United States and China : Partners, Competitors, or Adversaries?

How Should America View China’s Rise? How Should China View America’s Global Role?

by Paul Ballard
June 16, 2013

“China is the world’s most important rising power. In two decades, China has moved from the periphery to the center of the international system.”
– David Shambaugh, 2013.

“ America won a huge victory in the Cold War : we stood down the world?s only other superpower, simultaneously setting in motion globalization?s great advance around the planet.”
– Thomas P. Barnett, 2004.

“The appropriate label for the China-USA relationship is less partnership than “co-evolution”. It means that both countries pursue their domestic imperatives, cooperating where possible, and adjust their relations to minimize conflict. Neither side endorses all the aims of the other or presumes a total identity of interests, but both sides seek to identify and develop complementary interests.A cooperative U.S.-China relationship is essential to global stability and peace.” ~ Henry Kissinger, 2011.
“With China’s economic growth slowing, social conflicts, corruption, and the inequitable distribution of resources are now getting worse and the environment is deteriorating. No consensus has been reached on how to solve these problems.” Hu Shuli, 2011.
“The United States has jeopardized its ability to act effectively in the world because of runaway domestic spending, underinvestment in human and physical capital, an avoidable financial crisis, an unnecessarily slow recovery, flawed wars in Iraq and Afghanistan, recurring fiscal deficits, and deep political divisions. For the United States to continue to act successfully abroad, it must restore the domestic foundations of its power. Foreign policy needs to begin at home, now and for the foreseeable future. “ – Richard Haas, 2013.
“A momentous struggle is under way for the soul of China. On one side is the venal party-state, an entrenched elite fighting to preserve the country’s authoritarian political system and its privileged place within it. On the other is a ragtag collection of lawyers, journalists, entrepreneurs, artists, hustlers, and dreamers striving to build a more tolerant, open, and democratic China.” Philip Pan, 2008.
“The simple story of America is this: the rich are getting richer, the richest of the rich are getting still richer, the poor are becoming poorer and more numerous, and the middle class is being hollowed out. The incomes of the middle class are stagnating or falling, and the difference between them and the truly rich is increasing.” – Joseph Stiglitz, 2012.
Last weekend, the new President of China, Xi Jinping, and President Obama held informal meetings in a quiet retreat in the California desert – largely away from press cameras and Washington razzamatazz. The goal apparently was to begin building a direct more personal relationship between the leaders of the world’s two major powers. Both nations have grown much in stature in the past twenty-five years. China has successfully grown its economy into the second largest globally. America has become the world’s only superpower. Both societies admire and wish to emulate each other’s prowess. Yet both peoples often misunderstand each other. So, this unusual meeting between the two presidents could potentially prove most useful.
It reminded me of my experiences going to live in both countries. How different they were up close from the stereotypes the outside world sees. In 1970 I came to New York City as a graduate student from the U.K. After Europe, America impressed me hugely as a vibrant, dynamic, open society with incredible breadth of technology and learning, scale and efficiency of infrastructure. In 2007, I lived in Shanghai, China, with my Asian wife, to learn Chinese and get to know the country. Again, I was much impressed – by how much more open, un-regimented, market-oriented, un-Communist it was than I had expected. Then there is the sheer scale of everything – people, bicycles now cars, markets, skyscrapers seemingly everywhere. As an American now, I know first-hand how pragmatic, open and welcoming my fellow countrymen here are. In China, especially once my Mandarin was good enough, I found most individual Chinese equally open, helpful, hard-working and generous with their opinions. The taxi driver who strongly disagreed with China’s “one child” policy – not enough kids to support the grandparents in old age! So many young Chinese who had read English novels, enjoyed Western and Chinese pop music, wanted always to practice English and yearned after a new religious spirituality!
Which Way America’s and China’s Future? : Despite both societies’ great successes, as the comments above highlight, many Americans and many Chinese today see their respective societies now at a crossroads – albeit not the same one, though they are inextricably inter-linked in our globalized world. How have America’s and China’s recent past successes prepared them for the future? What are the major transition challenges each society faces? How will collaboration or competition between them affect their future achievements and the rest of the world?
How They Got Where They Are? Both the USA and China have enjoyed considerable economic success by international standards in the past two decades. In the 1990s, America achieved high growth – over 5% annually – and high employment through massive innovation in information technology and communications, and later outsourcing of assembly manufacturing of affordable high-tech consumer goods – notably to China, supported by liberalized private financial markets. Low interest rates propelled consumer spending and housing booms. Thus the USA came to have the largest, wealthiest single market of any developed economy. Meanwhile, China’s transformation was even more impressive. From a closed, desperately poor rural economy in the late 1970s, China’s political elite took the decision to open up through market liberalization – giving peasant farmers freedom to produce for the market. Later, in the early 1990s, foreign direct investment was invited in. Between them these forces launched one of the most massive economic and social transformations the world has ever seen. China’s economy has grown at over 9% annually for over two decades, lifting hundreds of millions out of poverty and moving many from the countryside to rapidly growing cities. China benefited from globalization building huge export markets in North America and Europe.
Challenges of Two Transitions : The recent global economic recession of 2008-09 highlighted the vulnerabilities and still considerable differences between the two nations. For the USA is still by far the world’s only true superpower, economically, militarily and politically. China has made great progress but its economy is still that of a low-middle income developing country. Both countries now face pressing needs for major transitions building upon their past success. Despite their large disparities, the USA’s and China’s transitions will – ironically and perhaps unexpectedly – share important common dimensions. Both will need to focus upon improving public goods and services in education, skills development , healthcare to tackle rising income inequality in both countries. Both will also face major – but quite different – political reform challenges.
America needs quite urgently to find ways of overcoming its deep partisan political divisions so that key national policy changes can be made for long-term prosperity and growth – notably on energy, climate change, public spending, entitlements.
China, however, faces perhaps far more daunting transition needs. As its wages and incomes rise further, China will lose competitiveness to other emerging markets in production of low cost final assembly goods for export. It will need to rely increasingly on more knowledge- and skill-intensive industries for jobs. To do this, China will need to liberalize its still largely state-owned enterprise (SOE) and foreign multi-national dominated economy by encouraging independent Chinese private businesses. These are currently heavily discriminated against in terms of taxes, subsidies, access to finance, stock exchanges and government markets.
For Chinese high-skilled workers and technicians, as well as entrepreneurs, open access to information as well as a much improved business environment – less regulation, strong and transparent rule of law in business – will be crucial. China’s wide and increasing income inequality – between rural and urban areas – and public and private enterprise workers – urgently needs addressing. Yet these challenges pit China’s reformers directly up against the powerful vested interests in China’s ruling political elite, intent upon retaining the status quo.
Political reforms will be vital also to underpin these economic reforms. Each year there are over seventy thousand public demonstrations across China. Often these relate to land rights and excessive taxation burdening China’s rural farmers and small businesses responsible for much of the nation’s productivity and output. In recent years, the Chinese government has introduced modest and limited reforms. In some cases, villagers claims have been granted. But the right to organize independently politically has so far always been repressed by the Communist Party leadership.
Chinese political leaders such as former presidents Jiang Zemin and Hu Jintao, have in recent years highlighted the need to learn from other countries in designing China’s transition reforms. But the most successful of these – in Western societies as well as Japan – show that a vibrant, dynamic, market-based economy relies crucially for long-term success on information, education, speech and political freedoms as well as the rule of law. Until now, despite China’s great successes – that have been largely state-driven – political will has been insufficient to achieve these changes. This has led most Chinese science graduates to stay abroad – in the USA and Europe – after finishing their studies. Meanwhile, most large private Chinese businesses are established as foreign interest enterprises under Hong Kong of Singapore law.
Looking to the Future : Partnership or Competition? : As Henry Kissinger rightly notes above, as major powers, both the USA and China will always give priority to pursuing their own domestic interests. However, in the past quarter century, it has been the opening up of both countries to each other that has vitally contributed to the economic successes they have achieved. Access to US markets, education, finance, corporate know-how has vitally assisted China’s transformation. Access to China’s immense pool of low-cost labor, natural resources and huge markets have – and will continue to benefit US economic growth. Nationalists in both countries, on the other hand, will continue aggressively to urge more restrictive, protectionist approaches.
But each nation can alternatively pursue policies that increase collaboration and working together – including in more open competitive market places on both sides. In this way, they could help ease each other’s now very necessary transitions to the future. To give but two examples : Chinese actions to establish more transparent modern legal and intellectual property systems will both benefit independent Chinese private businesses, as well as improve their access to the latest global technologies – by reducing defensive approaches by licensors. Meanwhile, US government taking steps to ease Chinese foreign direct investment (FDI) into the USA – especially by independent Chinese private businesses – could help spur China’s transition to a fully fledged market economy.
Internationally, China and America between them represent half the global economy. Collaboration between them at some level is vital to address major issues ranging from climate change, energy policy, international trade, global health issues. Both nations stand to benefit from a more open international system based upon broad multi-lateral agreements with others.
Perhaps most of all, by managing their respective transitions – political, economic, social – in far-sighted, forward-looking ways, both the USA and China can best help each other and ensure global stability and peace. I, for one, very much hope that during last weekend’s meetings, Presidents Xi and Obama began to build such a relationship and that it will bear fruit in the years ahead.

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