"East is East, and West is West, and never the twain shall meet" is the old Rudyard Kipling line, which 30 years ago was credible enough when much of China was attired in unisex Mao suits and still sustaining itself on cabbage in winter. But after two decades of 9% annual growth rates and the biggest, fastest reconstruction of an economy and a society in human history, such ideas have long been consigned to the "dustbin of history."
That particular Marxist slogan was recycled in October by Foreign Minister Li Zhaoxing to describe where Europe's ban on arms sales to China might properly be consigned. But Kipling's comment is definitely more passe. China's links and relationships with the rest of the world are not only rich and manifold, but also contribute to significant global economic imbalances.
It is the trade imbalances that are of most immediate importance because they greatly affect the day-to-day internal politics of trading partners whose governments must respond to electorates who can turn them out of office. Politicians have been known, under such pressure, to say and do whatever is necessary to win an election. China's objective in these and other matters should be to play a role that can be viewed as being as positive as possible, while taking into account the inevitability of what is occurring – the shift of the bulk of global manufacturing over to China.
China's admission to the high table of global affairs depends on its ability to act in a manner which helps to diffuse the problems arising from its rocketing prosperity, and to remove reasons for complaint as much as possible.
Historical baggage
While not wishing to put China on the couch, one is compelled to observe how fraught its history has been over the past century or so. The humiliations of the 19th century still rankle and engender in the minds of so many Chinese the sense that China is the underdog, the target of bullying by foreign powers. The power of that propaganda theme lingers, but the notion of China as the underdog is just soooo 20th century.
This country's recent creation of significant if still unequally distributed wealth, and the unprecedented prosperity it has provided for many of its people, has been partly driven by memories of a painful past, and a will to erase them. The drive for prosperity has been a singular uniting influence in the absence of anything else.
Which is all well and good – up to a point. In past eons, there have been days when the world stood in awe of the Middle Kingdom. As Chris Patten pointed out recently, for most of the past 2,000 years, China has been the strongest power on Earth. And while there was little of that in the last 200 years, in the last 20, China has made its way back into the awestriking business.
The days of bullying China are gone. Today, the world hopes that this country's new confidence does not signal a return to the Imperial ways of celestial indifference to the concerns of others. The indications so far are generally positive. However strongly China feels about Taiwan being part of the motherland, the smart money is of the view that it will not come to blows.
Economic leverage
So with China's treasury fast a filling, and foreign direct investment flooding in, the road is open for an invitation to China to join the inner sanctum of global affairs – as is only right and proper.
Today, China can move markets. Commodities rise and fall because of the stupendous purchasing power of this country, above and beyond what had once been the global norm. The current price of oil has as much to do with China demand as anything else.
And unless events take an unexpectedly nasty turn, the future would appear to be bright. Whopping annual percentage increases on small base numbers are becoming whopping increases on large base numbers. A decade more of this and much of China will be enjoying a Euro-American standard of living.
This country has enjoyed victory, or at least reasonable compromise, at trade talks with the EU and US. And while China's textiles and garment exporters have not been given full access to these markets, Beijing managed to secure better deals than might have been expected given the political problems the burgeoning Chinese economy have occasioned in the West.
But this country must concern itself with the imbalances it has created through no fault of its own, and seek to alleviate them if only for its own sake. No one can truly "win" in trade. In the 18th and 19th centuries, China only agreed to sell silk and tea to the West and closed the door on western goods. The silver bullion piled up in Chinese coffers and growing trade deficits built up in western account books. Imbalance. A situation not dissimilar to today in some ways, which has prompted solutions that were not necessarily equally beneficial to both parties.
It would be tragic if such imbalances were to result in conflict, even in the decaffeinated form of a trade war, or the renewal of barriers against the free movement of goods and services.
Time for a 500-yuan note
There has been intense speculation this year about the possible issue of a 500-RMB banknote. The highest denomination in circulation in recent decades has been the 100-RMB. But as the economy grows and spending expands, the lack of a large note can cause significant inconvenience when larger sums of cash need to be paid or carried. ATM machines cannot be relied upon to be found even in China's main cities and credit cards are not always accepted. China is still largely a cash culture.
The People's Bank of China has so far denied any imminent plans for a 500-RMB note, no doubt concerned about the inflationary implications, and historical connotations of bank- notes with growing numbers of zeroes. But the People's Republic has in fact had 500-RMB notes before, in the 1950s, as the illustration shows, and hyperinflation along the lines of the pre-communist late 1940s is unthinkable.
With China's growth galloping along the way it has been, and the way it is likely continue, the 500-yuan note is an idea whose time has come – and the sooner it comes, the better for all. One can understand the BPOC's reluctance to take a minimalist approach when things are going so well, and we applaud such an attitude. But this is not a case of change for change's sake. It would be greatly welcomed by those in need of such a denomination today, and would contribute to those who will need it tomorrow when their economic lives brighten with rising general prosperity.
A 500-RMB note would also provide an opportunity to feature the likeness of Deng Xiaoping, the leader who pulled China out of Cultural Revolution oblivion and launched it on the road to prosperity. To the point, in fact, where a 500-RMB note is needed. But it could not happen; it would be Chairman Mao again. In the current generation of banknotes, Mao has clearly been chosen as the sole symbol, as opposed to the 100-RMB notes used exclusively until the late 1990s which featured the collective visages of four leaders.
Counterfeiting looms as a problem, it is true. But China is a country where counterfeiting of goods is so widespread that the forensic eye of shop staff automatically intensifies as denominations rise. Even a 50-RMB note must weather the icy examination of the most humble clerk before it is accepted. Perhaps this would be an opportunity to introduce something in plastic such as the apparently indestructible banknotes used in Australia.
The only thing left to decide is the color. We would guess the authorities would decide upon a continuation of the current policy of consistency between mainland and Hong Kong currency colors, which would suggest a golden brown in line with the Hong Kong HK$500 note, aka "The Big Cow." After all, if there is anywhere that knows about money, it's Hong Kong.
So with wallets sometimes bulging to little purpose beyond alerting pickpockets, we urge the People's Bank to do it.
