"Is China The New Superpower?"

As the world focuses on China during the Olympics and keeps a watchful eye on Russia's military moves in Georgia, there is an underlying expectation - and for some, fear - that China is poised to become the world's new No. 1 superpower.

According to one projection, China is on the verge of supplanting the United States as the primary driver of the global economy, a leading role that dates back to the end of World War II. The Georgia Tech researchers who make this claim have little doubt that China, owing to all the money it now invests in research and development, will soon become the No. 1 technological superpower. Another study, done last year, points out that the sheer numbers of people in China will propel such a transition by mid-century.

After World War II, the United States was virtually the only country left standing and it accounted for 40 percent of world trade in the post-war years, according to Miller. Most countries pegged their currencies to the dollar. English came to be the dominant language of global politics and business and American culture grew globally pervasive. When the Soviet Union collapsed, the United States became inarguably the top superpower.

One key to this supremacy is hegemony. The word derives from a Greek term for leadership. It is the ability to dictate policies of other nations. It's often accomplished by brute force, as in the days of the Roman and British empires. Germany took a crack at it in the late 1930s. Russia has worked at it but by many historians' accounts never achieved hegemony in any global sense. China is often considered regionally hegemonic.

In addition to sheer military might, the United States achieved hegemony through economic, political and cultural influence - factors that many see as being on the wane now.

A couple years back, the presidential hopeful Ron Paul echoed what many analysts perceive: The "dollar hegemony" - U.S. currency's strength and attractiveness - has been a key factor in U.S. dominance, but "our dollar dominance is coming to an end."

Though it has become a great power in a "spectacular" rise over the past two decades, "China is not now a superpower, nor is it likely to emerge as one soon," Miller wrote in 2004, standing by that argument this week in an email.

In fact, many people who study these things see the world possibly entering a new phase where superpowers are not what they used to be. Rather than a unipolar world, where one country calls the bulk of the shots, the future might prove to be multipolar, where three or more nations share the preponderance of influence. Most analysts agree China is taking a seat at the world power table, the question is whether the country is motivated to seek world domination or prefers to play nice.

The United States has driven the world economy since the end of World War II. But part of the formula relied on for that success - heavy investment in research and technology - is being co-opted by China, just as Japan and other countries have done in recent decades.

Meanwhile, many American scientists complain that morality-based politics and a lack of federal funding has seriously eroded the U.S. leadership in science and technology in recent years.

A study earlier this year by the Georgia Institute of Technology projects China will soon pass the United States in the ability to export technology-based products.

"For the first time in nearly a century, we see leadership in basic research and the economic ability to pursue the benefits of that research - to create and market products based on research - in more than one place on the planet," said Nils Newman, co-author of the study. "Now we have a situation in which technology products are going to be appearing in the marketplace that were not developed or commercialized here. We won't have had any involvement with them and may not even know they are coming."

"China has really changed the world economic landscape in technology," said Alan Porter, another study co-author. "When you take China's low-cost manufacturing and focus on technology, then combine them with the increasing emphasis on research and development, the result ultimately won't leave much room for other countries."

Porter said Chinese scientists now write more scientific papers in international journals than any country for a number of key emerging technologies. China has also entered the exclusive club of nations putting people in space.

By one economic measure, China falls short of global domination for now. The country's gross domestic product - the value of goods and services it produces annually - is about $7 trillion, second place to the United States ($13.8 trillion).

Miller acknowledges that China is becoming the manufacturing hub of the world. But if the aim is superpower status, there remains much to be done.

"China is nowhere close to becoming a world financial center," Miller says. And to become a superpower, China's "dramatic economic growth must continue indefinitely, a prospect about which there are grounds for skepticism."

"China's rise further depends critically on the continuation of such [economic] growth rates, and there are reasons to wonder how long the spectacular rates of the past 25 years can continue," Miller says. "The high proportion of China's economy occupied by its exports makes it sensitive to the ups and downs of the international economy generally and to the engine of American consumption in particular."

"The U.S. isn't going to disintegrate into a backwater economy," said Porter, the Georgia Tech analyst. "But if you scan the contributing factors to technology-driven economic prominence, the Chinese upside is far greater. They are educating more scientists and engineers. Their government puts a high priority on technical capability and entrepreneurial activity. If you look at our educational system (especially K-12), our investment (savings rate), debt, and so on - prospects are scary."

China's success has been primarily due to manufacturing as a low-cost producer. This is attributed to a combination of cheap labor, good infrastructure, medium level of technology and skill, relatively high productivity, favorable government policy, and some say, an undervalued exchange rate. The latter has been blamed for China's bulging trade surplus (US$262.7 billion in 2007) and has become a major source of dispute between China and its major trading partners - the US, EU, and Japan despite the yuan having been de-pegged and risen in value by 20% against the US dollar since 2005. Other ongoing trade disputes are China's widespread illegal copying of intellectual property, software piracy, and perceived low quality/unsafe Chinese-made goods.

The state still dominates in strategic "pillar" industries (such as energy and heavy industries), but private enterprise (30 million private businesses) now accounts for approximately 70% of China's national output, up from 1% in 1978. Its stock market in Shanghai (SSE) is raising record amounts of IPOs and its benchmark Shanghai Composite index has doubled since 2005. SSE's market capitalization reached US$3 trillion in 2007 and is the world's fifth largest exchange. China now ranks 34th in the Global Competitiveness Index. Twenty nine Chinese companies made the list in the 2008 Fortune Global 500. Measured on market capitalization, 3 out of 10 of the world's most valuable companies are in China including #2-PetroChina, #5-China Mobile (world's most valuable telecommunications company), and #6-Industrial and Commercial Bank of China (world's most valuable bank).

China's rapid growth has pulled hundreds of millions of its people out of poverty since 1978. Today, about 10% of the Chinese population remains below the poverty line.

The economy is also highly energy-intensive and inefficient - it uses 20%-100% more energy than OECD countries for many industrial processes. It has now become the world's second largest energy consumer behind the US but relies on coal to supply about 70% of its energy needs. Coupled with a lax environmental regulation, this has led to a massive water and air pollution (China has 20 of the world's 30 most polluted cities). Consequently, the government has promised to use more renewable energy with a target of 10% of total energy use by 2010 and 30% by 2050.

    That China has or is becoming the new economic superpower is very obvious. China discovered that totalitarian "Big Government" stagnates an economy and people. Though the Chinese government still controls the energy industries, the State discovered that smaller government and a free market was the way to go in lifting billions of Chinese citizens from poverty to prosperity. China still has a long way to go when it comes to pollution, a free press and Internet, and improved living conditions for  the billions of rural Chinese citizens, but it appears things are on the right track, particularly since hosting the Olympics in Beijing. The one thing that China does right, as I see it, is the fact that China doesn't do anything against it's own interests. America, particularly in foreign policy, does many things that are not in America's best interests, spending trillions of dollars in wars and the defense of other nations. If America wants to remain a superpower, then America must put America first, not "Big Business" and foreign governments but the Constitution and compassionate capitalism. That's what makes America a superpower,as I see it.

tags: china  america  global superpowers  economy  free enterprise  business  capitalism  takebackamerica