The middle kingdom is rewriting the rules on trade, technology, currency, climate — you name it
Back when President Obama lived in Indonesia, in the late 1960s, China loomed as a malign force to the north, where communist cadres plotted to export their revolution to the rest of Asia. The Jakarta he’ll visit later this month has an entirely different attitude toward the People’s Republic. Local companies are doing deals in yuan, the Chinese currency, rather than dollars. If Jakarta gets in financial trouble, as it did back in 1997, it will be able to call on a $120 billion regional reserve fund, an Asia-only version of the International Monetary Fund due to be launched this month, bankrolled in part by China’s massive foreign-exchange reserves. Asia’s key economic political issues are no longer being hashed out on trips like Obama’s — between individual nations and the United States — but at summits that include only China, Japan, South Korea, and the Southeast Asian countries. “China has been instrumental in this shift in focus from ‘Asia-Pacific,’ which was largely about the U.S. and Japan, to ‘East Asia,’ which has China at the center,” says Martin Jacques, author of When China Rules the World.
Fair enough: everyone understands that China deserves a big say in what goes on in its neighborhood. But what most people haven’t noticed yet is that Beijing also wants to write — or, at least, help write — new rules of the road for the world. “China now wants a seat at the head of the table,” says Cheng Li, director of research at the John L. Thornton China Center at the Brookings Institution. “Its leaders expect to be among the key architects of global institutions.”
It’s easy to forget that big international bodies like the IMF and the World Bank were created by just a few nations, led by the United States. These economic organizations have global reach, but that globe used to be dominated by the American superpower, and their policies were suffused with U.S. values. When Beijing was a small-stakes player its leaders didn’t always like the setup, but they lived with it, even facing down fierce grassroots opposition to join the World Trade Organization.
But now China has more worldwide clout, and public opinion at home has taken on a combative (and sometimes downright jingoistic) tone. So with one eye on China’s national interests and the other on domestic critics accusing the regime of “coddling” the West, Beijing has begun to push harder to reshape international systems to make them more China-friendly (and, in the process, to raise the regime’s chances of survival).
Ironically, U.S. officials often complain that Beijing isn’t more involved in running the world — declining to help security efforts in Afghanistan, for instance. But in most such cases, China is being asked to take part in a system it didn’t set up — one it views as inherently biased in favor of the West. The Chinese are far more eager to participate in groups they’ve had a hand in building, like the Shanghai Cooperation Organization, a sort of Central Asian NATO in which China (as might be guessed from the name) plays the leading role. While that alliance started out as something of a joke in 1996, it’s grown into a pillar of regional security.
Similarly, Beijing’s efforts to push the yuan as a rival to the dollar are now making tentative progress. In the last few months, China has inked $100 billion in currency-swap agreements with six countries, including Argentina, Indonesia, and South Korea. The yuan has become an official trading currency between Southeast Asia and two Chinese provinces along its periphery. “The yuan will next be used as a trading currency with India, Pakistan, Russia, Japan, and Korea,” says Gu Xiaosong, director of the Institute of Southeast Asian Studies in Nanning.
Those countries will eventually be able to use the Chinese currency for deals between each other. And in an-other low-profile but important step toward making the yuan a freely convertible, international currency, Beijing issued its first international bond offering in Hong Kong late last year.
– Rana Foroohar and Melinda Liu