Xi will work to ensure that China emerges as the centrepoint of the global economy, the way the US has been since 1943.
After US President Donald J. Trump, Chinese Communist Party (CCP) General Secretary Xi Jinping is the most discussed world leader these days. The two others who qualify in the top four spots are not Angela Merkel or Boris Johnson, but Vladimir Putin and Narendra D. Modi. Love them or hate them, these are four individuals who are impossible for the world to ignore. In this group, China and the US are in a class of their own where the size of their economies are concerned, with India a considerable distance behind, but ahead of Russia. While the first two are already superpowers, India hopefully will qualify within a decade (given smart policy) and Russia after that. Neither rapid growth nor the retardation of growth through bypassing possible synergies happens by accident. Both outcomes are the result of policy. Smart policy promotes growth, while dysfunctional ones slow it down. Now that the world economy is wrestling with the shock of the Covid-19 pandemic, it is unlikely that China will soon regain the fighter jet speed that its economy achieved for a generation. However, it is clearly the intention of Xi to once again place China at the top of the growth tables despite for some years, his country being overtaken by India. The Sonia-Chidambaram effect on the Indian economy has been profound, and while many ministries (and the PMO) have shaken off that legacy, a few have not. It is to be seen whether this year it will be China or India that has the higher rate of growth. The Covid shock has opened the door for opportunities for India if the country avoids the community transmission stage to a substantial degree because of Prime Minister Modi’s decisive step of first barring the world from India and later making the entire country stay at home for a 21-day period. After that period, there will, hopefully, not be a total lockdown but a hybrid scheme that ensures a restart to the economy and its transformation and renewal besides relief from the virus.
General Secretary Xi, meanwhile, will be working to ensure that China emerges as the Middle Kingdom once again, the centrepoint of the global economy, the way the US has been since 1943. In such a plan, ensuring that the Chinese currency gains acceptance as the reserve and trading currency of choice will play a lead role. Xi knows that the US dollar being the reserve currency of the globe is both the cause as well as the effect of US predominance in the global order. Xi is part of a trio of “Red Emperors”—Communist Party supremos who were as powerful as predecessors in the Han or Tang dynasties. The other two in the trio are Mao Zedong, followed by Deng Xiaoping. The first, Mao Zedong, systematically consolidated China into a unified country bigger in area than that ruled by past dynasties such as the Qing or the Tang. Once such a unification took place and got stabilised, Deng Xiaoping used smart policy to make China a global economic force, with the aim of eventually making it the biggest. Deng was able to succeed in this because Mao had demolished the entire top crust of the Chinese Communist Party (CCP) during the Cultural Revolution. The pre-Cultural Revolution CCP leadership, had they remained, would never have allowed Deng Xiaoping to introduce capitalism with CCP Characteristics, a form of economic system that prevails in the country to this day. While Jiang Zemin and Hu Jintao oversaw substantial changes, these were nowhere near the scale contemplated by Xi, which is designed to displace the US at the apex of the global economic and security pyramid before he demits office.
In this task, Xi needs to end the role of the dollar as the global reserve currency. Together with steps being taken by him, the General Secretary is banking on the headwinds faced by the US that get created through bad policy, just as President Ronald Reagan made bold and brilliant use of the atrophy of the USSR that began during the 18 years of stagnation and decline under Leonid Brezhnev (1964-1982). Without this advantage and the additional impetus for collapse created by the Tughlaq policies of Mikhail Gorbachev, the USSR may still have survived, provided that the economic system got a makeover. Gorbachev believed that the key to salvation of the USSR lay in making concessions to get bounty from the very countries that were impatiently waiting for the USSR to collapse. He was surprised and petulant when such assistance failed to materialize.
Now that the US is no longer the biggest consumer of but the biggest competitor to Middle Eastern crude, with China replacing it in the first role, the task of breaking the link between international oil trade and the dollar has been made easier. And given the way the US has proved to be a fickle partner, most recently to the Afghans and the Kurds by Trump suddenly joining hands with their bitterest foes, several of its allies are reconsidering the reliability of their reliance on the US for security. Such US behaviour is in contrast to the Sino-Russian alliance, which has stood by its traditional friends even when doing so is against their own national interests, as is the case of China with Pakistan.
Jiang Zemin focused on growth, and did not much care that China’s technology and plant was almost entirely imported. Hu Jintao aimed for self-sufficiency, and ramped up domestic design and production of higher-end items such as automobiles and even aircraft. Xi Jinping is looking to China establishing frontrunner status and advantage in the Knowledge Economy. He is ensuring that the country go digital, and is spending vast sums on innovation and hi-tech startups. Xi has a plan. Does Trump have another to ensure that the US-dominated status quo continues well into this century? The jury is out on this question, the answer to which will define 21st century geopolitics.
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