History is passing our country and our continent by. Once we were the centre of the world, the place from where power, ideas and the future emanated. If we drew a map of the world, Europe was at its centre. That was how it was for 200 years. No more. The world is tilting on its axis in even more dramatic style than when Europe was on the rise. We are witnessing the greatest changes the world has seen for more than two centuries. We are barely aware of the fact. And therein lies the problem.

I vividly recall when the first edition of my book When China Rules the World was published almost three years ago. At the many talks I gave, I showed a Goldman Sachs chart that projected that the Chinese economy would overtake the US economy in size in 2027. Invariably someone would point out this was only a projection, that the future was never an extrapolation of the past, that it was most unlikely the forecast would come to pass and certainly not in this time frame. No one suggested that the projection underestimated the date, even though the western financial crisis was already almost a year old.

The latest Economist projection suggests China will overtake America in 2018. So why are we – and Europe – so far behind the curve? Why do we insist on living in a world that was rather than is? Why are we so out of touch with both the speed and import of China’s rise?

Our ascendancy of the past two centuries – first Europe and then the US – has bred a western-centric mentality: the west is the fount of all wisdom. We think of ourselves as open-minded but our sense of superiority has closed our minds. We never entertained the idea that China could surpass the US. Backward, lacking democracy, bereft of Enlightenment principles,the product of a very different history, it was not western. So how could it? We were the universal model that everyone else had to embrace to succeed. The only form of modernisation that worked was westernisation. China would inevitably fail: the project was unsustainable. By insisting on seeing China through a western prism, we refused to understand China in its own terms. Our arrogance bred ignorance: we were not even curious.

China is, indeed, in so many ways, not like the west. It is not even primarily a nation state but a civilisation state. Whereas the west has primarily been shaped by its experience of nation, China has been moulded by its sense of civilisation. This helps to explain why the Chinese place such a huge emphasis on unity and stability, their reverence for the state and their embrace of ideas such as “one country, two systems” in Hong Kong. Similarly, unlike Europe, China never sought to acquire overseas colonies but established a tribute system in east Asia. The Chinese state bears a fundamentally different relationship to society compared with any western state. The state is seen as an intimate, as a member of the family, rather than, as in western discourse, a problem, a threat, or even the enemy. For the Chinese, the state is the embodiment of its civilisation: as such, it could not be more important, it lies at the heart of the Chinese pysche.

It is impossible to understand or make sense of China through a western prism. As China becomes a great power and, over the next two decades, steadily usurps America as the dominant global power, we will no longer have any alternative but to abandon our western parochialism and seek to understand China on its own terms. But the shift in mindset that faces us is colossal.

What does it mean to be a civilisation state? What was the tributary system and how will it shape China’s future behaviour? Why is China’s idea and experience of race so different from ours? Just as every non-western country was compelled during the 19th and 20th centuries to understand the west in its own terms, it is now our turn to make sense of a country so different from our own.

It will be a Herculean task: we always look west, hardly ever east. When Bo Xilai, a leading contender for one of China’s top positions, was dismissed more than a week ago, it received little attention in our media even though it was the most important event of its kind for more than two decades. Compare, if you will, the attention, devoted by the British media – notably the BBC and quality newspapers – to the Republican primaries with that given to China in the build-up to the Communist party congress in November, when President Hu Jintao and Premier Wen Jiabao will be replaced by Xi Jinping and Li Keqiang. The latter is of far greater consequence yet the coverage is paltry in comparison.

We have an enormous China deficit that urgently needs addressing. It is replicated throughout our culture; there has been much talk of promoting Mandarin in our schools and yet, in both the state and private sectors, pitifully few offer it as a serious option. Our economy exhibits the same morbid symptoms: Britain exports more to Ireland than it does to China, India, Russia and Brazil combined. Unless we address these questions, we face the prospect of being sidelined by history.


China’s remarkable economic growth started in 1978, but as its economy was then only a 20th the size of America’s, its global impact was minuscule. By the turn of the century, however, after more than two decades of double-digit growth, the Chinese economy was more like a quarter of the size of America’s, with the consequence that its global effect was of an entirely different order. The story, moreover, was no longer simply about China because by then its rise had begun to transform the world. Only with the financial crisis in 2008, however, did the west finally begin to wake up to the implications.

Although countless commentators speak lazily of the global financial crisis, this is a misnomer. A visit to Beijing will soon dispel the illusion. The place is brimming with energy, elan, confidence and brio. While the west is mired in austerity and stagnation, with a psychology to match, China is riding an extraordinary wave of optimism. In 2010, according to a Pew poll, 91% of Chinese felt good about their country’s economy compared with 24% in the US and 20% in Britain. While most western economies are still smaller than they were before 2008, the Chinese economy has been growing in the region of 9-10% a year. That is why it will overtake the US almost a decade earlier than previously predicted.

2008 ushered in a new era, the beginning of a Chinese world economic order. Until recently the US largely shaped globalisation but now China is increasingly assuming that role. Its most dramatic expression is trade. China will shortly become the world’s largest trading nation. It imports huge amounts of natural resources and exports a massive volume of manufactured goods: in 2011, it overtook the US to become the world’s largest producer of manufactured goods, a position America had previously held for 110 years. In 1990, there was hardly a country in the world for which China was its chief trading partner. By 2000, there were a few, but nearly all were in east Asia. By 2010 the list stretched around the world, including Japan, South Africa, Australia, Chile, Brazil, India, Pakistan, the US and Egypt. Imagine how long the list will be in 2020.

China is rapidly emerging as a great financial power. In 2009 and 2010 the China Development Bank and the China Exim Bank – which I would guess the great majority of Observer readers have never even heard of – lent more to the developing world than the World Bank. Just as the Rothschilds funded much of Europe’s industrialisation in the 19th century, so these two banks are now doing the same on a far larger canvas, namely the entire developing world, comprising 85% of the world’s population. Meanwhile, in late 2008, China began making the renminbi, hitherto a currency that circulated only in China, available for the settlement of trade. The HSBC has predicted that by 2013-15 half of China’s trade with the developing world (which constitutes more than half of China’s total trade) will be paid for in renminbi. It is the first stage in the process by which the renminbi will replace the dollar as the world’s dominant currency.

The centre of gravity of the global economy is remorselessly shifting from the developed to the developing world. China is the main player and the outcome will be the rapidly declining influence of the developed world and the reconstitution of all major global institutions, notably the International Monetary Fund and the World Bank, to reflect this.


Pause for a moment and think what it feels like to be in Beijing these days. The place is on fire. It is alive with argument and debate. A country growing at 10% a year is constantly throwing up huge and novel problems that require response and solution. It is a far cry from Britain mired in stagnation, where debate rarely ever breaks new ground and for the most part is backdated. In contrast, China is not only remaking itself with extraordinary speed, but is also remaking the world. Beijing resembles London in 1850 or Washington in 1950, but on an epic scale. It is the most interesting and stimulating city in the world.

I spent much of last autumn as a visiting professor at Tsinghua University in Beijing. My stay was a whirl of talks and discussions. Far from the western image of China being devoid of debate, Beijing is positively throbbing with it. And it is extraordinarily open-minded and open-ended. I was invited to give a lecture at the ministry of foreign affairs to around 100 young diplomats at which I suggested that a foreign policy based on Deng Xiaoping’s principles was no longer appropriate: a new approach was required that reflected Chinese growing global interests while also drawing on its history. Far from being taken aback, those present entered into a vigorous discussion. These debates, furthermore, are infused with huge significance. As China becomes a great global power they will shape its future policies and priorities – and thereby the world.

One might think that in such times, and with such glittering prospects, China would be full of hubris, bordering even on arrogance. On the contrary, the opposite is the case. The Chinese are still deeply preoccupied with the colossal problems that confront a still poor and developing country of 1.3 billion people. Inequality has soared, sowing the seeds of growing resentment against the rich; land seizures, as events in Wukan recently demonstrated, provide a continuing threat to social stability; massive corruption is corroding the sense of justice and fairness. While possessed of the kind of inner confidence and experience that comes from being the heirs of a great civilisation, the Chinese have no illusions about where they have got to and the tasks that lie ahead.

In November, the Communist party will hold its 18th congress. It will elect a new leadership for the next 10 years during which time China will undergo profound change. Already, there is a major shift under way in economic priorities from low value-added production and massive exports towards higher-end production and domestic consumption. During the next decade we can expect important political reforms.

In Britain, meanwhile, China will continue to receive scant coverage. But, kicking and screaming, forever looking backwards to the age of the west, we will, nevertheless, be dragged into the age of China. Time waits for no country. Over the next decade, we will increasingly come under China’s spell.

It is worth reminding ourselves that last October, when the future of the euro was in grave doubt, European leaders pleaded with China to extend a huge loan. Britain is also broke and needs Chinese money for its infrastructure projects. There will be a growing clamour to learn Mandarin. And, as yet hardly recognised, we will find ourselves coming under the growing influence of Chinese soft power, be it the influence of Chinese parenting or the country’s stellar educational performance. China will irresistibly shape our future.