Are we on the cusp of a new world order?

The rise of China as an economic and military superpower is putting the US in a difficult spot

The collapse of the Soviet Union created space for the United States to effectively shape the global order as it saw fit. Sure, there were pockets of resistance but by and large the economic and military hegemony of the US ensured it was the only game in town. This unipolarity went unchallenged for decades.

But now there is an 800-pound gorilla beginning to exert its influence, threatening to disturb the global order dominated by the Washington consensus. The meteoric, almost unparalleled, rise of China has placed the US in a peculiar position– how best to ensure continuity of the existing order while making space for China’s ambitions expansion plans. Britain, the earlier superpower, had acquiesced to the US during the mid 1900s.  

In a new book, Amitav Acharya, Professor of International Relations at the American University, argues that while the US will continue to play a major role in world affairs, it has lost its ability to shape the world order. 

The rise of China threatens to disrupt the existing global order. China is a peculiar case - not only in size but also in its ambitions. While there have been challenges to the economic power of the US in the past (think Germany, Japan and the East Asian Tigers), they all foundered. China has both the economic and the military might to back it. 

The Middle Kingdom has already started courting countries using the massive resources at its disposal. Generous grants have been provided to African and Asian countries for development purposes. It isn’t a stickler when it comes to issues of human rights given that its own track record is dubious, at best. It is slowly creating the space for the emergence of an alternate global order with institutions not beholden to Western ideology. The creation of a BRICS bank is but one of them. 

But it isn’t as if the US is not countering it. Mindful of an expansionist China, it has stepped up its efforts to build relationships to counter China. The Asia pivot is part of this strategy. The deal with Iran and Cuba can also be viewed through this prism. 

While China may be actively seeking a greater role in shaping the world economic order, its path to challenge the supremacy of the hegemonic western order is not likely to be a smooth one. For one, the dollar continues to be the global default currency for trade. The Yuan could theoretically emerge as an alternate but that will require a complete overhaul of its financial systems. It will require a free floating exchange rate and no restrictions on the movement of capital flows. It also means a greater role for the market. 

But developments over the past week show how unsure Beijing is of creating greater space for the market to operate. 

The government intervened to prevent its stock markets from collapsing. Rather than letting the market function, Beijing worried about the vanishing wealth of its citizens chose to step in to prevent a stock market rout. 

Sure it will continue to have territorial disputes with its neighbours. Trade disputes could escalate. So, too, could altercations with the US. 

But as the transition towards a more market oriented economy is going to be painful, the Communist Party is more likely to worry about managing this internal transition in the least disruptive way possible. After all self-preservation is of paramount importance. (Ishan Bakshi covers economic affairs for Business Standard)