Sharing Power With China (and Others): An Unaccustomed Relationship

Beijing is challenging the world's economic and financial order. Americans had better get used to it....

The Chinese government has not been sitting idly by while the Obama administration has gotten into gear. Put another way, there has been chaos under heaven, and Beijing's situation is excellent. Over the past two months, Beijing has made a series of moves that could be interpreted as a challenge to the American-led economic and financial order. In March, Prime Minister Wen Jiabao explicitly voiced concerns about the direction of U.S. fiscal policy at his annual press conference. Later in March, China's central bank governor, Zhou Xiaochuan, argued that the costs of relying on the dollar as the world's reserve currency now exceeded its benefits....

--"Fearing China," by Daniel Dresner, Newsweek

A variation on a theme stressed here before: the American public must get past it's last-century, nationalistic misperceptions of its place in an evolving, "flattening" world--and especially with regard to China. And our leaders, who should understand this quite well, must act wisely and collaboratively in our new and evolving international relationships. It's not just that the Chinese are on such a steep ascendancy, or that the place of India, other Asian countries and the EC are also more prominent, but also that the self-inflicted damage to our financial system, economy, international standing, and our vulnerable creditor status, have so weakened us that there is no other wise and workable strategy available to us.

Chrysler's and General Motors' self-inflicted failures offers another example of changing industrial leadership--and another example of China opportunistically advancing its leadership ambitions during this time of international economic weakness. An article in the Washington Post (5.18.09), "As Detroit Crumbles, China Emerges as Auto Epicenter," makes the point:

The global auto industry is restructuring. Italy's Fiat is on the verge of taking control of Chrysler. Last year India's Tata Motors, already famous for its $2,000 Nano, acquired Jaguar and Land Rover.

And China's auto sector has emerged as a threat to the long-standing pecking order. Earlier this year, Geely Automobile, one of China's largest private carmakers, purchased an Australian drivetrain transmission supplier, a leading gearbox manufacturer. Weichai Power, one of China's top diesel engine manufacturers, acquired a French diesel engine producer. Another Chinese company, BYD, which counts Warren E. Buffett as an investor, launched a mass-market plug-in electric car, ahead of GM's anticipated Chevrolet Volt.

Detroit's annual auto show in January was somber, but Shanghai's show dazzled attendees with throngs of models, rock bands and light shows. This year, Nissan skipped Detroit and attended the Chinese event in April. Mercedes-Benz, BMW and Porsche all unveiled new-vehicle models in Shanghai.

"The center of gravity is moving eastward," Dieter Zetsche, chairman of Daimler, told reporters at the show.

This is just one example of China's evolving industrial leadership ambitions. And as we discussed in an earlier post, they are also moving confidently toward a greater financial leadership role in the world--and critically initiating a dialogue that calls into question the appropriateness of the U.S. dollar as the world's currency of choice. (See my post, China's Way Forward, the US Response, 4.26.09, Hyde Park's Corner.)

The challenge for the U.S., however, is not to overreact, but to find a balanced view of how threatening these changes actually are to the U.S., and to fashion a balanced, constructive response to it. And there is also the challenge of preparing the American people for these inevitable industrial and financial restructurings, and that new role of constructive, shared power in an evolving 21st-century world economic and geopolitical reality.

The Newsweek article by Dresner provides reasons why most of these changes should not be viewed as a threat to American prosperity, but only if we assume that shared leadership role. And there's the rub. The greater concern, posits the article, is that America is unaccustomed to a role of shared leadership, and unprepared to carry it out successfully, even if that is our stated strategy and clear intention. From the article:

If these moves do not amount to much, then why all the hubbub? To be blunt, America is out of practice at dealing with an independent source of national power. For two decades the United States has been the undisputed global hegemon. For the 40 years before that, America was the leader of the free world. As a result, American thinkers and policymakers have become accustomed to having all policy decisions of consequence go through Washington. Our current generation of leaders and thinkers are simply unprepared for the idea of other countries taking the lead in matters of the global economic order.

Dresner concludes by summarizing his conclusions on each point:

Most of China's recent actions do not constitute a real threat to the United States; indeed, to the extent that China helps to boost the economies of the Pacific Rim, they are contributing a public good. Obama—and Hunstman—need to make the mental adjustment to a rising China, welcoming many of China's policy initiatives while pushing back at those that threaten American core interests. If they can make this cognitive leap, then Sino-American relations can proceed on the basis of shared interests rather than mutual fears.

And they have to prepare the American people to make the same mental adjustment, the same cognitive leap, don't they?

http://www.newsweek.com/id/198586
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/17/AR2009051702269.html