The financial crisis has seen the global economy turned on its head. And it is China, rather than America, that is set to dominate through both soft and hard power
The 2008 financial crisis marked a fundamental shift in the relationship between China and the United States. Nothing could or would be quite the same again. The management of the US economy was revealed to have been fatally flawed, a lightly regulated financial sector almost allowed to shipwreck the entire economy. In a few short months, the crisis served to undermine a near-universal assumption of American, and western, economic competence; in contrast, China’s economic credentials have been considerably burnished. The crisis at the same time exposed the huge levels of indebtedness that have sustained the American economy, accentuated since by the financial rescue package, while underlining the financial strength of the Chinese economy, now the world’s largest net creditor with its massive foreign exchange reserves. Although hardly new, the crisis finally woke Americans up to the fact that China had become their banker, with all this meant in terms of the shifting balance of power.