Case Study: China

The development of the People’s Republic of China is something which the world has watched with great interest.  Since their reopening during the Nixon Administration with Ping Pong diplomacy and the troubles associated with the cultural emersion into global society, most notably the Tiananmen Square incident in 1989 and the Tibet issue which is ongoing.  However, the traditional Chinese philosophy that has come from Mao’s Cultural Revolution is slowly losing its control over the Chinese populous, leading to a new type of “counter-cultural” revolution.  This semester has been a look at this nation with great interest, since it is obvious now as it was with the selection of this country that they are on the verge of something unseen before.  The sudden increase of growth which has taken place and the subsequent emergence as a global player, both economically and politically has been something that no one could have predicted before they reopened.

The Chinese economy has seen an explosion of growth unanticipated throughout the world, the amazing thing about their growth is the fact that they have maintained over eight percent annual growth for the past eight years. We often hear China described as an emerging nation or economy. While this is true, to China itself, its status as an emerging country is really something of an aberration. It was, after all, a mere 150 years ago that China's economy was the largest in the world, and the country a major player in the region.

Nationalistic movements saw the fall of both the Qing Dynasty in 1911 and the Republic of China in 1949. Interestingly, the main charge of these movements was that the leadership of the day had failed to defend China from foreign aggression. But by replacing communist ideology with nationalism, China's leadership has put itself in an invidious position. Commercial media hypes up threats from Japan, Taiwan and the US, forcing the leadership to look strong in response. But this show of strength threatens China's standing in the outside world and could, under certain circumstances, threaten stability in the region.

Managing China's emergence as a world power will be difficult for all sides. China must ensure that the US does not see it as a threat, while the US needs to convince China that it is willing to share the limelight. Both will have to avoid using foreign threats to win domestic support.

China realized a century-old dream by successfully hosting the Beijing Olympic Games. The International community widely believes the Beijing Olympics symbolizes that China has finally become a major, world-class country. It represents a crucial step in the nation's efforts to climb up the next stage in terms of comprehensive national strength.

Cooperation is a key means by which China achieves peaceful development, as they stand for resolving differences through dialogue and negotiation when handling international affairs. An example of success in China's diplomatic philosophy of peace and cooperation can be found in the handling of the Korean nuclear issue. The fundamental task of China's diplomacy is to serve the grand objective of reform, opening-up and economic construction. As China's foreign trade expands across the globe, Chinese capital and enterprises entering overseas markets are gaining significance as an outstanding part of exchanges between the country and the rest of the world.

The past three decades saw China overcome many twists and turns in its quest for reform and opening-up without backing down at any difficult juncture. Looking ahead, China will no doubt achieve sustained development amid increased mutual opening between the country and the rest of the world.

Foreign diplomats have been keen to see how China would come down on the issue of regulation. On one hand, China values stability and thus would seem naturally to support regulation. On the other, it likely doesn't want international institutions that curb its sovereignty or constrain its financial flows.

In the initial weeks of the global financial crisis, Chinese officials resolutely declared that they were not significantly affected. But now, as factory closings, dire corporate earnings reports and stock market losses continue to mount, the Communist Party's confidence has changed to another feeling entirely: fear.

For the first time in the 30 years since China began its capitalist transformation, there is a perception that the economy is in real trouble. And for the Communist Party, the crisis is not just an economic one, but a political one. The government's response offers a glimpse into its still ambiguous relationship with capitalism -- relatively hands-off in good times, but quick to intervene directly at the first signs of a downturn in order to prevent popular unrest.

Export contracts sealed at a major trade fair in China declined by almost 16 percent as overseas buyers cut budgets amid the ongoing global economic downturn.  The value of orders signed at the 104th China Import and Export Fair in the southern city of Guangzhou, which closed on Thursday, totaled 31.55 billion dollars, down 15.8 percent from last year.   Evidence is mounting that the deepening global economic downturn is beginning to impact China's exports, a key growth driver for the world's fourth largest economy.  However this is not the only key to Chinese growth rather the Chinese are in the unique position in that they can begin to rely on their own consumers to pick up the slack from the cooling global market.  Thus while exports may be diminishing, if the Chinese government can influence its population to buy more and move away from the saver mentality that they have built up, then the Chinese economy can compensate for the loss of exports with an increase in domestic purchasing.

China could better pump up the world economy by buying more goods. The reason China's reserves are so large in the first place is that the country exports a lot more than it imports. In 2007, China's trade surplus accounted for nearly 2% of world GDP. China's industrial development has been driven by U.S. consumer demand while U.S. consumption has in turn been fueled by Chinese lending that kept interest rates low and asset values rising. But this symbiosis has fallen apart as the U.S. economy has softened and Chinese consumers are failing to fill the gap.

But China is not immune from the world economic chill, suffering its own abrupt slowdown as its property market falters and exports flag. And its leaders are used to keeping their heads low in international crises outside their own backyard.  "If the past is any guide, and generally it is, the Chinese will move in a low-key way, reacting to proposals from the United States and others," Lieberthal said.  "If you look at a vast array of foreign policy decisions over the years, caution is almost always the watchword for China."

China's investment in U.S Treasury bonds surged by $43.6 billion to $585 billion in September, pulling ahead of the Japan, which now holds $573.2 billion worth. Overall, analysts say China's holdings may be $800 billion or more. China is thought to be purchasing U.S. debt through third countries, purchases that are not immediately recorded by the Treasury as being held by China, analysts say.

"We feel deep regret that the U.S. insists on unilaterally taking these steps," Chinese Foreign Ministry spokesman Qin Gang said this week. The official China Daily newspaper said Wednesday that "such unilateral action smacks of protectionism."

The Chinese government is clearly in crisis over how to deal with the rapid slowdown of the country's economy under the impact of a deepening global recession. Like its counterparts around the world, Beijing has little understanding of, let alone control over, economic events that are already leading to widespread plant closures, rising unemployment and social unrest.

President Hu Jintao told the Chinese Communist Party (CCP) Politburo last weekend that with weakening global demand, "China's traditional competitive advantage is being gradually weakened". He declared that the crisis was "a test for the party's ability to govern". On November 27, Zhang Ping, chairman of the National Development and Reform Commission, warned that "excessive production cuts and closures of businesses will cause massive unemployment, which will lead to instability".