Idle factories, moored container ships, widespread bankruptcies, massive migration back to the hinterlands, strangely clean air—the signs of depression are everywhere in China. Because it makes so many of the goods the world isn't buying now, China stands to be worse hit than the rest of the world —just as America was during the Depression, when it was the world's sweatshop. But like America then, China will use tough times to design innovative products that will get it the high profits and the high-value jobs Americans kept to themselves for decades. And that is very bad news for the United States, unless it uses tough times to reinvent itself, too....Outsiders can rightly criticize the Chinese government if it tries to sneak in new export subsidies or push the RMB's value back down. But no one can criticize its ambition to increase the rewards for its people's work. Many Chinese companies will fail or make mistakes under today's intense pressure. But many are using the moment to prepare for their next advance. The question for Americans to think about is how we are using the same moment.
---"Interesting Times," by James Fallows, The Atlantic (April 2009)
A very good article. This Atlantic cover piece provides a broad, realistic perspective on China's struggle with this deep, global recession: suffering the deepest unemployment impact, protecting its sizable, favorable trade balance, and using this time of national stress and international weakness as an opportunity to strengthen its relative economic place and role in the world. James Fallows, a long-time China observer, visitor, and correspondent for The Atlantic, brings his substantial experience and understanding of China to this matter-of-fact treatment of China's unique challenges and opportunities.
A recent Washington Post article, "China Uses Global Crisis to Assert Its Influence," looks from the outside at China's emboldened international posture. Rather than defensively drawing within itself during this time of extraordinary economic challenge, it is now openly and confidently exercising a critical voice on issues of self-interest, and increasingly, opportunisticly claiming a place of financial leadership in a struggling world. From the Post article:
Overseas aid and loans are just one way China is asserting itself in its new role as a world financial leader. While polishing China's own image, Premier Wen Jiabao and other top leaders have blamed the West for the global economic crisis. Chinese officials increasingly are challenging the primacy of the dollar, warning other countries about the danger of keeping reserves in just one or two currencies, such as dollars and euros. And as the global economic crisis has eroded faith in U.S.-style capitalism, there's growing talk that a new "Beijing Consensus" will replace the long-dominant Washington Consensus on how developing countries should manage their economies.
The current edition of Foreign Affairs also leads with two interesting opinion pieces written under the heading, "The China Challenge." The first is "The G-2 Mirage: Why the United States and China Are Not Ready to Upgrade Ties," by Elizabeth Economy and Adam Segal. It argues that the opportunities for a stronger China-US bilateral relationship are limited by their different circumstantial interests and dictates, and that only inviting broader multilateral relationships can move China and the US forward together. From the article:
Calling on the United States and China to do more together has an undeniable logic. Both Washington and Beijing are destined to fail if they attempt to confront the world's problems alone, and the current bilateral relationship is not getting the job done. Real coordination on trade and currency reform remains stunted, both sides lag behind the rest of the world in addressing climate change, and meaningful partnership on global challenges -- from food safety to nuclear proliferation -- is limited.But elevating the bilateral relationship is not the solution. It will raise expectations for a level of partnership that cannot be met and exacerbate the very real differences that still exist between Washington and Beijing. The current lack of U.S.-Chinese cooperation does not stem from a failure on Washington's part to recognize how much China matters, nor is it the result of leaders ignoring the bilateral relationship. It derives from mismatched interests, values, and capabilities.
The United States must accordingly resist the temptation to initiate a high-profile, high-stakes bilateral dialogue and instead embrace a far more flexible, multilateral approach to China. In other words, Obama should continue to work with China in order to address global problems, but he also needs to enlist the world to deal with the problems created by the rise of China.
The second Foreign Affairs piece is, "Deng Undone: The Cost of Halting Market Reform in China," by Derek Scissors. It takes a different tack. Staying with a bilateral model, Scissors argues for dialing back the unworkable scope of the US agenda for further reforming China's market economy, and focusing on a few important issues and pressing them aggressively. From Mr. Scissors:
The Chinese Communist Party no longer sees the pursuit of further genuine market-oriented reform as being in its interest. The burst of growth that the economy exhibited after the initial state-directed stimulus convinced the CCP that true liberalization is now unnecessary as well as sometimes painful. Whatever the objectives of the Obama administration, it must realize that it will be difficult to change Beijing's views quickly. True broad-based market-oriented reform in China should remain a long-term goal of U.S. economic policy. But for now, the Obama administration would do better to focus its economic diplomacy on evaluating and responding to the Chinese government's strategy of aggressively promoting state-led growth. It should not presume that Beijing will return to market reform anytime soon.
The U.S. government cannot afford to get this wrong. Because of the increasing pressure of the global economic crisis, some have called for a policy of partial disengagement. But the U.S.-Chinese relationship is the most important bilateral economic relationship in the world....Even incremental improvement in a relationship of this magnitude would have a large economic payoff, all the more so given the recent collapse of the global financial system.
And so he must engage China--only he [Obama] must do so while reorienting U.S.-Chinese trade policy in light of Beijing's lack of interest in discussing issues such as its subsidization of state enterprises and its apparent decision to halt market-oriented reform. Washington should encourage the Chinese to focus on a narrow range of feasible measures. Energy, the environment, and bilateral investment are fine topics for bilateral negotiations, but the agenda should be restructured to emphasize a series of meaningful reforms designed to, for example, liberalize prices, curb state dominance in corporations, shield U.S. companies from mercantilist measures, and allow money to move freely in and out of China.
So, despite their suffering at this time, China continues to assert itself, plan its continuing growth, and reach for international leadership. The Atlantic's Fallows dispassionately provides the more clear-eyed view of China, as it is, and where it is likely headed. While the Foreign Affairs article by Scissors acknowledges US failure to influence further market reforms in China, it presumes that market reform should continue to be our principal goal, and that we should pursue it aggressively. Although, he counsels, any near-term success will require paring significantly our economic reform agenda.
Understandably, but unrealistically, Scissors appears to presume that it is China's place to be more accomodating of US interests, geopolitically and economicly. After all, shouldn't China understand that that is the order of things? He does not appear moved by the reality that China understands full well where it's economic policy interests lie, and what the changes or reforms advocated by the US will mean for them, plus and minus, now and later. China's leadership is very astute about such things. And they do take the long view: politically, geopolitically and economically--and that means decades, not just the next economic or business cycle.
China will proceed in advancing their markets, businesses and higher-value employment, but only as fast and as far as it serves the evolving interest and preserves the advantage of China and its people--as they see it. More respect, patience and resilience might serve the US better at this point, more balanced realpolitik. Economy's and Segal's multilateral approach to working with China reflects the wisdom of practical reality. Only a multilateral approach will likely be effective with many issues; although, we will necessarily have to work some mutual issues on a bilateral basis. And that real-world approach would also encorporate Scissors' practical observation about a short list of issues for economic diplomacy.
But, whatever our agenda and tactics, we must approach those issues with Fallows' respect for China as it is today: their abundant strengths, considerable needs, their ascendant future--and their soverign sense of destiny in plotting their future in accordance with their view of their best interests. And then there's Fallow's question: is the US using this period of both weakness and opportunity to prepare and strengthen us for a changing international economy and geopolitical landscape, and our role in it? Embracing significant change will be, must be, our future, too.
http://www.theatlantic.com/doc/200904/chinese-innovation
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/22/AR2009042203823.html
http://www.foreignaffairs.com/articles/64946/elizabeth-c-economy-and-adam-segal/the-g-2-mirage
http://www.foreignaffairs.com/articles/64947/derek-scissors/deng-undone
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