Economic growth has propelled China into one of the world’s largest markets and forced its accession into the WTO. Some experts talk of a greater China, with the intertwined economies of Mainland China, Hong Kong, Taiwan, and the expatriate Chinese communities of Southeast Asia as being a regional unit based on Chinese economic and political systems. Such a grouping will have important ramifications for the East Asian sphere in the future. This will be especially relevant as Chinese military capabilities keep expanding with the concomitant decline of Russian military competence.

Economically China’s success is predicated on inward flows of foreign capital and technology, and access to the US market. China’s trade surplus with the US of $40 to $50 billion annually is approximately the same as Japan’s though such export success does not constitute a superpower. Large exporters are oftentimes MNC’s operating in China many of which are owned of course by Japanese, Western or non-Chinese interests. In fact foreign firms account for 75 % of Chinese exports. (1) In spite of its economic reformation in the past half century, China does suffer from some serious problems. State bureaucracy still weighs heavily on the economy. More than 50 % of China’s factories are state owned and many industries receive generous government assistance. Nationalized firms are home for hundreds of thousands of redundant employees. Wide scale unemployment and huge inequalities throughout various regions are threats to Chinese political stability. There is also a close connection between government bureaucrats, business people and party officials. One should not forget that it is still one of the world’s poorest countries.

During the next twenty years, China (with the integration of Hong Kong followed by Macao and, eventually Taiwan) will almost certainly experience a relative surge in its economic performance. Assuming that the Chinese economy continues to maintain the pace to which it has grown accustomed during the last 15 years of globalization and liberalization (not a certainty but not out of the question), its emergence as a potential US rival in the Asian region may be reached faster than some experts expect. Such a development will not only affect the dynamic of Japan's role in a re-vitalised East Asia, but also may well introduce new stresses and strains in Sino-American economic and political relations as both actors jostle for influence within an East Asia increasingly split between a ‘Greater Chinese’ area and the rest who would still be dependent on the US and Japanese markets. The splitting of East Asia into two spheres is a more probable outcome of Sino-US IPE competition than a coalesced East Asian bloc of like-minded nation states.

As China seeks to carve out for itself a rising economic destiny and a sphere of influence of continental dimensions there will almost certainly erupt new forms of contention and antagonism in its relations with the United States. It is highly unlikely that the United States will allow a radical displacement of the centre of gravity of world trade from the present arrangement in which quasi intra-liberal economic and political cooperation and initiatives are controlled by a consortium of powers consisting of the U.S.A., Japan and the EU (with the help of international banks, the IMF, WB and WTO). As China pursues an aggressive policy of capturing markets in the rest of Asia (as well as of appropriating a lion's share of the domestic market), conflicts between China and the United States will ensue. The presumption of bloc creationism in East Asia is rather unlikely.

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1. Gilpin, 2000, p. 283