed
December 11, 2015. http://news.xinhuanet.com/english/2015-11/20/c_134837180.htm.
4

topical studies of Chinas new ideas regarding hosting the 2016 iteration of the G20 in
Hangzhou. Furthermore, these economic agreements will serve as the foundation for
speculations on the relationship between the United States and China in the long run, allowing us
to further relate the tianxia and harmonious world theorems as factors in Chinas possible
hegemony, hierarchy, or co-operation with other countries as another economic superpower. It is
important to note that the hypothetical future of US-China relations outlined in this document is
based on the assumption that the United States and China will be able to peacefully coexist as
international actors, as they have for many years. Also, we can assume that no country will
engage in any military actions based on argumentum ad baculum (the logical fallacy of threat to
force to merely bring about the acceptance of a defined conclusion).5
To conclude this paper, a brief summation of the above points will be expressed, along
with the full integration of global order theories and their relationship to economic analysis.
Chinas historical and current reputation as an international power as we advance through
economic changes and regime shifts will be expressed as well. Furthermore, generalizations will
be made regarding the international economic state of the country as it is today, and may be in
the future (eventual hierarchy, hegemony, or co-operation, as previously described).
B. Thesis Statement

Chinas visions of global order theory, since the harmonious world and tianxia concepts
were introduced, created an economically hegemonic nation that sought to better itself through
economic actions alongside other international actors. The onset actions of Chinas smile

Fisher, David. "Logical Fallacy: Appeal to Force." Logical Fallacy: Appeal to Force. Accessed
December 13, 2015. http://www.fallacyfiles.org/adbacula.html.
5

diplomacy created a facade that China wanted to propagate into foreign relations with the
United States over time, effectively rendering agreements based on Chinas ulterior motives.
Furthermore, the 1980s reform period under leader Deng Xiaoping gave Chinas economic
expansion a kick-start with agricultural shifts, an influx of foreign direct investment, and the 6th
Five Year Plan, effectively propagating great power and financial strength. The modern world
brought about Chinas non-military hegemonic rise as an international superpower, although
contributing to the economic congestion of various sectors and overall financial slowdown more
recently as it has tried to assert dominance over the world. As China has recently surpassed the
United States in terms of economic growth, we may speculate that both nations are headed
towards eventual co-operation in the future through the foundations of various international
agreements between the two countries.

II. East versus West: Chinas Neoclassical Global Order Theories


A. Ancient Tianxia Theory

Beginning in ancient times (1046-221 B.C.E) stemming from the Zhou period, perhaps
the most prominent Chinese international relations idea was that of tianxia () theory 6,
further defined as All-Under-Heaven. These roots can more aptly be described with
interpretations in two ancient contexts ( originally from the pioneer of modern Chinese

humanities, Liang Qichao)7 according to Wang Mingming, a Chinese anthropologist at Peking


University.
Firstly, tianxia could be seen as Chinas ethnographic vision of itself domestically,
complete in a super-societal system, referring to a [political entity] that reached a topographical
scope far greater than that of a kingdom (guo). Further, when said entity was complete it
[aligned] the frontiers of China with the limits of the Universe8 (also known as shijie). This
belief can most easily be described as the spreading of Chinese political actions throughout the
kingdoms and domestic communities present at the time. It allowed for Chinas scholars to
envision a future of global rule as this concept could (and soon would be) applied on an even
more massive scale. These older applications of this idea most likely led to the modern
restructuring in political and international economic areas as we will soon discover under Zhao
Tingyangs research.
Secondly, another definition of tianxia theory is relevant in the physical manifestations of
relative size, not only between Earth and Heaven (such that Earth is proportionally smaller).
Furthermore, it is defined as present in the relative gap between the realistic geographical
definition (whether domestic or global) and the universal cosmic definition (see above). We
will primarily be focusing on the first ethnographic vision, although the other-worldly idea
outlined here may prove interesting to some.9

Mingming, Wang. "All under Heaven (tianxia): Cosmological Perspectives and Political
Ontologies in Pre-modern China." HAU: Journal of Ethnographic Theory 2 (2012): 337-83.
Accessed December 14, 2015. www.haujournal.org/index.php/hau/article/download/
hau2.1.015/113.
7

Ibid, p. 338

Ibid.

Zhao Tingyang (as described earlier) has effectively pushed the introduction of this
concept from its philosophical origins into the international relations realm 10 with Tianxia Tixi
(published in 2005), and further developed the modern iteration in a second volume published in
2009. This new updated theory can be outlined as follows (under Zhang Feng, a scholar from
Tsinghua University):
First, tianxia, a dense concept referring to the world, has three meanings: 1) the earth or
all lands under the sky; 2) a common choice made by all peoples in the world, or a
universal agreement in the hearts of all people; and, 3) a political system for the world
with a global institution to ensure universal order. With the concept of tianxia, therefore,
the world is understood as consisting of the physical world (land), the psychological
world (the general sentiment of peoples) and the institutional world (a world institution).
Zhao claims that this conceptualization regards the world as the highest political unit,
setting it apart from Western conceptualizations that stop at the nation-state as the highest
unit of analysis. This Chinese-style analysis uses the structure of familystatetianxia,
which Zhao argues is a wider and more powerful explanatory framework than those
found in Western theories.11
As we can see, additional layers of theory are present (the physical, psychological, and
institutional), and the world is viewed as an entire system. In this newer concept, we see tianxia
as equated to an all-inclusive system. There are no enemies, or opposing forces, as the free world
exists as a single union that operates under a certain hierarchy of powers. Moreover, the
legitimacy of the system is reflected in a family atmosphere. Although this may seem like a
strange international view of global order that is radically different from Western-influenced
common political organizational structures that we see today (democracy, oligarchy, monarchy),
the Eastern scholars think the updated tianxia seems to hold up well. The hierarchical Sino-

Feng, Zhang. "The Tianxia System: Chinese Order in a World Utopia." China Heritage
Quarterly. March 15, 2010. Accessed December 16, 2015.
10

11

Ibid.

centric vision that China has of a father-figure that presides over the world may not always
work well from an international economic point of view.
The tianxia perspective allows China to rule the free world in hegemony (under nonmilitary threat), under the assumption that all enemies would become friends, all religions would
be tolerated, and that it would be implemented on a global scale. 12 Professor William Callahan at
the University of Manchester gave a lecture at the University of Southern California in 2008,
stating that Zhaos concept contained a fatal flaw: it used absolute exclusion and hierarchical
inclusion to marginalize the West13. Instead of assimilating differing modes of thought and
global perspectives, China would ultimately steamroll the United States into cooperation.
Callahan saw another issue here: not everyone wants, or will embrace this new world order, and
that the United States could have the means to resist China with military force or some other
means. Thus, Callahan does not view Zhaos tianxia theory as a post-hegemonic state of doom,
but rather as a new hierarchical state of the world, with China at the top. However, Chinas
economic position in the international system has been tested repetitively throughout history, and
more recent global conflicts have questioned its ability to lead the worlds economic future.
Furthermore, in an system such as this one, who can we depend on to mitigate any conflicts and
keep peace? The more reasonable theory that China may use (harmonious world), with
normative soft power is evident as well, but a blend of these two ideas will prove effective if
Chinas visions of itself happen to eventually come to fruition.

Gobena, Lelise. "The Implications of "Tianxia" as a New World System." USC US China
Institute. December 4, 2008. Accessed December 16, 2015.
12

13

Ibid.

10

B. International Foundations in the Westphalian Model

The Westphalian model of international relations theory can most aptly be characterized
as the byproduct of the Thirty Years War, and moreover, the Peace of Westphalia in 1648. It
contains three common contentions that proved to become the standard foundations for
international state and non-state actors in modern times (primarily discussed in Theories of
International Relations - POLS 245 at Lake Forest College). Furthermore, these are defined:
1.) Every state has the right to its own governance and ruling of individuals in its territory (state
sovereignty),
2.) The overall legal equality of each state remains the same amongst all actors,
3.) The international affairs of one state in relation to another are private (other parties cannot
intervene). 14
Of the three, perhaps the most ambiguous is that of state sovereignty, in the sense that it gives the
state power to influence its citizens and further develop its overall relationship with other
international actors. However, along with economic and social development, we see a few
caveats. Obviously, certain countries will advance quicker (economically developed countries, or
EDCs), and some slower (lesser developed countries or LDCs). Therefore, the principle of state
autonomy provides a safeguard against possible exploitation in this sense. If EDCs have the
ability to exploit LDCs, we will see a shift in policy initiatives towards those countries with
more economic or political influence (China). Further, I see it as crucially important to ensure
consideration of all viewpoints, no matter the size or power of the country (every one should get

Shah, Arsh. Theories of International Relations Notes. Lake Forest College. March 1st,
2014. Accessed December 15th, 2015.
14

11

the ability to preserve their own sovereignty). The United States outlook on the Westphalian
model can be seen sparingly throughout our regular conduct of foreign policy.
The American viewpoint of the Westphalian model that is currently in use reflects how
we act as an influential power in the global system in a very small way. The Westphalian model
speaks of nation-states, not international actors. Given this, we try to respect the cultural and
physical boundaries of other countries, giving them the ability to make decisions on their own,
and usually only intervene when absolutely necessary. This ideology will be expressed as we
move further into the theoretical perspectives, drawing on our relationships in Chinas spheres
with Professor David Kangs analysis. We have entered into many international agreements with
China from an economic standpoint, but there are still some military-based issues in debate (such
as the territorial disputes of the South China Sea cases, where the United States could possibly
intervene). Our position on international issues is usually quite considerate of the cultural norms
and traditions of Eastern societies (as we are a large Western power), but we must be weary to
ensure that we remain okay on all fronts with China. However, our political and economic
stances on the international level are often more confrontational than that of Chinas. Of course,
we can always play a third-party role in disputes, but the American mindset is to play a main
role. These strong arm tactics prove to move us away from the Westphalian model slowly as we
take on bigger responsibilities throughout the world. Whether they be in organizations like the
OECD, World Bank, IMF, WHO, or even inclusive of our relationships with China, we continue
to strive for strength in reputation. While we move on from older ways of thinking, China is very
much stuck in a cultural lag. Given the fact that the Westphalian model of state-sovereignty is
Western-founded, more so in older European civilizations, we should question how well it can be

12

applied to a more Eastern way of thinking (China). Can China still respect state-sovereignty,
international privacy, and legal equality in the Westphalian model? Yes, it could (on the surface),
but delving deeper into this investigation proves everything is not quite as it seems.
The Chinese perception on the Westphalian model lies at the radical opposite of ours;
such that, in the realm of international economic perspectives, China is driven towards more
domestic state oriented economic actions, as Steven Krasner points out: [t]he existing trade and
investment regimes more or less assume that corporations are independent of the state; this
assumption is comfortable for the United States. It is not so comfortable for China: a more
powerful China might press for principles, norms, and rules that were more accepting of state
direction of the economy.15 Therefore, as Chinas internal political structure affects its
international actions, we see a change in modes of thought from the United States (intervene on a
harsher level), to China (interventions on a softer level). Chinas economic policies are pushed
under the perspectives of internal motivations within the CCP and existing political structure,
primarily allowing Chinas position domestically to flourish, but also slowly strengthen its
international relationships (with countries such as the United States, over time). This soft power
dynamic shows that Chinas old styles of thinking still form the basis for its current activities as
an international economic power. To elaborate:
We see Westphalian ideas embedded deeply in the thought underlying Chinas approach
international affairs. For example, the Five Principles of Peaceful Coexistence, which
China continues to adhere to, at least in name, lift Westphalian concepts almost verbatim.
In particular, contemporary Chinese sensitivity to the principles of territorial integrity and
non-intervention in the affairs of other states highlights the importance of Westphalian
values to Chinas leaders. Furthermore, the power of the individual and of private
Harris, Peter. "Westphalia with Chinese Characteristics." The National Interest. July 24, 2014.
Accessed December 13, 2015. http://nationalinterest.org/blog/the-buzz/westphalia-chinesecharacteristics-10947.
15

13

enterprise in deciding the trajectory of Chinese national interests or state policy is still
highly limited. China continues to be dominated by state-owned enterprises and free
thought and expression remain highly stifled. National interests and national policy, in
effect, begin and end with the Chinese state.16

Furthermore, it tries to align itself closely with the properties (as outlined above) of the
Westphalian model. As I stated earlier, this proves problematic such that China cannot change its
perceptions of how it should act in global affairs. The cultural lag created here is rooted in
Chinas policies and in its worldview. Therefore, the promotion of tianxia theory is prominent in
the international relationships that China has with other countries; it strives to be a leading
father figure, especially in the economic sense. However, this grandiose vision is set on the
back burner and turns into a modernized idea that is more easily understandable - the harmonious
world theory.

C. Modern Harmonious World Theory

This second major Chinese theory was most famously spoken of in a speech at the 60th
anniversary of the United Nations in 2005, where former premier Hu Jintao introduced new
security concepts of trust, mutual benefit, equality and collaboration to establish a good
collective security mechanism throughout the world. This would give way to a century of

Panda, Ankit. "China's Westphalian Attachment." The Diplomat. May 20, 2014. Accessed
December 14, 2015. http://thediplomat.com/2014/05/chinas-westphalian-attachment/.
16

Also see:
"China's Initiation of the Five Principles of Peaceful Co-Existence." China's Initiation of the Five
Principles of Peaceful Co-Existence. Accessed December 17, 2015. http://www.fmprc.gov.cn/
mfa_eng/ziliao_665539/3602_665543/3604_665547/t18053.shtml.
for an in-depth at Zhou Enlais Five Principles of Peaceful Coexistance (1954)

14

development for all people, guarantee human rights, and allow China to firmly hold high the
banner of peace, development, and cooperation, and will combine [its] development with the
progress of humanity. 17 This was the first modern example of harmonious world theory smile
diplomacy that linked the UN Charter to Chinas quest to become a great power. Rosemary Foot,
a professor of international relations at the University of Oxford, argues that since 1979, Chinas
goal has always been to achieve a good amount of national strength. Moreover, to achieve this,
China requires a peaceful regional and global environment. 18 These needs gave rise to the
creation of benign economic policies that, while vague, will facilitate a good reaction from the
United States for some time.
Harvard scholar Shi Yinhong (a contributor to Foots work) detailed two notable
perspectives that China currently has on the outcome of their battle for global power with the
United States: that both countries will eventually reach long-term mutual cooperation. Of course,
this can only be with varying levels of consequences (Mutual agreements on certain terms, all the
to the United States never submitting to China).19 So, put more simply, the path to effective,
enjoyable, real mutual cooperation between these two countries will not happen without some
disagreements and conflict. If and when change occurs (and one should hope that it will, no
matter how long it takes), Foot imposes:
Overall, this strategy could be interpreted as soft bandwagoning with the United States.
But it is counterbalanced by a stronger Chinese global and regional presence, expressed
17

"Hu Jintao Delivers an Important Speech at the UN Summit." China-UN. September 15, 2005.
Accessed December 16, 2015.

18

Foot, Rosemary. "Chinese Strategies in a US-Hegemonic Global Order: Accommodating and


Hedging." International Affairs 82, no. 1 (January 2006): 77-94. Accessed December 16,
2015.

19

Ibid.

15

through multilateral fora, global regimes and formalized bilateral ties, in which Chinese
officials retain the option to promote their own interests even where these might cut
across those promoted by Washington. In this sense, while Beijings strategy can be
viewed as accommodation with the current US-dominated global order, it also contains
an important hedging element, or insurance policy, through which China seeks to secure
its future.20

This insurance policy of hedging can be defined as a set of strategies aimed at avoiding (or
planning for contingencies in) a situation in which states cannot decide upon more
straightforward alternatives such as balancing, bandwagoning, or neutrality.21 Therefore, we can
assume that maybe China will try to actively stop conflict and seek peace more aggressively than
the US will (after all, one can assume that we (the Untied States) have never really cared about
what other countries thought of us, as an inherently self-centered country built on strong
patriotism and nationalism). In this case, we are left to interpret whether the quest towards a
harmonious world necessarily begins with a harmonious society.
Professor David C. Kang expands on the concepts outlined above (balancing,
bandwagoning, and soft power influences) through the lens of the United States as a key
economic actor in the East Asian region. More specifically, he indicates that a lasting United
States presence in the area would be the only threatening entity with the ability to contain
Chinas sustained [economic] growth.22 This balancing of China by the United States could

20

Ibid.

21

Goh, Evelyn. Meeting the China challenge: the US in Southeast Asian regional security
strategies Policy Studies 16, Washington DC: EastWest Center, 2005, pp. viii and 23
Accessed December 16, 2015.

Kang, David C. "Getting Asia Wrong: The Need For New Analytical Frameworks."
International Security 27, no. 4 (2003): 71. Accessed December 14, 2015. http://www.jstor.org/
stable/4137604.
22

16

possibly lead to confrontation in the policy-making arena as well. However, on the other hand, if
the United States chooses to remove itself and allows China to spread its soft power relationship
around the East Asian region, other international and domestic actors will likely submit to
Chinas eventual rise. 23 Kang also illustrates this idea in another work regarding the peaceful
development of China as it rises to the top of its regional hierarchy. He states:
Chinas expected emergence as the most powerful state in East Asia has been
accompanied with more stability than pessimists believed because China is increasingly
becoming the regional hierarch. On the one hand, China has provided credible
information about its capabilities and intentions to its neighbors. On the other hand, East
Asian states actually believe Chinas claims, and hence do not fear -- and instead seek to
benefit from Chinas rise. 24

Kang advocates to describe this as a hierarchy as hegemony is a determinant of a


comprehensive international system that is dominated. Since we are focusing on a specific
region in this case (East Asia), we can see China as a leader on a more domestic front.
Furthermore, it is safe to assume no other domestic or international actor wants to drive China
out, but rather is open to the resources of such a grandiose power and would rather befriend the
country than go against.25 These regional assumptions of Chinas rise in the regional sphere can
further carry into the international relationship between itself and the United States, such that we
identify China as another major global power and can further realize that there is much to gain
through co-operation and developmental economic actions )such as outsourcing and free trade,
among others).
23

Ibid.

Kang, David C. "Why China's Rise Will Be Peaceful: Hierarchy And Stability In The East Asian
Region." Perspectives on Politics, 2005, 1-9. Accessed December 13, 2015. http://www.ou.edu/
uschina/SASD/SASD2005/2005readings/Kang-prediction.pdf.
24

25

Ibid.

17

III. Chinas Emergence as a Global Economic Power


A. Neo-Liberal Economic Perspectives

The main idea behind neoliberal economics regards the free market economy as the most
stable instrument in the context of international trade and globalization. To expand, the free
market, at its strongest point, is able to move goods much easier throughout the world and in
between countries, can utilize sources for the cheapest resources, and engage in profit
maximization as well. 26 This simply works after all barriers to entry are removed, namely: any
tariffs, restrictions on capital inflows (including foreign direct investment), regulations, and
international legislation (that harms the potential for trade.) 27 We can engage in a more selfbalancing economic action throughout the globe, such that supply and demand automatically
create the optimal flows of resources from one country to another. The liberal portion of this
definition advocates freedom from government intervention (no more harsh economic rules), as
well. From a theoretical point of view, this sounds like an economists dream, but in reality, we
have to understand that true economic neo-liberalism is difficult to bring into reality. The thought
of un-regulated free trade - simply based on economic theory does not seem completely feasible
in our eyes, which is why economic globalization takes place. Furthermore, this idea of free
markets can be seen most prominently in older economic theory by drawing on a crucial
viewpoint of economic thinking: Adam Smiths Invisible Hand Theory from his publication The

Shah, Anup. "A Primer on Neoliberalism." Global Issues. August 22, 2010. Accessed
December 16, 2015. http://www.globalissues.org/article/39/a-primer-onneoliberalism#Neoliberalismis.
26

27

Ibid.

18

Wealth of Nations (1776): the government should stay out of the may of the economic actors
(firms) and let them engage in free-market operations, which will balance demand and supply of
consumers. The lower the price of a good, the higher the demand, which promotes competition
between firms and further ensures that economy will reach its most efficient outcome. The idea
of free-market economics is important because it allows us to consider a vision of a new
economic order in which countries could freely exist and act, as our combination of tianxia and
harmonious world theory promote (although these are driven by Chinas visions of leadership).
The all-inclusive aspect of harmonious world theory can be applied to economics as well: such
that China wants to promote its on worldview in an ideal light, rather than push it forcefully. In
the realm of international economic thought, we see this as a more feasible option that could be
more commonly accepted.
From Chinas point of view, we see a gradual paradigm shift towards a more democratic
Western state of economy. This does not mean, however, that China completely respects
neoliberal economic traditions (although the United States in fact does), and the overarching
political structure that is present in China today reflects that concept:

Firstly, the differences between the two can be seen from an institutional perspective. The
socialist system with Chinese characteristics is founded on the fundamental political
system of peoples congresses. This fundamental political system serves as the basis for
Chinas basic political systems, which include multi-party cooperation and political
consultation. The socialist system with Chinese characteristics also comprises a basic
economic system whereby public ownership is the mainstay while various forms of
ownership are able to develop side by side. Secondly, the differences between the two are
evident from the guiding principles they follow. Chinas socialist market economy
attaches great importance to the role of macro control, laying emphasis on exerting the
strengths of both planning and market forces. Thirdly, the differences between the two are
evident from the role of the government in economic activities. A great deal of research,
19

including research by Western scholars, has argued that the success of the Chinese path is
attributable to the fact that China not only boasts a big government, but also a good
government.28

To sum up this idea, we can further understand that from a political perspective, the Chinese
government is already integrated in the economic decisions that the country makes today (mainly
caused by China being run in oligarchy), so much so that the socialist formats of economics still
play a role in how the Chinese Communist Party (CCP) and leaders of China envision
themselves in the mind of other international actors. The facts of these parties playing a role
shows that this form of big government can cause the congestion in the policy making arena
(whether international or domestic) as such a horizontal regime will cause delays.
B. Alternative Viewpoints on the Washington Consensus: The Beijing Consensus

The Washington Consensus is a series of 10 policy reforms that the United States
government and many other US-based international foundations (like the IMF, World Bank,
WHO, etc) believed should be the base layer of economic policy for growth throughout the
world. As a neoliberal perspective, the Washington Consensus focuses on strong macroeconomic
growth through the removal of trade barriers, the introduction of market-determined interest
rates, and lastly, strong fiscal discipline (strict criteria regarding the limitations of budget
deficits.29 In some sense, China does not agree with these ideologies and a more flexible
alternative policy is suggested, called the Beijing Consensus.
"There Are Alternatives: How China Departs from the Wests Neoliberalism - Online University
of the Left." Online University of the Left. September 4, 2015. Accessed December 15, 2015.
http://ouleft.sp-mesolite.tilted.net/?p=1821.
28

"Washington Consensus." World Health Organization. 2015. Accessed December 10, 2015.
http://www.who.int/trade/glossary/story094/en/.
29

20

Drawing on the works of Ramo (Foreign Policy Centre, 2004) 30 and Huang (2008)31, a
suitable definition of the Beijing consensus: Chinas alternative to the Washington Consensus,
effectively harboring three main ideas: innovation, pursuit of goals through human development/
rejection of the per-capita GDP dialogue and self determination. 32 Furthermore, the government
focuses on an inherently communistic ideology: that of the people. Innovation in policy is driven
by what the government thinks is best for China as a country, and further has the capabilities to
extend a vision past numbers-based goals such as GDP. Moreover, this model draws on
relationships between the human development index (HDI) and gross domestic product (GDP).
To illustrate this, pre-financial collapse (in 2007): [According] to the UNDPs 2007 data
(published in 2009) China was ranked 102nd out of 182 countries in terms of per-capita GDP,
whereas it was ranked 56th in measurements of adult literacy, 72nd considering life expectancy,
and 92nd according to HDI value (UNDP). Considering GDP as the single most important factor
would therefore undervalue Chinas other substantive achievements. 33 This relevance to
personal relations can also be seen in the words of Premier Wen Jiabao (who illustrates Chinas
need for growth in all spheres: [B]alancing urban and rural development, balancing
development among regions, balancing economic and social development, balancing
development between man and nature, and balancing domestic development with opening wider

Ramo, Joshua Cooper. The Beijing Consensus. London: Foreign Policy Centre, 2004. Web.
Dec 16, 2015. http://fpc.org.uk/fsblob/244.pdf,
30

Huang, Yasheng. "Debating China's economic growth: The Beijing consensus or the
Washington consensus." The Academy of Management Perspectives 24, no. 2 (2010): 31-47.
31

Turin, Dustin R. 2010. The Beijing Consensus: China's Alternative Development Model.
Student Pulse 2 (01), http://www.studentpulse.com/a?id=134
32

33

Ibid.

21

to the outside world.34 These developmental goals show China as a strongly rooted economic
actor with viewpoints past statistical rankings. A mindset such as this one will likely allow China
to purport itself as a calm country, with the ultimate goals of creating a world that an exists (and
is fine with existing) underneath it. This perception of hierarchy may prove dangerous to the
United States in the international realm if we are under assumption that hegemony will occur
from the Chinese front, but for now, we can assume that China has the ability to softly lead in the
future due to its viewpoints such as this. Finally, the third facet of the Beijing Consensus relies
on self-determination, moreover the ability of China to continue along its own international path
regardless of US influence. This proves useful especially for LDCs because they have the ability
to construct another model based on the Beijing Consensus. It is important to note that the
Beijing Consensus may not have the strict economic stability (as stated in US economic
thought) to become a widely accepted model for economic growth, but under a socialist-type
political and economy, a people-centric approach to economic thinking and international
development proves quite useful. As Arif Dirlik states:
In the PRC, the search for autonomy and self-determination has taken a
multilateralist approach to global relationships which contrasts sharply with the
increasingly unilateralist direction US policy has taken over the last two decades. The
most important aspect of the Beijing Consensus may be an approach to global
relationships that seeks, in multinational relationships, a new global order founded on
economic relationships, but which also recognizes political and cultural difference as well
as differences in regional and national practices within a common global framework. A
century of revolutionary socialist search for autonomy, bolstered by recent economic
success, qualifies the PRC eminently to provide leadership in the formation of an
alternative global order.35
34

Ibid.

Dirlik, Arif. 2006. Beijing Consensus: Beijing Gongshi. Globalization and Autonomy Online
Compendium;
Gresh, Alain. 2008. Understanding the Beijing Consensus. Le Monde Diplomatique
35

22

B. Deng Xiaopings Transformative Economic Reform Period: Foundations for Growth

The initial communal, socialistic base of the existing Chinese political structure was built
when the Peoples Republic of China was formed in 1949-1950 by Mao Zedong and his
organization, with policies such as the the first and second Five Year plans (that would soon be
built upon years later). Since then, China has undergone a cyclical economic rise and fall
entering into the more prominent reform period (led by statesman Deng Xiaoping from
1978-1982). Hereafter, the statistics presented reflect the initial numbers based growth approach
that China takes (pre-Bejing Consensus) - data obtained from the National Bureau of Statistics
and China Statistical Yearbooks indicate the following in relative GDP36:

<< Figure 1 about here>>

As we can see, the biggest overall gain in real-GDP growth percentage after 1979 took place in
1984, where the GDP growth percentage sat at a record 15.2% increase, given a majority of
foreign direct investment took place.37

36

"National Bureau of Statistics of the People's Republic of China." 2012. Accessed December 12,
2015. https://www.stats.gov.cn.
and
"China's Gross Domestic Product Growth." Chinability. March 10, 2015. Accessed December
12, 2015. http://www.chinability.com/GDP.htm.
37

Ibid.

23

<<Figure 2 about here>>

This was largely due to Deng Xiaopings economic reform policy known as the Second
Revolution a term coined by Xiaoping to create his new economic vision of a grand China. His
main goals were to: 1) [D]ouble GDP from 1981 to 1990 and ensure enough food and shelter
for all people; 2) [D]ouble GDP again in the 1990s and make sure people live a moderately
prosperous life; and 3) [A]chieve modernization by 2050 by raising incomes to the levels of
medium-size developed countries. 38 As we can see outlined here, the first two stages reflect
human-centric approaches psychologically: appealing to the people of China. Further, the third
goal was wholly underestimated, as Chinas GDP has already passed that of the United States (as
of 2015, 35 years before Xiaoping had originally thought). Ramo, of Beijing Consensus also
draws on the idea that TVEs, an industrial factor change, (Township and Village Enterprises)
drove the first series of agricultural reforms pushing Chinas city workers into the country side,
allowing for the rapid expansion of agricultural/rural economy. Moreover,
[T]he first hints of how well innovation and productivity growth could work came in the
first Chinese sector to be marketised: agriculture. In the early 1980s agriculture grew
faster than any other part of the economy. Chinese planners would make small,
liberalizing tweaks to inputs, expecting modest output increases. But these small
adjustments triggered non-linear 20 and 30 percent growth leaps. In just five years in the
early 1980s, for instance, wheat productivity increased by 60 percent, maize by 55
percent. Chinese farmers, long considered among the most backward and traditionbound workers in the world, used limited control of their crops and an innovative two-tier

Hays, Jeffrey. "Deng Xiaoping's Economic Reforms." Facts and Details. 2013. Accessed
December 15, 2015. http://factsanddetails.com/china/cat9/sub59/item372.html#chapter-9.
38

24

price system to optimize output and even, in their spare time, build small businesses.
They absorbed new technology such as better rice stocks and improved field drainage.39
Furthermore, Deng Xiaopings policy initiatives proved worthwhile, drawing upon what
Mao had created in the realm of rural economic activities (through quotas on crops, as seen
throughout historical evidence). But the greatest idea that Deng had created was the removal of
the commune system, and the introduction and opening of marketable crops. Both of these new
ideas allowed for the expansion of the booming agricultural sector to contribute to the rapidly
growing GDP, such that as of the 6th Five Year Plan, we saw growth in the agricultural sector of
11 percent40, investment in fixed assets at 350 billion yuan (about $54 billion nominal USD) , an
increase in fiscal revenue of 15.9 billion yuan per year (about $2.45 billion nominal USD per
year) or a 12% annual growth rate. Lastly, as of 1984, China rose from 28th in world exports to
10th on a global scale 41.
<<Figure 3 about here>>

Although these concepts had ultimately proved worthwhile, short term fiscal overflow creates
unnecessarily high inflation. Of course, as with any economic cycle, we will soon see this bubble
burst in 1997, with the introduction of the Asian Tiger Era that China is affected by, namely
moreso driven by the influence in of China on the ASEAN (Association of South East Asian
Nations).

Ramo, Joshua Cooper. The Beijing Consensus. London: Foreign Policy Centre, 2004. Web.
Dec 16, 2015. http://fpc.org.uk/fsblob/244.pdf, pg 16.
39

"The 6th Five-Year Plan (1981-1985)." China.Org. 2012. Accessed December 14, 2015. http://
www.china.org.cn/english/MATERIAL/157619.htm.
40

41

See Figure 3

25

C. The Post-2007 Economic Climate: A Crisis?

As we catapult ahead in time to more recent years, after the effects of a regional
1988-1990 GDP slump as a result of the Asian Tiger Era, the 1997 crisis 42, and the creation of
the Sino-US Strategic Economic Dialogue (created by Jintao and Bush to aim for the
accomplishment of long-term economic objectives, effectively open to the privatization of
firms), we are introduced to the post-2007 state of Chinas economy. Therefore, I feel it is crucial
to examine changes in the thought processes of its past leaders, effectively illustrated through an
observation by Ramo:

Chinese strategists now feel some kind of strategic leverage is a must for their continued
development. Unlike Deng-era foreign policy, which was guided by the idea that China
should hide its brightness, Hu-era policy is already defined by an awareness of Chinas
place in the world. This is yet another increasingly well- discussed part of the Beijing
Consensus. While Mao worked under a strategic assumption of zhanzheng yu geming
(war and revolution), Deng generally avoided conflict in favour of development, with a
foreign affairs doctrine of heping yu fazhan (peace and development). Jiang had an
evolved version of Deng: zengjia xinren, jianshao mafan, fazhan hezuo, bu gao duikang
(build trust, decrease trouble, develop cooperation and avoid confrontation.) Yet
Chinese strategists clearly feel a new doctrine is necessary, one that gives them tools of
self-determination without the political or economic costs of a massive buildup. The goal
for the Chinese is not conflict, but the avoidance of conflict. This is a doctrine that
sometimes confuses U.S. thinkers, who are looking for signs of a China threat, but it
reflects a deeply held Chinese belief that armed conflict is an indication of failure. True
success in strategic issues involves manipulating a situation so effectively that the
outcome is inevitably in the favour of Chinese interests.43

42

See Figure 1

Ramo, Joshua Cooper. The Beijing Consensus. London: Foreign Policy Centre, 2004. Web.
Dec 16, 2015. http://fpc.org.uk/fsblob/244.pdf, pg 38-39.
43

26

On the fiscal front we see that:


The Chinese people have long maintained a tradition of frugality and saving. Chinas
national savings rate has consistently been among the worlds highest since the 1970s.
These savings have played an enormous role in easing the shortage of funds for
development and facilitating the countrys economic take-off. In addition, the rapid
development of Chinas economy, the sharp increase of tax revenues, and the Chinese
governments control of land and other critically important resources have endowed
China with considerable financial strength. In 2012, Chinas fiscal revenue reached 11.72
trillion yuan. This has enabled China to engage in the large-scale development of
infrastructure, allowing it to accomplish major undertakings of national significance that
would likely have been beyond the reach of other countries.44
With these developmental advantages, the Chinese path is not only benefitting Chinas
modernization at present, but will also continue to benefit it in the future. The Chinese path has
provided other developing countries with a relatively clear and implementable solution to the
problems that they have encountered during the process of modernization.Given that Chinas
evolving leadership is self aware of its global stance (as of Hu Jintaos reign), we can safely
assume that Xi Jinping has pushed China further into a more modernized vision than that of his
predecessors. But this does not prove worthwhile in the economic reputation of the country.
As of 2010, Chinas economy has seen a constant drop in gross domestic product.
Furthermore, debt-GDP ratio statistics indicate that in 2014, the debt sat at 282% of Chinas GDP
45(for

some comparison, Ireland, who was also hit by the financial crisis had a 123.2% debt-GDP

"There Are Alternatives: How China Departs from the Wests Neoliberalism - Online University
of the Left." Online University of the Left. September 4, 2015. Accessed December 15, 2015.
http://ouleft.sp-mesolite.tilted.net/?p=1821.
44

45

See Figure 3.

27

ratio in 2012). The implications of this study done by the McKinsey consultancy firm46 show that
debt has quadrupled over a seven year period, due to real estate and shadow banking issues.47

<<Figure 4a and 4b about here>>

An article published in the Sydney Morning Herald seems to point us in an interesting direction:
that this is merely a quick recessionary cycle for China, moreover that we cannot assume a large
financial crisis just because statistics have reflected a drop since 2007. 48 This may hold true in
some sense, but with a current GDP growth rate of 7%, China primarily affects world
commodities markets as well as international holdings (it contains $1.5 trillion in United States
FDI)49, so in the midst of its current financial slowdown, our returns will not be completely
recovered for a while. Chinas total holdings make up 11% of the worlds GDP, and they
consume 40 to 70 percent of the global demand for commodities.
The overall demand slowdown in the worlds commodities holds true as the country
continues to consume extremely large percentages:

Dobbs, Richard, Susan Lund, Jonathan Woetzel, and Mina Mutafchieva. "Debt and (not
Much) Deleveraging." Debt and (not Much) Deleveraging. February 2, 2015. Accessed
December 13, 2015. http://www.mckinsey.com/insights/economic_studies/
debt_and_not_much_deleveraging.
46

47

Ibid.

Gittins, Ross. "Don't Buy the China Doom and Gloom Stories Just Yet." The Sydney Morning
Herald. November 20, 2015. Accessed December 17, 2015. http://www.smh.com.au/business/
the-economy/dont-buy-the-china-doom-and-gloom-stories-just-yet-20151119-gl2oep.html.
48

http://www.bloomberg.com/news/articles/2015-11-19/a-hard-landing-in-china-could-shake-theworld49

28

<<Figure 5 about here>>

One such commodity not mentioned: silver (usually an indicator of economic stability).
According to the Visual Capitalist50, silver consumption in China is 13% of the worlds, and with
prices sitting at around $14.15 per ounce, this quarter marks the lowest drop in the commodity
for the last 13 economic cycles51. Furthermore, the next claimed price on silver is around $12.50,
very low when compared to the YTD (year-to-date cap of $50.00). Given its recent decreases in
manufacturing, we see the producer price index (PPI) fell 5.9 percent, compared with an
expected 5.5 percent drop and after a 5.4 percent decline in the previous month. This marks the
42nd consecutive month of declines.52 This relative drop in all commodities marks a crucial
shift in Chinas economy: changing from a working class old market (focused on manufacturing
and metals), to a consumer driven new market53 (technology, internet). Chinas current policy
initiatives include its newest (13th) Five-Year Plan for economic recovery, but for these to be
feasible, many scholars indicate that the GDP-growth rate must be equal to 6.5-7 percent. Below
we can see the possible projections according to the International Monetary Fund until 2020:
Desjardins, Jeff. "China Consumes Mind-Boggling Amounts of Raw Materials." Visual
Capitalist. September 10, 2015. Accessed December 14, 2015. http://www.visualcapitalist.com/
china-consumes-mind-boggling-amounts-of-raw-materials-chart/
50

Whitefoot, John. "Silver Prices to Soar on China's Economic Slowdown." Stock Market Advice
Investment Newsletters Profit Confidential. November 19, 2015. Accessed December 15, 2015.
http://www.profitconfidential.com/silver/silver-prices-to-soar-on-chinas-economic-slowdown/
51

Tang, Kit. "Asian Shares Fall as Japan, China Data Add to Growth Fears." CNBC. September
10, 2015. Accessed December 19, 2015. http://www.cnbc.com/2015/09/09/nikkei-asx-rally-maylose-steam-after-wall-street-decline.html.
52

Xuequan, Mu. "China Shifting to Nation of Consumers: Expert." Xinhua. November 20, 2015.
Accessed December 16, 2015. http://news.xinhuanet.com/english/2015-11/20/
c_134835036.htm.
53

29

<<Figure 6 about here>>

Population stability decreased as well (due to drops in manufacturing) showing that


Chinas working-age population shrank last year for the first time in at least two decades and
the United Nations predicts further declines over the next 10 years.54 Older aged members of
the working class prove difficult to utilize with todays updating world of technological
advancement as well. Therefore, more technological based businesses are taking a role to fill
Chinas economic gaps. Entrepreneurship also plays a crucial role, with 10,000 new market
players entering every day.55 The White notes that [t]he United States has also benefited from
the emergence of a global middle class that, by 2030, is projected to include more than 3 billion
consumers in Asia alone. U.S. exports of goods and services supported approximately 12 million
jobs in the United States in 2014.56 These innovative ideas can be pushed back to the Beijing
Consensus as well, showing that technological adaptivity proves to be useful in Chinas eyes.

Xie, Ye. "Morgan Stanley's China Bear Puts Zero Odds on 6% Economic Growth."
Bloomberg.com. November 19, 2015. Accessed December 14, 2015. http://
www.bloomberg.com/news/articles/2015-11-19/morgan-stanley-s-china-bear-puts-zero-oddson-6-economic-growth.
54

Zhaohui, H.E Lao. "Chinas Economy Is Transforming Itself: Ambassador Zhaohui." IPolitics.
Accessed December 13, 2015. https://ipolitics.ca/2015/11/19/chinas-economy-is-transformingitself-ambassador-zhaohui/.
55

"FACT SHEET: U.S.-China Economic Relations." The White House. September 25, 2015.
Accessed December 18, 2015. https://www.whitehouse.gov/the-press-office/2015/09/25/factsheet-us-china-economic-relations.
56

30

Therefore, we see a lot of hope arising from Chinas recent transition to this new market type. On
top of this, there are still a few more international financial issues that need to be sorted out in
todays world.
D. Issues in International Trade and Financial Markets

More recent founded issues in international trade and financial markets are plaguing the
country as of this year. The devaluation of the Chinese yuan/renminbi has affected Forex (foreign
exchange markets for currency). This devaluation has led to the subtle shaming of Chinas
economy by the united states. Since the currency devaluation occurred in September of this year,
the Chinese yuan currently is fluctuating in relationship to the US dollar. 1 USD equals about
6.46 Chinese yuan today, effectively shifted from the 7.2 it was back in 2008. This leads to any
exports from China as cheaper on the international front, but imports are grounded as much more
expensive. Therefore, our exports cannot and will not be accepted into China as frequently. So,
whilst hurting the US economy, China is able to engage in meaningful export-oriented trade.
However, this past November, we saw a milestone event for the CCP and the economic markets
in China: the yuan was accepted as a global reserve currency.57 This further means that the IMF
has deemed it freely useable, widely traded and used. 58 This is in favor of those individuals
who see market-oriented liberalization and trade as an effective outcome for China in the future.
Lastly, we should examine the famed consumer spending hypothesis that China faces:

Lopez, Linette. "Everything Just Changed for China's Currency." Business Insider. November
30, 2015. Accessed December 18, 2015. http://www.businessinsider.com/chinese-yuan-hasbecome-a-reserve-currency-2015-11.
57

58

Ibid.

31

$6.4 trillion in consumer spending by 2025, according to an article published on CNN Money.59
This could be entirely possible, given the recent market trends in consumerism and a modernized
financial market that shys away from commodities (ancient) and towards technology (modern).
According to CNN statistics:
At this [5.2%] rate [of consumption], cumulative consumer spending will hit a whopping
$56 trillion between now and 2025, keeping China firmly in place as the second-largest
consumer market in the world, after the United States.This is largely in line with what the
Chinese government is hoping for the domestic economy. Beijing is engineering a shift
away from an export-led economy, toward one driven by higher consumption. It's been an
uphill battle as China struggles with a slower growth rate -- the economy is now
expanding at the worst pace since the 2009 financial crisis. But even if overall GDP
growth slows by as much as one percent going forward, the report indicates consumption
would still grow by 4%. In other words, China appears to largely be on track.60
I couldn't agree more. Is China in the midst of an economic slump? Yes. Will these effects largely
damage the current state of the economy? Possibly, in the short run. However, I believe we
should remain optimistic for the future, as Chinas growth rate still trumps countries such as
Japan, who also faced a 1% GDP-growth rate this past year.61 In the eyes of our predictions on
China running the future global economic order, we see that small setbacks (amongst everything)
will not hinder Chinas progress. Its approach to foreign relations continues to dominate, and the
effects that harmonious world theory and tianxia have on the economic actions and rise of China

Yan, Sophia. "China's Consumers to Spend $6.4 Trillion by 2025." CNNMoney. November 19,
2015. Accessed December 19, 2015. http://money.cnn.com/2015/11/19/news/economy/chinaconsumer-spending/.
59

60

Ibid.

61Scott,

Malcom. "A Hard Landing in China Could 'Shake the World'" Bloomberg.com.
November 19, 2015. Accessed December 22, 2015. http://www.bloomberg.com/news/articles/
2015-11-19/a-hard-landing-in-china-could-shake-the-world-.

32

over the past 35 years (1980-2015) indicate a growing familiarity with how they should operate
in the future.

IV. The Future of Economic Relations Between China and the United States
A. Theoretical and Cultural Analysis of the Relationship

The future international economic relationship with the United States, although possibly
unstable, usually promotes the idea of long term stability of both countries side by side. We can
discover the forthcoming trends of the Sino-American relationships within Chinas two
prominent theories of global order in a non-military hegemonic state and their application to its
current policy model, namely Chinas regime under its current Prime Minister Xi Jinping. There
are a few distinct instances in recent news articles where Jinpings true intentions for China are
revealed. An article published in the New York Times on a US-China carbon emissions
agreement that was negotiated at APEC (the Asia Pacific Economic Cooperation) stated that the
US would cut their carbon emissions twenty-six to twenty-eight percent by 2030, whereas China
promised to simply have their emissions peak by that year, giving no real promise of whether
they would drop or not.62 Furthermore, in an article by South China Morning Post, more details
of a Free Trade Area of the Asia-Pacific emerged, placing China at the center of a new Silk
Road [that] envisions an Asia-Pacific land and maritime network of industrial and financial
infrastructure serving 40 per cent of the world's population in a region that will account for 50

62

Landler, Mark. "U.S. and China Reach Climate Accord After Months of Talks." The New York
Times. November 11, 2014. Accessed December 16, 2015.

33

percent of its trade.63 Given these efforts to thwart the US shift as it sees China as an economic
threat of great power, Xi announced that China will put US$40 billion into [this] Silk Road fund
for infrastructure and resources, which would improve links and break the region's connectivity
bottleneck.64
In regards to these news occurrences, we gather that Xi Jinping is acting in a more
aggressive fashion than his predecessors (Hu Jintao, Jiang Zemin, and Deng Xiaoping) when
pushing the evolution of Chinas smile diplomacy (which is to appear to other international
institutions, friendly on the surface, with hidden intentions internally). The Economist (a US
source) detailed an article regarding Chinas internal affairs saying that the internal state media
warned of a hostile West planning to undo China.65 These shrill announcements contradict Xis
notions for a new type of great-power relationship, and a mutual quest for China and the
United States to maintain stability and world peace. This also created a very delicate atmosphere
for the impending status of Chinas relations with the United States. Both countries want to view
one another as both an ally and an enemy in their quest for hegemony. This teetering back and
forth between states of mind for both countries will likely prove damaging to the world at large
in the long run, because there is never a distinct sense of trust between them. It is through this
introspective lens that we can observe Chinas currently accepted idea of harmonious-world
theory.

"A New World Order Takes Shape as China Rises." South China Morning Post. November 13,
2014. Accessed December 16, 2015.
63

64

Ibid.

65

"The Chinese Order." The Economist. November 15, 2014. Accessed December 16, 2015.

34

Chinas perspective today views (or favors the viewing of) the combination of two
ultimatums (in my analysis) for its future conquest of power: it overtakes the world with nonhegemonic tianxia (quite unlikely), and coexists with US in a harmonious world. China does not
want to think about the potential third option: that with its current back and forth motions (with
the US) and delicate balance of saving face in both the regional and global arenas, it will never
coexist alongside another great power like the United States. China was built on the idea of
face, which can be closely compared to the neo-Confucian idea of filial piety and shame,
namely that acting out of line will bring dishonor to ones family (in this case, all of China, in the
eyes of the world). Further, this concept is applicable to international relations today under the
guise of smile diplomacy. China saves face in good actions (like the harmonious world) and
damages it in others (like the perception it gave the United States in an Economist article which
leaked Chinas internal state media warnings to our general public, as previously stated). If China
decides to play it safe, and save face, they will calmly and slowly assimilate to the US vision of a
hegemonic world order, as Foot stated. If not, they will enter eventual coexistence (albeit with
neo-Confucian influences) with a mutual disdain for their friend across the Pacific: the United
States. Ramo (of the Beijing Consensus viewpoint) states:
There is a sharp debate inside Chinese policy circles about whether or not the U.S. will
allow China to rise. Official Chinese policy will try to mask these conflicts in the
interest of good Sino-U.S. relations, but behind that faade, lies this calculation: It is
important, Chinese planners write, for us to master the art of keeping a proper distance
and propriety in U.S.China relations. And, they warn, We should not place unduly
high expectations of the economic interdependence between China and the United States.
There is an area of misunderstanding which makes it seem that Chinas vast market has a
very big holding force to US policies, and which holds that as long as we emphasize

35

economic cooperation and exchange, we can sleep in peace. In fact, the economic
interdependence between China and the United States is not reciprocal.66
B. Main Events: China on the TPP, Economic Cyber Espionage, and the G-20 Summit

The three vitally important economic events outlined in the section detail the TransPacific Partnership (TPP), a recent policy agreement between the United States and China
regarding intellectual property theft through economic cyber espionage, and lastly the recently
announced 2016 G20 in Hangzhou, China.
To begin, we should examine the TPP, which is effectively the largest regional trade
agreement in the world, composed of 10 parties (including the US and Japan), who will conduct
an estimated amount of 28 trillion USD in business developments. 67 As China is not a part of the
TPP, we see increased concerns on the Chinese front because of economic power imbalances in
Asia. Furthermore, Shinzo Abe and President Obama seem to be leading the more recent
changes, causing China to realize that the United States and Japan are formulating policy
initiatives without them. So, as a result, China has considered joining the TPP, and is considering
changing its current stance. In the meantime (before joining) the alliance, China is most likely
drafting policy initiatives as well. President Obama has stated on the matter: When more than
95 percent of our potential customers live outside our borders, we cant let countries like China
Ramo, Joshua Cooper. The Beijing Consensus. London: Foreign Policy Centre, 2004. Web.
Dec 16, 2015. http://fpc.org.uk/fsblob/244.pdf, pg 40;
66

The Choice of Chinas Diplomatic Strategy, Mar 19, 2003 Peoples Daily, Also Jiang Zemins
Report to the 16th Party Congress, at
http://news.xinhuanet.com/ english/2002-11/17/content_633685.htm
Naughton, Barry, Arthur Kroeber, Guy Jonquieres, and Graham Webster. "What Will the Trans
Pacific Partnership Mean for China?" Foreign Policy. October 7, 2015. Accessed December 17,
2015. http://foreignpolicy.com/2015/10/07/china-tpp-trans-pacific-partnership-obama-us-tradexi/.
67

36

write the rules of the global economy, we should write those rules.68 While this development
may serve as a negative in the US-China realm, Chinas more recent economic cyber-security
agreement with the United States fosters some mutual attraction.
The developments regarding treatment of economic activities in cyber-espionage (that
China was conducting intellectual property theft through hacking the United States government)
were put to death recently this past September as the President issued a statement at the White
House:
I raised once again our very serious concerns about growing cyber-threats to American
companies and American citizens. I indicated that it has to stop. The United States
government does not engage in cyber economic espionage for commercial gain. And
today, I can announce that our two countries have reached a common understanding on
the way forward. Weve agreed that neither the U.S. or [sic] the Chinese government will
conduct or knowingly support cyber-enabled theft of intellectual property, including trade
secrets or other confidential business information for commercial advantage. In addition,
well work together, and with other nations, to promote international rules of the road for
appropriate conduct in cyberspace.69
Following this, Chinese Premier Xi Jinping issued his own iteration:
During my visit, competent authorities of both countries have reached important
consensus on joint fight against cyber-crimes. Both sides agree to step up crime cases,
investigation assistance and information-sharing. And both government will not be
engaged in or knowingly support online theft of intellectual properties. And we will
explore the formulation of appropriate state, behavior and norms of the cyberspace. And
we will establish a high-level joint dialogue mechanism on the fight against cyber-crimes
and related issues, and to establish hotline links.70

Hsu, Sara. "China and the Trans-Pacific Partnership." The Diplomat. October 14, 2015.
Accessed December 14, 2015. http://thediplomat.com/2015/10/china-and-the-trans-pacificpartnership/.
68

Bejtlich, Richard. "U.S.-China Cybersecurity: To Hack, or Not to Hack?" The Brookings


Institution. September 28, 2015. Accessed December 18, 2015. http://www.brookings.edu/blogs/
up-front/posts/2015/09/28-us-china-hacking-agreement-bejtlich.
69

70

Ibid.

37

These statements allow us to make some foregrounded remarks. Furthermore, these comments
by both Obama and Jinping create some lasting doubt. Of course, we know that both countries
have engaged in espionage work to gain an advantage over their respective counterparty.
Therefore, regardless of what is said on the surface (as we have learned through harmonious
world theory and the exploration of face, or filial piety), China will continue to conduct
business as usual, drawing on its abilities to accomplish its own objectives in the present and the
future.
Lastly, the G20 Summit in 2016 under Chinas leadership is important to note. Premier Xi
Jinping stated in a recent press-release on the G20 webpage that Chinas main goals for its
hosting the summit are: [Moving] towards an innovative, invigorated, interconnected, and
inclusive world economy.71 Given that economic developments create the foundation for the
next G20, we see Chinas goals on the matter aligned with global objectives for economic
wellbeing. These 4 Is also align with Chinas domestic visions in innovation drivendevelopment, international economic cooperation, interconnectedness that feeds the creation of a
more open world economy, and lastly, inclusive growth between these countries. From our
theoretical points of view in global order: we see that Chinas major policy advancements in this
area will help create its ideal vision of a harmonious world in the future, and being at the center
of international trade and on good relations with the rest of the G20 will ensure that it is never
hated.

V. Conclusion

71

http://www.g20.org/English/Dynamic/201512/t20151201_1660.html

38

In conclusion, we have discovered the ancient foundations of global order theory as


prominently large causes of Chinas economic actions in history, and how China deals with
international financial issues today. Speculations for the future of US-China relations are still
wish-washed in the foreign relations arena, in which China promotes overall engagement on the
global spectrum. However, critics employ that China continues to demonstrate saving face on a
core level and that it always has ulterior motives when dealing with the United States in a oneone scenario. Sure, Chinas fluctuations in GDP and other statistics may indicate us losing hope
in its ability to conduct global as a father figure under tianxia theory (namely Callahans nonmilitary hegemonic definition), but the harmonious world will prevail as a grounded fallback.
Further, many economists dictate that GDP reflections in China are in fact artificial and manmade. However, we see quarterly growth measurements as still relatively accurate in some sense,
although not perfect.
Furthermore, China and the United States will engage in constant competition to lead the
world. It does not seem like there will be an easily settled quest for power in the scenario. Under
our preliminary assumption that no military force will be used, my belief is that China and the
US will enter and stay in the current struggle for global power. On the other hand, the nation
across the Pacific seems to have the upper hand as of now, as it can drive domestic interests and
international interests as a proponent of globalization and modernization. Since the government
regulates a majority of the economic policies in China, free-market trading is completely out of
the question and Chinas citizens must further trust its government to point it in the right
direction. In the long term, the United States in China could be headed towards mutual
cooperation, because it does not seem likely that either side will give up so soon.

39

But does the future of United States and China relations necessarily reflect the tianxia
and harmonious world theories that China promotes? Given the recent GDP growth trend, if we
assume that Chinas relative losses are merely cyclical, China does have a solid shot at remaining
on top of the United States as an economic world power. Also, over the next 5-10 years we could
see China dispersing its diplomatic influence throughout a variety of international arenas, from
the G20 Summit to its central actions as a member of the FTAAP. Further, I contend that China
should have its own modifications to the tianxia theory and instead find some middle ground
that the itself and the United States can agree on. Moreover, if Callahan is right, and we safely
assume that the United States will not want to agree with China on all of its terms, then China
will most likely create a joint relationship and agree upon various settled terms with the United
States.
As an international trade partner with China, the United States needs to pick its plan of
action very soon, as the next few years will determine Chinas force as an economic superpower
and international actor. With other regions in the Asia-Pacific signing on to Chinas ideologies,
we must ensure that safe and peaceful cooperation alongside the country is used to guide the
world into its economic future, together. The modifications of tianxia theory with some policy
changes integrating the United States would prove most useful for future control, along with our
slight changes to harmonious world theory as well. A bilateral economic partnership would work
well and hopefully both countries could achieve their objectives. If not, however, the United
States and China could be stuck in endless competition over the global world economy.

40

41

Figures
Figure 1.
Estimated GDP of the Peoples Republic of China - 1952-2014 (in billions of renminbi)

Source: The National Bureau of Statistics: https://www.stats.gov.cn, and Chinability

42

Figure 2.
Foreign Direct Investment Allocation - Peoples Republic of China (1979-1998)
(In millions of USD; 1999 rate)

Source: Lawrence J. Lau, The Chinese Economy: Past, Present, and Future, Stanford University,
1999, p.11 (http://stanford.io/1Mgl8qc)

43

Figure 3.
Import-Export Balances of the Peoples Republic of China (1952-2014) (in billions of USD)

Source: The National Bureau of Statistics (https://www.stats.gov.cn) and Chinability


44

Figure 4a
Global Debt to GDP ratio of Advanced Economies since 2007.

Source: McKinsey Global Institute Analysis

45

Figure 4b.
China Debt-GDP Ratio (2000-2014) versus Global Debt-GDP Ratio (Q2 2014) by Economic
Sector

Source:McKinsey Global Institute Analysis

46

Figure 5.
Chinas Consumption of World Commodities (precious metals, resources, population, and GDP)
(in percent)

Source: Visual Capitalist (http://www.visualcapitalist.com/china-consumes-mind-bogglingamounts-of-raw-materials-chart/)

47

Figure 6.
Real GDP Growth in China from 2007-2014 and GDP Projections to 2020

Source: IMF. World Economic Outlook, April 2015 (https://www.fas.org/sgp/crs/row/


RL33534.pdf)

48

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