A Partnership of Equals.docVIP

A Partnership of Equals: How Washington Should Respond to China’s Economic Challengeby C. Fred Bergsten,To be an economic superpower, a country must be sufficiently large, dynamic, and globally integrated to have a major impact on the world economy. Three political entities currently qualify: the United States, the European Union, and China. Inducing China to become a responsible pillar of the global economic system (as the other two are) will be one of the great challenges of coming decades—particularly since at the moment China seems uninterested in playing such a role.quoteChina has a profound interest in seeing that the international rules and institutions function effectively.quoteThe United States remains the worlds largest national economy, the issuer of its key currency, and in most years the leading source and recipient of foreign investment. The European Union now has an even larger economy and even greater trade flows with the outside world, and the euro increasingly competes with the dollar as a global currency. China, the newest member of the club, is smaller than the other two but is growing more quickly and is more deeply integrated into the global economy. Its dramatic expansion is therefore having a powerful effect on the rest of the world. (China is often paired with India in such discussions, but Indias GDP is less than half of Chinas. The value of the annual growth of Chinas trade exceeds the total annual value of Indias trade. China will dominate its Asian neighbor for the foreseeable future.)China poses a unique challenge because it is still poor, significantly nonmarketized, and authoritarian. All three characteristics reduce the likelihood that it will easily accept the systemic responsibilities that should ideally accompany superpower status. The integration of China into the existing global economic order will thus be more difficult than was, say, the integration of Japan a generation ago. The United States and the European Union