The United States influences the world economy and will continue to remain an economic superpower. But China has been trying to counterbalance the United States, despite the instability China faces in terms of its economic policies.
The United States will remain the world’s economic leader even though its share of the world economy has fallen and its economic diplomacy is becoming more difficult. China is fighting hard for the position the United States holds, but it wants to be an economic superpower on its own terms. Although the news flow from China has been shaking the world, it has a long way to go, including guarding itself against capital flight and foreign influences.
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Although the United States’ share of global GDP and trade has fallen, US firms host 61% of global social media users, carry out 91% of online searches, have invented the operating systems for 99% of smartphone users, and manage 55% of the world’s assets under management. Even though the United States and China (including Hong Kong) are similar in their share of world GDP (both at 16%–17% in terms of purchasing power parity), the nature of economic activity is shifting toward globalized services, such as cloud computing and computerized financial trading, which gives the United States an edge.
US economic diplomacy since the 2007–08 recession has been difficult. Its efforts to discourage its allies from supporting China in creating the Asian Infrastructure Investment Bank failed. The author notes that the US Congress and the US public have always been ambivalent about economic diplomacy, and the current administration has not been good at managing that tension. The consequence is that the three pillars of the global economy—the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO)—have all been neglected. The IMF lacks capital to lend to emerging markets; the World Bank has become too bureaucratic, and its ratio of loans to emerging market output is falling steeply; and the WTO has been unable to bring in comprehensive new deals.
China has been trying to overtake the United States as an economic leader, but its economy is open in some ways and closed in others. China has a long checklist of threats to guard itself against, which necessarily brings instability.
The author discusses in detail how the United States will continue to remain an economic superpower through its influence on other countries’ economies in terms of trade, intangible and tangible capital flows, global dependence on the US dollar, and economic policies. But if the United States is going to remain in this position, it will need to improve its economic diplomacy and most likely build a better relationship with China.