After Japan was dethroned by China as the second world’s economic power, I knew that the United States was next in line. But never in my wildest dreams thought it would happen this fast. It’s difficult to digest that at this very moment, China is the most powerful economic power in the world. I’m still in a state of shock.
There’s no easy way to say this, so I’ll just say it: The U.S. is no longer No. 1. Today, the country is No. 2. Yes, it’s official. The Chinese economy just overtook the United States economy to become the largest in the world. For the first time since Ulysses S. Grant was president, America is not the leading economic power on the planet.
It just happened—and almost nobody noticed.
The International Monetary Fund (IMF) recently released the latest numbers for the world economy. And when you measure national economic output in “real” terms of goods and services, China will this year produce $17.6 trillion—compared with $17.4 trillion for the U.S.A. As recently as 2000, the U.S. produced nearly three times as much as the Chinese.
To put the numbers slightly differently, China now accounts for 16.5 percent of the global economy when measured in real purchasing-power terms, compared with 16.3 percent for the U.S. This latest economic earthquake follows the development last year when China surpassed the U.S. for the first time in terms of global trade.
Make no mistake: This is a geopolitical earthquake with a high reading on the Richter scale. Throughout history, political and military power have always depended on economic power. Britain was the workshop of the world before she ruled the seas. And it was Britain’s relative economic decline that preceded the collapse of her power. And it was a similar story with previous hegemonic powers such as France and Spain.
We can see Chinese increasing presence in Latin America. For example, the terminal ports of Balboa and Cristobal on both ends of the Panama Canal are operated by Hutchinson Whampoa Limited based in Hong Kong.
Currently the Panama Ports Company, a subsidiary of Hutchison Whampoa Ltd., has exclusive and extensive rights to control both ends of the Panama Canal. Hutchison Whampoa is a Chinese company owned by Hong Kong billionaire, Li Ka-Shing, who has strong ties with Beijing. Considering Li’s close ties with the Chinese government, it is highly plausible that Hutchison Whampoa has the potential to act as Beijing’s political agent and that their possession of the ports at either end of the Panama Canal constitutes a serious U.S. national security issue.
China’s increasing influence in the Western Hemisphere has been of growing interest to lawmakers on Capitol Hill. In fact, on June 11, 2008, the House Foreign Affairs Subcommittee on the Western Hemisphere held a hearing entitled “The New Challenge: China in the Western Hemisphere.” In the hearing, experts on Latin America pointed out that total trade between China and the Latin American and Caribbean region skyrocketed from $8.2 billion to $102 billion in less than ten years. Furthermore, those testifying mentioned that Chinese President Hu Jintao’s visit to several Latin American countries in 2004 underscored China’s increased presence in the hemisphere. During his visit, Hu stated that China would invest $100 billion in the region over the next decade.
Over the past years, several Latin American countries that had no diplomatic ties with the People’s Republic of China have now established them. For instance, in 2007, Costa Rica aborted its ties with Taiwan and established diplomatic relations with the People’s Republic of China, primarily for economic and financial reasons. However, the most important indicator of China’s growing influence is its control over the ports at both ends of the Panama Canal. China has been operating these ports since 2000 and their influence inside Panama has grown as indicated by a bill submitted last year to the legislature that mandates teaching Mandarin in all Panamanian public schools.
Another dramatic example is the construction of an international waterway in Nicaragua by China connecting the Pacific and Atlantic Ocean. The construction of the canal is scheduled for the end of December 2014.
In June 2013, Nicaragua’s National Assembly approved a bill to grant a 50-year concession to the Hong Kong Nicaragua Canal Development Investment Company (HKND Group) to build the waterway. The concession can be extended for another 50 years once the waterway is operational. Construction of the canal, estimated to cost between $40 to $50 billion, is scheduled to begin in December 2014, with completion due within five years. This event is a serious competition to Panama’s economy which heavily depends on the operation and positive cash flows of the Panama Canal.
Considering that Cuba, Venezuela, Nicaragua, Ecuador and Bolivia have leftists governments, the presence of China in Latin America raises concerns on the security and stability of democratic governments in the Western hemisphere.
Next year 2015 promises to be a very interesting year in more ways than one. Good Day.