Five reasons why China is bound to win the race with the US

1. Economy

The US economy grew by roughly 3% last year. China's grew by 10%.

In the US, the budget deficit for the fiscal year 2009 was a whopping $1.42 trillion. China had hundreds of billions of dollars worth of budget surplus in 2010.

The US national debt just reached 14 trillion dollars and the country is paying interest on it at some $250 billion a year. Much of that money is being paid to China, its biggest creditor.

Some, especially in the US say China is at fault for keeping its currency artificially low to make its cheap but quality goods even more competitive on world markets – others vehemently disagree.

Both US and Chinese companies complain that they face obstacles when trying to enter each other’s markets directly, without a local partner.

2. System of governance or Obama vs Hu

Obama has to share power with the US Congress. The latter did not fail to oblige in demonstrating it and on the day of Hu's visit the House promptly voted to kill Obama's most important reform – the healthcare bill.Everybody including the authors of the repeal know that the Obama loyalist dominated Senate will in turn kill the repeal – but that doesn't seem to stop them from proceeding. The Chinese are likely shaking their heads in bewilderment.

Hu is presiding over The Politburo Standing Committee of the Communist Party of China, a body as powerful as little understood. If China watchers and spooks know what is going on inside it – they are not saying much. To the outside observers it appears to be monolithic and unidirectional. It's decisions are final, huge in scale and consequence, and are implemented without a hitch.

Obama is facing a battle to keep the White House his in 2012. It will take a lot of energy and likely set a new record in campaign spending- every previous one did.

Both the length of stay in power and eventual successor of Hu are known.The man called Xi Jinping will succeed Hu in the posts of secretary general and president in 2012.

3. People and businesses

- or, as Karl Marx would put it, working class and capital in the United States have conflicting goals. The workers want to keep their highly paid jobs at home – whilst corporations are under pressure to deliver profit. To make sure it happens, they move production to China where the labor is much cheaper and workers expectations are lower.

In China, while workers are paid relatively little, they share a common goal with management to produce more and to move to ever more sophisticated production.

But there is more to that than just a Chinese worker’s wage vs that of his American counterpart.

On the eve of Hu Jintao's visit, the Massachusetts company called Evergreen Solar, one ofthe largest makers of solar panels in the United States, announced that it is closing its main American factory, laying off the 800 workers by the end of March and movingproductiontoChina.

The chief reason for the move?There is much greater government support for high technology companies in China. To put it simple, China is better at setting favorable rules for investors willing to play by local rules- and keeping them in place, rain or snow. So much so that notoriously anti-union Wal Mart is happy to have all of its Chinese workforce unionized. Strikes? What strikes?

4. Geopolitics

The US is currently fighting two wars. Although one is winding down, the other shows no sign of abating.In the last 30 years, the US was engaged in dozens of military conflicts, from very small to large. The US keeps hundreds of military bases abroad – with a varied decree of welcome from the local population, from "very positive" in Kosovo to "highly negative" in Okinawa

On the world stage, the US is involved in applying various forms of political and economic pressure on several countries at any given time, with North Korea and Iran being perennial enemies.

China has not fought any wars since its short and indecisive engagement with Vietnam in 1979. Since then, the masters of Beijing prefer to fight wars for hearts and minds with fairly lavish economic aid to different countries of the world, especially in Africa. The hallmark of its foreign policy is "never criticize foreign countries, their people, governments and ways of living".

Take Pakistan. The US there is building a bunker of a new embassy and air strips to utilize its killer drones. China is building a super-highway through the mountains and deserts to the port of Gwadar that is promising quite simply to become the world biggest trade hub in the future.

5. Defense and security spending

Neither country is exactly a model of transparency when it comes to how much they really spend. But some things and trends are clear enough.

The US likely has the world’s strongest army and the second biggest. China has the world’s biggest one and, possibly, second strongest.

Both have enough nukes to annihilate the main cities of any country in the world although the US can do it many times over.

The US spends roughly 1 trillion dollars a year – China spends 10-15% of that, which is roughly 5% of the US GDP (or 20% of US federal budget) – China's is about 2.5%.



…and three reasons why the race would take some time

1. Corruption

Acknowledged to be China's biggest problem on the way to dominating the world. Last year alone a whopping 146,517 officials across the country were investigated and tried for corruption. Estimates of money passing hands differ from several billion to hundreds of billions of dollars yearly.

The fearsome sounding The Communist Party's Central Commission for Discipline Inspection is tasked with combating "capitalist vice" but so far seems to be losing. The booming Chinese economy could probably swallow the bitter pill economically, but corruption creates unrest and makes the masses volatile. Since the Chinese economic miracle is strongly based on a social contract between the people and the all-knowing Communist Party at the helm, the latter can't afford any disturbances.

The US has a strong and comparatively efficient system of battling corruption that prides itself on the occasional arrest of some top official like Illinois governor Rod Blagojevich. It costs a chunk of money to upkeep such a police-judicial system but it instills confidence and pride in citizenry

2. Poverty

Another acknowledged problem. The average Chinese is making less than $3000 a year and in rural areas it is less than $1000. This keeps the purchasing power of the Chinese population relatvely low – but the sheer size of the population compensates. The automobile might still be seen as the ultimate symbol of success in many parts of the country – but between them the Chinese bought more cars than Americans last year.

The population of the USA is both rich and happy-go-lucky spending, including in credit. Insofar as somebody is willing to offer that credit, things will not change drastically.

3. Perceptions and PR image

The Chinese have learned to produce sleek mobile phones and fancy sneakers (and 5th generation fighter planes, by the look of things) – but they have woefully underestimated the power of mass communications within the rich world. The average European or North American has been sold the image of some undernourished slaves toiling at the factory in a faraway dusty town under the watch of a Communist Party goon with an AK-47 and Mao Tse-tung Quotations book. Drunken Russian tank-driving cossack and evil mullah ceded the image of Top Enemy to that of world-domination-bent Chinese communist. Only very recently did the Communist Party seem to realize that even the obvious things need to be sold to the finicky Western public. The resounding success of the Olympic Games in Beijing was one step in the right direction. Investing heavily in English broadcasts of CCTV 9 and Xinhua will be the other. The battle for western hearts and minds will be long though.