China rising, U.S. declining? Don’t panic yet.

The Group of 20 meeting of national leaders in Cannes, France, this week, in the midst of the Greek and European debt crisis, provides a stark contrast between the rising influence of China and the declining influence of the U.S. President Hu Jintao of China arrives with the solution to the European debt crisis in his pocket. China can invest sufficient billions in hard currency in Europe on whatever terms and conditions it chooses. The U.S., plagued by our own out-of-control debt crisis, has no ability to mitigate the European debt crisis, notwithstanding its clear threat to the U.S. economy.

Is China inclined to spend its foreign currency trade surplus to save the European and world economy? While we in the U.S. focus on our balance of trade deficit with China, the reality is that China and Europe have become each other’s leading trade partners. They each have a larger stake in each other’s economies than we do in either. The U.S. is reduced to standing on the sidelines to see how the European debt crisis plays out, while the Europeans negotiate with China over their common future.

We need to regularly remind ourselves, however, that China is plagued with internal problems of its own which make improbable its chances for achieving lasting world dominance.

I’ve written previously about China’s efforts to restrict the internet and Chinese dissidents, which are reactions to the internal opposition the Chinese government faces to its repressive and unjust policies. Tens of thousands of “mass incidents” of protest have been reported by the Chinese authorities themselves every year.

China is severely challenged to provide adequate food and energy resources for its growing population. This challenge is aggravated by environmental degradation and climate change. Air pollution, water pollution and shortages, and food safety are every day concerns now for the Chinese people and government.

Major state construction projects like the Three Gorges Dams on the Yangtze River have encountered such severe engineering and environmental challenges that their projected return on investment now seems impossible.

The supposedly high achieving Chinese educational system is actually an underfunded and fragile house of cards. Millions of young people receive little or no formal education because of inability to pay school fees. Those few who manage to complete high school are subjected to the “gao kao” or “big test”, a three-day ordeal that determines whether and where they will be allowed to continue their studies, and what subject they will be allowed to study. Unhappiness with educational opportunities in China is widespread.

And because China lacks a free press, it is plagued with corruption at all levels which cannot be corrected, and which makes the whole economy inefficient.

The latest measure of the severity of China’s internal problems is the Wall Street Journal’s report of surveys showing the majority of rich Chinese, those having accumulated 10 million Chinese yuan ($1.6 million U.S.), are considering leaving China for better living conditions overseas, with 14% of them already having completed immigration applications, or having made the decision to apply. One study estimates 960,000 people in China have personal assets of at least 10 million yuan, and 60,000 with assets of at least 100 million yuan ($16 million U.S.).

And what would be the number one destination of choice for wealthy Chinese (and probably for all emigrants from all countries and levels of wealth)? Clearly, the United States of America, a fact confirmed by the surveys cited by the Wall Street Journal.

So how bright can China’s future really be if their wealthiest and most successful citizens aspire to leave with as much of their wealth as they can take out? And how dark can our own future really be as long as the United States remains the preferred destination for wealthy and successful immigrants and their investment capital?