 1.2 Billion people: A lot of workers, a lot of consumers, a lot of state revenue  Since 1985, the Chinese economy has grown at an average rate of over 9.5%  The year 2025: Why does being #1 in GDP matter?  Since the 1980s, the number of people in the world living in absolute poverty (on less that 1.45 a day) has decreased by only about 10% Within China, the rate of absolute poverty has fallen 85% of its population to around 15%.  China’s trade balance for the last year: was +177 $Billion; America’s: -650$B.  A peaceful rise? The 2 nd largest military budget in the world and the world’s largest army

 Psychology and fear of the unknown: Attribution error.  Realism  Security dilemmas and fear: How would you like to share a border with Russia, India, Pakistan, Afghanistan, North Korea, and a bunch of other countries?  For many, China has become the face of the larger forces of history that may inevitably lead to the decline of America power and our “right” to own the 21 st century  The lure of simple, but potentially incorrect historical analogies: How do they see us? How do we see them?

THE EUROPEAN UNION HAS:  Military expenditures that are roughly 2.5 times that of China  a GDP just shy of 3 times China’s  And all of this spread out over a population of 500 million, that is only 40% that of China.  Each American worker, including all sectors of the economy, generates an average $35.50 per hour for our GNP. The average French worker = $35  Germany’s trade surplus last year = 200$ Billion, or 16 times larger than China’s on a per capita basis

 The average Chinese industrial worker (in other words, if we ignore the poorest Chinese workers who make the up the majority of their economy): $6.30… which is 8 times what s/he made in 1980, but a fraction of what you find in any developed economy  Chinese labor mostly “complements” our economy.

 Nominal Chinese GDP per cap in 2010: $3,700, #86 in the world and less than half the world avg.  US nominal GDP per cap in 2010: Over $47,000 (incidentally, we’re only in the top 10, which makes you wonder about all this obsessing about our place in GDP rakings).  If we adjust China’s GDP for its purchasing power: $7500 per cap. Or 98 th in the world.

 At around 2%, the Chinese still spend only half of the GDP percentage spent by the US. In fact the Chinese devote the lowest percentage of their national budget of any UN security council member.  While the Chinese have 2.3 million active military troops, they have no foreign military bases (although they are contemplating them in their region). Adjusted for population, they have 1.7 active troops per 1000 people.  By contrast, America has 1.5 million active troops (over 5 per 1000) that are based in over 100 countries around the world… including those on China’s border.

 Yes: They certainly manipulate their currency … But this isn’t all bad.  And Chinese currency manipulation isn’t the main problem behind the US trade deficit:

 Unlikely given their political culture.  Free-riding incentives: Security-wise the SQ is pretty good to them.  But they will increasingly challenge the US supremacy in their region. What should make of the unfolding submarine arms race?  Even their nuclear posture is defensive for now: US active 1,950 / total 8,500 warheads China active 180 / total 240  And they will continue to have a large military and ever more professional army… but they don’t have the luxury of moving it all around and fighting wars across the world

 What is soft power?  China appears to be very interested in building and using soft power.  It’s soft power is pointed against us: China is working hard to establish itself as a morally superior counterbalance to the US when it comes to speaking out on political issues of global import.  Soft power is more important now than ever before: In an era of nukes and increased concerns for human rights, the US advantage in military spending may be less important and their way of engaging the world may have lots more appeal.  Won’t human rights issues be a problem?