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China Shakes the World

"Kynge's crisp assessment of the dynamics involved is both authoritative and eye-opening." — Publishers Weekly

"The sleeping tiger has awakened — and is ravenously hungry. Should the United States worry about China? Most definitely — but, by Kynge's account, for different reasons from the ones being raised on Capitol Hill." — Kirkus Reviews

About the Book

From the politics of censorship to the outsourcing of American jobs, items about China blanket the media every day. China's emergence on the world stage has been building for the past few decades, and the shock waves of its awakening are clearly felt across the globe. But what explains China's dramatic, unprecedented rise — and how much longer can it continue?

China Shakes the World: A Titan's Rise and Troubled Future — and the Challenge for America, by James Kynge, is a powerful and unique look at the people and politics behind China's burgeoning influence on the United States and around the globe. Kynge, the former China bureau chief of the Financial Times, examines China's current successes and problems, how its transformation — for better or worse — affects Americans right now, and what the future will hold for China and the United States.

The power of the Chinese people is an undeniable force: The country's hunger for jobs, raw materials, energy sources, and food, along with its export of goods, workers, and investments, is drastically reshaping world trade and politics. Kynge uncovers the surprising ways this explosion of growth is intertwined with our politics, our health, and our economies — essentially our entire lives. From China's work force gobbling up American factories in the Midwest to an industrial boom spreading pollution to American shores, China's actions halfway around the world have immediate impact here at home. And while China's economy is no house of cards, not all of its economic graphs point up. Kynge forecasts a bleak future for both China and the United States if China doesn't address her many internal weaknesses, from appalling environmental conditions to murky banking systems to inept government institutions.

Kynge also gives us remarkable personal stories of ordinary citizens at the center of this new revolution. Liu Chuanzhi, a survivor of the Cultural Revolution and chairman of Lenovo, which recently bought IBM's PC division, and Yin Mingshan, an ex-convict and former bookseller who built China's first and most successful motorcycle company, are examples of the extraordinary Chinese entrepreneurs driving the nation forward. But intertwined with these success stories are those of unfortunates like Qi Yuling, a peasant girl whose identity was stolen by her friend's wealthy father, depriving her of a university education, robbing her of a future. Qi's story speaks to other weaknesses China faces: the breakdown of social trust and the corruption and fraud practiced by peasant farmers and the highest government officials alike.

An expert and lively account of China's presence on the global stage, China Shakes the World provides a completely new perspective on the China we think we know. Kynge shows clearly how and why China has become so influential in nearly every aspect of our lives, and perhaps, more importantly, how the future of global politics, economies, ecosystems, and more depend upon the precarious relationship between our two nations.

About the Author

A journalist in Asia for two decades, James Kynge was the China bureau chief of the Financial Times until 2005. During his tenure at the Financial Times, and as a Reuters reporter before that, Kynge covered many significant events in the region from the Tiananmen massacre in Beijing in 1989 to the China-Taiwan missile crisis of 1996, and Taiwan's first presidential election. Fluent in Mandarin, he has visited every Chinese province and is the recipient of numerous journalism awards.

Kynge has spoken at the World Economic Forum and the National Committee on U.S.-China Relations and has appeared on CNN, the BBC, and National Public Radio. Based in Beijing, he currently works as a chief representative of the Pearson Group, promoting its business interests throughout China.

A Conversation with James Kynge

China's impact seems more widespread and powerful every day. What drove you to write China Shakes the World?

By early 2004, I had spent most of my twenty-year career as a journalist writing about China and the countries that surround it. I had first come to China in 1982 as a student of Chinese language. We were students sent off into the unknown from the University of Edinburgh and told only that the place that we were to spend a year studying was somewhere between the Yellow River and the birthplace of Confucius. When we got there — to a China still scarred by the Cultural Revolution — we found that unauthorized contact with Chinese was banned. It wasn't exactly the perfect environment for a language student! China, too, was almost entirely sequestered from the world around it. You could find almost no expression of Western culture.

Since those days, I have spent a total of twelve years living and working in China, and I have covered as a journalist many of the formative moments in the country's development over the past twenty-seven years. I was there during the Tiananmen massacre, as a young Reuters reporter, and was present during the mid-1980s, too. In the 1990s, I saw firsthand how the country began to boom and I have been here continuously from 1998 until now. My job as China bureau chief for the Financial Times meant that I tracked most of the twists and turns in the story of China's emergence as a palpable force in the world economy.

The story of that emergence starts back in the early 1980s. The first two decades of China's era of "reform and opening" were gradual steps eroding the stark disconnect between China and the rest of the world (which I saw firsthand in the early 1980s). In short, it was the story of how China's openness to the world was changing China. Later, though, the key issue became how China's openness was changing the world. When I realized that China's development and its relationship with the outside world had hit a tipping point, I knew I had to write about it.

How is China's rise affecting the United States right now?

Much has been written about the loss of manufacturing jobs and the closure of factories, especially in the old industrial heartlands such as Ohio, Illinois, and other places in the Midwest. What has never before been examined is the fact that China's competitive challenge is neither specialized nor localized; it runs from the bottom of the technology ladder to the top. Thus Chinese competition can jeopardize the survival of U.S. shoe factories at the same time that it threatens the survival of high-tech machine tool manufacturers. I illustrate this with a visit to Rockford, Illinois, a center for high-tech machine tool manufacturing in the United States, and a victim of Chinese competition. This development represents a whole new type of competitive challenge. In the past, countries with low labor costs generally competed in the low-tech sector. But China, primarily because it is so open to foreign companies that set up their factories there, has — in the words of one U.S. executive — "got us nailed from the bottom and from the top."

Some argue that the pain the United States suffers in terms of job losses and a shrinking industrial base is more than offset by the cheaper imports that its consumers can buy from China. This, some argue, gives people greater disposable income, meaning that on average they are better off. I do not dispute this. What I am trying to convey is that the loss of jobs is important politically. You can see this in a small survey I did standing outside Wal-Mart in Rockford. I asked more than one hundred shoppers if they wanted to say "thank you" to the Chinese migrant workers. Some people gave me strange looks. Others walked quickly away and only one or two replied in the affirmative. What this (admittedly unscientific) sample of American opinion suggests is that generally people do not feel thankful to China for the cheaper products that they buy. But they do rail against the perceived injustice of job losses and a shrinking manufacturing base. Ultimately, this means that they are more likely to vote for politicians that promise to save jobs and restrict Chinese inroads into the U.S. economy. This, in turn, has geopolitical implications for the future.

In what ways is China's growth affecting everyday life around the globe?

To a significant extent, China's influence has shaped the business cycle not only in the United States but also in many other parts of the world over the past five years. Its export of deflation — the falling average cost of manufactured products from China over the past eight or so years — has helped to keep American inflation, and thus interest rates, low. That, in turn, has boosted borrowing, increased the money supply, and contributed to the rapid appreciation in some asset prices, particularly property. So you could say that the U.S. property bubble was also "made in China."

Similarly with the price of oil, Chinese demand has accounted for the largest portion of increased global oil demand over the past five years. Though this is by no means single-handedly responsible for the high prevailing price of oil, it is nevertheless an important factor behind it. Other effects, though in their infancy, are already apparent. China is boosting the price of several agricultural commodities, such as grain and meat, because of an interesting mix of factors: Its deep environmental degradation, chronic water shortage, and lack of available agricultural land has made it less able to feed itself. This means that food imports are rising. This trend has only just begun. In a few years time, China will do to the price of water what it has already helped do to the price of oil. And not so hidden is the effect of China's environmental degradation: intercontinental pollution.

What does China's transformation mean for the future?

China Shakes the World identifies a political incompatibility, a clash of systems between China and the United States that makes each country progressively less able to handle its disputes with the other, even as the magnitude of these disputes is growing. This mismatch — exacerbated by growing geopolitical rivalry — defines the main challenge for the future. It may well lead to an upsurge of trade protectionism (already in evidence since I wrote the book) that could reverse a historical trend of some two hundred years standing. It was more than two hundred years ago that Lord George Macartney, an envoy of the British king, led one of the largest ever trade missions to the Middle Kingdom to entreat Beijing, unsuccessfully, to open its doors. Two centuries later, it is we who are starting to close our doors to China.

This is no small thing. The period of relative peace and prosperity that has characterized Pax Americana since the end of World War Two has depended more than anything else on a doctrine of free trade and open markets. The United States has been the architect of this era. But the continuation of this era is now threatened by the potential inability of the United States and China — two powerful economies powered by incompatible political systems — to manage their differences. Just one of many examples: The United States insists that China crack down on the piracy of intellectual property, but Beijing always falls short of Washington's goals. The reason for this is the issue that often gets lost in the debate: China's central government exercises only tenuous control over its local governments, and it is the local governments that are often behind the piracy. Frailties in its body politic disable it, preventing it from doing the United States' bidding. Beijing's refusal to revalue the renminbi, its currency, despite a clamor from the United States, also derives from internal frailties.

The other major way in which China's rise affects the United States is geopolitical. Much has been written about this subject in different forums. I look at it, however, through the prism of China's burgeoning appetite. Beijing's need to shore up the security of its energy and resources supply lines — without which it cannot progress — is bringing it increasingly into diplomatic disrepute with Washington. Its oil-inspired alliances with Iran, Sudan, and Venezuela — to name a few — are creating misgivings in U.S. policy circles. Yet China cannot deny its appetite. Neither can it afford to be choosy where it sates itself.

China's rise to power, so far, has not always been smooth sailing. What are some of the biggest challenges facing China in its climb to power?

The two biggest challenges that China faces are interrelated. The first is domestic. As mentioned above, the central government in Beijing — despite its appearance as a solid slab of irresistible authority — is barely in control of several aspects of its vast country. This vexes the ruling Communist Party more than almost anything else, because, in essence, it shows the limitations of a single party state. But Beijing, barring a thorough political reform, has little chance of forcing disobedient local governments to heed its words. These local authorities are like the fiefdoms of old, a law unto themselves, virtually devoid of checks and balances on the power of the local party boss. This is the main reason for the corruption that is spreading root and branch through the sprawling hierarchy of Communism. It is also the reason for much of the environmental degradation currently plaguing large parts of the country — and the rest of the world.

The second challenge is external. China is an economy that is dependent on the outside world to an almost unprecedented extent. Its reliance on foreign investment and on trade is far greater than that of its neighbors, South Korea and Japan, or of any large economy in the developed world. Thus, if the world starts to close its doors on China, the impact would be keenly felt. This, in turn, could upset a delicately poised internal balance, which requires the creation of some 24 million jobs every year — merely to keep the unemployment level stable. That means that China needs to find enough jobs every year to find work for all of the long-term unemployed in Europe.

Aside from these two issues, China also has a huge environmental challenge, which its political system renders it ill-equipped to resolve. As explained in the book, the environmental devastation is multifaceted and deep-rooted.

How will China Shakes the World change readers' perceptions of China?

First, the book explains how so many trends and realities in today's world are caused or influenced by China. Our jobs, our futures, our economic cycles, aspects of the geopolitical balance, our working week, our welfare states, and the process of globalization itself are influenced greatly by China's emergence.

Second, the book shows how the world's largest "Communist" state — which is actually seized by a brand of capitalism so raw that it reminds us of nineteenth-century America — is widening divisions between rich and poor, the haves and have-nots all over the world, particularly in the United States.

Third, the book reveals how much of the world's fate hangs in a precarious balance struck between two large countries — China and the United States — with virtually incompatible systems, the poorer acting as a key creditor to the richer, so that the people in the richer one can continue to buy things from the poorer, which all the while is claiming more and more of the richer's jobs.

Fourth, that China's economic rise is not the product of some freak occurrence, or is an unsustainable bubble. Its rise is the result of a compression in developmental time, a "developmental time-warp," if you will — the result of a marriage of Industrial Revolution labor costs and twenty-first-century infrastructure, equipment, financing, and trade patterns.

Fifth, China Shakes the World shows that China's rise is powered not by some over-weaning Communist agenda but by a vast variety of people of every hue and persuasion all engaged in the single enterprise of escaping from a harrowing past.

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