THERE'S ONLY ONE SAFE HARBOR:

Santa Clausewitz, a minor Chinese god (Spengler, 12/20/04, Asia Times)

Something like a folie a deux unites US neo-conservatives who fear China with America-haters who hope that China will undermine US world influence. Before radical Islam appeared on the radar, the likes of William Kristol and Robert Kagan warned in 1996 of the "emergence of China as a strong, determined, and potentially hostile power". As recently as December 13, Mark Helprin complained in opinionjournal.com that "China is now powerful and influential enough ... to make American world dominance inconceivable". Nonsense. It is China's success that is inconceivable without US world dominance. If US financial markets were to break up, China would go into a tailspin.

The neo-conservatives take exception to China's political system, which no one will mistake for Anglo-Saxon democracy. By the same token, the anti-imperialists claim that China offers an alternative to the US model, proof that economic success does not depend upon the Anglo-Saxon legal template. Ideology overwhelms reason in both arguments. China's success leans upon US financial markets, which cannot exist without Anglo-Saxon law. The Chinese are willing to take risks in China precisely because they can share local risk with international investors, while keeping their own savings safe in the United States.

The Chinese are famous for caution with respect to core savings, and just as famous for gambling with money they can afford to lose. No nation saves more of its income; if one believes the official numbers, Chinese salt away nearly half their earnings. The United States makes it possible for Chinese to take risks and stay safe at the same time.

China's half-trillion dollars of foreign-exchange reserves, according to the same critics, display China's strength and the United States' weakness. On the contrary: the reserves are there because the government of China knows that the Chinese trust US banks rather than Chinese ones, and wisely keep a hoard of rainy-day savings in US funds. China cannot invest its savings at home until such time as Chinese laws, regulations, and politics give rise to a banking system as strong as America's, that is, until China's legal system looks a lot more Anglo-Saxon.

At which point China will have ceased to exist.

Posted by Orrin Judd at December 20, 2004 8:59 AM