China and the Credit Crisis: The Emergence of a New World Order

CHAPTER 9

Nova Pax Sinica—Can China Lead the World?

China, a country with a huge population, much of which is poor, and with an economy still only partially developed, finds itself today holding the balance of financial power as a result of the spectacular success of its economic policies and the consequences of the financial crisis which have weakened the United States and pushed China into the global limelight. Can China rise to the challenge of global leadership, knowing that this requires it to integrate itself more thoroughly in the global political economy, expose the inner workings of its communist party system to global scrutiny, and seek assistance from other countries, particularly the United States, which it has regarded until recently as a competitor and even as an enemy? And can the rest of the world learn to live with a powerful China ruled by a communist dictatorship?

The Decline of America

Until the financial crisis of 2008, the global dominance of America and its allies seemed assured. Rooted in the post-war financial restructuring at Bretton Woods, and confirmed by the collapse of the Soviet communist system in 1990, the US dollar and the Anglo-Saxon financial system lay at the heart of the economic boom brought by globalization. Against this background of many years of American-led global growth, in September 2006 Treasury Secretary Henry Paulson traveled to Beijing to inaugurate a discussion between America and China aimed at economic cooperation. Before he ...