Chinese Fireworks Display
By DAVID BROOKS
On July Fourth, we think about our country and its future. But these days it’s impossible to think about
America and its future role in the world without also thinking about China. This was the subject of a
combative discussion this week at the Aspen Ideas Festival.
The agent provocateur was Niall Ferguson of Harvard. China and the U.S., he argued, used to have a
symbiotic relationship and formed a tightly integrated unit that he calls Chimerica.
In this unit, China did the making, and the United States did the buying. China did the saving, while the
U.S. did the spending. Between 1995 and 2005, the U.S. savings rate declined from about 5 percent to
zero, while the Chinese savings rate rose from 30 percent to nearly 45 percent.
This savings diversion allowed the Chinese to plow huge amounts of capital into the U.S. and dollar-
denominated assets. Cheap Chinese labor kept American inflation low. Chinese efforts to keep the
renminbi from appreciating against the dollar kept our currency strong and allowed us to borrow at low
During the first few years of the 21st century, Chimerica worked great. This unit accounted for about a
quarter of the world’s G.D.P. and for about half of global growth. But a marriage in which one partner
does all the saving and the other partner does all the spending is not going to last.
The frictions are building and will lead to divorce, conflict and potential catastrophe. China, Ferguson
argued, is now decoupling from the United States. Chinese business leaders assume that American
consumers will never again go on a spending binge. The Chinese are developing an economy that relies
more on internal consumption.
Chinese officials are also aware that the U.S. will never get its fiscal house in order. There may be
theoretical plans to reduce the federal deficit and the national debt, but there is no politically practical
way to get there. Depreciation is inevitable and the Chinese are working to end the dollar’s role as the
world’s reserve currency.
Chinese nationalism is also on the rise. The Internet has made young Chinese more nationalistic. The
Chinese are acquiring resources all around the world and with them, willy-nilly, an overseas empire
that threatens U.S. interests. The Chinese are building their Navy, a historic precursor to expanded
ambitions and global conflict.
Think of China, Ferguson concluded, as Kaiser Wilhelm’s Germany in the years before World War I: a
growing, aggressive, nationalistic power whose ambitions will tear through pre-existing commercial
ties and historic friendships.
James Fallows of The Atlantic has lived in China for the past three years. He agreed with parts of
Ferguson’s take on the economic fundamentals, but seemed to regard Ferguson’s analysis of the
Chinese psychology as airy-fairy academic theorizing. At one point, while Fallows was defending
Chinese intentions, Ferguson shot back: “You’ve been in China too long.” Fallows responded that there
must be a happy medium between being in China too long and being in China too little.
Fallows pointed out that there is no one thing called “China” or “the Chinese,” and that many of the
most anti-American statements from Chinese officials are made to blunt domestic anxiety and make
further integration possible. That integration, Fallows continued, is deep and will get deeper. Many,
many Chinese leaders were educated in the U.S. and admire or at least respect it. If you go to cities like
Xian, you find American and European aviation firms fully integrated into the commercial fabric there.
Fallows’s main argument, though, was psychological. When he lived in Japan in the 1980s, he said, he
sometimes felt that the Japanese had a chip-on-their-shoulder attitude in which their success was bound
to U.S. decline. He says he rarely got that feeling in China. Instead, he has described officials who are
thrilled to be integrated in the world. Their mothers had bound feet. They themselves plowed the fields
in the Cultural Revolution. Now they get to join the world.
Some of the officials interviewed by Fallows believe the U.S. is following unsustainable fiscal policies
that will lead to decline, but they view this with frustration, not joy. Fallows doesn’t know what the
future will hold, but he believes that Chinese officials still see the dollar as their least risky investment.
Domestically, China will not turn democratic, but individual liberties will expand. He agreed that
China and the U.S. will dominate the 21st century, but he painted the picture of a more benign
I came to the debate agreeing more with Fallows and left the same way, but I was impressed by how
powerfully Ferguson made his case. And I was struck by their agreement about what to do. This
conversation, like many conversations these days, gets back to America’s debt. Until the U.S. gets its
fiscal house in order, relations with countries like China will be fundamentally insecure.