GLOBAL DIALOGUE
Volume 9 ● Number 1–2 ● Winter/Spring 2007—The Rise of China China and the United States: Learning to Live Together
China is a country full of contradictions. For many outsiders, it is a fascinating and mysterious place. It has often surprised them with continuity when they expect change and change when they expect continuity. After nearly three decades of rapid economic growth that has lifted millions of Chinese out of poverty and pushed the People’s Republic towards becoming a great power on the world stage, China remains a puzzle. Many wonder why economic freedom and political liberty are still divorced and why China’s proclaimed policy of peaceful development is accompanied by double-digit increases in the annual defence budget. Are China and the United States friends or foes? Is China a revisionist great power or a status quo developing nation? Is the huge imbalance in Sino-American trade caused by the artificially low value of the Chinese currency, the renminbi? Should US policy towards China be defined by engagement or containment? What are the prospects for the bilateral relationship? These questions frustrate analysts, who often fail to give clear-cut answers. This essay will attempt to address some of these important issues in the hope of stimulating further dialogue and debate. Superpower or Developing Nation?In 1940, Senator Kenneth Wherry of Nebraska expressed the following hope: “With God’s help, we will lift Shanghai up and up, ever up, until it is just like Kansas City.” Were he alive today, the senator might be surprised to find that Shanghai, China’s economic and commercial hub, has indeed been lifted up, and is actually much taller and more dynamic than Kansas City. But it is the United States, not God, that has contributed so much to the fast rise of China in the past quarter-century, especially through trade and investment, and the maintenance of peace and stability in East Asia.
The Western media have a tendency to exaggerate China’s might, just as they have a tendency to magnify China’s problems. A growing economic power, China has changed the landscape of the international political economy of the twenty-first century. But just how powerful is China? According to some calculations, the Chinese economy is already the fourth-largest in the world, and by 2050 will overtake that of the United States as the largest. Few note that even if the prediction proves true, China will long remain a low-to-medium-income country judged on the basis of its per capita gross domestic product (GDP).
According to the CIA World Factbook (2007), China’s per capita GDP (using purchasing power parity) was $7,600 in 2006, compared with America’s $43,500. The actual income of most Chinese is significantly lower. The Chinese economy is only about one-sixth the size of America’s. Over 60 per cent of Chinese citizens still live in the much poorer rural areas of the country.
Indeed, there are two Chinas one needs to understand. Coastal China, represented by Shanghai and Guangdong, is vastly different from western China, where tens of millions still live below the poverty line. China is full of paradoxes as it moves up the ladder to prosperity: rising living standards and a growing income gap, luxury condominiums and shantytowns, shining new infrastructure and environmental degradation.
China’s military build-up has been a source of friction with the United States. China’s military power and its strategic intentions are often exaggerated and misinterpreted by the West, contributing to the rise of the “China threat” theory. Many Western observers fail to see that Beijing’s priority is to defend the peace and security of a huge country and to keep Taiwan within the loose framework of one China. They tend to focus on the annual increase in China’s military budget, without noting that Beijing’s ability to project power is still limited and that China’s neighbours and the United States are all enhancing their military strength. China claims its military spending is for defensive purposes. It has warned that the political landscape in East Asia is becoming more fraught because of North Korea’s nuclear-weapons programme, closer defence co-operation between Japan and the United States, and the current Taiwanese government’s pursuit of formal independence. Accordingly, as Beijing explained in a white paper on national defence released in December 2006, China feels obliged to upgrade its navy, air force and strategic nuclear capacity over the next fifty years to prepare for a technology-driven battlefield.
China is only beginning to realise the importance of so-called soft power. Its political system, its human-rights record and its control of the media are not a source of pride for China or a cause of admiration from abroad. Chinese leaders seem to understand that to become a global power, China must improve its international image. Unlikely to accept a multi-party system anytime soon, Beijing has experimented with village elections and internal competition within the Communist Party. Over the past few years, China has reached agreements with foreign partners to establish 130 Confucius Institutes around the world to promote the Chinese language and culture. There are already a dozen Confucius Institutes in the United States. According to the Chinese Language Council International, a government body that co-ordinates the teaching of Chinese in foreign countries, China plans to set up a total of five hundred Confucius Institutes or Confucius Classes globally by 2010.
Not a day goes by without a major international news story about China or scholars commenting on its rise. The People’s Republic is depicted as though it were already a superpower. The “China threat” hypothesis sells quite well in certain quarters. To placate Western concerns, the Chinese government maintains that China is essentially still a developing country. This is probably closer to the truth than is the notion of Chinese might underlying the “China threat” scenario. For many years to come, China will remain a developing nation, albeit a large and fast-growing one. Undoubtedly, China aspires to become a respected great power. But it is premature to regard it as a menacing superpower since its future is uncertain. With so many domestic issues to tackle, China has neither the capability nor the intention to challenge the United States diplomatically or militarily. Sino-American AttitudesThe Chinese have a simple and attractive name for the United States: meiguo, or “beautiful country”. Many Chinese harbour fond feelings towards America, and hope that China will become more like it.
Older generations of Chinese still have good memories of American missionary work in China and of US support for China during the Second World War. Some hospitals and schools the missionaries established are still functioning today. The younger generations have a more complex love-and-hate feeling towards America, best exemplified, perhaps, in the following irony: many of the young students who protested against the “barbaric” US bombing of the Chinese embassy in Belgrade in 1999 went on to apply for visas at the US embassy in Beijing the next day.
Whether China and the United States are friends or foes is a false debate. It misses the central point that the two countries are so interdependent economically and strategically that they are no longer in a position to make this type of either/or decision.
Observers tend to view Sino-American relations as a series of actions and reactions. Mistrustful actors are prone to see only virtue in their own actions and only malice in those of their adversaries. Such mirror images apparently still exist in the United States–China relationship, especially among conservative and nationalistic forces on both sides. But outside these circles, hostility is minimal. There are certainly concerns over and dissatisfaction with each other’s policies and practices, but generally the leadership and the public on both sides feel the need to co-operate and treat each other with goodwill.
China, under President Hu Jintao, is attempting to build a “harmonious society” at home, which he has defined as the development of “democracy, the rule of law, justice, sincerity, amity and vitality”, and a peaceful world abroad. Beijing emphasises that China’s development is peaceful, i.e., one implemented by peaceful means for peaceful purposes and that threatens the interests and security of no other country. This strategy of peace is apparently intended to counter the “China threat” argument that prevails in some parts of the world.
China has tried to avoid direct conflict with the United States and has increased co-operation with it. China gave diplomatic and intelligence support to the US campaign against al-Qaeda and the Taliban and has contributed financially to the reconstruction of Afghanistan and Iraq. On the most sensitive issue in Sino-American relations, that of Taiwan, China has acted cautiously in recent years. Adhering to its long-standing “one country, two systems” model, China aims to resolve the Taiwan dispute by peaceful means. Even US government officials admit it is the pro-independence government in Taipei that has created tensions across the Taiwan Strait recently.
The academic debate over whether China and America are friends or foes may continue, but the administration of President George W. Bush seems to have made up its mind. For example, it has repeatedly used the term “friends and allies” to refer to four of the other nations involved with it in the six-party talks on North Korea and its nuclear programme: South Korea, Japan, China, and Russia. China is not a formal ally of the United States, but definitely a friend in need as Washington attempts to settle one of its most vexing foreign-policy issues. The US Trade DeficitIn recent years, trade has topped the list of contentious Sino-American issues. America’s huge trade deficit with China is a constant irritant for many US politicians. The US media overwhelmingly blame the not-yet-freely-convertible Chinese currency as the culprit.
While highlighting the growing trade deficit, the US government seldom mentions that Chinese imports from the United States have grown rapidly year by year (although trade in the other direction is growing even faster). Trade with China benefits American consumers. If the United States raises tariffs on Chinese goods or imports less from China, as some protectionists have urged, it is ordinary Americans who will be hurt as they will have to pay more for Chinese products.
Good and cheap Chinese products help the United States maintain a low inflation rate, saving Americans billions of dollars. Trade with China has helped directly or indirectly to create four million to eight million jobs in the United States.
From a global perspective, the United States–China trade imbalance is structural, caused by shifting trading relations in the world economy. Traditional key US trading partners in Asia all have huge investments in China. They produce in China and then export from it with the label “Made in China” on their products. Since the United States has the world’s largest and most insatiable market, even if its trade deficit with China were reduced, its deficit with other developing nations would increase.
Although the undervalued renminbi gives Chinese exporters some trade advantage and enlarges the US trade deficit, it is not the main cause of America’s indebtedness. Nor can it explain America’s homegrown problems such as slow job creation, weak wage increases and rising income inequality. Those problems are rooted in bad economic policies, including enormous deficit-financed tax cuts and a dearth of public investment and private savings. The purchasing power of Americans is fully demonstrated during the holiday season. Ironically, their massive consumption is built upon almost zero household savings. The unbalanced growth of the US economy is not caused by trade with China. The United States needs to save more, borrow less, invest further in infrastructure and education, prepare its workforce better for more intense international competition, and build an improved safety net for workers displaced by the global economy.
Those who repeatedly urge China to revalue the renminbi quickly either do not understand the economics behind Sino-American trade or simply do not care about the negative impact such a revaluation would have on China’s economy and society. They also tend to ignore that by the end of 2006 the renminbi gained 6 per cent against the US dollar following Beijing’s decision in July 2005 to allow it to move against the dollar. China is addressing America’s concerns, but will move at its own pace to avoid triggering social dislocation.
More than five years after China’s accession to the World Trade Organisation, the country has made progress in trade liberalisation, fulfilling most of its WTO obligations. But greater effort is needed to protect intellectual property rights and rectify the huge trade imbalance with the United States.
The United States certainly shares the responsibility for the trade imbalance. For one thing, it still largely maintains the economic and military sanctions it imposed against China following the Tiananmen Square massacre of 1989. These prohibit the sale to China of high-tech or dual-use military products. But how does the United States expect to reduce its trade deficit with China if it sells it only apples and oranges? China’s complaint that the United States still harbours a Cold War mentality has some plausibility. One really cannot advocate free trade when one is not a free trader oneself. US trade policy towards China not only perpetuates the trade imbalance, but is harmful to bilateral relations. What Sort of Power?Is China a revisionist or a status quo power? It could be both. It is a revisionist power because it has adjusted and expanded its traditional foreign policy in an attempt to project itself as a responsible global player; it is a status quo power because it does not want to disrupt or change the current international political and economic system, from which it has benefited enormously since it opened up to the world nearly thirty years ago.
Reasons for considering China a revisionist power include the growth of its confidence in tandem with its economic might. Its economic clout is beginning to spill over into the political, diplomatic and cultural spheres. Under Hu Jintao, China is gradually discarding Deng Xiaoping’s maxim that it should not take the lead in international affairs. China’s diplomacy has become pro-active and multidirectional. Until the mid-1990s, China shunned multilateralism in foreign policy for fear of becoming the target of attack by a united West. Gone are those days. In 2006 alone, China hosted several high-profile international conferences, attracting over sixty heads of state or government. In June that year, the Shanghai Co-operation Organisation, comprising China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, convened a summit in the city of its founding. In October, the southern city of Nanning hosted a summit between China and the Association of South-East Asian Nations. In November, the summit of the China–Africa Forum was held in Beijing. And in December, China hosted a multilateral energy conference.
China also firmly supported Margaret Chan in her successful bid to become director-general of the World Health Organisation in November 2006. Chan is the first Chinese national to head a major international organisation.
With growing economic and political clout, China is likely to play a bigger role in international politics. In the Middle East, for example, it is considered a more impartial external power than the United States and one better able to mediate between Israelis and Palestinians. The fact that China enjoys the trust of both Israel and the Arab world speaks volumes about its influence in the region. In December 2006, the Chinese foreign ministry hosted for the first time a seminar on the Middle East, which was attended by former senior officials from both Israel and the Palestinian Authority.
Its multidirectional oil diplomacy has seen China leave its footprint in Africa, the Middle East, Latin America, Central Asia, and elsewhere. China’s heavy investment in countries with poor human-rights records or that are prone to serious corruption such as Sudan, Iran, and Zimbabwe has raised the eyebrows of many in the West. Is China using the so-called Beijing Consensus—economic liberalisation without political democratisation—to challenge the Washington Consensus—economic privatisation in the context of political liberalisation? China denies this. It insists that it is not exporting any ideology. Its extensive trade links with all sorts of governments are driven by the needs of its own domestic economic growth, and its investment in developing regions such as Africa and Latin America is mutually beneficial.
Yet China can also be considered a status quo power. It desires a peaceful international environment for maintaining its domestic growth. It does not seek to challenge the relatively stable international and regional order. It attempts to resolve international differences through dialogue and negotiation. For example, in the disputed South China Sea, Beijing and other parties have developed a code of conduct for handling their differences and jointly exploring undersea resources.
Most notably, China initiated the six-party talks on North Korea’s nuclear programme, aiming to resolve the dispute peacefully through multilateral negotiations. Whether the talks will eventually succeed in persuading North Korea to renounce its nuclear-weapons option is unclear, but they have helped the United States to focus its limited foreign-policy resources on Iraq and Afghanistan without having to worry unduly about a new conflict in East Asia.
Some observers claim that China would like to see the decline of US power so that it can challenge America’s supremacy. But it can also be argued that it is in China’s interest to prevent the waning or at least the rapid decline of US power. A weakening United States is more likely to depart from the international regime it created and shaped, and which has benefited China so much. Engagement or Containment?How ought the United States to deal with a rapidly transforming China? Even before the two countries formally established diplomatic ties in 1979, there was a heated debate in the United States between advocates respectively of engaging and containing China. Today, there is still a clear divide between the so-called panda-huggers and dragon-slayers in US policy and academic circles.
In reality, US policy towards China has been characterised by “congagement”—a combination of containment and engagement, with the balance tilting towards the latter. More specifically, the two economies are already closely knit and interdependent, beyond the stage of simple engagement. Politically, the United States has engaged China in the hope that it will move towards democratisation. In security affairs, the United States has essentially maintained a containment policy, beefing up its military alliance with Japan and strengthening co-operation with China’s neighbours.
Perhaps their competing and sometimes conflicting interests will prevent the United States and China from ever become allies. But remarkably, their differences have not prevented the two countries from co-operating on many global and regional issues. China needs the United States to help maintain a peaceful international environment for continued economic growth. It wants to work with Washington to prevent a formal declaration of independence by Taiwan. And it understands that trade with America is still vital for its economy. For its part, the United States is aware that China is not a present or imminent danger, and that it is not intentionally challenging America’s superpower status. China’s future can be shaped. Its peaceful development offers more opportunities than threats for the United States.
Winston Churchill once said that jaw-jaw is better than war-war. Dialogue is helpful for the two sides to dispel misunderstanding and promote co-operation. In December 2006, Treasury Secretary Henry Paulson led a high-profile US delegation to Beijing that included the heads of the departments of Commerce, Labour, Health and Human Services, Energy, the Office of the United States Trade Representative, and the Environmental Protection Agency, plus the chairman of the Federal Reserve, for the inaugural Strategic Economic Dialogue (SED) between the United States and China. The agenda for the SED focused on maintaining sustainable growth, opening markets and improving energy security and the environment. The SED represents a significant first step towards establishing a sustainable Sino-American relationship. Such dialogue will not resolve all the problems between the two countries, but is useful for enhancing mutual trust and understanding.
In her keynote speech at the inaugural SED, China’s deputy prime minister Wu Yi said: “We have had the genuine feeling that some American friends are not only having limited knowledge of, but harbouring much misunderstanding about, the reality in China. This is not conducive to the sound development of our bilateral relations.” Certainly, much the same could be said about Chinese views of America.
Both sides have a long way to go in order to nurture this important relationship. The Institute of International Education conducts an annual census of foreign students in the United States and of US students abroad. According to the institute’s Open Doors report for the 2005–6 academic year, more than 62,500 Chinese students were studying in the United States but only 6,389 American students were studying at Chinese colleges and universities. The previous year, only 4,737 American students studied in China. Clearly, greater engagement and interaction are necessary if this asymmetry in bilateral exchanges is to be remedied.
For most American students, study abroad still means travelling to London or Paris. Only in recent years has China become a destination worth considering. The Open Doors data also show that in the 2005–6 academic year, China was the eighth-leading host destination for American students and the only Asian country in their top ten list. According to China’s Ministry of Education, nearly one-third of all Chinese students who studied abroad in the past two decades went to the United States. Obviously, many more American students need to study China, its language, culture, politics, and economics, if bilateral ties and understanding are to continue to improve. Potential FlashpointsFor decades, Taiwan has been the most contentious issue between the United States and China. However, the two powers have reached a basic understanding about Taiwan’s status, i.e., that the island should not move towards a formal declaration of independence, which China has said it would consider a casus belli. Because of this understanding, some analysts argue that Taiwan is no longer the core issue between the two powers.
Other third parties besides Taiwan could give rise to clashes between the United States and China. These include Sudan, Venezuela, Iran, Burma, and North Korea, to name just a few. Sino-American confrontations could be caused by energy competition, geostrategic rivalry, or the deep suspicion and misunderstanding the two sides still have of each other’s intentions and policies. While ties between the United States and China have improved in recent years, they remain volatile. Beijing and Washington must take care that disputes and tensions involving these other parties do not damage bilateral relations.
China’s energy diplomacy also has the potential to sour relations with the United States. China’s current global hunt for energy is clearly driven by its domestic growth needs. There is no evidence that China is engaged in a strategic competition with the United States in the Middle East, Africa, Latin America and other energy-rich regions. However, if its key interests are undermined by the United States, China may be forced to become more aggressive in its foreign policy and more active in seeking oil from countries like Iran and Sudan, a move that would seriously alienate Washington.
The United States should work with China to give it a sense of energy security and shared interests in a stable energy market. The failure of the Chinese bid to acquire the US oil and gas company Unocal in 2005, an acquisition thwarted by strong opposition from the US Congress, feeds Chinese fears that the United States will not allow the People’s Republic equal and reliable access to the world oil market.
Australia, South Korea, and potentially Japan can help bring the two powers together. President Roh Moo-hyun of South Korea unveiled in early 2005 a new foreign-policy doctrine by declaring that Seoul must become a balancer among regional and external powers so that tensions do not escalate in North-East Asia. Roh stated that South Korea could serve as an honest broker between China and Japan and between the United States and China. Prime Minister John Howard of Australia has also offered to serve as a balancer between the United States and China when disagreements arise. As key allies of the United States and major trading partners of China, both South Korea and Australia are well positioned to bridge the Sino-American divide and to become anchors of stability and peace in Asia. Japan ought to improve relations with China in the interests of assuming such an important role itself. Whither US–China Relations?The growing political and economic power of China is transforming the country’s foreign policy. As Wu Jianmin, a senior diplomat and president of the China Foreign Affairs University has observed, the People’s Republic is moving from “responsive diplomacy” (fanying shi waijiao) to “proactive diplomacy” (zhudong shi waijiao). The Middle East, Africa, and Latin America, once considered too distant for any significant economic and political investments by China, are now locations in which it can implement key objectives of its new, multidimensional foreign policy.
As China continues to expand its economic and diplomatic activities in the Middle East, countries there are beginning to turn to Beijing for assistance in conflict resolution. In January 2007, Prime Minister Ehud Olmert of Israel visited China to commemorate the fifteenth anniversary of the establishment of diplomatic relations between the two countries. The chief purpose of his visit, however, was to seek Chinese support in pressing Iran to suspend its uranium-enrichment programme.
The 2008 Olympic Games will be China’s coming-out party as an emerging great power. The country is proud of its progress and cares deeply about its international image. The next couple of years will be an excellent opportunity for the United States to exercise its influence on China and push bilateral co-operation to new heights. China is a stakeholder in the international political economy. So is the United States.
Just as marriages need to be nurtured, so do state-to-state relationships. With nearly monthly contacts among senior US and Chinese officials and regular strategic dialogues, Beijing and Washington are institutionalising their interactions. Bilateral contact is much deeper, wider, and more systematic than it has ever been.
China and the United States need to focus on broad, long-term goals rather than politically sensitive short-term issues. Chinese leaders should be encouraged and prodded, not pressured and lectured. China’s thirst for energy is a development problem shared by a growing number of countries. Even without China, energy demands from India and other emerging markets are expected to jump drastically in the next few decades. So for the United States and the international community, how to help developing countries reduce the cost of modernisation and improve energy efficiency has become a serious challenge.
China’s rise does not imply America’s decline. For the foreseeable future, the two powers will coexist in the world. China, with its proclaimed harmonious diplomacy, is not seeking to challenge America’s supremacy in world affairs. The most critical issue in their bilateral ties in the new century will probably not be Taiwan or trade, but determining and abiding by their respective roles in the international political economy. They must form a long-term vision for the future of their relations.
The Sino-American relationship is no longer just of bilateral significance. It now has deep regional and global implications. Good relations between the world’s only superpower and the largest rising power are absolutely essential for maintaining global peace and prosperity in the twenty-first century. China and the United States have no alternative but to co-operate towards this end. |