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We Are At War With China, Too and We Can't Let Them Win

Are we at war with China? Yes-- we are engaged in a struggle with China that will ultimately prove far more important to the security of the United States than will our skirmishes in Iraq or Afghanistan. The weapons involved are commercial rather than military, and the toll will be in jobs and financial reserves as opposed to bodies, but it is a war nonetheless. At the moment, however, only the Chinese have taken up the fight. We are still clueless. A story in Wednesday’s Wall Street Journal is but one of many that proves the case.

As their economic might builds, so does the tendency for the Chinese to tweak the U.S. -- in resisting sanctions on Iran, in maintaining a severely undervalued currency, in pursuing their commercial interests at the cost of diplomatic courtesies, in rapidly building its military capabilities and in repudiating human rights, climate control efforts and other causes dear to Western hearts. It is only a matter of time before this increasing bumptiousness spills over into actual conflict.

President Obama has said about China that the pursuit of power is not a “zero-sum” game. He should ask the manufacturing workers in Detroit and Ohio who have lost their jobs. They might think otherwise. Americans think that China is pushing the U.S. into an economic decline. A recent Pew Center survey reports that an astonishing 44% of Americans consider China the world’s leading economic power. This, despite the fact that our economy is more than three times larger than China’s. Admittedly, the PRC’s rapid growth has brought that multiple down and some project that our leadership will vanish altogether in the next couple of decades.

It is time for the United States to stand and fight. Just as earlier projections of Japan’s ascendance proved wrong, it is likely that China will encounter speed bumps on its path to world dominance. Today, the United States' number one goal should be building these obstacles and paving our own super-highway. How can we take back leadership?

First, we have to spur private enterprise. Despite our current travails, the U.S. has arguably more arrows in our quiver than does China, including entrepreneurial talent, management expertise, the rule of law, copious natural resources, a broad-based economy, and an open political system (such as it is). We also boast the finest institutions of higher education in the world -- which attract the best minds from around the globe. One goal should be to loose these weapons of mass instruction, and allow those educated in our country to remain and work here, thereby earning some return on our investment. What we must NOT do is to drive off high-value newcomers, banish profitable activities to more welcoming locales and begin behaving as a nation in decline.

Americans have a sneaking suspicion that the Chinese are doing everything right, while we, well, we muddle and Tweet. We worry that China’s leaders, unfettered by a clumsy Congress and hobbling human rights issues, can forge ahead, outmaneuvering us on every flank.

Articles, such as one which appeared recently in the New York Times about China’s copper mining venture in Afghanistan, do not help. The piece made us look like dummies. “While the United States spends hundreds of billions of dollars fighting the Taliban and Al Qaeda here, China is securing raw materials for its voracious economy,” reported The Times. A similar win in Iraq, where China’s state-owned oil company won the first post-Saddam concessions, suggests the country is all-too-cunningly drafting behind our Marines.

What is less frequently reported is that China, too, is facing serious social and economic challenges. The country struggles with an appalling divide between (urban) haves and (rural) have-nots, as well as an aging population. A story in the latest edition of Business Week chronicles the makings of a sizeable real estate bubble in China. In just the month of November, housing prices in 70 major cities soared 5.7% and housing starts jumped 194%. The real estate bubble forming in China is being inflated by cheap credit, securitization and a government that is pushing banks to lend. (Does this sound familiar?) Chinese leaders, fearful of social unrest, have used every means imaginable to avoid a slowdown. Not only have they spent heavily via a giant $586 billion stimulus program and pushed bank lending, they have also kept their currency from moving higher. Because they have accumulated huge amounts of U.S. debt, they have been in a position to withstand revaluation pressure, which has boosted exports.

Meanwhile, the Obama administration is spending its time and political capital redistributing our nation’s resources instead of figuring out how to create more wealth. This week Interior Secretary Salazar announced increased regulations that will make it harder to drill for oil and gas on federal lands. Imagine, as oil prices drift higher, the government is actively trying to prevent more drilling! Meanwhile, the Chinese are pursuing oil and gas resources all over the globe, in addition to building nuclear power plants, wind farms, and taking every imaginable course to ensure its long-term energy supplies. The difference in approach could not be starker.

On every front, the Obama administration builds barriers to success, by raising the cost of hiring workers via the health care bill, to increasing the scrutiny of mergers and acquisitions and threatening changes in labor laws and emissions standards that would impair industry. They have also given into organized labor by refusing to push through important trade agreements with Columbia, South Korea and Panama which would boost opportunities for our exporters.
It is time for this administration to stop star-gazing. They must recognize that the U.S. is still -- and must remain -- the mightiest country in the world.

Liz Peek is a financial columnist and frequent Fox Forum contributor. Read more from Liz at LizPeek.com.

Liz Peek is a writer who contributes frequently to FoxNews.com. She is a financial columnist who also writes for The Fiscal Times. For more visit LizPeek.com. Follow her on Twitter@LizPeek.