Tweet
Dollar as reserve currency isn't going anywhere?
-- 
Unconventional Wisdom
A special anniversary report challenging the world's most dangerous thinking.
JANUARY/FEBRUARY 2011
Daniel W. Drezner
Daniel W. Drezner, is professor of international politics at Tufts University's Fletcher School of Law and Diplomacy.
…AND CHINA ISN'T BEATING THE U.S.
China is a great power in every sense of the word. It is the most populous country in the world. The Middle Kingdom has weathered the Great Recession better than the West. It is developing a blue-water navy to rival the United States in the Pacific. In 2010, China surpassed Japan as the world's second-largest economy. For many Americans, however, this is not enough. Politicians, commentators, and the public believe China has already supplanted the United States to achieve primacy in world politics. This is not only wrong -- it is dangerously wrong.
According to a November 2009 Pew Research Center survey, 44 percent of Americans believe that China is "the world's leading economic power," compared with 27 percent who name the United States. Elites have fed this mass perception. After a midterm election cycle that featured anti-China ad after anti-China ad, President Barack Obama warned, "Other countries like China aren't standing still, so we can't stand still either." With public perception and political rhetoric like this, it is little wonder that Forbes magazine recently named Chinese President Hu Jintao the world's most powerful individual.
It's time to make a few things clear. If one measures power strictly according to GDP at market exchange rates, then the United States is roughly 250 percent more powerful than China. If one uses a combination of metrics -- as does, for example, the U.S. National Intelligence Council's 2025 project -- then China possesses a little less than half of America's relative power. Even on the financial side, the U.S. still reigns, and, hype notwithstanding, the dollar is not going anywhere as the world's reserve currency. The renminbi could be an alternative in the far future -- but after the 2008 financial crisis, China is loath to open up its capital markets. Even by the less tangible metrics of soft power, the United States still outperforms China handily in new public opinion surveys from the Pacific Rim by the Chicago Council on Global Affairs.
Right now, the United States is vastly more powerful than the People's Republic of China. Anyone telling you otherwise is selling you something.
Why the massive misperception? In part, people are looking at the wrong measures. China has the world's largest currency reserves, leading many to conclude that Beijing now has the ability to dictate terms to the United States and everyone else. But that just ain't so. The "balance of financial terror" constrains China as well as the United States because China needs American consumers at least as much as the United States needs China to buy its debt.
No doubt, China amassed more power while American might ebbed over the last decade, and Beijing is now throwing its weight around. But the United States still has a huge lead. As for China's recent bout of belligerence, it has yielded Beijing little beyond Japan releasing a fishing-boat captain -- while pushing South Asia and the Pacific Rim closer to the United States.
Exaggerating Chinese power has consequences. Inside the Beltway, attitudes about American hegemony have shifted from complacency to panic. Fearful politicians representing scared voters have an incentive to scapegoat or lash out against a rising power -- to the detriment of all.
Hysteria about Chinese power also provokes confusion and anger in China as Beijing is being asked to accept a burden it is not yet prepared to shoulder. China, after all, ranks 89th in the 2010 U.N. Human Development Index, just behind Turkmenistan and the Dominican Republic (the United States is fourth). Treating Beijing as more powerful than it is feeds Chinese bravado and insecurity at the same time. That is almost as dangerous a political cocktail as fear and panic.
Daniel W. Drezner, professor of international politics at Tufts University's Fletcher School of Law and Diplomacy
--
Unconventional Wisdom
A special anniversary report challenging the world's most dangerous thinking.
JANUARY/FEBRUARY 2011
Daniel W. Drezner
Daniel W. Drezner, is professor of international politics at Tufts University's Fletcher School of Law and Diplomacy.
…AND CHINA ISN'T BEATING THE U.S.
China is a great power in every sense of the word. It is the most populous country in the world. The Middle Kingdom has weathered the Great Recession better than the West. It is developing a blue-water navy to rival the United States in the Pacific. In 2010, China surpassed Japan as the world's second-largest economy. For many Americans, however, this is not enough. Politicians, commentators, and the public believe China has already supplanted the United States to achieve primacy in world politics. This is not only wrong -- it is dangerously wrong.
According to a November 2009 Pew Research Center survey, 44 percent of Americans believe that China is "the world's leading economic power," compared with 27 percent who name the United States. Elites have fed this mass perception. After a midterm election cycle that featured anti-China ad after anti-China ad, President Barack Obama warned, "Other countries like China aren't standing still, so we can't stand still either." With public perception and political rhetoric like this, it is little wonder that Forbes magazine recently named Chinese President Hu Jintao the world's most powerful individual.
It's time to make a few things clear. If one measures power strictly according to GDP at market exchange rates, then the United States is roughly 250 percent more powerful than China. If one uses a combination of metrics -- as does, for example, the U.S. National Intelligence Council's 2025 project -- then China possesses a little less than half of America's relative power. Even on the financial side, the U.S. still reigns, and, hype notwithstanding, the dollar is not going anywhere as the world's reserve currency. The renminbi could be an alternative in the far future -- but after the 2008 financial crisis, China is loath to open up its capital markets. Even by the less tangible metrics of soft power, the United States still outperforms China handily in new public opinion surveys from the Pacific Rim by the Chicago Council on Global Affairs.
Right now, the United States is vastly more powerful than the People's Republic of China. Anyone telling you otherwise is selling you something.
Why the massive misperception? In part, people are looking at the wrong measures. China has the world's largest currency reserves, leading many to conclude that Beijing now has the ability to dictate terms to the United States and everyone else. But that just ain't so. The "balance of financial terror" constrains China as well as the United States because China needs American consumers at least as much as the United States needs China to buy its debt.
No doubt, China amassed more power while American might ebbed over the last decade, and Beijing is now throwing its weight around. But the United States still has a huge lead. As for China's recent bout of belligerence, it has yielded Beijing little beyond Japan releasing a fishing-boat captain -- while pushing South Asia and the Pacific Rim closer to the United States.
Exaggerating Chinese power has consequences. Inside the Beltway, attitudes about American hegemony have shifted from complacency to panic. Fearful politicians representing scared voters have an incentive to scapegoat or lash out against a rising power -- to the detriment of all.
Hysteria about Chinese power also provokes confusion and anger in China as Beijing is being asked to accept a burden it is not yet prepared to shoulder. China, after all, ranks 89th in the 2010 U.N. Human Development Index, just behind Turkmenistan and the Dominican Republic (the United States is fourth). Treating Beijing as more powerful than it is feeds Chinese bravado and insecurity at the same time. That is almost as dangerous a political cocktail as fear and panic.
Daniel W. Drezner, professor of international politics at Tufts University's Fletcher School of Law and Diplomacy
Comment