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The Forum > Article Comments > The war has already been won > Comments

The war has already been won : Comments

By James Fairbairn, published 3/11/2010

Why China was victorious, and why the USA chased the wrong prize

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Thanks for the article.

Several points.

1. You mention four core factors: Economic strength, Control of raw materials; Technological supremacy militarily; and Population size. I believe political stability should also be included as this is one of the major risks that may influence the growth of China.

2. Food production is another factor that will influence a growing China more than the rest of the world.

3. "Chinese have strategically now secured over 98% of the world supply" Well this isn't 100% accurate... When China started exporting rare earths at very cheap prices in the 90s, this resulted in many mines being shut down around the world. It would be more accurate to say that China produces 98% of rare earths, even though it only has about 38% of the worlds proven reserves. This is definitely a strategic advantage, but if it restrains production/exports, prices will increase and more mines will open in the US, Australia and elsewere. Hardly a game changer.

4. What's this talk of genetic weapons
Posted by Stezza, Wednesday, 3 November 2010 11:29:53 AM
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This article overlooks too many issues. I don't agree at all.

1)As Stezza mentioned, political instability is a big issue. With more than 74,000 instances of 'unrest' recorded annually in China in recent years, this problem is getting worse.

2)The strength of the Chinese economy is illusory. Much of the Chinese GDP is coming as a result of the real estate boom and sky high prices in places such as Beijing and Shanghai. The problem is that these expensive apartments aren't occupied. A textbook real estate bubble, which is responsible for massive amounts of Chinese GDP.

3) Water. This is a crucial resource and when you consider the fact that melting glaciers on the himalayan plateau provides China with most of its water supply (you also get the real reason behind the occupation of Tibet) you begin to realize how precarious the situation really is, with anywhere between a quarter and a third of China, still an agrarian nation, suffering from drought.

4) Belligerent foreign policy. A rising power needs some allies. China isn't good at this. Consider the recent announcement that the South China sea is China's alone. This resulted in a meeting between the US and vietnam as well as other Asian nations with stakes in the project. Now they have all turned against China and the alliance between Vietnam and the US has never been stronger.

5) Widespread corruption. The percentage of GDP that is being siphoned off is vast, but in terms of negative effects, this is nothing compared to how the public views it. Never forget that the Tiananmen square protests began merely as a protest against corruption - political change was just a side effect.

6) Inability to innovate. Take a look at the world's most recognised 100 brands. Name some Chinese ones. You won't be able to.
China is capable of producing huge state behemoths, like the ICBC and Construction banks, but the private sector remains reliant on these government-owned enterprises. The system isn't geared towards entrepreneurs.
Posted by TurnRightThenLeft, Wednesday, 3 November 2010 12:47:25 PM
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Yes, there are too many variables and cards to turn before one can imply that China will surpass the might of the US.

I suspect that the US (and West) will be more inclined to change the rules rather than let an authoritarian China rise and rise, at least that is my hope.
Posted by Chris Lewis, Wednesday, 3 November 2010 12:56:09 PM
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Yes,in reference to rare earths, Stezza has effectively refuted the author's argument. Those elements are used in relatively small quantities and efforts are underway by manufacturers to reduce consumption levels --and there are alternative suppliers. So, unless China is the sole source of one or more essential rare earths,oil is still the top strategic commodity.

Fairbairn has a more convincing thesis in regard to America's dire fiscal situation. The USA is approaching the level of debt servicing that historian Niall Ferguson claims is the first stage of a steady and surprisingly rapid retreat from imperial power.
Posted by mac, Wednesday, 3 November 2010 5:46:47 PM
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Thanks for all your interesting comments so far. Obviously it is always tricky to go into massive detail when constrained by a maximum word count when writing articles (and comments), so in brief to deal with some of the points raised so far:
- Rare Earth's significance: Amongst economists there are 2 schools of thought, and Stezza's yours was definitely one. Only time will tell.
- Fiscal Situation: Mac you are spot on. The similarities with Britain's fall from grace are similar but magnified massively this time
- Political Stability: The US had a bloody civil war and yet 50 years later was moving into top spot. Clearly China has some major internal difficulties, however there are some that would argue that their central control will give them an advantage over the (divided)and corporate driven democratic West (not saying that it is right however).
- Beligerant Foreign Policy: The Chinese could learn a lot from the USA's actions post 1945 in that department eg: Iraq, Vietnam, plus numerous others
- Food / Water: I did discuss those as risk factors in the piece
- Inability to innovate: An accusation the British used to throw at the US frequently pre 1914, and the US at Japan post 1945. In 1914 most "global" brands were British. It is highly likely that global brands of the next century will Chinese along with a handful of old British and more recent US brands.
- Variables: Absolutely, it would be absurd to think that we can predict the future. I am merely hypothesising potential trends bearing in mind historical and current factors.
- Genetic weapons: Never underestimate weapons manufacturers innovation. A number of countries have been researching military applications of genetics for years now.
Posted by James Fairbairn, Wednesday, 3 November 2010 6:54:05 PM
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I agree to the commnets. The renminbi is underappreciated; it needs to be appreciated. China is overappreciated; it needs to be depreciated. Unnan City, Japan
Posted by Michi, Wednesday, 10 November 2010 8:54:23 PM
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