China Versus America
Prospect Magazine, March 2010
Edited by Andy Ross
Chinese officials argue that their country's resilience in the face of
America's meltdown has vindicated Chinese state capitalism. China has
embarked on a process of economic and political decoupling from the west.
But there is still considerable mutual dependence between the United States
American policymakers must ensure that U.S. power remains
indispensable to China's rise. This will not be a popular undertaking in
Washington. Americans will be asking why a country with 10 percent
unemployment can't persuade a country with 10 percent growth to respect
trade rules and play a responsible role on the global stage.
collapse of European communism taught China's leadership that to hold onto
power, it must succeed where other socialist states had failed by offering
people a rising standard of living. Building China's economy meant
establishing the country as an export powerhouse.
destruction that comes with decades of double-digit growth has created big
problems inside China: disparities of wealth between coastal cities and the
rest of the country, serious environmental damage, and social unrest. The
Communist party is using markets to create wealth that can be directed as
officials see fit. The motive is to maximize the state's control of
development and the leadership's chance of survival.
ambitions have provoked a sharp response from high-tech companies in the
United States and Europe. They charge that China's policy of favoring
products made with domestically created intellectual property proves that
Beijing is no longer even pretending to observe international intellectual
property rules. The predicaments of Boeing and Google illustrate how the
U.S. and Chinese brands of capitalism are pushing Washington and Beijing
China will not mount a military challenge to the
United States any time soon. A cold war-type conflict is much more likely to
develop over issues of economic security than military confrontation.
Charges of Chinese corporate espionage will complicate the efforts of
Chinese companies to invest in the United States. And western companies will
find themselves competing for natural resources across the developing world
with Chinese state-owned companies.
America's cold war experience
offers a useful strategy. The stalemate imposed by mutually assured
destruction created a sense of stability. Today, the United States and China
are locked in a new form of mutually assured economic destruction. America
still needs China to help finance its debt. China needs access to U.S.
consumers to keep unemployment in check and for continuing foreign
Over the next several years, hard power will ensure that
the United States remains indispensable for global political and economic
stability. The United States now spends more on its military capacity than
all potential competitors combined. It outspends China by about eight to
AR I see the need for a
tripartite world order: China, the United States, and the European Union. Then
we shall have the follow-the-sun coverage we need for seamless
America and China in 2020
World Affairs, July/August 2010
Edited by Andy Ross
Increasingly, the United States and China are in a zero-sum competition for
resources and wealth.
There is still considerable mutual dependence
in U.S.-Chinese relations. The financial crisis of the past twenty months
has produced significant aftershocks in China. The risk of an intensifying
cycle of recrimination is increasing. To manage this risk, U.S. policymakers
should find every available means over the next decade to ensure that
American economic and military power remains indispensable to China's rise.
China's commitment to foreign trade and investment has generated an
astounding three decades of double-digit growth. Western firms are now
banking on the promise of steady long-term profits as China develops what is
expected to become the largest middle class in history.
Yet over the
past several years, China's leadership has also been forced to embrace the
natural volatility and often toxic side effects that come with decades of
hypertrophied growth in a developing country. Rapid industrialization has
done enormous environmental damage, displaced huge numbers of people, and
widened wealth gaps between coastal cities and the interior.
leadership has invented state capitalism with Chinese characteristics.
China's finance ministry has reported that state companies produced $3.3
trillion in sales in 2009, about 70 percent of the country's GDP. China's
political leaders are using markets to create wealth that can be used to
maximize state control of the next phase of development.
need for foreign investment wanes, so will the influence of foreign
companies. Chinese companies are already using their new leverage within the
political bureaucracy to win advantages and protections that force their
competitors onto a less-than-level playing field.
A growing number of
U.S. companies have begun to complain about the Chinese government's plan to
support homegrown intellectual property. Beyond claims of espionage,
high-tech firms in the United States and Europe now charge that China's
policy of favoring products made with domestically created intellectual
property in government procurement proves that Beijing has lost interest in
even pretending that it will observe international intellectual property
A perceived shift in the balance of power within U.S.-Chinese
relations are pushing Washington and Beijing toward conflict. The Chinese
leadership has made it clear that its primary goal is to create new jobs and
to ensure steady and predictable economic growth. Beijing has every
incentive to resist any commitment that distracts from that ongoing project
or exposes China to unnecessary risk.
Washington is wise to continue
to seek closer economic integration with China and to try to work toward
eventual realization of a G-2 model of cooperation. Between now and 2020,
U.S. policymakers should do everything possible to cultivate mutually
assured economic destruction.
The U.S. government should also invest
in its hard power. Soft power played a crucial role in helping America
outlast the Soviet Union, and it will continue to help extend U.S. political
and cultural influence. But hard power can ensure that the United States
remains internationally indispensable for political and economic stability.
China will one day possess a much more substantial military capacity
than it has today, and China will expand its political, economic, and
cultural influence. But China has no reason to gamble its economic future
and political stability by challenging U.S. hard power outside of Asia.
There will be more battles like those with Google and Boeing as Beijing
responds to threats from Washington by limiting the access of U.S. firms to
Chinese markets. China and other governments that embrace state capitalism
will increasingly direct trade flows toward one another, sharply lowering
the trajectory of economic growth in the West.
By 2020, America and
China will have more than ever to gain from closer ties.