Politics

哪些因素会引发美中战争？

Mar 2, 2021 Joseph S. Nye, Jr.

坎布里奇—当中国外长王毅最近呼吁重塑美中双边关系时，一位白宫发言人回答，美国将美中关系视为需要实力支撑的强势竞争关系。显而易见，乔·拜登总统政府并不只是在单纯逆转特朗普的政策。

有些分析人士指出，修昔底德将伯罗奔尼撒战争归因于斯巴达人对雅典人崛起的恐惧，他们相信，美中关系正在进入一个冲突时期，即原有霸主与日益强大的挑战者之间相互抗衡。

我并不持如此悲观的态度。我认为，经济和生态领域的相互依存降低了爆发真正冷战的几率，更不必说热战了，因为两国均有动机在若干领域进行合作。与此同时，误判的风险是永远存在的，有人认为，存在“梦游”般爆发灾难的风险，就像一战时曾经发生过的那样。

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0 Comments on this paragraph, 37 Comments on this article

Bill Meldrum Jan 8, 2022

Absolutely, economically rationality should guide the strategic intent of both the US, and China. But at a tactical level, when heavily armed US nuclear submarines are irresponsibly stumbling around in the South China Sea on a regular basis, the likelihood of a strictly rational response by both countries may be illusory.
- Bill Meldrum Jan 8, 2022
  
  And if anyone is unclear what I'm alluding to here, the so-called Gulf of Tonkin incident prior to the Vietnam War may be instructive.
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F Ahmed Mar 8, 2021

Except that both sides should not over or under-estimate and be prudent, it is a pretty useless article.
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Yoshimichi Moriyama Mar 8, 2021

China will never make compromises about Xinjiang camps or human rights violation.
Buy it will make necessary compromises about its Archilles tendon; it has got to protect it by all means to protect itself and go on with its economic growth.
Its tendon is its huge dependence on free and non-discriminatory trade with the outside world, particularly with the so-called free industrialized, developed parts, much far more so than with the so-called developing parts, because its power and might come from there. Chinese leaders and bureaucrats are painfully aware of the fact though they try to hide that.
At the same time, we are dependent on the trade with China. So the problem is more with ourselves than with them. And we have money-mongers in Wall Street which have decisive influence on Washington; they do anything and everything for the sake of a penny. The problem is with us.

About Taiwan.
If you have asked a carpenter to build your house and he has not fulfilled his promise and does not seem to start it, but of course you cannot build it yourself. Then you could ask another carpenter for it.
Beijing said it would respect freedom and democracy of Taiwan as a promise, but it has been doing things that endanger Taiwanese independence.
Then, unlike the previous case, you could protect and keep the promise on your part by sending troops, selling more weapons, President Biden visiting Taipei, or the Taiwanese President coming to Washington, etc. It would constitute no breach, on your part, of the US-Chinese agreement; you would be protecting the agreement.
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David Punabantu Mar 7, 2021

The key word here is "US dollar". China's economic might is based on US dollars. The creation of China's economic power stems from the International Monetary Fund ( IMF). It was the Interim Committee of the Board of Governors of the IMF's fifth meeting held in Jamaica in January 1976 that set to resolve the on going crisis, that in the past also plagued the Gold Standard.
Here the IMF Board of Governors fifth meeting, set the seal on the Second Amendment of the IMF articles that limited reforms to those areas on which consensus had been reached [in an attempt to correct the crisis.] But on the central aspect of reform-the exchange rate regime, convertibility of official balances and the reserve system-the Jamaica agreement virtually accepts the fait accompli that had followed the breakdown of the Bretton Wood system. (North-South: A Programme for Survival (1980) p.205).
The Jamaica reforms basically outlined a believed path out of the Triffin Dilemma. The answer to the Triffin Dilemma that the global economic and financial universe faced was, "continuing with the prevailing situation with the role of the US dollar reduced, with an increased role for other currencies and private financial markets, and with all governments trying to reduce their exposure to exogenous events; or moving in the direction of regional monetary blocs, which would each work out their own relations with other monetary areas; or advancing to a better-organized world system" (North-South: A Programme for Survival (1980) p.206).
The interpretation of the Jamaica reforms by the IMF executive has seen Europe form its Euro some 24 years later, so as to under IMF interpretation of the reforms, to reduce the role of the US dollar in international trade.
Since the emergence of the Euro on the global financial markets it has competed with the US dollar as a reserve currency resulting in many central banks off loading a good portion of their US dollar reserves and having them replaced with Euros.
The next interpretation of the Jamaica reforms by the IMF executive was to promote the increased role of other currencies and private financial markets. The IMF executive has implemented this as labeled in reform packages as "free market reforms" and "foreign currency liberalization" of the US dollar that in the pre-reform period faced exchange controls in African states under IMF sponsored Structural Adjustment Programmes (SAP). The IMF hoped by liberalisation of economics in foreign currency and goods US dollar cash flows back to the US would deal with the Triffin Dilemma.
These best laid plan instead saw these US dollar cash flows end up in China as it offered cheaper products than undermined US and European goods.
Understanding how China became "US dollar rich" is clearly seen in a book written by the former editor of the Financial Times Mr. Geoffrey Crowther titled "An Out Line of Money" in which he wrote, " if a purchaser is someone who wants D-marks in order to pay for German exports, the fact that he can get his D-marks cheap is equivalent to a reduction in the price of exports; it will stimulate sales in exactly the same way as an ordinary depreciation of the exchange rate” (Crowther (1951) p.260). While Western economic philosophy under the IMF pushed for the "depreciation of the exchange rate" for developing countries to stimulate US dollar inflows, China however stimulated US dollar inflows through a "reduction in the price of exports".
It must be noted that Chinese firms quote in US dollars but the financial payment settlement is in Chinese Renminbi as a result of their foreign currency regulations. This Chinese system is not new but was used by mining companies like Anglo-American Corporation as the sold commodities based on the "producer price" that was half the London Metal Exchange price.
What is fundamental to China and Mr. Geoffrey Crowther observations is D-marks buying German goods and Chinese Renminbi buying Chinese goods.
These are the underlyinging axioms to the Supply and Demand Doctrine as propounded by Adam Smith. Adam Smith's underlying axioms to his Supply and Demand Doctrine is that he saw British goods being bought by the British Sterling pounds whose supply and demand created the price of commodities. If a German wanted British goods they would have to first change their D-marks into British Sterling pounds hence establishing an "exchange rate" against which the purchased British Sterling pounds purchased British goods, while purchase D-marks purchased German goods.
Consequently the "exorbitant privileged" the US dollar exhibits has made the US dollar dearer and hindered US global trade as the Jamaica Accord took it as a "fait accompli'.
This "fait accompli" is clear seen in the IMF fixed cross rates. For example the IMF fixed cross rates on the 28th of May 2020 gave the exchange rate between the two trans-Atlantic nations as US$1 equal to £1.2284. When looking at the Euro the value of the US dollar and Sterling pound in Euro respectively is €0.91027 and €1.11826 giving a IMF fixed cross rate of 1.2284 which mimics the exchange rate of the two trans-Atlantic nations of the UK and USA.
The South African Rand shows a similar picture being ZAR17.4053 per US dollar, and ZAR21.3813 per British Sterling pound giving a cross rate when the two figures are divided of 1.2284. Similarly the North Korea Won with KPW165.848 per Sterling pound against KPW135 per US dollar gives a cross rate of 1.2284. South Korea gives a similar picture. KRW1,517.51 per Sterling pound against KRW1,235.32 per US dollar when divided together gives a cross rate of 1.2284. The Japanese Yen shows the same picture with JYP132.25 per Sterling pound and JYP107.65 per US dollar when divided together gives 1.2284. The Canadian dollar also shows the same image being CAD1.69181 per Sterling pound and CAD1.37721 per US dollar that gives a cross rate of 1.2284. The Indian Rupee at INR92.4590 per Sterling pound and INR75.2657 when divided gives 1.2284 which is the exchange rate between the US and UK.
Even the Chinese Renminbi at CNY8.9449 per Sterling pound against CNY7.15910 per US dollars gives a cross rate of 1.2284. Zambia with ZMK22.1715 per Sterling pound against ZMK17.925 per US dollar gives the same picture.
The question that arises from this is does North Korea have exactly in its money markets the same US dollar and Sterling liquidity to equal the cross rates as determined by the IMF? Does Zambia, Canada, Japan, South Korea, China, India to name a few countries have everyday day in and day out the same liquidity of Sterling pounds and US dollars in their money markets to justify the value given to the IMF fixed cross rates.
To create value free floating cross rates are needed whose value is actually based on existing currency liquidities within each country's money as a function of trade.
Free floating cross rates would create a "cheap US dollar" and currency arbitrage would equalise quotations between markets. In other words countries with trade surpluses with China would acquire stronger currencies against the Chinese Renminbi, against which they would buy the Chinese Renminbi to buy US dollars which are then used to purchase US goods in the US if it is favourable.
A case in point is recounted by the IMF managing director Mr. M. Gutt at Harvard University on the 13th February 1948, when he presented a paper entitled The Practical Problem of Exchange Rates.
Then as Tew records, the official direct Sterling-US dollar rate ruling in Britain and the United States is one Sterling pound to US$4, but the Lira-Sterling and Lira-US dollar direct rates are such that the Sterling pound-US dollar cross-rate in Italy is one Sterling pound to US$2.6. (Tew Brain (1967) p.79)
Americans found it cheaper to purchase goods from the UK via Italy until the IMF stepped in and imposed the IMF fixed cross-rate system in favour of the UK and not Italy nor the US.
Corporate and ordinary Americans at the end of the day because of the IMF fixed cross-rate system, had to pay out more US dollars for the pound, while corporate Italy lost out on US dollar inflows because the market price of the US dollar to the Sterling pound was temporary in a pseudo-free floating Lira driven market system based on Lira liquidity.
The IMF ban contradicts Article VIII Section 3 of the Fund Agreement, in that no member shall engage in any discriminatory currency arrangements or multiple currency practices. (Tew Brain (1967) p.79).
As noted exchange rates bore little relation to countries competitiveness undoubtedly contributed to the distortion of the trading system. (Common Crisis (1983) p.42).
In the end the IMF fixed cross rates "selling rates… discriminate either to the categories of transactions for which payment is to be made (e.g. payments to the United States may be penalized by making the US
dollar dear). The latter type of discrimination inevitably corresponds very closely to disorderly cross-rates.” (Tew (1967) p.81). It is the IMF fixed cross rates act as a tariff on currencies and hence trade. Remember Richard Cobden who sought to the removal of corn tariffs placed on cheaper imported corn by the Corn Law as it raised the price of imported corn. . Eventually the Corn Law was removed and cheaper corn entered the England. Bread prices dropped and workers had more disposable income, and this income created a demand for manufactured goods, which in turn shifted workers from agriculture to manufacturing and set England on the industrial revolution. Gradually other nations in Europe started to remove or reduce their tariffs. (Global Challenge Foundation).
America can equal take on China if it moved towards a free floating cross rates system against which imports are paid in the country of origin currency in line with the underlying axioms of the Supply and Demand Doctrine, and the value of the US dollar would vary between nations and markets based on actual trade, while currency arbitrage would equalise quotations between markets. Thus the notion of an overvalued or undervalued currency becomes redundant. While China has its cheap products to stimulate currency inflows, while a cheap US dollar globally will once again establish US goods position in the global economy because their quality is the best.

Crowther Geoffrey. An Outline of Money. 2nd ed. New York: Thomas Nelson & Sons Ltd, 1951.

North-South: A Programme for Survival. The Report of the Independent Commission on International Development Issues under Chairmanship of Willy Brandt. London : Pan Books Ltd.. 1980

Tew Brian. International Monetary Co-operation 1945-67. 9th ed. London:
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David Lentz Mar 7, 2021

This is an excellent thought provoking article
I will mention a couple of things
1)
First the wildcard of climate change
Ironically the USA will be most impacted by climate change. According to the Pentagon the greatest national security threat to the USA is climate change
I say ironically because the recent president and his over 70 million supporters don’t believe in it
China and India face enormous climate change risks also
So how will climate change affect the equation
This was not mentioned in the article
2)
Sparta and Athens were both Greek
Although Sparta had a conservative warrior culture with a large slave population the helots
And Athens was more cosmopolitan and progressive attitude but again a large slave population but more diverse
China is an old civilization with the CCCP representing the current form of imperial rule
The USA is postmodern with a large fundamental conservative Christian minority which seems to have outsized influence on policy and is too young to be considered a civilization
So the lack of understanding between these two nations is huge which can lead to miscalculation
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Nick Wang Mar 7, 2021

Professor Nye correctly pointed out the danger of magnifying Chinese power/threat disproportionately. And by magnifying Chinese power/threat, US could also easily slip into under-estimating its own strength. The singular focus of MSM on the likelihood of China surpassing US economy, while ignoring a slew of other metrics, only exacerbates this tendency. Increasing brinkmanship as we saw by US playing the Taiwan card and freedom of navigation show of force could sleep walk the 2 sides into a hot war, which could have been avoided on a cool headed assessment of mutual power/threat.
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John Davis Mar 7, 2021

I thought Sparta was the victor of the Peloponnesian War.
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Rajiv Chopra Mar 7, 2021

The risk, as he mentions, is a miscalculation. It -war- could also come about when an American, or Chinese, leader feels that he needs to prove something. In my current readings, I realize that when China went to war with India, one reason was Mao's need to assert himself at home. The famine had weakened him.
So, let's see what happens
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Steve Gokorsch Mar 7, 2021

I do not believe we know what the next war will look like. Since the invention of nuclear weapons mankind has spent the majority of our energy working to avoid using them. The concept of MAD appears to have worked with the old USSR and may still apply with China.

The US has engaged in retaliatory military missions (not wars) against other nations which attack us only to find ourselves involved in nation building with people who do not want a free nation. (a fool's errand)

I do not believe that Americans have any innate animosity towards the Chinese, or any other nation for that matter. However, and this is big; we have a problem with the Chinese' stealing our I/P, product and processes. No sooner is a new device invented then the Chinese copy it and export it to the world (and back here). They steal everything. Culturally it appears they do not believe it is "wrong" in the western sense of the word. Thieves are never friends...not even to other thieves. We can never be friends with China not because of their political system, but because of their lack of integrity and commercial behavior.

So we may already be involved in a war with China. Not a traditional military war but in a war to protect our ideas and inventions from theft by them. I'm not sure we CAN win this war given our open society...
- Nick Wang Mar 7, 2021
  
  You made a fair point coming from the US perspective. Interestingly, the same point was made by the Chinese in the 19th century on the theft of their tea making technology by the British. https://www.smithsonianmag.com/history/the-great-british-tea-heist-9866709/
  - Steve Gokorsch Mar 7, 2021
    
    Nick,
    
    I cannot comment on something which another nation did centuries ago. I believe the Brits were drinking tea for centuries and grew it everywhere they could. (even India).
    
    What is clear TODAY, is if you do business with China expect your I/P, products and processes to be stolen. If you have I/P here in the States, put up firewalls and lock it up because China will try to steal it. And beware of counterfeit products with your companies logo's. (We even found fake circuit breakers...)
    - Nick Wang Mar 7, 2021
      
      You made a fair point and I do not wish to dispute nor disparage what you said. It's worth pointing out though that historically wannabe nations are known to acquire advanced technical knowhow to advance their development by the very means which form the subject of your ire. Here is an interesting historical account of how Jefferson/Hamilton sought to advance US manufacturing edge during the formative years of the nation. https://www.history.com/.amp/news/industrial-revolution-spies-europe
      - Steve Gokorsch Mar 7, 2021
        
        Nick, it is called in my country "theft" or possibly "theft of intellectual property" and it is illegal. In most advanced countries the Government works to prevent this type of larceny. In Communist China it appears the CCP supports it.
        
        China is NOT a "wannabe" nation. Take a trip there sometime and look for yourself.
        
        As I have said many times to many people both US Citizens and others. China is not our friend and can never be as long as they are a Communist nation.
        
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Yoshimichi Moriyama Mar 4, 2021

We learned in school that 1 : 2 = 2 : 4 = 4 : 8=... But it cannot be said that Russia vs. US = China vs. US, because Russians and Chinese have different world views and different attitudes toward the US and the West. For instance the leaders of the Kremlin were seriously worried at the so-called oil crisis of 1973 that the West might fall. But "If we saved China from Japan, they (the Chinese) would thank us for nothing," as I quoted in my comment on Joseph Nye/Biden's Asian Triangle, Feb. 4. A Japanese professor of Kyoto University, Masamichi Inoki, said that he was very sure at the time of the Cuban Missile Crisis of 1962 that the Soviets' ships carrying missiles would turn back before Kennedy's blockade line. If interested, read my comment on Andrew Sheng and Xiao Geng/How to Cooperate with China, Feb. 24. You will know something new about China, I hope.

I wonder what US soft power could do for Vietnam when a Vietnamese fishing boat was being sunk by a Chinese coast guard ship. I am afraid nothing could be done in such a case by Flat Top Abraham Lincoln sailing near-by or a B-52 bomber flying just above.
I wonder what US soft power could do for Australia which coal China refused to take.

Henry Kissinger's On China is not a first-rate book but the first chapter, the Singularity of China, will be illuminating. "Where the Western tradition prized the decisive clash of forces emphasizing the feats of heroism, the Chinese ideal stressed subtlety, indirection, and the patient accumulation of relative advantage...Wei qui (a traditional Chinese chess, known in Japan as go or igo) translates as 'a game of surroundings pieces'. It implies a concept of strategic encirclement...If chess is about a decisive battle, wei qui is about the protracted campaign...The wei qui player seeks relative advantage...The wei qui player needs to assess not only the pieces on the board but the reinforcements the adversary is in a position to deploy...Wei qui teaches the art of encirclement...a talented wei qui player moves into 'empty' spaces on the board, gradually mitigating the strategic potential of his opponent's pieces. Chess produces single-mindedness; wei qui generates strategic flexibility...Chinese thinkers developed strategic thought that placed a premium on victory through psychological advantage and preached the avoidance of direct conflict (pp.23~25.) "
- Yoshimichi Moriyama Mar 5, 2021
  
  So, in the wei qui game, the opponent finds himself eventually in an environment where he has to retreat, give in or give up.
  
  China is also vulnerable when it comes to food and energy security. It lacks enough arable land to feed its population and imports roughly half its oil from the Middle East. In a conflict, China's naval capacity is insufficient to prevent China from being cut off from vital supplies (from Ryan Hass, China is Not Ten Feet Tall: How Alarmism Undermines American Strategy, foreign affairs online, March 3.) Yes, that's right, but China evades being trapped into such "in a conflict."
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Leo Arouet Mar 4, 2021

Joseph Nye is absolutely right. China has a small GDP compared to the United States. Its economy has slowed from a growth rate of 9% to 4.3% today. It has a budding housing bubble that could burst at any moment. China does not have soft power like the United States. In short, China is far from the rising power that its supporters paint.
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william holmes Mar 3, 2021

China's "Belt Road"lending plan appears highly unlikely to reach the targeted $1tr.; cf. Boston Univ. Global Energy Finance database stats cited in Financial Times 12/7/20 (indicating big drops in lending starting 2016); cf. also FT 4/30/20 re shift in official Chinese thinking.
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william holmes Mar 3, 2021

Prof. Nye's term "Western Pacific" is ambiguous, crucially on whether it extends to the west of the "first line of islands".
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Michael Public Mar 3, 2021

There is only one issue here and that is Chinese nationalism installed by the CCP in a massive brainwashing effort in order to prevent any attempt at regime change. The problem with nationalism, like in WW1, WW2 and the Cold War, is it breeds a mentality of superiority for the people who then demand that their (often imaginary) foes are destroyed. Then all hell breaks lose. If China stopped the USSR style propaganda and moved to a more balanced and fair public narrative the risk of war with everyone else, the US included, would subside. As commentators will point out America is far from innocent too, but their share of the blame here is much lower.
- Godfree Roberts Mar 3, 2021
  
  I have never encountered that in China, or in Chinese literature.
  
  Can you provide us with a direct quote and link from a PRC source that demonstrates your point and that is sufficiently different from, say, American patriotic instruction?
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j. von Hettlingen Mar 3, 2021

Joseph S. Nye, Jr. warns against the escalation of economic, trade, technological, and geopolitical tensions that would lure China and the US into the Thucydides Trap. The Greek historian, Thucydides described the ancient conflict between a rising Athens, instilling fear into the established Sparta, that attributed to the Peloponnesian War (431–404 BC) fought between the two leading city-states . The fighting engulfed the entire Greek world, and was regarded by Thucydides as the most momentous war up to that time.
Today, the US-China relationship “is entering a period of conflict pitting a hegemon against an increasingly powerful challenger.” Mounting rivalries between an emerging China and the dominant US could ultimately lead to a war, unless both sides avoid dangerous miscalculations and exaggerated fears. But there is always the danger of “sleepwalking” into a catastrophe, the way Europe stumbled into World War I.
The author is less pessimistic about such a scenario. He belives that “economic and ecological interdependence reduces the probability of a real cold war, much less a hot one, because both countries have an incentive to cooperate in a number of areas.” It is up to leaders in China and the US to forge a “constructive relationship.” If Americans “succumb to fear,” and assertive Chinese leaders indulge their reckless ambitions, there is a risk of a war.
If Americans are aware of their advantages, they might worry less, even if China surpasses the US to become the world’s largest economy in a decade. The author says “national income is not the only measure of geopolitical power. China ranks well behind the US in soft power, and US military expenditure is nearly four times that of China. While Chinese military capabilities have been increasing in recent years, analysts who look carefully at the military balance conclude that China will not, say, be able to exclude the US from the Western Pacific.”
No doubt it is tough to acknowledge one’s economic decline. The US was “once the world’s largest trading economy and its largest bilateral lender. Today, nearly 100 countries count China as their largest trading partner, compared to 57 for the US.” Many Americans resent China’s economic rise, saying it came at the expense of their declining wages and employment. Beijing’s unfair trade practices and intellectual property theft were to blame for their grievances.
Despite its $3 trillion in foreign reserves, China still sees itself as a developing country and eligible to borrow from the World Bank, with US taxpayers subsidizing loans to Beijing. Meanwhile, the US - the richest and most powerful nation in the world, borrows billions each year from China, whose GDP per capita ranks 64th globally. Measured in dollars, China’s economy is about two-thirds the size of the US economy. But its market size, overseas investments and foreign aid have enhanced China’s “overall power relative to the US.”
According to the author, “balances of power are hard to judge,” due to the vagaries of geopolitics. The US “will retain some long-term power advantages that contrast with areas of Chinese vulnerability. One is geography. The US is surrounded by oceans and neighbors that are likely to remain friendly. China has borders with 14 countries, and territorial disputes with India, Japan, and Vietnam set limits on its hard and soft power.”
Economically, the US has an advantage because it no longer relies on imported energy to fuel growth. The “shale revolution” had transformed North America from “an energy importer to exporter. At the same time, China became more dependent on energy imports from the Middle East, which it must transport along sea routes that highlight its problematic relations with India,” due China’s construction of an economic corridor through its arch-enemy, Pakistan.
The US also has “demographic advantages. It is the only major developed country that is projected to hold its global ranking (third) in terms of population. While the rate of US population growth has slowed in recent years, it will not turn negative, as in Russia, Europe, and Japan. China, meanwhile, rightly fears ‘growing old before it grows rich.’ India will soon overtake it as the most populous country, and its labor force peaked in 2015.”
Last, not least, the author can boast that “15 of the world’s top 20 research universities are in the US; none is in China.” This allows the US to lead in “key technologies (bio, nano, information) that are central to twenty-first-century economic growth.” Despite China’s heavy investment in R&D, the US still has an edge over its rival.
It is still too early to announce the end of Pax Americana and usher in an era of “Pax Sinica,” without taking account of “the full range of power resources. American hubris is always a danger, but so is exaggerated fear, which can lead to overreaction. Equally dangerous is rising Chinese nationalism, which, combined with a belief in American decline, leads China to take greater risks.” If both sides can focus more on cooperation and the production of global public goods, this would mitigate the risk of sleepwalking into a war.
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Godfree Roberts Mar 2, 2021

"Even if China surpasses the US to become the world’s largest economy, national income is not the only measure of geopolitical power. China ranks well behind the US in soft power, and US military expenditure is nearly four times that of China. While Chinese military capabilities have been increasing in recent years, analysts who look carefully at the military balance conclude that China will not, say, be able to exclude the US from the Western Pacific”.

None of Professor Nye's assertions hold up under even cursory examination:

1. China has the world's largest economy, as the CIA's World Factbook and ever international agency allows: $24 trillion vs $20 trillion PPP.

2. China is far ahead of the US in soft power. The RCEP, the CAI, and SCO dwarf America's alliances (mostly with countries it occupies militarily). And China dominates the US in the United Nations.

3. While US military expenditure is nearly four times that of China, its effectiveness is much lower. All of China's missiles are more modern and far outrange US missiles. Ditto its army and navy.

4. China can exclude the US from the West Pacific whenever it chooses, as readers of US Naval Intelligence reports well know.
- Michael Public Mar 3, 2021
  
  The author specifically said dollars and not PPP. PPP is not a valid measure because China keeps its exchange rate down by inter alia buying US Bonds.
  - Godfree Roberts Mar 3, 2021
    
    The CIA and every International body uses PPP because it is the only valid way to compare national economies.
    - Eric P. Mar 3, 2021
      
      Sorry Godfree, speaking as a professional economist that is completely false. GDP with versus without PPP adjustment are two separate measures, each of which has a separate meaning and each of which are frequently used in international comparisons. PPP adjustment is useful to evaluate living standards because it adjusts for the price of non-tradable goods (like getting a haircut), whereas non-PPP-adjusted GDP better captures an economy's relative size in tradable goods.
      
      In the context of China there are two relevant measures here. GDP per capita after PPP adjustment captures living standard in China in a way that is comparable to the rest of the world. GDP (not per capita, without PPP adjustment) captures the overall 'size' of the Chinese economy on the world stage, in more of a hard power sense.
      
      Naturally any kind of international comparison also has to come with the caveats that China both manipulates its exchange rate and fabricates its GDP statistics.
      - Godfree Roberts Mar 4, 2021
        
        The media use nominal ('in name only') GDP to prolong the myth of US supremacy.
        No responsible, international agency does so, for utilitarian reasons.
        The US Defense Department, for example, uses PPP because, as they rightly observe, China buys 90% of its materiel domestically, and PPP reflects the RMB's greater buying power at home.
        A practical consequence of this is China's bigger, better armed fleet which, compared to its nominal GDP budget, would be unaffordable. But in PPP terms is much closer to its stated budget.
        Put another way, Chinese RMB can buy three Burke class destroyers for what the USN pays for one.
        
        Eric P. Mar 4, 2021
        
        Sorry, but again your claim that international and government agencies do not use non-PPP adjusted GDP simply has no basis in factual reality. It's fundamentally absurd to suggest that such organizations would even have a policy on using PPP-adjusted vs. non-PPP-adjusted GDP, because they constitute two different variables with different meanings which are each separately useful. In practice both variables are used in multitudes of different ways by different government and international organizations.
        
        Godfree Roberts Mar 4, 2021
        
        Can you provide an example of an international agency that consistently uses nominal dollars when comparing US and Chinese GDP?
        
        Eric P. Mar 4, 2021
        
        That demand is flatly nonsensical and ignores everything I have written above. As I stated, international economic organizations do not have policies on which of the two variables (nominal vs. PPP-adjusted GDP) are somehow 'preferred.' They are different variables and both are in use for different purposes. You can check the World Bank's World Development Indicators or the IMF's International Financial Statistics, and you will find that data for both nominal and PPP-adjusted GDP is available for the US, China, and many other countries. You can also read the IMF's Article IV reports on various countries, including China and the US, and you will find reference to both nominal and PPP-adjusted GDP.
        
        You have made extremely sweeping claims that PPP adjustment is "the only valid way to compare national economies," and that "no responsible, international agency" uses nominal GDP. Those claims are comprehensively false, and go entirely against the working practice of the economic profession. The burden of proof lies on you alone to demonstrate that professional economists and economic organizations systematically prefer PPP-adjusted to nominal GDP. You have not provided any such proof, and it would be impossible to do so because your claims are false.
        
        Godfree Roberts Mar 4, 2021
        
        I thought not.
        
        Eric P. Mar 4, 2021
        
        Well, then you've wholly misunderstood my critique of your position.
        
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P. Kamath Mar 2, 2021

As always, Prof. Nye’s colomn is an interesting thought-byte to think over😑!
A new reply to this comment has been posted.

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