Martin Jacques - When China Rules the World

Unlike the white diaspora, which was a product of relative European power and wealth, the Chinese diaspora was largely a consequence of hunger and poverty at home, combined with the use of Chinese indentured labour by the British Empire. This notwithstanding, the Chinese diaspora in South-East Asia enjoys, relatively speaking, disproportionate economic power, while Chinese ethnic minorities more or less everywhere have experienced increasing economic success in recent decades. From being industrious but poor, the Chinese are steadily rising up the ladder of their respective adoptive homelands in both economic and cultural terms. That process is being driven in part by the growing power of China, which is serving to raise the self-confidence, prestige and status of the overseas Chinese everywhere. The multifarious links between the mainland and the Chinese diaspora, in terms of trade and Mandarin, for example, are predictably helping to enhance the economic position of the overseas Chinese. In some Western countries, notably Australia and also in Milan in Italy, where there have been clashes between the increasingly prosperous Chinese community and the local police, there has been evidence of strong resentment towards the local Chinese. [1262] [1262] ‘A Battle of Cultures in Milan ’s Chinatown ’, International Herald Tribune , 27 April 2007; also ‘Chinese Entrepreneurs Upset French Neighbors’, International Herald Tribune , 6 June 2007. The recent success of the Chinese, who have traditionally been regarded as inferior and impoverished, has proved disconcerting for sections of the Milanese population. But as China becomes steadily wealthier and more powerful, the Western world will have to get used to the idea that growing numbers of Chinese at home and abroad will be richer and more successful than they are.

The other side of the coin is China ’s attitude towards the overseas Chinese. As mentioned earlier, one of the narratives of Chinese civilization is that of Greater China, an idea which embraces the ‘lost territories’ of Hong Kong, Macao and Taiwan, the global Chinese diaspora and the mainland. The Middle Kingdom has always been regarded as the centre of the Chinese world, with Beijing at its heart and the disapora at its distant edges. All Chinese have held an essentially centripetal view of their world. The way that the diaspora has contributed to China ’s economic transformation is an indication of a continuing powerful sense of belonging. The rise of China will further enhance its appeal and prestige in the eyes of the diaspora and reinforce their sense of Chineseness. The Chinese government has sought, with considerable success, to encourage eminent overseas Chinese scholars to work and even settle in China. Meanwhile, as discussed earlier, Chinese migration is on the increase, notably to Africa, resulting in the creation of new, as well as enlarged, overseas Chinese communities. It is estimated that there are now at least half a million Chinese living in Africa, most of whom have arrived only very recently. There are over 7 million Chinese living in each of Indonesia, Malaysia and Thailand, over 1 million each in Myanmar and Russia, 1.3 million in Peru, 3.3 million in the United States, 700,000 in Australia and 400,000 in the UK; the approximate figure for the diaspora as a whole is 40 million, but this may well be a considerable underestimate.

How will this relationship between China and the diaspora develop? Will the mainland at some point consider allowing dual citizenship, which at the moment it does not? Is it conceivable that in the future there might be a Chinese Commonwealth which embraces the numerous overseas Chinese communities? Or, to put it another way, what forms might a Chinese civilization-state take in a modern world in which it is predominant? A commonwealth would no doubt be unacceptable to other nations as things stand, but in the event of a globally dominant China, the balance of power would be transformed and what is politically possible redefined. The impact of any such development would, of course, be felt most strongly in South-East Asia, where the overseas Chinese are, relatively speaking, both most powerful and most numerous.

Chinese economic power will underpin its global hegemony. With the passing decades, as the Chinese economy becomes increasingly wealthy and sophisticated, so the nature of that power will no longer rest primarily on the country’s demographic clout. It is impossible to predict exactly what this might mean in terms of economic reach, but, given that China has a population around four times that of the United States, one might conjure with the idea that China ’s economy could be four times as large as that of the US. In mid 2007, before the credit crunch, with rapidly rising share prices on the Shanghai and Hong Kong stock exchanges, [1263] [1263] Hong Kong-listed shares surged after the Chinese government agreed in August 2007 that its citizens would be allowed to invest in the Hong Kong stock market. All five of China ’s biggest companies by market value in late 2007 had Hong Kong listings. Chinese companies accounted for three of the ten largest companies in the world by market value (see Figure 46), and by the end of October that figure had risen to five out of ten. Citic Securities, the biggest publicly traded brokerage in China, trailed only Goldman Sachs, Morgan Stanley and Merrill Lynch in market value among securities firms, while Air China was the world’s biggest airline by market value, having overtaken Singapore Airlines and Lufthansa. [1264] [1264] ‘ China Market Values Soar’, International Herald Tribune , 30 October 2007. Of course it may transpire, as happened with the value of Japanese companies in the asset bubble of the late eighties, that these figures prove to be considerably inflated, but nonetheless they are probably a rough indication of likely longer-term trends.

The potential volume of Chinese overseas investment, as China ’s capital account is steadily opened and the movement of capital liberalized, is huge, especially given the level of China ’s savings. In 2007 China had $4,800 billion in household and corporate savings, equivalent to about 160 per cent of its GDP. On the assumption that savings grow at 10 per cent per annum, China will have in the region of $17,700 billion in savings by 2020, by which time China should have an open capital account. If just 5 per cent of savings leaves the country in 2020, that would equal $885 billion in outward investments. If outflows reach 10 per cent of savings, $1,700 billion would go abroad. [1265] [1265] Jing Ulrich, ‘Insight: China Prepares for Overseas Investment’, Financial Times , 7 August 2007. To provide some kind of perspective, in 2001 US invisible exports totalled $451.5 billion. At the time of writing, Chinese overseas investment is still, in historical terms, in its infancy, but it is growing extremely rapidly: China ’s overseas investment reached over $50 billion in 2008, with an annual average growth rate of 60 per cent between 2001 and 2006. [1266] [1266] ‘ China ’s Overseas Investment Rises 60 % Annually’, 2 February 2007, posted on www.chinadaily.com.cn/bizchina. A hint of what the future might hold was provided by the investments made by Chinese banks in Western financial institutions, which, in late 2007, found themselves seriously short of capital as a result of the credit squeeze which began in August of that year. By the end of 2007 Chinese financial institutions owned 20 per cent of Standard Bank, 9.9 per cent of Morgan Stanley, 10 per cent of Blackstone, and 2.6 per cent of Barclays. [1267] [1267] ‘Morgan Stanley Taps China for $5bn’, Financial Times , 19 December 2007; Tony Jackson, ‘The Chinese Bank Plan is One to Watch’, Financial Times , 23 July 2007; Geoff Dyer and Sundeep Tucker, ‘In Search of Illumination: Chinese Companies Expand Overseas’, Financial Times , 3 December 2007. This, however, proved to be the high-water mark, as the Chinese government, increasingly aware of the depth of the American financial crisis, advised its banks to desist from becoming involved in rescue packages for beleaguered American and European banks.