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Written by Publisher
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Monday, 23 August 2010 17:42 |
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On the streets of Britain, hip hop jabs at Muslim politics
Peter Mandaville YaleGlobal , 19 August 2010
BRADFORD: Listening to South Asian Muslim teenagers in this post-industrial British city, one can understand how Islamic faith and American hip-hop music coexist. Searching for music that reflects their own experiences with alienation, racism and silenced political consciousness, many teens, even quasi-religious groups, turn to the urban music of black America.
Despite the recent popularity of a pop-oriented variant of nasheed devotional music, the acts with the largest followings are not Muslim nor do they focus on overtly Islamic themes. Rather, the teens offer a litany of popular culture icons – American hip-hop and rap artists including Jay-Z, the late Notorious B.I.G. and Tupac Shakur. Young South Asian Muslims throughout Britain have widely adopted and thoroughly adapted symbols and styles of African-American urban culture. Slang combining northern English colloquialisms, Bengali and American gangsta culture infuses daily conversations.
Social ills – drugs, gangs, unemployment – are common in British cities, and racial tensions can run high. A collective sense of identity emerges from this common urban experience, across different national settings – hence the transatlantic currency of the hip-hop movement, and presence of Islamic references in hip-hop culture, through quasi-Muslim religious groups such as the Five Percenters.
Seeking to validate the impulse that lies behind the popularity of this music, but direct its outward expression in more positive directions, a number of artists have recently experimented with Muslim versions of hip-hop. As Abdul-Rehman Malik, an observer of the UK’s Muslim music scene puts it, “they’re searching for a cultural and political expression that they can marry to their religious beliefs.” The fusion is sometimes a tough sell, however – not least of all because of persistent debates within Islam as to the permissibility of music.
Beginning with the group Mecca2Medina in London in 1997, the Muslim hip-hop movement has grown with impressive speed even as it struggles to achieve mainstream recognition within both the Muslim community and the wider hip-hop scene. Many Muslim artists cite passing references to Islam in mainstream hip-hop, and in their minds, the natural extension is to bring a religious identity front and center. For some, hip-hop is also a vehicle for engaging world politics. Figures like Fun-Da-Mental frontman Aki Nawaz attracted controversy for the 2006 album “All Is War,” which some viewed as glorifying terrorism. The music of another edgy act, Blakstone, features aggressive and confrontational lyrics.
While well-known American rap and hip-hop artists, such as Mos Def and Lupe Fiasco, express a Muslim identity, they do not make religion or politics an explicit focus of their music so as to avoid discomfort or rejection by the music industry. Many Muslim hip-hop artists, such as the female spoken word duo Poetic Pilgrimage, complain about persistent racism, even within Muslim communities in the West, contending that their work transcends ethnic and racial barriers.
This legacy of racial tension, while rarely a focal point of contemporary national-security policy, has reared its head in the form of multiple efforts in recent years to reinvigorate the figure of Nation of Islam activist Malcolm X. For example, shortly after Barack Obama’s 2008 election, Al-Qaeda’s deputy leader Ayman al-Zawahiri released a video statement castigating the US president as a “house slave” in contrast with the hard-line confrontational politics of Malcolm X.
Pointing to another side of the American civil rights leader, a British government–funded counter-radicalization project – combining traditional Islamic scholarship and social consciousness with hip-hop sensibilities – seeks to mobilize urban British Muslim youth around what they see as more cosmopolitanism impulses of Malcolm X after his break with the Nation of Islam and subsequent global travels. Abdul-Rehman Malik, a driving force behind the Radical Middle Way, expects popularity of Islamic hip-hop to grow: “Hip-hop is our way of seeing Islam in situ, in our place – a way of reflecting the anger of the Muslim street by creating discursive spaces for the expression of that anger. But it has to be real, and it has to resonate: your rap is only as good as the depth of its message.” Thinking about radicalism this way permits better understanding of other forms of oppositional politics framed in terms of Islam, as well as recognition of the appeal of Muslim politics as connected to broader histories of global exclusion.
These developments become more significant when one considers the demographics of Islam, with some 70 percent of the world’s 1.5 billion Muslims under the age of 30. Embracing hip-hop could be a fad or signal young Muslims’ growing affinity with leftist values. Islam, however, has never fit comfortably on a political spectrum defined in conventional terms of right and left. The Islamic worldview is socially conservative in most of its mainstream forms, but the centrality of social justice in Islam has always meant that Islamic parties share some common ground with the left – even where the politics between them are contentious.
Leftist parties in the Muslim world historically haven’t hesitated to couch their rhetoric in religious terms when so doing was perceived as useful – witness Zulfikar Ali Bhutto’s description of Pakistan People’s Party policies in the early 1970s as Musawat-i-Muhammadi, or “Muhammad’s egalitarianism.” Iran’s Islamic Revolution was received as an essentially Third World project in many quarters, with supporters from Nigeria to Indonesia and even some outside the Muslim majority world citing Khomeini’s anti-hegemonic credentials.
Today we see sparks of growing cooperation between Islamists and leftists in the Middle East, although so far this speaks more to a realization by opposition leaders that it’s politically expedient to play down differences. This marriage of convenience extends to Islamist-leftist engagement on the global level, with both sides regarding the other warily even as they occasionally make common cause. In 2004, for example, the Bangkok-based NGO Focus on the Global South partnered with Hezbollah to host a strategic-planning conference in Beirut for anti-Iraq war and anti-globalization movements, prompting criticism from other left-leaning groups in Lebanon opposed to Hezbollah.
A common anti-war stance provided space for coordination between Islamists and the global justice movement on other occasions. For example, the Muslim Association of Britain, affiliate of the Muslim Brotherhood, organized in concert with several anti-globalization groups the huge 2003 anti-war rally in London. The same association sent a delegation to the 2006 World Social Forum meeting in Venezuela, although again the motivation was more shared antipathy to the Bush administration rather than real ideological affinity.
In other cases, however, engagement between Islamic movements and the left has had more substance. In Europe, Muslim groups and the Green movement have shared platforms, and no less a figure than Tariq Ramadan has had ongoing if fractious dialogue with the altermondialisation movement, France’s distinct current of anti-globalization thought.
One also cannot help but notice the recent spate of texts on Islamic liberation theology – inspired by Latin America’s dissident Catholic-Marxist fusion from the 1960s and 1970s. Muslim thinkers from Ali Asghar Engineer in India to South Africa’s Farid Esack and the Iranian-American cultural critic Hamid Dabashi have articulated varied, often sharply contrasting accounts of the relationship between Islam and social-justice activism.
While these new arenas of Muslim politics do not yet represent mainstream political Islam, it’s significant that the actors and networks largely bypass the established “old guard” of modern Islamism such as the Muslim Brotherhood. In other words, young Muslims, dissatisfied with the failure of conventional Islamist groups to deliver results, may be searching for alternative avenues of political expression and mobilization – iPods firmly in hand.
Peter Mandaville, associate professor of Government & Islamic Studies and co-director of the Center for Global Studies at George Mason University, is the author of “Global Political Islam.”
Rights:Copyright © 2010 Yale Center for the Study of Globalization
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China Discovers World Expo Is No Olympics |
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Written by Publisher
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Monday, 23 August 2010 17:30 |
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World’s Fairs are no longer a big draw for global audiences
Maura Elizabeth Cunningham, Jeffrey N. Wasserstrom
YaleGlobal , 17 August 2010
SHANGHAI: From gigantic video displays on Shanghai skyscrapers to electronic monitors inside plush subways showcasing luxury products and the country’s latest engineering marvels, the message is clear: China has arrived. Hosting the World Expo with grand pavilions and futuristic displays, Shanghai can barely contain its brimming pride. But for all the razzle-dazzle, the Chinese government must feel some disappointment that this “second Olympics” is barely registering in world opinion. The past three decades of intensified globalization, bringing countries and their splendors much closer together, may have robbed China of the mystique associated with the great World’s Fairs of earlier eras.
The Expo is halfway through its six-month run and remains low on the global radar, compared with the 2008 Beijing Olympics. This frustrates Chinese authorities and Expo planners who wanted this “Economic Olympics” to be as high-profile as the athletic one. But it reflects the fact that, like past World’s Fairs, the Shanghai Expo is intended mainly to impress a domestic audience – well over 90 percent of visitors come from the host country. Tours of national pavilions provide a vicarious sense of international travel, and displays of new technologies offer a window on the future.
Here in Shanghai, there’s nothing under the radar about the event; it’s impossible to spend even an hour on the city’s streets without being reminded of the Expo. Images of its Gumby-like blue mascot Haibao adorn walls and countless billboards. Hedges in parks are cut to resemble him, and people have their pictures taken next to giant Haibao statues. On the subway, a monitor keeps passengers abreast of daily attendance: Some 400,000 these days, despite blistering heat – and over 40 million since May Day’s opening, well on the way to reaching the oft-pronounced goal of 70 million.
The Expo is a constant topic of conversation: Comments range from expressions of excitement that China has come far enough to host such a glorious event to frustration about six-hour waits at popular pavilions. Locals who have been abroad tend to be blasé or dismissive, seeing the Expo as a disruption of daily life, spurring relocations and a frantic buildup in a city whose urban fabric has already been turned inside out. Visitors streaming in from nearby provinces, by contrast, often seem awed. Despite queues and heat, they relish the chance to marvel at objects from regions they’re unlikely to visit – Denmark’s “Little Mermaid” is here, a Van Gogh painting hangs in the French Pavilion, and the China Pavilion houses representations of architectural forms associated with various Chinese regions.
What foreign visitors think hardly matters. There are so few, we are sometimes stared at as if we were not fellow spectators but part of the show, similar to the experiences of Li Gui, a Chinese traveler to the first official American World’s Fair, the 1876 Centennial Exhibition.
That World’s Fair held in Philadelphia has broader relevance, reminding us that Shanghai’s Expo is not the first to signal a country’s rapid rise. The Expo tradition was launched with London’s 1851 Crystal Palace Exhibition. For the next two decades, only European capitals were deemed advanced enough technologically, influential enough economically, and international-minded enough culturally to host World’s Fairs, the most prominent international events in that era before the television-fueled Olympic surge. The United States was the first non-European country to break into the charmed circle of World’s Fair hosts, and an Asian country would not host until Japan’s Osaka Expo in 1970. Now, with an economy on the verge of displacing Japan’s as the world’s second largest, it is China’s turn. And rather than hosting a World’s Fair like any other, it’s staging the largest in history.
To ensure that the Expo will be a “success” in the sense of having more countries represented by pavilions than any previous World’s Fair, the Chinese government offered to partially or fully finance displays by countries that could not otherwise afford to be present. To ensure that 70 million visitors attend, the government gives free tickets to locals and provides special deals to keep sprawling Expo parking lots filled with buses.
What remains unclear is whether the massive Expo budget, which is larger than that for the 2008 Games, will be enough to accomplish another goal: ensuring that this Expo is in the same league as great World’s Fairs of the past. In today’s soundbite-driven era, that would require it take the host city to a new level in terms of generating buzz. Here, the choice of Shanghai for the venue may have been a mistake, given how frequently the dramatic resurgence of the metropolis as a once-and-now again global city has made headlines ever since Pudong – East Shanghai – became home to some of the world’s tallest buildings in the mid-1990s and the world’s fastest train earlier this decade.
Shanghai would seem an ideal site for an Expo, since it has long been a port through which the world’s newest technologies and most fashionable trends entered China. This reputation dates to the treaty port era, 1843 to 1943, when the city was home to two main foreign-run enclaves – districts where Western countries and later Japan established spheres of influence, and where Chinese residents could taste French pastries, see neo-classical buildings like those in London, and shop at department stores comparable to those of New York and Tokyo.
Shanghai was, in other words, a precocious producer of what we call the “World’s Fair Effect” – a setting where elements of the global and the futuristic came together in a fashion as they did at London’s Crystal Palace. The World’s Fair Effect, once confined to fairgrounds, can now be felt in many locations, from Disney World’s Epcot Center to food courts at luxury malls to the internet, which offers virtual tours of the globe without users leaving home. With so many international experiences now part of our daily lives, expos are not the only place to encounter the world.
Within Shanghai itself, moreover, the World’s Fair Effect is not limited to treaty-port remnants. The city is dotted with department stores that showcase products of all lands, and Pudong’s rocket-like Pearl of the Orient Tower is the most famous of several local buildings that look as though they could have been left behind by a World’s Fair of decades past.
Perhaps more than any city in the world, Shanghai already resembles a futuristic fairground even when no circus is in town.
For China, particularly patriotic domestic residents whom the Communist Party must impress to retain some patina of legitimacy, this Expo is one more indicator that the country has reclaimed its former status as one of the world’s most powerful nations. From a global point of view, though, the Shanghai Expo can be seen as a test of the viability for any contemporary World’s Fair. And it is hard to see how, in an era of globalization so saturated with World’s Fair Effects, such an international event can ever really matter again. If the determined and deep-pocketed Chinese state can’t do it, who can?
Maura Elizabeth Cunningham is the editor of the “China Beat” and a past contributor to publications such as Forbes.com; Jeffrey N. Wasserstrom, until recently in Shanghai, is the author of “China in the 21st Century: What Everyone Needs to Know,” just published by Oxford University Press. Both authors are based in the History Department of the University of California, Irvine.
Rights:Copyright © 2010 Yale Center for the Study of Globalization
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Last Updated on Monday, 23 August 2010 17:33 |
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Unwanted Immigrants: America’s Deportation Dilemma |
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Written by Publisher
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Tuesday, 27 July 2010 17:08 |
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Passing immigration laws is easy – moving the uninvited people back home is far more difficult
Joseph Chamie YaleGlobal , 27 July 2010
NEW YORK: As being played out by the legal battle between the US Government and the state of Arizona, the bottom line in the illegal immigration debate is whether or not to deport those unlawfully resident within a country.
Faced with the growing presence of illegal migrants – many arriving without documents on foot, in backs of trucks, on creaky boats; others overstaying their visas; and still others having asylum claims denied – nations from Angola to Australia, Israel to Italy and the United Kingdom to the United States struggle with this knotty issue.
The deportation dilemma has become more acute due to global recession and widespread joblessness at levels not seen since the Great Depression. Partly as a result, a common perception emerges throughout Europe, North America and elsewhere – “millions of native workers without jobs and millions of jobs without native workers.”
Whereas the global number of illegal migrants is large, estimated at roughly 50 million, those actually deported are considerably less (see Table 1). In the US, for instance, less than 4 percent – or 358,886 – of the estimated 11 million illegal migrants were deported in 2008. While deportations have declined in some countries, such as Germany, Greece and Italy, numbers of deported have increased substantially in others, such as Canada, France, the UK and the US.
Concerning the undesirability of illegal immigration, near universal agreement exists among governments and much of the public, especially when it involves smuggling and trafficking. In fact, governments – especially at intergovernmental gatherings such as the United Nations – uniformly stress national sovereignty, emphasizing rights to monitor borders, manage immigration and pass laws aimed at deterring illegal immigration.
However, and this is the crux of the issue, views and policies differ enormously between sending and receiving countries, such as Mexico and the US, and within countries, such as Israel, Italy, Spain, the UK and the US, on how to deal with millions of men, women and children living unlawfully in scores of countries around the world.
At one extreme are those who contend that deportation is the appropriate and required solution: As illegal migrants are lawbreakers, they should not be rewarded with amnesty or legalization. Relevant laws pertaining to illegal immigration should not be ignored, camouflaged or halfheartedly carried out by responsible authorities. Illegal migrants must go to the back of the line and apply for immigration back in home countries just as legal immigrants have done and continue to do. Granting amnesty to illegal migrants not only undermines the rule of law, erodes public trust and constitutes a slap in the face to all those who migrated legally, this view maintains, but it also encourages future illegal immigration.
At the other extreme are those who oppose deportation, pressing for legalization of unauthorized migrants: Most of these migrants, struggling to meet their most basic needs, simply seek gainful employment to support themselves and improve the lives of their families. Identifying and sending unauthorized migrants back to home countries is costly and logistically difficult. Moreover, widespread deportations can lead to economic disruptions, breakup of families and violations of fundamental civil liberties. Unauthorized migrants should be allowed to reside and work legally in the country, proponents maintain, and permitted to apply for citizenship.
In the middle are the many who tend to equivocate on deportation, depending on circumstances: Unauthorized migrants – and it doesn’t matter from where – who commit serious crimes should be returned to their home countries after serving jail sentences. In contrast, law-abiding unauthorized migrants should be allowed to remain and permitted to apply for citizenship. In particular, unauthorized migrants who arrive as children – and those subsequently born in the country to unauthorized migrants – should be allowed to stay in the country and become citizens.
The political will needed to implement wide-scale deportation programs is normally lacking or weak at best. Politics, voting patterns, economic interests and labor needs, especially evident in Europe, Japan and the US, push political leaders to turn a blind eye to illegal immigration, by and large evading the prickly issue of deportation.
In addition, the costs of identifying, detaining, processing and deporting are considerable. For example, the United Kingdom Border Agency spent the equivalent of about $40 million in 2009 on chartered and scheduled flights to remove illegal migrants. In the US, simply detaining an illegal migrant has average cost of about $100 per day.
Legal deportation proceedings, if they take place at all, frequently give rise to ethical and humanitarian concerns. Sending illegal migrants back to countries with civil conflict or searing poverty, for example, could violate their basic human rights. In some cases, if returned home – especially to war-torn countries – their lives could be endangered by militants and insurgents. Moreover, expulsion of seriously ill or disabled unauthorized migrants, including those with HIV/AIDS, heart disease or cancer as well as mental illness or physical disabilities, to their countries of origin, particularly if least developed, could be a death sentence.
Even when deportation is decided by the courts and ordered by governmental authorities, illegal migrants, especially among the EU countries, increasingly protest court decisions with defiant refusals, including hunger strikes, street demonstrations and appeals to human rights organizations, often leading to lengthy stalemates. Taking up refuge in places such as churches and makeshift camps, some illegal migrants alongside sympathetic supporters challenge physical removal, often with attendant reporters and television crews. In response to heightened visibility and negative public reaction to these removals, some governments, such as France and the UK, deport illegal migrants surreptitiously late at night.
Objections to deportation also arise in the countries of origin, such as Mexico which has spoken out against US deportations and the recent Arizona law. Some nations, such as China, Ethiopia, Eritrea, India, Iran, Jamaica, Laos and Vietnam, refuse to repatriate many of the illegal migrants. Also, origin countries, such as Cambodia, El Salvador, Guatemala and Jamaica, are understandably not keen to receive deported citizens convicted of crimes abroad or linked to organized crime. And the numbers of deported criminals are not inconsequential; the US alone deported close to 100,000 criminals in 2008.
In addition to the loss of valued remittances, returning unauthorized migrants are likely to contribute to unemployment rolls, additional costs and political unrest. Besides new and uncertain economic circumstances, deported migrants often face re-entry difficulties, including stigmatization and depression.
As a result of their inability or unwillingness to return illegal migrants to their home countries, some governments, especially among EU nations such as Italy and Spain, have offered regularization programs to hundreds of thousands. To reduce opposition to amnesty, legalizations programs are frequently labeled as “the last.”
Legalization is often coupled with commitments for increased border, interior and workplace enforcement as well as public information campaigns aimed at discouraging future illegal migration. However, governments acknowledge that offering “last chance” legalization programs likely encourage others to try unlawful entry in hopes of being eligible for the next amnesty, as was the case following the “last” US amnesty to nearly 3 million illegal migrants passed under President Ronald Reagan in 1986.
Political leaders, especially in developed countries, are unlikely to consider amnesty or legalization, not until the economy rebounds and record-setting unemployment rates subside. At the same time, legalization advocates insist that governmental authorities address the plight of the undocumented migrants.
For the foreseeable future, governments and intergovernmental organizations must struggle with the deportation dilemma. And until it’s resolved, illegal migrants must confront the immigration Sword of Damocles.
Joseph Chamie, former director of the United Nations Population Division, is research director at the Center for Migration Studies. “Reprinted with permission from YaleGlobal Online - www.yaleglobal.yale.edu - (c) 2008 Yale Center for the Study of Globalization.”
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How Serious Is the Chinese Challenge? Part II |
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Written by Publisher
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Friday, 23 July 2010 09:23 |
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Despite its rise, China has lopsided financial interdependence with the US
Markus Jaeger YaleGlobal , 15 July 2010
New York: The Chinese economy has been growing at 10 percent annually since the beginning of economic reform in the late 1970s. If current trends hold, China will overtake the US in terms of economic size by 2025. In PPP terms, China will be world’s largest economy by 2020.
Economic analysts are divided about China’s road to economic preeminence. Some foresee dangerous speed bumps while others argue that interdependence can only smooth the ride.
Despite China’s dramatic economic rise and increasing financial weight, the Sino-US economic-financial relationship can be best described as one of “asymmetric interdependence” – where Beijing finds itself in a position of “asymmetric vulnerability” – heavily skewed in Washington’s favor.
Several factors and developments could undercut China’s trajectory.
Some analysts anticipate rising geostrategic competition between China and the US. Historically, rising powers make use of their increasing influence, argues Aaron Friedberg, and increasing dependence on imported commodities could lead China to mitigate supply risks by seeking “regional preponderance,” thus increasing strategic competition between Beijing and Washington. From there, it’s a small step to construct a scenario where geostrategic competition leads to economic conflict weighing on Chinese economic development, as predicted by international relations realists such as John Mearsheimer. Other scholars are more optimistic about the possibility of a peaceful “power shift.” David Shambaugh, Robert Sutter and Bates Gill interpret much of Beijing’s international behavior as evidence that China is becoming a “responsible stakeholder” in an international system that, by and large, offers it benefits through an open trading system.
Some analysts anticipate political instability. The lack of post-Mao charismatic leadership and the declining strength of ideology have weakened the foundations of China’s political system, according to Harvard’s Roderick MacFarquhar. Increasing social activism could undermine Communist Party rule and regime stability. Again, from this analysis, it’s only a small step to come up with a scenario where political volatility and uncertainty weigh on economic growth. Andrew Nathan is more optimistic, arguing that the Chinese government has repeatedly proven its ability to respond to newly-emerging social and economic demands. Localized social unrest does occur, but given the combination of regime responsiveness and political control, he maintains that “a spark isn’t going to start a prairie fire in China.” Demographics ensure that demands for political reform will remain manageable as “the middle class won’t demand democracy when it is afraid of an even more numerous class of peasants and migrant workers, and therefore sees the authoritarian regime as a bastion of order against chaos.”
Lack of further reforms might undercut future growth. Pei Minxin, senior associate at Carnegie Endowment, suggests that partial economic reform has led to the emergence of a “mixed” state-centered system that perpetuates the privileges of the ruling elite. This system allows the elite to “tap efficiency gains from limited reforms to sustain the unreconstructed core of the old command economy – the economic foundation of its political supremacy.” He calls this a “trapped transition,” where the ruling groups have little incentive to pursue further reform. Absent economic reform, however, economic growth is bound to decline. A variation of this argument has been put forward by Woo Wing Thye, professor of economics at UC Davis, who suggests the challenge lies in sustaining economic growth while at the same addressing rising social inequality and accommodating increasing middle-class demands for political reform. Optimists, like Barry Naughton, point out that the government has repeatedly proven its ability to successfully deal with various economic challenges and that growth remains largely driven by large-scale economic and demographic forces that are relatively independent of government policy.
Naturally, other concerns range from environmental sustainability and viability of the current investment-heavy, export-led growth strategy to political event risk. According to the “bears,” all of these might create potentially non-negligible risks capable of undermining, or at least significantly slowing down, China’s rise. Nonetheless, short of a complete – and very unlikely – breakdown, a reasonable downside scenario is likely to mean 5 to 7 percent annual growth, rather than full-blown economic stagnation. China is unlikely to be thrown off-course in the way the Soviet and Japanese economies were. Structurally, China’s medium-term growth potential is, after all, significant. Unlike Japan in the 1980s, China is located far from the technological frontier, and its development model is based on a relatively high degree of economic openness, and unlike the Soviet Union, China is better suited to generate total factor productivity by importing foreign technology. Therefore, China will more likely than not continue to register at least 8 percent annual growth over the next decade.
China’s increasing economic size will provide Beijing with growing political, economic and financial influence. While China’s rise has greatly increased its power, this has thus far translated into limited bilateral influence vis-à-vis the US. China’s most important economic-financial lever of influence regarding the US is the threat to sell off its estimated $1.4 trillion in US treasury and agency debt.
Such a move would be costly for Beijing, however, economically and financially, China would shoot itself in the proverbial foot. First, the value of its holdings would decline, and higher US interest rates would weigh on the US growth outlook, hurting Chinese exports. Furthermore, unless it’s willing to accept renminbi apprecation, China would have to find other dollar assets to invest in,as rapid renminbi appreciation is hardly in China’s interest in terms of exports and dollar-denominated US debt holdings. However, if China does re-invest in dollar-denominated assets, this would presumably help ease financing conditions in other segments of the US financial system, potentially offsetting negative effect of higher rates in the treasury market on the economy.
Second, if Beijing were to dump large chunks of US debt, it might disrupt financial markets in the short run. The medium-term impact would likely be manageable, as other official foreign buyers with close security ties to the US, including Japan and Gulf nations, would step in, albeit at higher interest rates.
Last but not least, any politically motivated fire sale of US debt would trigger a severe political backlash – and not just from the US – as well as undermine China’s standing as a reliable financial investor and economic partner.
Financially, economically and politically, Beijing would pay a high price for significantly raising US borrowing costs and it would end up paying a higher price than Washington – simply reflecting the fact that China is much more dependent on the US than vice verssa. The US has access to a more diversified investor base, with which it maintains close political relations. The US market is substantially more important to China in terms of both exports and imports than vice versa – and the Chinese export sector is relatively more employment intensive.
China’s holdings of US debt do not lend themselves as a coercive instrument and are perhaps better regarded as a limited deterrent. Rising cross-border asset holdings and trade have increased interdependence, raising the costs of economic conflict for both China and the US. Nonetheless, the potential costs of a conflict due to China’s trade dependence are substantially higher for Beijing than for Washington.
However, if and when China reduces its export dependence on the US market relative to US dependence on the Chinese market, and if and when it adopts a substantially more flexible exchange rate regime, the balance of economic and financial power will shift dramatically in Beijing’s favor. Until then, Beijing has a far greater interest in preventing a wider economic-financial Sino-US conflict than Washington does.
Markus Jaeger is a director at Deutsche Bank Research, New York.
“Reprinted with permission from YaleGlobal Online - www.yaleglobal.yale.edu - (c) 2008 Yale Center for the Study of Globalization.”
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