How Does China React as Trade Tensions Increase ?

Capitalism has an international push by its nature, one that contradicts the regionally based political structures of the world, principally the nation state. As each region faces pressures from its private sector to foster growth, it comes into conflict with geopolitical rivals, particularly in a time of recession. The principal reason for the Bretton Woods system was to prevent these type of tensions - including protectionism and currency devaluation - from spiraling out of control.

The implosion of Western banking reduced the tensions involved with opening up China's banking sector, as required by its WTO admittance in 2001. Western banking is swamped in too much debt to think about expansion at the moment. But there are many other areas of potential conflict, as a WTO case regarding the trade of raw materials illustrates. The WTO ultimately represents a loss of control for Beijing. By joining the organization, China put itself on a collision course with the international demands of capitalism. This ultimately means a loss of power for the CCP, and that is something I believe they will not accept. China's currency controls and trade restrictions are done to maintain domestic employment, which is the foundation of social and political stability. But the West is not going to accept a permanently restricted Chinese market.

Past growth doesn't predict future growth. If it did, Japan would now have the largest economy in the world. And mainstream publications are already hinting about "The End of the Big Business-China Love Affair".

One can envision a scenario in which a China under strong centralized control mostly disengages from the West, and establishes a regionally based trading system. A Chinese-centered sphere of influence based around South East Asia is a common theme through history, and one I believe will ultimately occur again. Another scenario would be the weakening of Beijing's central authority, with provinces establishing trading relationships with the West that fit their particular needs. Of all the scenarios in China's future, a global titan that overtakes the United States is the least likely.

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Related:
1 "Cracking China's Banking System" - Blended Purple
2 "Storm Clouds Over Globalization" - Blended Purple
3 "The End of the Big Business-China Love Affair" - Time

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4 "Maoists Gaining Influence Within China's Government ?" - Blended Purple 9/27