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China And US Enter New Territory Over Economy

(c) Sky News 2013

Barack Obama officially begins his second term as US president but the legacy of his next four years may already have been written.

If predictions are correct, President Obama is set to preside over the end of an empire as America is eclipsed by China as the world's economic superpower.

The Organisation for Economic Co-operation and Development (OECD) has predicted that China will become the world's largest economy by 2016 - a milestone which will have profound global geopolitical implications. 

The fundamental shift explains why the direction of the US/Chinese relationship is more important than any other over the coming few years.

In a recent interview with Time magazine, President Obama put the relationship and the broader Asia-Pacific region at the top of his agenda.

"We are helping to shape and frame what the Asia-Pacific region will look like. That's critically important because that’s where the growth and population and increasing centre of gravity is going to be.

"China is going to continue to rise and we should hope for China's success. A stable China that over time is transitioning to a more open, democratic society would be really good for us economically and politically."

The US became the world's most powerful country economically more than 100 years ago, since then that clout has allowed Washington to establish itself as the world's leader.

America has, to the benefit of some and the detriment of others, acted for decades as the world's policeman.

It has the world's pre-eminent military force and the most advanced monetary system. The US dollar is the only genuinely global currency.

It is no coincidence that organisations like the International Monetary Fund and the United Nations should be based in America.

All that has been possible because of America's position as the largest economy on earth and victory in the Second World War.

But China's meteoric rise over the past few decades could change everything.

If the OECD is right, then the economic sun will set for America in the second half of 2016 - three years into Mr Obama's second term.

America will no longer be able to boast about being number one, a fact that is bound to play as a pivotal moment in the psyche not just of Americans but of those who will be taking the baton - the 1.3 billion people of China. 

As the economic leader, will China take on the responsibility as the global policeman? Will an ever increasing Chinese clout shape world events? Will the West increasingly bow or succumb to Chinese demands because their economies are so entwined in China's?

The irony of course is this - China is still an authoritarian one-party state and with no elections, the Communist Party has ruled over this vast land since 1949.

At the risk of wildly over-simplifying the Party's success strategy, it is their obsession with control and censorship coupled with cautious yet broad economic reforms that have placed China where it is now.

Since the reforms of the 1990s, the rule-of-thumb for China's population has been this - if you can do what you want as long as you don't question the Communist Party's legitimacy and as long as you accept that the Party allegiances will be advantageous (or even essential) in every facet of life.

And so an undemocratic nation controlled by a Communist government whose members make up just 6% of the population is set to become the most powerful nation on earth.

For America this prompts a decision - confrontation or cooperation. 

There are some within American politics who believe China's rise should be countered with an effort to encourage an internal struggle to remove the Communist Party.

There are others who believe we should allow history should judge which political system – democracy or autocracy – is correct.

Henry Kissinger was the US National Security Advisor in the 1970s when Washington first established ties with the Communist government in Beijing.

In July 1971, he held top secret meetings in Beijing with then Chinese Premiere Zhou Enlai which eventually lead to the historic bilateral talks between President Nixon and Chairman Mao.

Secret documents, released from the vaults after 30 years, reveal the cautious diplomacy which is being repeated almost word-for-word today.

"We realise, of course, that there are deep ideological differences between us," Mr Kissinger is quoted as saying to Premiere Zhou at the secret meeting in the then US embassy in Beijing.

"You are dedicated to the belief that your concepts will prevail. We have our own convictions about our future.

"The essential question for our relations is whether both countries are willing to let history judge who is correct, while in the interval we cooperate on matters of mutual concern on a basis of mutual respect and equality for the benefit of mankind."

Some might say that history has now judged the political victor, though that could be argued either way - those who think Communism is a failure will point the wholesale collapse of the Soviet Union.

But the men who run the Communist Party in China will say the opposite as under their leadership, China is set to become the world's most powerful nation.

Mr Kissinger is now 89 but still actively commenting on the relationship he was central in forming.

Last March he said: "The inevitable tendency to impinge on each other should not be equated with a conscious drive to contain or dominate, so long as both can maintain the distinction and calibrate their actions accordingly.

"China and the United States will not necessarily transcend the ordinary operation of great-power rivalry. But they owe it to themselves, and the world, to make an effort to do so."

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