The spats between the United States and China appear to be getting more numerous and more serious.

The Chinese strongly objected to Washington’s latest arms deal with Taiwan. President Obama accused the Chinese of currency manipulation, while at Davos, Larry Summers, the director of the White House’s National Economic Council, made an oblique attack on China by referring to mercantilist policies. The disagreement between China and the United States at the Copenhagen climate summit in December has continued to reverberate.

Then there was the spat over Google’s claims that cyber attacks against the company had originated in China. The U.S. is increasingly critical of China’s opposition to sanctions against Iran. Now Beijing is fuming over the meeting this week between Mr. Obama and the Dalai Lama.

For the most part, however, the issues of contention are not new. The Chinese reaction to the Taiwan arms deal was entirely predictable, the only novelty being a threat of sanctions against the firms involved. Beijing’s response to the Dalai Lama meeting in Washington is equally predictable.

Mr. Obama’s statement about currency manipulation and the comments by Mr. Summers about mercantilism are a little different. True, they are not entirely new — the Treasury secretary, Timothy Geithner, accused the Chinese of currency manipulation a year ago. But since then, the U.S. administration had until now chosen to be more discreet.

Google and climate change are relatively new disputes. But we should not be surprised by them. China’s rise means that it is now involved in areas of the world and on issues where previously it had little or no stake. As China becomes a global power it is bound to come into conflict with the United States on a number of subjects.
It appears that the relationship is entering a markedly different phase. The question is whether growing acrimony will seriously harm the bilateral relationship, or whether the generally positive relations of the past three decades can continue.

There is a further underlying change in the relationship, namely China’s rise and America’s decline. While neither is new, the latter has only begun to be recognized since the global financial crisis. The expressions of the shift in power between the two are numerous. China has become more self-confident and, in a mild way, more assertive.

This has been most evident in the way in which China has — understandably — expressed concern about the value of the dollar, raised the question of a new special-drawing-rights-based reserve currency, and blamed the global financial crisis on the behavior of Western, especially American, banks; though it can also be seen in a more general, though subtle, shift in Chinese attitudes.
It would be quite wrong, however, to conclude that there has been a major change in the Chinese approach toward the United States.

The fundamental Chinese goals remain as they were defined by Deng Xiaoping. The overwhelming priority is economic growth and lifting tens of millions out of poverty. Creating the most favorable external environment for the pursuit of this objective continues to mean, above all else, a favorable relationship with the United States.

Although the Chinese may play their hand with a little more self-confidence and assertiveness, I see no significant evidence that they have abandoned their tried and trusted position. It has worked well for them and continues to do so. Time is on their side, and they can therefore afford to be patient.

But what of the United States? The fact that America has only just begun to wake up to the fact that it is in decline is a cause for serious concern. The United States is completely unprepared for what this might mean: that it can no longer assume a relationship of superiority with China, and that it has to seek a new understanding of China rather than expect the Chinese to continue to play second fiddle.

This belated awareness of a weakening America has happened too precipitously for its implications to be digested either by policy elites or the American public. Most are still in denial.

A classic illustration was the anger and frustration in media and political circles over Mr. Obama’s relatively contrite attitude toward the Chinese during his November visit there. In fact, Mr. Obama was right on two counts: The U.S. has to learn to deal with China on equal terms and it must be mindful of China’s role as its creditor.

Put simply: The major concern is not China getting too big for its boots — at least in the short term — but a growing sense of American frustration that its boots are no longer as big as they were or should be, together with an unwillingness or refusal to understand China on anything other than American terms.

Relations between the two could steadily deteriorate, with negative implications for the rest of the world. This will make things more difficult for China and might slow its progress, but the United States could suffer even more.

China must not be confused in the American mind with a Soviet Union Mark 2. It is a far more formidable adversary whose ultimate strength is not its military hardware but its economic prowess, and whose diplomatic weapon is not saber rattling but great patience.

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Updated and expanded new Chinese edition just released.

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Turkish edition just published!

When China Rules the World is the first book to fully conceive of and explain the upheaval that China’s ascendance will cause and the realigned global power structure it will create.

New edition available now from:

Amazon UK
and all good booksellers.

US second edition is available now via: 

Amazon US