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Thoughts on China as a global partner or strategic rival of the U.S.

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Thoughts on China as a global partner or strategic rival of the U.S. China is both a partner and a rival depending on the venue and issue. Both the U.S. and China have benefited from their economic interactions via trade and investment–probably China has benefited more simply because they were basically closed when they started this process.
There is truth in all of these statements, but taken out of context can be misleading. There is no question that China has done well with its economic transition and development, which is what the U.S. and much of the world was hoping. There is no reason why every country cannot do better for its citizens. The puzzle is why so many are failing at this. Kudos to China’s leaders for the political will and good policies to achieve the success that they have.

When a country with a large population such as China’s joins the world economy, the effects are going to be more significant than with a small country. Some of the hyperbole in the statements stem from this characteristic. For example, of course China needs a lot of resources, and once they obtained the money to acquire more, they started to shop. And they can produce a lot of exports, so when they begin to trade it will cause dislocations elsewhere, as happens when any country trades. (Remember, trade is a two way street—companies in a country can only sell abroad if they find willing customers. But they also consume a lot of stuff at home. And they have welcomed many companies to invest in China, which has been profitable for those companies.

One idea to consider is that the reason the U.S . and other countries are very involved with China today is due to historical accident. China’s leaders began to reform at the moment that East Asian economies were looking for cheaper land and labor to help their manufacturing stay competitive. If China had remained closed, these companies might have gone to Indonesia, or India, or elsewhere. The benefits of the “neighborhood” effects for China as a result of being available for East Asian development were an amazing piece of luck for China. India missed this boat and will take a lot longer to catch up as a result. Once the East Asian companies began to produce in China, it set into motion a cluster effect so that now the supply chain is very sophisticated, especiallyin southern China, and the costs are low.

Meanwhile China’s opening is a process that cannot be complete immediately. For example, even though China is a member of the WTO, implementing and enforcing all the aspects of the agreement is currently beyond the capabilities of the various pieces of the central government, but it is a work in progress. This frustrates foreign companies and sometimes makes it look like China does not want to play by the rules. And in fact, some in China may not want to play by the rules. So there is also a domestic interest factor that is working to determine how things stand as well. Intellectual property rights protection is a good example. While China has on the books some very good laws, enforcement will be difficult until there is pressure from enough Chinese domestic companies to also have IPR protection.

Another example is the safety of products produced in China. The establishment of institutions that can check for safety and enforce laws is underway but far from complete–as in the U.S. probably up until the 1970s. So safety is an issue for Chinese exports to the U.S. and elsewhere, but it is also an even bigger issue for the citizens of China. They are subject to unsafe products all the time, and are beginning to exert pressure to have this fixed.

In terms of international relations and national defense, China acts no differently than other countries that behave to protect and promote their interests. The bigger question implied by some of the statements in the CNN.com piece is whether there is some sinister long term plan to become the most powerful country in the world and then make decisions that hurt the U.S. and others. A couple of thoughts here: 1) Since participating in the global economy with good relations with the U.S. and most other countries has served China well, why would they want to throw that away? 2) Again, there will be groups within China that have different interests. If the military (or some part of the military) feels that they need China to dominate for them to be powerful, they may push for this. However, there are many other interests that would counter them. 3) On certain issues such as Taiwan, we understand quite well there would be a meeting of the minds within China if Taiwan declared independence, with most of China opposing it even at great cost. 4) Given thoughts 1-3, we should take precautions with China just as we do with most countries, stay informed, stay ahead technologically, but keep the communication open and build trust with mutually beneficial cooperation to minimize antagonism and misunderstanding.

Finally, with respect to the points in #15, China is certainly a one-party political system but there is much more personal freedom now than under Mao’s leadership. I believe most political scientists would not say China is a totalitarian state. In addition, the party is very aware of its fragility, and often overreacts to contain stability “just in case.” They are trying to figure out how to allow–actually promote–economic and personal freedom but keep their political power. Although China has done very well in terms of growth, it faces very serious problems in many areas (e.g, environment, education, job creation, transitioning the rural population to urban jobs and lifestyles). The scale and diversity of the country, and the complexities of the problems given the former system, mean that there are no obvious solutions.

In conclusion, I and my colleagues worry more about rogue elements getting access to nuclear weapons than China taking over the world. Nonetheless, we spend a lot of time thinking about China, as it will be one of, if not the, most important new player in the decades to come.

The article referred to in this commentary is “Is China a global partner or strategic rival of U.S.?” By Tom Evans, CNN, November 3, 2009 2:38 p.m. EST;

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