In the 1870s, the US overtook Great Britain as the world's leading economy, a title it bears alongside "Leader of the Free World". But all that could change within the next ten years, if the predictions come true and it is overtaken by China, its most significant economic rival. There are some researchers who claim that, according to certain criteria, China’s economy is already larger than that of the US.
In just 40 years, China, once a poor agricultural economy, has become an engine of global capitalism. About a century after the US economy surpassed that of Britain, China's meteoric growth - probably unprecedented in history - began through a series of reforms that shifted the Soviet-style planned economy toward a capitalist market economy.
From an economic point of view, this has been a huge success. China’s gross domestic product (GDP) skyrocketed from just $150 billion in 1978 to $ 1 trillion in 1997 and $16.3 trillion in 2021. China is the only economy to have maintained an average annual growth rate of 9.5% from 1979 to 2018. Recent estimates suggest that, by 2030, China will overtake the US, and will have GDP of $33.7 trillion versus $30.4 trillion for the US.
According to a report published in March by the Belfer Center for Science and International Affairs at Harvard University’s Kennedy School of Government, "China’s sustained 'miracle economic growth' over the past four decades at an average rate four times that of the U.S. has redefined the global economic order."
The Belfer Center states that although, on its current trajectory, China is slated overtake the US within a decade, "By the yardstick both the CIA and the IMF judge to be the best metric for comparing national economies - purchasing power parity - China has already surpassed the US to become the world’s largest economy."
The report gives other significant measures that indicate how China has strengthened at the expense of the US. Among other things, "China has displaced the U.S. to become the manufacturing workshop of the world; China has overtaken the U.S. to become the No. 1 trading partner of most nations in the world; China has established itself as the most essential link in the world’s critical global supply chains; and China has replaced the US as the primary engine of global economic growth. Since the 2008 financial crisis, one-third of all growth in the world’s GDP has occurred in just one country: China."
In addition, the Belfer Center researchers note, "In 2020, China supplanted the U.S. as the home to the largest number of the most valuable global companies on Fortune’s Global 500 for the first time."
A threat to the democratic model
The implications of the way China is strengthening at the expense of the US are many, and go beyond the economic aspect. In 2022, China's defense spending is expected to rise by 7.1 % to $230 billion, the second highest military budget in the world, although still far behind that of the US, which currently spends three times that amount, about $690 billion, on defense and security. But the assessment is that, as the Chinese economy grows, so will China's desire to outdistance the US in the arms race. In such a state of affairs, a military conflict seems only a matter of time.
It is not only the military and the economic aspects that are disturbing. Although China is not a dictatorship in the classic definition of the word, the unprecedented economic success of the authoritarian one-party state model, headed by President and General Secretary of the Chinese Communist Party Xi Jinping, poses a threat to the democratic model itself.
With a capitalist agenda backed by communist-style centralism and authoritarian leadership, China has managed to teach the free world a lesson. Even if the forecasts for 2030 prove imprecise, the trend is clear. Eventually, the dragon will beat the Statue of Liberty. The implications of China's growing strength are myriad, and the global future is uncertain: Will the success of the Chinese authoritarian model undermine democracy from within? Will labor rights in Western countries have to take a step backwards in order to deal with China's cheap labor? These are among the questions posed by China’s predicted hegemony.
The US is taking these dangers extremely seriously, repeatedly warning its allies and partners against China's growing power and interests, and sometimes applying heavy pressure. The basic US argument is that Beijing's interests are not necessarily just economic, or just military, or just political. Often, they are a combination of all these, even though the matter in hand is apparently just an economic deal, such as constructing a road system in Africa, laying a railway in Europe, or constructing and operating a port in Haifa.
In recent years, the US has exerted direct pressure on Israel to stop certain deals with China. It made Israel cancel the Phalcon AWACS sale and halt the sale of Israel Aerospace Industries’ Harpy UAV, an affair that ultimately led to the resignation of Ministry of Defense director general Amos Yaron in 2005, due to American pressure. The US opposed China’s presence in the new Haifa Bay Port and its involvement in digging tunnels for the Tel Aviv light rail system, claiming that these things represented threats to US naval ships, to Israeli naval bases, and even to the Israel Defense Force headquarters in Tel Aviv.
"Not about confrontation, but about strategic competition "
After a rich career at the CIA, and in academia and research institutes, in January 2021, shortly after the change of administration in Washington with the election of US President Joe Biden, Dr. Jung H. Pak was appointed Deputy Assistant Secretary for Multilateral Affairs and for Global China issues at the US State Department. In her role, she is responsible for everything related to dealing with China.
Pak recently came to Israel for a series of intensive meetings with Israeli officials at the Foreign Ministry and other ministries on Israel's relations with China. She made time in her busy schedule for an interview with "Globes" about US-China relations and Israel's position between the two powers. She also talked about North Korea and its young ruler, Kim Jong Un, of whom she wrote a biography, published two years ago. The book draws on her deep knowledge and experience as an intelligence officer.
Over 20 years ago President George W. Bush set new rules of the game when he said "China is no strategic partner, it is a competitor." Where do we stand now? Has China evolved from a competitor to an adversary?
Dr. Pak: "Our response to China has been to compete, and to compete strategically, and we're doing that, first, by investing in ourselves, second, by aligning with all of our allies and partners, and third, by competing with the PRC to defend all of our interests, and to build our vision for the future. So, it's not about confrontation, but it's about strategic competition, and trying to see areas where we can cooperate with Beijing as well. So, I would call it more competition than confrontation."
While Ukraine astonished the world with her resilience against Russia, many have turned their eyes to the east, to Taiwan and China, whose ruling ambition toward the island have never been hidden. At first China was inspired by the Russian initiative. Biden has said that he will defend Taiwan in the event of an attack - a policy that is obviously contrary to the official policy of the State Department in recent decades. So, in a few years’ time, will we see a rerun of the war that we're seeing in Europe now?
"We oppose any actions that seek to change the status quo by force, and we will do what we can to make sure that Taiwan can defend itself, and we continue to encourage Beijing to engage with Taiwan, so our policy has not changed at all.
"On the Russia-Ukraine issue, we continue to stand with the people of Ukraine and the government of Ukraine against Russia's unlawful, brutal atrocities that it's committing in Ukraine, and of course we appreciate Israel's partnership on this effort. What I think we hope to convey to other countries that might seek to upend the principles of territorial integrity and sovereignty, is that they should look at this lesson in how the international community came together in an unprecedented way that's unified and that's imposing costs on Russia for its brutal action in invading Ukraine. I hope that other countries will take a lesson that the international community will act together and that we will impose costs on those that would seek to invade other countries.
"And so, on China, we look back to the February 4th joint statement in which the two countries declared that there were no limits on their cooperation. We see the greater strategic alignment between Beijing and Moscow to be of great concern, and we continue to press Beijing to join the international community in condemning Russia's actions.
"But I hope that the lesson that they will learn is that the international community will unite to oppose such actions. In the meantime, I think it's really important for us or all of our allies and partners to stand together and make sure that the Ukraine example does not happen again."
I read in "The Wall Street Journal" last month, that in one meeting with a senior economic and financial official, President Xi said that it was critical to show that China's one-party system was a superior alternative to Western liberal democracy, and that the US was declining both politically and economically. Is he right about that?
"I prefer not to do my work or live my life based on what the Chinese government says about the United States. Last week, we celebrated 45 years of the US-Asian partnership, and the president hosted eight leaders of Asian countries in Washington DC for a two-day summit. We have our Indo-Pacific strategy, announced in February, designed to build prosperity and resilience and increase our security in the Indo-Pacific region, and with the Middle Eastern and North African countries, as around the globe we continue to be very much committed to decades-long alliances and partnerships, whether it's educational exchanges, people-to-people ties, as well as security issues. So, I prefer to go along with what we want to do."
I understand, but at the same time it seems as though China's state capitalism is actually working actually better than the American system, I mean, economically, and all the predictions of the past year or two say that China’s economy will surpass America’s within a few years, ten years I think. Is that really inevitable?
"We continue to believe and assert, and President Biden has come out very strongly for this, and he has said publicly, that democracies work. And we oppose authoritarian visions of the world and efforts by authoritarian nations to impose their vision of the world onto the international stage. And we will continue to work with allies and partners to build resilience, make sure that we have energy security, that we work together on climate issues, that we work together on food security, as well as build sustainable futures for all of our peoples. So, we continue to operate under our belief, and demonstrated evidence, that democracies will work, and have worked.
"And we will continue to make sure that that the United States' commitment to the MENA region, as well as around the world, span people-to-people, economics, trade and investment, security, supply chains, energy security, etcetera.
"So, I will push back against the idea that authoritarian systems work better, because we want to work for the dignity of human beings. We want to work on the dignity of workers, we want to make sure that we tackle this climate crisis, which is an existential crisis, for folks in MENA and around the globe where islands are sinking, coastlines are eroding, the glaciers are melting with profound effects on our food security and day-to-day things that matter to us. So, democracies work, and we will continue to build on that with our allies and partners."
But at the same time, the US has strongly advised its friends and allies in the last few years to beware of China's encroachment on their national security and infrastructure, including Israel's port in Haifa, for example. How would you evaluate the general response, and how pleased or displeased are you with Israel's response?
"I want to make it very clear that this is not about the Chinese people, this is not about this monolithic China, but we are specifically pushing back against very problematic activities. And this is a conversation that we've had with Israel, as well as scores of other allies and partners, to make sure that Israel and other countries ‘are in the driver’s seat’ in their relationships with the PRC and in their engagements with PRC entities, whether business or otherwise… We, the United States, have seen from our relationships that we have lessons that we can convey, to try to help our allies and partners to be more resilient, to ask the right questions, and to be empowered in whatever they do."
More specifically about Israel, is the US pleased or displeased with the Israeli response to American warnings and appeals, like the one I mentioned concerning the Haifa Port, which, despite the wishes of the US, the Chinese eventually built, and there are other notable areas of cooperation between Israel and China.
"I don't know if it's my position to be pleased or not pleased, but in general, I think the United States has a very deep relationship with Israel and we're deeply grateful for the partnership, across the board, but you know as friends and allies and partners we want to make sure that we go together, and work together on common challenges. I don't think it's a matter of being pleased or not pleased."
But how much do the United States’ warnings stem from economic concerns, and how much from security concerns?
"I don't think it's an either or, because that's not how the PRC sees things. So, I think economics is security, and security is economics, which is why it's so important for the United States to continue to engage across the board. And in terms of technology, we want to make sure that we have appropriate locks in place, that all vulnerability gaps are closed, and that people continue to innovate, secure in the knowledge that their networks are safe. And so we are thinking ahead of the future, we want to make sure that we close those gaps, and make sure that we are we're well-positioned for the future."
A week ago, the question was posed in the Wall Street Journal, 'Who won the US China trade war?,' and they partially answered it by saying that neither country got the concessions it sought and both damaged their economies. Was the policy of raising tariffs wrong? And was the decision by the Biden administration to continue the war by other means incorrect?
"We've seen over the years where the PRC has given unfair subsidies, dumping products, engaging in cyber hacks to get intellectual property, and so these are practices that we oppose and that we will continue to make impose costs on… Based on the PRC actions we've seen, it's important to address those PRC actions that are damaging to the investment environment, that are damaging to countries' sovereignty, or their Innovation, or their tech sectors.
"At the end of the day, we want the PRC to play on a level playing field. You know that we have a very complicated relationship with Beijing, that we have an economic relationship with Beijing, so it's been it's in both of our interests to make sure that we have a system and an environment that's good for economic growth, that's sustainable, that's environmentally sound, and that is broad-based, that respects workers' rights across the board. So, I would hope that this is something that is attractive to our allies and partners, and I think it is, and we will continue to press the PRC to stop those activities, but when they don't we will continue to push back."
Regarding the Chinese military facilities in Djibouti and or possibly also in the United Emirates, as well as China's strategic accords with Iran and its pending relations with Saudi Arabia, what do you think China's goals are in the Middle East these days? And how much is the US concerned about them?
"I think the Chinese goal in the Middle East, but also globally, is to expand its power and influence through a variety of ways, through trade and investment, through economic ties, and through, potentially, security cooperation.
"As I said to you earlier, we are making sure that Israel and other countries are in the driver's seat when they are looking at these relationships, at these various nodes of connections with the PRC. This is not about the US versus China. It's about our allies and partners and how we help our allies and partners become empowered and strong and resilient, so that we can work together."
Last week, there was a huge leak of documents and pictures from the concentration camps in Xinjiang. On the one hand, the US has accused China of committing crimes against humanity and possibly genocide in the region, and last year Biden even banned the import of products from Xinjiang because of the fear that some of the products were products of forced labor. But on the other hand, with inflation now rising in the US to its highest level in decades, the White House is reportedly considering dropping the tariffs in order to help the US economy through China's cheap labor. Is that not somewhat two-faced and cynical?
"I’m not sure about the reports on cutting tariffs, but on Xinjiang, this is something that we talk about all the time with everyone, including with Beijing. This is a horrific genocide and crime against humanity, undertaken by the government, and we will continue to press on that. It's just mind-boggling what is going on there and just heartbreaking. There's no compromising. How do you compromise with genocide?"
Kim Jong Un is not crazy - he’s completely rational
For the first time in two and a half years, North Korea admitted last month that the Covid-19 pandemic had reached it as well. In that country, more than 3.5 million people have been diagnosed with symptoms, with the number rising every day by 90,000 to 100,000. There are those who estimate that the numbers are much higher than those published daily by the state in the local media, which are, of course, controlled by the government. The US offered to provide vaccines against the virus weeks ago, but North Korea has not responded.
Last week while visiting South Korea, US President Joe Biden did not rule out a meeting with Kim Jong Un, depending on how "sincere" and "serious" the North Korean leader was.
Biden's predecessor, Donald Trump, met with Kim Jong Un three times after a rather weird exchange of messages between the two, during which Trump termed Kim "Little Rocket Man," in response to which the North Korean president warned in a speech that he had a "nuclear button is on his desk at all times." The US President responded on Twitter, "Will someone from his depleted and food starved regime please inform him that I too have a Nuclear Button, but it is a much bigger & more powerful one than his, and my Button works!"
Dr. Jung H. Pak is a leading expert on North Korea and even published a biography two years ago, entitled, "Becoming Kim Jong Un: A Former CIA Officer's Insights into North Korea's Enigmatic Young Dictator."
Is Kim Jong Un really crazy as he is often portrayed in the media, or is he a rational leader with a good understanding of reality and governance?
"He is rational. Just because we don't agree with his policy choices - I don't think that makes him irrational
"North Korea just completed three ballistic missile tests. That makes 23 this year alone. All of these missile tests are designed to show strength, to develop and advance its technical capabilities. What's relevant for the MENA region, is North Korea's long history of proliferation, including with Iran. So the United States will continue to work to tighten and turn the screws on North Korea's ability to generate revenue for its weapons programs."
Pak adds that while the US continues to focus efforts on North Korea's nuclear disarmament, it is also continuing its Covid-19 outreach. "We'll continue to see to humanitarian cooperation," she says. "It's North Korea's choice. North Korea is the biggest obstacle to delivering aid and vaccines and pandemic-related assistance."
Where do you think the North Korean regime is headed? Is it likely to resort to force given its present unprecedented internal crisis?
"Look, they've done at least four ICBM (intercontinental ballistic missile) tests since January, so they've diversified their platforms, they've diversified the types of missiles, they're getting better, and bigger, and faster and more dangerous. And here, again, we need to make sure that we work together on sanctions implementation, and try to get Beijing to cooperate in a productive way."
Do you see any eventuality in which North Korea might join China and Russia in a campaign against US interests or against members of the QUAD - the strategic alliance between the USA, Japan, India and Australia?
"I think it's really important that Russia and China, as North Korea’s political and economic benefactors, should oppose its policies and work with the international community on sanctions and implementing the sanctions. This is a profoundly dangerous and destabilizing entity in the region, and we'll continue to keep plugging away at that."
Published by Globes, Israel business news - en.globes.co.il - on June 12, 2022.
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