Talk these days of the creative economy as soft power and a harbinger of world peace, ignores the huge struggles taking place between Google, Facebook no one hand and Baidu, We Chat, Tencent on the other, pitching the U.S. and China directly against each other in a cold digital war of online platforms, search engines and aggregation algorithms. It is very nice to assert the diversity of cultures in a globalized world. But this diversity is in reality dependent on some very hard issues of finance, intellectual property rights and communications infrastructures.
Unlike the Cold War period -- in which the Soviet Union was isolated from the global economy -- commercial interests and trade secrets underpin the intrinsically entangled Sino-American economic relations. The higgledy-piggledy distinction between national security and corporate interests is hardly convincing to the Chinese, especially when the US revolving doors conveniently inhabit the space between government service and corporations during both Democratic and Republican administrations. Just like the Sino-American relations in commercial intercourse, economics triumphs over ideology in the partisan world of American politics. On China's side, its intertwined national and economic interests are enshrined in the peculiar institution of the State-Owned Enterprises (SOEs).
Both Washington and China are steadily upping the stakes in their rivalry as China's provocations of U.S. friends and allies become more flagrant and America's commitments to support them become more categorical. Both believe they can do this with impunity because both believe the other will back down to avoid a clash. There is a disconcertingly high chance that they are both wrong. Asia today therefore carries the seeds of a truly catastrophic episode of mutual misperception.
Neither China, nor any other country, has "unlimited financial resources." Finite resources are, in fact, the core principle of economics. When you tee up the problem that way, you risk missing the actual problem, which is a combination of state power and the savings imbalances noted above. As the authors note, it has long been the policy of China to suppress household consumption, virtually insuring both excess national savings (Pettis stresses that Chinese household savings are not unusually high) and wide-spread poverty (though they should have noted that there are at least internal noises in China pushing the other way -- we'll have to see what they amount to). Those national savings must flow somewhere, and flow they do, to countries across the globe that consume more than they produce.