China's shadow cast far ahead

A US intelligence report predicts the Chinese economy will soon reign supreme, gaming out the effect of its ascent and that of a number of emerging markets.

Photo illustration by Lee McGorie / The National

The dragon is likely to overshadow the American dream in less than two decades, an influential US intelligence agency says.

China is set to be the world's largest economy as Asian power surpasses that of North America and Europe by 2030, according to a US National Intelligence Council report published last week.

"Asia will have surpassed North America and Europe combined in terms of global power, based upon [GDP], population size, military spending, and technological investment," the report said. The council advises the director of national intelligence.

Overturning more than two centuries of western global dominance, America and European nations will no longer maintain a monopoly of power, the council says.

Instead, they are likely to share it with dynamic emerging economies in a multipolar world.

That is the assessment in Global Trends 2030: Alternative Worlds, a report published every four years to outline likely developments for incoming, or in this case, returning, presidential administrations.

And while the United States is likely to remain "first among equals", the council believes China's economy will outpower that of the US a few years before 2030.

The council had previously predicted China's rise in stature but did not predict that it would become the number one economy.

The 2008 financial crisis accelerated a tectonic shift in power from the US and Europe to emerging economies, stifling US growth and sparking a series of sovereign-debt emergencies in the euro zone that officials have yet to tame. Some economists, including at the IMF, warn that Europe potentially faces a decade of anaemic growth if it does not quickly fix its evolving crises.

In the meantime, emerging markets such as China, India and Brazil have amassed greater punching power in international institutions such as the IMF, the Group of 20 leading and emerging economies and the United Nations.

Although not without their own problems, major emerging economies have expanded at near breakneck speeds over the past decade and are expected to be the primary drivers of growth in the coming years.

Over the next two decades, the intelligence report says, European economies and those of Japan and Russia are likely to continue in relative declines while China, India, Brazil and regional players such as Colombia, Indonesia, Nigeria, South Africa and Turkey become especially important to the global economy.

In what the council calls its most plausible worst-case scenario, the risk of interstate conflict increases while the US draws inward and globalisation stalls.

Such fears come amid instability in parts of the Middle East and North Africa. Syria's civil war is spilling over into neighbouring states, Iran is allegedly nearing the creation of nuclear weapons, while Egypt's new government is facing political turmoil.

The council says global power is likely to continue to be disbursed among the expanding cast of world actors. That will be accompanied by the growing empowerment of individuals, fuelled by a middle-class expansion that makes the poor a minority in the world population for the first time.

While that will probably mean individuals and small groups will play a key role in solving global challenges, it also gives them greater access to deadly and disruptive technologies such as cyber crime and bioterrorism, the council warned.

Furthermore, rapidly ageing populations and growing food, energy and water demands could lead to resource scarcities. Global demand for energy is forecast to grow by 50 per cent as populations expand, while the US could become energy independent by 2030 as it taps new-found natural-gas resources.

While US analysts say they see those dynamics as virtually certain to change the world, they believe a number of game-changing factors could reshape the future in radically different ways.

The council says the US is at a critical juncture amid the rapid and vast geopolitical changes. It likens the current historical coordinates to the years preceding the First and Second World Wars and the fall of the Soviet Union. The extent to which the US injects itself in international affairs - withdrawing or decisive reassertion - is key to the council's alternative possible futures.

Its best-case scenario sees the US engaging with a politically reformed China as part of a coalition that acts to intervene in South Asian conflicts.

"This scenario relies on political leadership with each side overruling its more cautious domestic constituencies to forge a partnership," the council said.

Last month, a congressional advisory panel said China was the greatest threat to US cybersecurity and an expected surge in Chinese investment required greater government oversight to better protect national security and domestic economic interests.

The council's most plausible worst-case simulation details a potential rise in conflict throughout Asia - including the Middle East - as Europe and the US turn inward. In this case, the euro zone quickly unravels, a US energy revolution fails to materialise and global economic growth falters.

* with Dow Jones