By Alfredo Toro Hardy
While the Cold War between China and the United States reasserts itself with every passing day, New Delhi and Washington emphasize their geopolitical rapprochement in response to Beijing’s regional expansiveness.
Not so long ago, though, two notions were in vogue: Chimerica and Chiindia. As the first of them highlighted the economic imbrication between China and America, the second celebrated the economic might that China and India had enjoyed through most of history, as a prelude to their interlinked brilliant economic future. As the first of these contractions portrayed reality, the second was essentially aspirational. Both, however, seemed to signal trends in motion.
Chimerica
The first of those notions was jointly coined by Niall Ferguson. and Moritz Schularick and later expanded by Ferguson. It alluded to the symbiosis existing between the world’s two largest economies: China and the United States. Although they accounted for only 13% of the world’s land and a quarter of its population, they accounted for a full third of the global GDP and over 60% of its cumulative GDP growth. Their complementarity represented globalization’s main growth turbine. (Ferguson and Schularick, 2007; Ferguson, 2008).
Zachary Karabell graphically explained the characteristics of this complementary: East Chimericans (Chinese) were savers, West Chimercans (Americans) spenders; East Chimericans did manufactures, West Chimericans services; East Chimericans exported, West Chimericans imported; and East Chimericans piled up reserves and bought bonds that allowed West Chimericans to run deficits. Karabel even compared this economic symbiosis to the European Union, adding, however, that while the latter was the result of deliberate design, Chimerica was the fruit of favorable circumstances. (Karabel, 2009, pp. 163, 256).
The United States and China, according to such a vision, were not able to dispense from each other. Notwithstanding its huge and reiterated budget deficits, America’s economy could function in a normal way thanks to the Chinese willingness to keep buying, once and again, its public debt emissions. Meanwhile, China’s financial surpluses, that allowed for such debt absorption, were generated by America’s disposition to accept a disproportionate negative trade balance with that country. In 2011, around two thirds of China’s international reserves were invested in U.S. financial assets. (Reuters, 2011).
At the same time, it was pointed out that America’s corporations required China’s market and workforce in order to keep growing, in the same manner in which Chinese companies were in need of the technological transfer provided by these corporations. In the end, U.S.’ corporations and consumers and Chinese workers and companies, all benefited. This synergy between the United States and China represented, according to many experts, globalization’s fundamental dynamo. Not surprisingly, Ian Bremmer used the term “G-2” to refer to this interconnected world economic axis. (Bremmer, 2013).
Chiindia
The term Chiindia, on its side, portrayed the combined strength of China and India, who until 1820 had represented 50% of the world’s GDP, and which were again reasserting their historical economic relevance. According to Kishore Mahbubani’s triumphalist Asian perspective: “…the kind of incredible domination of the world that America and the West enjoyed for the last 200 years was a hugely artificial moment of history. For 1,800 of the last 2,000 years, the two largest economies in the world were consistently China and India. So by 2050, or earlier, the number 1 economy will be China, number 2 India, number 3 the United States of America – that’s the normal scheme of things”. (Mahbubani, 2011).
As referred to by Anil K. Gupta and Haiyan Wang: “Starkly put, China and India are changing the rules of the global game. They are two of the world’s largest and the two fastest growing economies. Thus, they account for the two biggest growth opportunities for almost any product or service (…) They are two of the world’s poorest economies in terms of per capita income. Thus, they offer some of the lowest wage rates for blue-and white-collar work- wage rates that can have a transformational effect on competitive advantage. They are the world’s two largest producers of science and engineering graduates. Thus, they represent an opportunity to radically expand a company’s intellectual capabilities without a proportionate increase in cost structure. And finally, they are the breeding ground for a new cohort of ambitious, aggressive, and fast-moving global champions”. (Gupta and Haiyan, 2009, pp. 1,2).
At the same time, it was argued that the combination of rapid growth and big population common in both countries, offered them a spectacular advantage. Despite its fast growth in previous decades, Japan could have never expected to surpass the U.S. ‘s GDP. This, for the simple reason that its population is hardly 40 percent of that of the United States. On the contrary, China would only require that its per capita income becomes a quarter of that of the United States, in order to surpass that country’s GDP. Hereafter, its population dimension would allow China for several additional decades of sustained economic growth. Something similar applied in relation to India. In 2011 China was, in GDP per capita terms, where Japan had been in 1965. Meanwhile, in 2011 India was where Japan had been in 1950. This meant that China and India had much tissue to cut upon. Not surprisingly, it was estimated that by the decade of 2040, both economies would represent 40 percent of the world’s total GDP. (Attali, 2011).
This conjunction, called to position these two Asian neighbors at the top of the global economic ranking, represented the materialization of what, a century ago, Rabindranath Tagore referred to as the geo civilizational paradigm. This alluded to the natural historic confluence between these two venerable civilizations.
Into the attic of old junks
At the junction between the end of first decade and the beginning of the second, of the millennium, notions such as Chimerica and Chiindia embodied the world’s new economic realities. Nowadays, however, they are totally out of vogue. Their desuetude has, indeed, been notorious. The rapid rise of geopolitics and the decline of globalization placed them in the attic of old junks.
As the United States and China decouple (or “de risk”) their economies by leaps and bounds, terms such as “on shoring”, “nearshoring”, or “friendly shoring” have emerged. They portray the reality of American factories leaving China. This process has been accompanied by trade wars, technological blockades, boycotts of services and products, restriction on the export of rare earths, restrictions or over regulation of foreign investments, and so on and so forth. All of it, framed within what is perceived as a countdown towards an inevitable military confrontation between both countries. Meanwhile, the assumption of a natural economic confluence between China and India has been buried under the weight of geopolitical rivalry.
The quick obsolescence of notions such as Chimerica and Chiindia is testimony of the extraordinary fluidity of the international scene. In 2007, Zbigniew Brzezinski wrote a pivotal book in which he asserted that the combined impact of modern technology and global political awakening was leading to an acceleration of political history. As a result of it, what in the past took centuries to materialize was now taking decades, and what before took decades could now happen in just a year. (Brzezinski, 2007, p. 206). This kind of acceleration is reflected in the speed that turned upside down the conditions that sustained both notions.
Given the hard right populist wave that currently engulfs the U.S., Europe and Canada, it is to be presumed that in a few years-time the international scenario will look quite different than it does today. Even venerable NATO might have imploded as a result. Amid such a flux, the only certainty is uncertainty itself. The way in which Chimerica and Chiindia fell into desuetude is a good proof of it.
References
Attali, Jacques (2011). “Regional Outlook Forum”, Institute of Southeast Asian Studies, Singapore, 12 January.
Bremmer, Ian (2013). Every Nation for Itself. London: Penguin Books.
Ferguson, Niall and Schulrick, Moritz (2007). “‘Chimerica’ and the Global Asset Market Boom”. International Finance. October, 3.
Ferguson, Niall (2008). The Ascent of Money. London: Penguin Books.
Gupta Anil K. Gupta and Haiyan Wang (2011). Getting China and India Right. San Francisco: Jossey-Bass.
Karabell, Zachary (2009). Superfusion. New York: Simon&Schuster.
Mahbubani, Kishore (2011). “The Seesaw of Power: A Conversation with Joseph Nye, Dambisa Moyo and Kisshore Mahbubani”. International Herald Tribune Magazine, June 24.
Reuters (2011). “Beijing seeks assurances of safety of its US assets”, January, 13.
Author: Alfredo Toro Hardy – Retired career diplomat, scholar and author. Former Ambassador to the U.S., U.K., Spain, Brazil, Ireland, Chile and Singapore. Author or co-author of thirty-six books on international affairs. Former Fulbright Scholar and Visiting Professor at Princeton and Brasilia universities. He is an Honorary Fellow of the Geneva School of Diplomacy and International Relations and a member of the Review Panel of the Rockefeller Foundation Bellagio Center.
(The views expressed in this article belong only to the author and do not necessarily reflect the views of World Geostrategic Insights).