Eclipse: Living in the Shadow of China’s Economic Dominance

On 8 March 2012, the Lee Kuan Yew School of Public Policy hosted a lecture “Eclipse: Living in the Shadow of China’s Economic Dominance” by Professor Arvind Subramanian, Senior Fellow at Peterson Institute for International Economics and Centre for Global Development. The speaker evaluated the weakening economic might of the US in relation to surging China, which arguably is poised to become a superpower sooner than expected.

Subramanian said, “China’s economic dominance is imminent and much broader in scope than anyone can currently imagine.” The Chinese currency is likely to “become the main international currency within 10-15 years” and could potentially become the “premier reserve currency in the next 10 years or even earlier”, thereby threatening the dominance of dollar, he noted.

Referring to George Kennan, a prominent US diplomat and advisor who actively propagated a containment policy against the USSR, Subramanian emphasized the importance of “not containing China, but empowering it” in order to uphold multilateralism and ensure the stability of the current international trading system.

On the long-term growth projection of the two countries, Subramanian noted that the US economy will likely grow at 2.5 percent per year in the next 20 years, whereas China’s annual growth within the same period could approximate 6.5 percent. He referred to “structural middle class problem” as one of the underpinning ills of the US. Overall, he portrayed the economic outlook of the West as “pessimistic.”

By 2030 China will be a middle income “kingdom” and its living standard will be 50% of the US, said Subramanian. China might not have much soft power and as a developing country, it may not be able “to supply global public goods than rich nations can”, he further added. As such, China will be a “cautious superpower”, employing both “carrots and sticks” in pursuing strategic interests. 

Subramanian questioned whether the current “open international system could survive China’s rise” and responded positively by stressing that it was due to open system China’s prosperity materialized. With its growing importance in global affairs, “China can create a win-win situation with the rest of the world”, and needs to take the lead in key international issues, he said.

The speaker noted that the International Monetary Fund ought to be strengthened with increased Beijing’s participation and contribution, which in turn will lead to its greater recognition from the West. With regard to climate change, Subramanian said that non-cooperation on the issue is costlier to China and India than to the West, and highlighted slow but encouraging signs in changing attitudes in the two nations.

In conclusion Subramanian emphasized that “it’s in China’s hands, not in American hands, for China to become the superpower” and underlined multilateralism as an “insurance” to check on China.

is a second-year Master of Public Policy student at the LKY School.