by Maj (ret'd) CORNELIU E. CHISU, CD, PMSC,
FEC, CET, P. Eng.
Former Member of Parliament
Pickering-Scarborough East
As we bask in our few precious months of summer sunshine, it might benefit us to take a moment to look at China and the rapid rise of its ambitions to replace the hegemony of the dollar.
China is a new hotspot in the world economy, and it has achieved this status in a few short decades by transforming itself from a poor planned economy to a gigantic market-oriented economy. It has enjoyed continuous rapid economic growth resulting from a combination of domestic economic reforms and open trade policies.
China seems to have learned quickly from the collapse of the Soviet Union and adopted a new form of communist rule; let's call it market communism.
China's GDP per capita passed the US$10,000 benchmark in 2019; and two years later reached US$12,551, surpassing the world's average (estimated at $12,100) for the first time in 2021.
As the world's second largest economy, China's gross GDP is on the way to overtaking the US by 2030 at the latest, according to the International Monetary Fund (IMF).
It is important to note that China's economic development has produced several hundred million middle class consumers, an important driving force in consumption of quality goods and services.
China has become the world's largest trading nation, the largest goods trading partner for over 130 countries and economic entities and one of the largest investors.
In 2020, China became the largest global investor for the first time-accounting for 20.2% of global foreign direct investments. Along with economic power comes political and military power, and China, being well aware of this, has a plan.
Over the years we have seen the rise and fall of the British Empire and the Soviet Union as superpowers with only the United States still clinging to superpower status.
There are indicators that define the characteristics of a country as a superpower. Today, China is seen as a candidate to unseat the United States as the world superpower because of the remarkable progress it is making, culminating in dominance in the international arena.
China's economic boom and the expansion of its military have caught the attention of the world. Its recent closeness with Russia and cooling relations with the United States are indicators that something will soon happen on the international scene.
In my personal opinion China's rise to relevance on the international scene
will certainly result in a global hegemony challenge as it competes with the United States in expanding its global reach.
The question is, will China's rise wreak havoc in the United States and the World as we know it, and will the United States be able to counteract it?
This is a good question to which we do not know the answer. Let us hope that cooler heads prevail and a potential global conflagration can be avoided.
Where does Canada find itself amidst these global upheavals? Certainly, it is sandwiched between these two powers. Furthermore, recent developments indicate that under political pressure from the US and the latest political tensions with China, Canada is not in an enviable position.
The ability to change our situation will require a good deal of political skill which seems to be absent from our political leadership at the moment, as internationally, it is focused exclusively on the war in Ukraine.
China is now Canada's second largest trading partner in goods, with recent annual trade (imports plus exports) valued at around CAD$75 billion. However, that economic relationship has been under considerable pressure since Canada-China diplomatic relations went into a downward spiral after December 2018.
Despite the increasingly securitized nature of international relations in a multipolar world, evidenced most recently by the Trudeau government's decision to ban Huawei from its 5G network, for the moment China remains an important economic partner for Canada.
Developing an effective Canadian strategy for future engagement with China would be desirable, constructive and indeed necessary for Canadian businesses. Such a policy would allow for making long-term decisions with respect to the soon-to-be-largest world market in a region that is fast becoming the global geo-economic centre of gravity.
To achieve this, one must have an informed picture of China's global economic outreach, the current state of Canada-China economic linkages, and a savvy political skill. Pursuing a superficial strategy centred on eventually decoupling with China based on fake factors appears fanciful at best and counterproductive at worst. It is certainly short-sighted considering that both Canada and China have avidly participated in and benefited significantly from global trade in the past.
China's economy is targeting a growth rate of 5.5% in 2022, which is much higher than many other developed countries that will eventually face a recession due to the energy crisis generated by the conflict in Ukraine. China's ability to cushion through global economic disruptions has proved to be an important skill, unmatched by any of the group of 7 most developed countries.
China will continue to be the world's largest trading nation, with its economy projected to overtake the United States in a few years. More parts of the world will see China's footprint more strongly than ever before, and its large middle-class population will continue to present good business opportunities to the world's intelligent businesses.
The world is rich with different paths for governance and models for economic growth. Differences in culture and tradition manifest themselves in various social norms and value systems. While the existing common regulatory standards provide the foundations of a rules-based international order, navigating and managing inevitable cultural differences remains very important for bilateral economic engagement.
The ongoing high inflation in the West, including Canada, and the negative economic effects caused by the sanctions on Russia pose a real threat for an imminent global recession. As the world's second-largest economy, China's relatively stable environment to produce and grow in today's world will continue to be an important mitigating factor.
Although new and unforeseen concerns exist regarding the closeness of China's relationship with Russia following the war in Ukraine and the recent tensions with the US in relations with Taiwan, it remains important for Canada to maintain relations with China.
Canada needs to show resilience in today's international order by maintaining open and deepening trade linkages, which would have the added benefit of mitigating the risk and the magnitude of a global recession.
Having a productive and healthy engagement strategy with China will remain important for Canada for economic opportunities.
The future will tell if Canada will be able to do so. What is your take on it?
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