China: The Principal Risk To The Global Economy

By Chandrashekar (Chandra) Tamirisa, (On Twitter) @c_tamirisa

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Two facts, unavoidable, have emerged on the political-economic landscape of the world. The decline of the United States is not one of them unless America makes it so.

The first is the prolonged structural adjustment of the European polis and oeikos in response to the stresses the European Union (EU) is facing about a decade into the formation of the economic and monetary union (EMU). And the second is the rise of China to the top of the global economic heap. The third fact is that both of these facts have to do only with the United States in the global economy.

While yesterday’s debates about the viability of the EMU and China’s exchange rate are resurfacing because of the embers of the vanquished after Mundell-Fleming in Europe, following my lead in trying to find ways to deal with the EMU and China Dale Jorgensen of Harvard is finally striking the right note away from Washington.

The normative facts are three fold: first, the world order is secular and democratic, founded in the principle of secular faith of American founding in the 18th century, but not in the European modern secularism of the 19th. Second, the euro is here to stay and EU will stay on course to its vision of 2050 (Middle East and North Africa – MENA – is following the EU lead and led by Tayyip Erdogan’s secular and democratic Turkey, Egypt and Saudi Arabia). And third, contrary to Harvard’s Kenneth Rogoff, China’s exchange rate is of the least concern, of most concern being China’s monolithic political structure after Bo XiLai’s recent ouster from the Chinese Communist Party at a time of transition in Beijing from Hu Jintao and Wen Jia Bao.

The top 5 world country (not regional) economies are United States, China, Japan, India, and Germany. By 2020, ceteris paribus, the top 5 will be China, United States, India, Japan and Germany. Of these five, China is the only non-compliant country in the world order, an unhealthy prospect, especially given the rising instabilities within the fracturing and factioning Chinese political system and China’s aspiration to continue to grow rapidly to converge on a per capita basis with United States, EU and Japan by 2030 which could potentially destabilize the global economy, making China – not Europe – the principal risk to itself and the global economy in the immediate term.

China will be welcome at the top of the post-World War II world order only if it transitions from Hu Jintao through multiparty elections in 2012-2013, primarily because, contrary to Harvard’s Kenneth Rogoff, China’s current account surplus with the rest of the world will once again rise as the former G7 group of countries recovers.

Should China not comply, by the Summer of 2016 Rio Olympic Games after the Olympics in London in 2012, the global political-economy will be principally represented by United States, India, Japan, Germany and Brazil or one-half the size of the world economy – all secular (having separated Church from State) democratic republics.

(Thanks to Snehal Manjrekar of India for posting on Linkedin a ProSyn article by Kenneth Rogoff of Harvard about China’s current account surplus and its implication for the renminbi exchange rate)

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About Chandrashekar (Chandra) Tamirisa

http://www.thecommonera.com/Common_Era/Me.html
This entry was posted in Brazil and South America, China, Hong Kong, Taiwan and Mongolia, Economics, Politics, Transformations LLC, Turkey, Middle East, North Africa and Central Asia, World and tagged , . Bookmark the permalink.

One Response to China: The Principal Risk To The Global Economy

  1. 1776 @1_776
    @ikhwan @AmbLocke @StateDept @VP @whitehouse @Number10gov @Elysee 我吃犛牛,我失去了大半個中國, 多黨民主制在中國的一些省份,將有利於
    Collapse Reply Delete Favorite
    1:49 PM – 3 Sep 12 · Details

    Izabella Kaminska ‏@izakaminska
    “China has been investing in too much productive capacity, which in turn produces too much.”
    Expand Reply Retweet Favorite

    7h 1776 @1_776
    @izakaminska Urbanization of China from East to West is not occurring at expected rate because of concentration of finance in certain areas.
    Hide conversation Reply Delete Favorite
    4:30 AM – 5 Sep 12 · Details

    7h 1776 @1_776
    @izakaminska China’s domestic consumption can rise. It is not producing too much.
    Hide conversation Reply Delete Favorite
    4:31 AM – 5 Sep 12 · Details

    1h Financial Times ‏@FinancialTimes
    Clinton struggles to soothe Beijing fears http://on.ft.com/OYAyGS
    View summary Reply Retweet Favorited

    1h 1776 @1_776
    @FinancialTimes China’s domestic consumption can rise. It is not producing too much.
    Hide conversation Reply Delete Favorite
    10:09 AM – 5 Sep 12 · Details

    1h 1776 @1_776
    @FinancialTimes China urbanization from East to West isn’t occurring at expected rate because of concentration of finance in certain areas.
    Hide conversation Reply Delete Favorite
    10:06 AM – 5 Sep 12 · Details

    1h 1776 @1_776
    @FinancialTimes Soothing Beijing Fears: http://www.thecommonera.com/Common_Era/Investor_Relations.html … going forward West and get back to China East @amblocke Test [multiparty] democracy in Tibet
    Hide conversation
    Reply Delete Favorite
    10:33 AM – 5 Sep 12 · Details

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