The Contest of the Century: The New Era of Competition with China
by Geoff Dyer
Allen Lane
4 stars
Mark O'Neill
Acu, 280 kilometres north of Rio de Janeiro, has been transformed from a seaside village into a huge port with a pier 3.2km-long which can handle Chinese ships that carry 400,000 tonnes of iron ore in a single journey. It is the "new highway" to China, which has overtaken the US to become the largest trading partner and largest foreign investor in Brazil.
This reshaping of the world by a rising China is one of the main themes of The Contest of the Century by Geoff Dyer, a journalist in the Washington bureau of the Financial Times. Previously, he worked as its bureau chief in Beijing, in Shanghai and also in Brazil, giving him the expertise to cover this important topic.
"China has started to make the crucial shift from a government that accepts the existing rules to one that seeks to shape the world according to its own national interests," he writes.
The first section deals with the military contest in Asia between China and the US. The second covers the political challenges China is presenting, including its huge investment in soft power, human rights and nationalism. The final section covers Beijing's plan to challenge the US dollar with the yuan and the boom in Chinese finance and investment.
The book is well researched, with detailed information, interviews and evidence to support Dyer's arguments. It will provide new information to the reader.
The two most interesting chapters are those on the economy. HSBC predicts that by 2015, at least half of China's trade with the developing world, around US$2 trillion, will be in yuan. "The world is slowly, but surely, moving from greenbacks to redbacks," says Qu Hongbin, its China economist.
So can and will the yuan replace the dollar? Dyer is sceptical. Beijing maintains a high wall of capital controls; it is hard to take yuan in and out of the country and for foreigners to invest in China's financial markets.
To make the yuan a major world currency, Beijing has to make far-reaching reforms.
"China has two options. It can keep its particular model of state capitalism. Or it can have a global reserve currency. But it cannot have both," Dyers writes.
China is one of the world's biggest foreign investors and providers of capital. Between 2005 and 2011, it lent US$75 billion to Latin America, more than the World Bank, the US government and the Inter-American Development Bank combined. From 2007 to 2012, the China Development Bank lent US$42.5 billion to Venezuela, one of the world's biggest oil producers.
"China is quietly setting up an alternative system of global development financing that has the potential to make the Washington institutions [World Bank and IMF] less relevant," he writes.
In the battle between the two countries, the US is still likely to prevail. "Without a political system that embraces a greater degree of pluralism, allows more dissent and is rooted in the rule of law, China will struggle to get the respect it needs to turn its economic weight into power and influence."
The same goes for the PLA. "The lack of transparency about its military spending, the absence of real discussion about China's long-term, strategic objectives and the PLA's ambiguous status within the country all make suspicion inevitable" among its neighbours.
Those who want a comprehensive treatment of an important issue that will shape much of our world for the next 20 years should read this book.