Will China rule the world?

Will China rule the world?

By Dani Rodrik
First Published: January 13, 2010

CAMBRIDGE – Thirty years ago, China had a tiny footprint on the global economy and little influence outside its borders, save for a few countries with which it had close political and military relationships. Today, the country is a remarkable economic power: the world’s manufacturing workshop, its foremost financier, a leading investor across the globe from Africa to Latin America, and, increasingly, a major source of research and development.

The Chinese government sits atop an astonishing level of foreign reserves – greater than $2 trillion. There is not a single business anywhere in the world that has not felt China’s impact, either as a low-cost supplier, or more threateningly, as a formidable competitor.

China is still a poor country. Although average incomes have risen very rapidly in recent decades, they still stand at between one-seventh and one-eighth the levels in the United States – lower than in Turkey or Colombia and not much higher than in El Salvador or Egypt. While coastal China and its major metropolises evince tremendous wealth, large swaths of Western China remain mired in poverty. Nevertheless, China’s economy is projected to surpass that of the US in size sometime in the next two decades.

Meanwhile, the US, the world’s sole economic hyper-power until recently, remains a diminished giant. It stands humbled by its foreign-policy blunders and a massive financial crisis. Its credibility after the disastrous invasion of Iraq is at an all-time low, notwithstanding the global sympathy for President Barack Obama, and its economic model is in tatters. The once-almighty dollar totters at the mercy of China and the oil-rich states.

All of which raises the question of whether China will eventually replace the US as the world’s hegemon, the global economy’s rule setter and enforcer. In a fascinating new book, revealingly titled When China Rules the World , the British scholar and journalist Martin Jacques is unequivocal: if you think China will be integrated smoothly into a liberal, capitalist, and democratic world system, Jacques argues, you are in for a big surprise. Not only is China the next economic superpower, but the world order that it will construct will look very different from what we have had under American leadership.

Americans and Europeans blithely assume that China will become more like them as its economy develops and its population gets richer. This is a mirage, Jacques says. The Chinese and their government are wedded to a different conception of society and polity: community-based rather than individualist, state-centric rather than liberal, authoritarian rather than democratic. China has 2,000 years of history as a distinct civilization from which to draw strength. It will not simply fold under Western values and institutions.

A world order centered on China will reflect Chinese values rather than Western ones, Jacques argues. Beijing will overshadow New York, the renminbi will replace the dollar, Mandarin will take over from English, and schoolchildren around the world will learn about Zheng He’s voyages of discovery along the Eastern coast of Africa rather than about Vasco de Gama or Christopher Columbus.

Gone will be the evangelism of markets and democracy. China is much less likely to interfere in the internal affairs of sovereign states. But, in return, it will demand that smaller, less powerful states explicitly recognize China’s primacy (just as in the tributary systems of old).

Before any of this comes to pass, however, China will have to continue its rapid economic growth and maintain its social cohesion and political unity. None of this is guaranteed. Beneath China’s powerful economic dynamo lie deep tensions, inequalities, and cleavages that could well derail a smooth progression to global hegemony. Throughout its long history, centrifugal forces have often pushed the country into disarray and disintegration.

China’s stability hinges critically on its government’s ability to deliver steady economic gains to the vast majority of the population. China is the only country in the world where anything less than 8% growth year after year is believed to be dangerous because it would unleash social unrest. Most of the rest of the world only dreams about growth at that rate, which speaks volumes about the underlying fragility of the Chinese system.

The authoritarian nature of the political regime is at the core of this fragility. It allows only repression when the government faces protests and opposition outside the established channels.

The trouble is that it will become increasingly difficult for China to maintain the kind of growth that it has experienced in recent years. China’s growth currently relies on an undervalued currency and a huge trade surplus. This is unsustainable, and sooner or later it will precipitate a major confrontation with the US (and Europe). There are no easy ways out of this dilemma. China will likely have to settle for lower growth.

If China surmounts these hurdles and does eventually become the world’s predominant economic power, globalization will, indeed, take on Chinese characteristics. Democracy and human rights will then likely lose their luster as global norms. That is the bad news.

The good news is that a Chinese global order will display greater respect for national sovereignty and more tolerance for national diversity. There will be greater room for experimentation with different economic models.

Dani Rodrik, Professor of Political Economy at Harvard University’s John F. Kennedy School of Government, is the first recipient of the Social Science Research Council’s Albert O. Hirschman Prize. His latest book is One Economics, Many Recipes: Globalization, Institutions, and Economic Growth.
This commentary is publioshed by DAILY NEWS EGYPT in collaboration with Project Syndicate (www.project-syndicate.org).

Google banned 30,000 advertisers post Economic Resurrection, Ad police suddenly affordable

Google banned 30,000 advertisers post Economic Resurrection
Ad police suddenly affordable

By Cade Metz in San Francisco • Get more from this author
Posted in Music and Media, 15th January 2010 21:40 GMT

In the fall of 2008, when the worldwide economy began to melt, Google responded by shamelessly expanding ad coverage on its web-dominating search engine, letting more ads onto more pages. But now that the economy has recovered, the web giant has suddenly become more much vigilant in its efforts to weed out what it considers low-quality advertising.

According to new data from AdGooRoo - a search marketing consultant that tracks search ads from a network of servers across the globe - Google permanently banned 30,000 accounts from its AdWords ad system at the beginning of December. That's roughly 5.3 per cent of its active advertisers. Ad coverage dipped nearly 10 per cent in the wake of the mass axing, and yet AdGooRoo's data indicates that Google's revenues surged in the fourth quarter, thanks to increased competition for placement among the web's top ad spenders.
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In other words, when the economy was in the tank, Google needed all the extra revenue it could get. But now that the economy is healthy again, it can step up efforts up to remove what it sees as inappropriate ads. The big boys are spending more, so it doesn't need as many clicks to boost the bottom line. What's more, by shrinking ad coverage, Google can actually drive more traffic to the big spenders. If you cut 30,000 advertisers, those still on the search engine get more clicks - and the more clicks, the more those big spenders pay.

Google announces its fourth quarter financials next week, and AdGooRoo data is typically a reliable indicator of what's to come. "Our ad coverage metric confirms that something big went down at the Googleplex last month. Ad coverage, which has been steadily climbing for the past 12 months took a sudden and precipitous dive in December," reads the firms latest search-ad report, due out on Monday. "Ordinarily, this would foreshadow a weak quarter, but we believe that this small drop will be more than offset by strong ad revenues."

Two years ago, in January 2008, Google famously began an effort to shrink ad coverage on the world's most popular search engine. This continued through the middle of 2008, and when the subject came up during Google's quarterly earnings call that July, senior vice president Jonathan Rosenberg attributed the shrinkage to Google's "continued focus on quality" advertising.

"[Google co-founder] Larry [Page] says we'd be better off showing just one ad [per page] - the perfect ad," Rosenberg said, indicating that coverage would continue to shrink.

But then he was interrupted by Google's other co-founder, Sergey Brin, who piped up with what can only be described as a shocking moment of candor. "There is some evidence that we've been a little bit more aggressive in decreasing coverage than we ought to have been," Brin said. "We've been reexamining some of that."

The economy was softening, and sure enough, coverage soon began to expand. According to AdGooRoo's numbers, Google's search engine showed 57 per cent more ads per page in the fourth quarter of 2008 than it did in Q3, as the economy imploded following the infamous demise of Wall Street stalwarts Lehman Brothers and Merrill Lynch.

Google had made significant changes to AdWords that fall, and naturally it said this would also improve ad "quality." So, whether Google is shrinking ad coverage or expanding it, the only aim to provide the world with better ads.

But surely it's obvious that Google is dialing up and down as the economy rises and falls. And now that the economy is on the rise again, the company has renewed efforts to crack down on ads it doesn't like. Google started banning advertisers en masse in early October - just as it was about to announce that the economic meltdown was over - and this house-cleaning came to head on December 3.

The official line is what you'd expect from the Mountain View Chocolate Factory. "Google is constantly working to ensure that we’re showing ads to our users that are relevant, in accordance with our ad policies, and safe for users. To that end, we perform regular reviews, using both manual and automated processes, in order to detect and disable ads that violate our policies," it told Search Engine Land.

But surely, the timing is no coincidence. ®

Challenging China

Chinese surprise at Google pull-out threat

By Chris Hogg
BBC News, Shanghai

Google's warning that it might pull out of China over cyber attacks has surprised human rights activists here.

They seem unfazed that China is accused of trying to hack into their Gmail accounts. But a major foreign firm like Google being prepared to speak out and challenge the government so directly is unusual.

The Chinese authorities will be infuriated that Google has made its announcement before negotiations with officials have got under way.

China has so far said little publicly in response.

I would bet on a harsh reaction from the Chinese government
Dan Sefarty, Viadeo

An unnamed official quoted by the state news agency Xinhua said only that the authorities were trying to find out more about Google's suggestion it might leave the country.

The company's main Chinese rival Baidu is less reticent. In a blog post that has since been taken down, the firm's chief architect Sun Yunfeng claimed Google was just trying to play down its market failure.

"Would Google top executives still proclaim that they would 'do no evil'," he said, quoting the company's code of conduct, "and quit China if they had taken 80% of China's search market?"

Google's market share is estimated to be around 30% in China, about half the size of Baidu's, the search engine market leader.

The senior Baidu executive said the American company's move would "satisfy the imagination of those Westerners who have never been to China and understand nothing of China but still like to point fingers at China".

'Mismatch' in perception

Others in the technology sector here see this differently.

google.cn homepage ( archive image)
Gmail accounts of rights activists have reportedly been accessed

Dan Sefarty heads Viadeo, the firm that owns the Chinese social networking site Tianji.com.

"Google is rare," he says. "It's a US company succeeding in China. It has impressive market share and is atypical among other foreign companies who try to get into this very tough market."

He warns that Baidu has strong links with the government and may be lobbying hard to gain business advantage from this row.

"I would bet on a harsh reaction from the Chinese government," he says. "Look at what they have done with Facebook and Twitter, which have been blocked in China for six to nine months now."

Opinion is divided over whether or not Google really plans to withdraw from the country, the world's largest internet market.

Duncan Clark, an analyst at the Beijing hi-tech consultancy BDA, says he sees a "mismatch" in perception between the Chinese authorities and the foreign firms doing business here.

"People here think no-one can do without China, and I think now some companies are thinking no-one can deal with China," he told the French news agency AFP.

"There is a feeling that China is emboldened and that they don't need to have the same sort of dialogue [as before]," he said.

Google's senior US executives are well aware of the Chinese preference for gradual change, and also of the authorities' likely resistance on a matter of such ideological importance to them as control of the internet, an arena described by a senior public security official just a few weeks ago as a "battlefield".

Some analysts see Google's announcement as a gambit for what will be extremely tough negotiations with the Chinese, rather than an ultimatum.

But others suggest that the more Google bent towards the demands of the Chinese government, the more harm was done to its reputation overseas, and at some point it had to make a stand.

'Heroic' decision?

Whether you regard Google's market share as impressive or disappointing, compared to its dominance elsewhere, there is little doubt it is not a household name in China in the same way that it is abroad.

A Chinese flag flutters outside Google's China headquarters in Beijing
Google has about 700 staff in its China offices

But Hu Li, a student in Beijing, told the BBC he admired what he called the company's "heroic" decision to offer an unfiltered service, and hailed the announcement to pull out if it could not reach its objective.

Some people even laid flowers outside the company's Beijing headquarters, in the hi-tech Haidian district, as a mark of respect.

But this sentiment was certainly not shared by everyone.

Another man, an IT worker who would only give his surname, Zhong, said the American firm should respect China's situation regarding this kind of issue.

"China has been using censorship for a long time," he said. "Any change can only happen slowly - it won't happen overnight."