If an alien intelligence were monitoring news on Earth, they would probably assume China was eating America’s lunch.
It makes sense. America has seen easier times.
The global order the United States established is in crisis, America’s uncoordinated response to coronavirus eroded the credibility of its ossified institutions, and the resurgence of nationalist politics on the right and emergence of culture wars on the left suggests a nation almost splitting apart.
No wonder pundits often question whether the Chinese model is a better one than that of liberal democracy. Such talk is not unfounded. China turned the pandemic into a testament of its strength, growing its economy at a record 18.3% in 2021 so far – its biggest jump in GDP since 1992.
But, to conclude that America is failing due to China’s success is to confuse correlation with causation.
China is a competitor, not a predator. America’s dominance may be in the process of being hollowed, but this is largely a result of internal factors, not external ones. Growing political dysfunction and weakening economic dynamism are tunneling an existential hole through the shining city on the hill. China is not doing this to America.
Indeed, China alone cannot end America’s era of supremacy. Though the world’s center of gravity may be shifting from the Atlantic Ocean to the Pacific, the United States is still a more enticing country than any other on Earth and its soft power is deep. English is the world’s lingua franca, more than twice as powerful as Mandarin on the Power Language Index. Chinese is monosyllabic with four tones, and each pronunciation has a different, unrelated meaning from the others. English is not only dominant globally, but it also sways local exchanges, like in Dubai, where English is the default language even though a large majority of the population does not speak it natively.
The most entrepreneurial immigrants are drawn to America in droves, from Europe to India to yes, also China. Most risk-taking castaways from other nations prefer to settle in America, where there is the widespread belief that with enough grit and determination, one can still propel herself from nothing to everything within a generation. A 2019 report highlighted that 45% of Fortune 500 companies were founded by immigrants or their children, up from 43% two years prior. For all the attacks on the calcified wealth divide in the US, there is still fundamental socio-economic mobility. In contrast, China is a closed ‘system’ where the ability to improve one’s lot in life is most often based on political relationships, not merit.
In 2016, China issued more than 1,500 permanent residency cards, while the US issued 1.2 million. Those are 1.2 million bets on the future that China is not making.
Until China’s financial sector matures, it will invariably prioritize domestic stability over international growth, and the yuan is unlikely to displace the dollar as the global currency. To do so, it must first reach full capital account convertibility. But, opening up the capital account would make Beijing vulnerable to capital flight and financial crisis from the volatility of global financial markets. China’s commitment to full yuan liberalization has been more rhetorical than real. The yuan’s integration with the global financial system will be carefully engineered, as Beijing wants to first maintain domestic stability and growth.
Even the much-hyped digital yuan was built with an isolationist approach to cryptocurrency – current Chinese cybersecurity laws prevent interoperation between the Chinese blockchain and international public blockchains from other jurisdictions – which will keep China from fully integrating with the global financial community. Just as China’s internet is walled off from the rest of the world, China’s digital yuan will likely also be used only domestically. If the US embraces open crypto protocols, as it did with the open internet, its financial dominance will be enhanced, while China’s will remain stymied. America can print as much money as it wants as long as it continues to innovate dynamically – a huge strategic advantage relative to other nations.
Finally, China is embroiled in numerous territorial disputes with its neighbors: Japan, India, and the Philippines, to name a few. The US, in contrast, is still largely physically surrounded by allies.
During the 1970s and 1980s, when the US auto industry, electronics industry, and petrochemicals industry suffered competitiveness setbacks from Japanese and German manufacturing capabilities and lower labor costs, America’s brutally efficient form of capitalism redirected its dynamism. Across the country, factories closed and workers were laid off, as capital was redirected to improving productivity, often through innovative information technology. This led to phenomenal growth in the country’s technology sector, producing companies like Microsoft and Apple. It was painful, but today, the iPhone is American, the dominant electric car is American, and the reusable rocket is American.
America can do it again.
The key is not to let growing domestic disagreement undermine the two imperatives for the future. The United States must continue to attract the brightest global talent despite the politicization of immigration policies, and it must continue to take an open-minded approach to emerging technologies. These are the indisputable twin engines of progress.
Yes, America has deep fissures and is not a united nation. There are myriad news stories on America’s decline from the left and right that underscore this. But, inside China, there are zero stories about China’s cornucopia of problems. This difference does not speak to American weakness and Chinese strength, but rather of one nation that embraces differences and another that fears them. And as natural selection underscores, diversity is essential for long-term survival.
So, to any interstellar alien observers out there, know this: China will surely continue to rise, but don’t count out the United States.