Remarks to Le Cercle
Ladies and Gentlemen:
You have asked me to say a few words about China’s rise and its role in the post-American world. There is a lot of nonsense being voiced on this topic at present. It’s timely to address it. I played a minor part in the original opening of China to the West. Somewhat like Leonard Zelig or Forrest Gump in other contexts, over the course of fifty years as China returned to wealth and power, I was often on or in the scene. I am happy to share some impressions with you.
After serving in India, working to keep China out of the United Nations, and studying Chinese in Taiwan, I first visited the China mainland forty-six years ago. It was then in the final stages of its “cultural revolution” — a poor, isolated, vulnerable, and deeply troubled society. But it was also the heir of a great civilization, led by tough men of strategic vision. China had a considered Weltanschauung. Henry Kissinger felt intellectually at home when he discussed geopolitics with Mao Zedong, Zhou Enlai, Deng Xiaoping, or their associates.
Under Mao, China’s politics were notoriously erratic. There was a story going around then about three guys in a labor reform camp. One was very tall; one middle-sized; and one was really short. It took them about six months to screw up the courage to ask each other why they were there. The tall guy said, “I’m here because I opposed Deng Xiaoping.” The middle-sized guy said, “I’m here because I supported Deng Xiaoping.” The short guy said, “I am Deng Xiaoping.”
Deng Xiaoping was arguably the shortest leader and the greatest man of the last century. Forty years ago, he abruptly put the Chinese fourth of humanity through a phase change, replacing socialist sloth and Maoist uncertainty with rapid, reliable progress powered by eclectic borrowing of foreign ideas and practices. On December 16, 1978, he announced the normalization of China’s relations with the United States. Two days later, at a plenum of the Chinese Communist Party’s Central Committee,
• He repudiated ideological deductive reasoning in favor of inductive reasoning — urging Chinese to return to their second century A.D. philosophical tradition of 实事求是 — “seeking truth from facts;”
• He proclaimed the liberation of the Chinese mind — 解放思想 — to enable exploration of new and unorthodox — often foreign-inspired — ways of doing things;
• He relaxed ideology and pushed party controls aside to create a policy environment in which the Chinese people could let their entrepreneurial instincts rip — propounding a standard of “whatever works” under the slogan: “白猫黑猫只能抓耗子的就是好猫 — “black or white, if a cat can catch rats, it’s a good cat;”
• He encouraged studying ideas and practices abroad to accelerate China’s rejuvenation under the slogan: “以实践为真理的唯一标准” — “practice is the sole criterion of truth;”
• He fostered local and regional experimentation with new policies and programs under the slogan “cross the river by feeling the stones” — “摸着石头过河;” and, subsequently,
• He introduced checks and balances as well as age and term limits to prevent one-man rule and ensure that politics reflected a disciplined diversity of opinion.
These changes were bold. They were risky. As Deng himself pointed out, “when you throw open the windows, flies and other insects are bound to come in.” He was not deterred by this. He used China’s new relationship with the United States to erase most elements of the Soviet system other than Leninism in China. Deng did not see democracy as an effective means by which to return his country to wealth and power. Instead, he emulated and scaled up the authoritarian pattern of rapid economic development that had lifted Japan, south Korea, and Taiwan to prosperity years before.
The China that Deng fathered remains:
• Uninspired by the European Enlightenment and reliant on authoritarianism as the antidote to anarchy;
• Committed to leadership by a meritocratically composed, hierarchical political elite and unapologetically Leninist;
• Insistent that its citizens at least appear to conform their self-interest to national aspirations for the restoration of Chinese prestige; and
• Devoted to industrial policies that manipulate market forces to promote desirable investment and commercial transactions.
Deng and his successors made no secret of any of this. If some in the United States and elsewhere nevertheless imagined that China would Americanize itself, it is up to them to reveal the origins of their delusion. With the sole exception of the first year of the Clinton administration, the U.S. objective was to alter China’s external behavior, not its political culture. The success or failure of policies can be measured only by the extent to which they realize their objectives, not by extraneous ideological expectations or serendipity. The Clinton attempt to coerce changes in China’s political system by withholding trade favors is the only real policy failure of the past forty years.
Otherwise, U.S. policies were remorselessly realistic. The United States wanted to use China to contain the Soviet Union. It also wanted to curb the destabilizing effects of the Chinese revolution internationally. The United States achieved — indeed, overachieved — the changes it sought in China’s place in the world. Deng’s simultaneous normalization of relations with the United States and his inauguration of what he called “reform and opening” (“改革开放“) had profound effects.
• His decisions led to the immediate end of China’s strident pursuit of the revolutionary overthrow of the existing world order. (The catchy slogan, “countries want independence, nations want liberation, and people want revolution” was heard no more, and demands for a new world economic order duly disappeared from the Chinese phrasebook as well.)
• China prioritized the maintenance of a peaceful international environment conducive to its domestic economic and social development.
• Chinese threats to “liberate Taiwan” by force gave way to proposals for negotiated reunification.
• Deng and his successors integrated China into the post-World War II capitalist order, embracing market economics, and becoming major contributors to the Bretton Woods institutions.
• They abandoned policies of autarky, globalized the Chinese economy, and bet their country’s future on interdependence with the United States and Europe.
Throughout the 1980s, the United States and the West worked with Deng’s China to bring down the common enemy — the USSR. China’s military and intelligence role in this effort in the last decade of the Soviet Union is little known or discussed. Public debate then focused somewhat irrelevantly on whether the United States should sell arms to China. At that very moment, Washington was secretly buying billions of dollars of Chinese weaponry to counter the Soviet occupation of Afghanistan and to equip so-called “aggressor squadrons” that could train U.S. forces against real-world Soviet doctrine and equipment. While American scholars argued over how to categorize China ideologically, it facilitated American listening posts on its territory that provided unique insights into Soviet military research, development, capabilities, and deployments. Sino-American cooperation proved to be a tipping point toward the ultimate success of George Kennan’s grand strategy of “containment.” It is ironic that, while all but a few in the West never knew or have forgotten this, some in China now join Vladimir Putin in lamenting the Soviet collapse Sino-American cooperation helped engineer.
Meanwhile, China’s embrace of key elements of capitalism transformed it from an economic dead zone into — depending on how you measure it — either the world’s largest or second largest economy. China lifted more than 800 million of its own citizens out of extreme poverty, raised the standard of living of hundreds of millions more in neighboring countries, and created the world’s largest middle class. In recent years, China’s economy has been the greatest engine of world economic growth.
China’s exports to the United States, a majority from US-invested companies, have kept American consumer prices and inflation low. China has been America’s fastest growing foreign market. The Chinese government has been the largest foreign financier of the U.S. fiscal deficit. In 2016, Chinese enterprises invested more than $50 billion in the U.S. private sector. These investments have created more than 200,000 American jobs. If this is evidence of some sort of U.S. policy failure, what would success have looked like?
Much like the American founding fathers (and for the same stated reasons), China seems to regard allies as liabilities rather than assets. It has no entangling alliances. (U.S. policies are, however, pushing it into an anti-American entente with its traditional Russian adversary.) China has emerged as a staunch defender of the U.N. Charter, sovereignty, multilateralism, and transnational regulatory regimes like the World Trade Organization (WTO). Among the permanent members of the U.N. Security Council, China is the largest contributor to peacekeeping operations. Some of its practices are objectionable to other members of the international community, but then so are some of ours.
We in the United States and, more generally, in the West, wanted a strong, stable, and prosperous China that was a responsible stakeholder in the global order we created after World War II. Notwithstanding a mounting tendency to blame China for our current malaise, that’s more or less the China we now have. But let me briefly review the current American bill of particulars against China.
First, China’s trade with the world may be essentially in balance but it runs a huge bilateral trade surplus with the United States. To understand the importance of this to President Trump, you must suspend normal economic reasoning and think like a real estate investor and property manager. You own and operate a number of buildings. To you, as a manager, what matters most is the bilateral landlord-tenant relationship in each building. Each embodies a struggle for advantage between landlord and tenants. If more cash is being spent on the building than is coming back to the landlord, the tenants are getting more out of the relationship than he is. From President Trump’s perspective, China is raking in more cash from bilateral trade with the United States than the U.S. is getting from bilateral trade with China. Ergo, China is ripping America off.
As a corollary, from the point of view of a real estate investor, multilateral institutions are the moral equivalent of municipal governments or the Mafia, that is, political organizations that complicate the lives of landlords by imposing regulations, staging inspections, and levying fines. They are an unwelcome modern echo of the millennial Chinese curse: “may you come to the attention of persons in authority.” President Trump is trying to free America from the WTO and other external organizations and influences that restrict his international freedom of maneuver. At the same time, however, Americans resent the fact that our retreat from the funding and leadership of such bodies is willy-nilly drawing in Chinese money and the influence that comes with it.
Second, China has pilfered technology from American companies by both fair means and foul. In the view of some of Mr. Trump’s minions and many others, China must be punished for having done so. The outflow of American technology must be stopped to keep China from catching up to or passing the United States. Here, it helps to conceive of technology not as a process developed through international collaboration but as a native-born thing that can be locked up in a deepfreeze to preserve the capabilities it confers. I will briefly consider the implications of curbs on technology transfer when I address scenarios for the evolution of antagonism between the United States and China.
Third, for real estate moguls, life is a contest for prestige. China is big and growing faster than the United States. President Trump is out to keep America first. He’s determined — in his words — to “keep China from becoming bigger than us.” That fits the agenda of some of the militarists around him, who are worried about the loss of American primacy to China in the Indo-Pacific, on the Eurasian landmass, and globally.
Fourth, China has developed an alarming ability to carry out what the Pentagon calls “anti-access and area denial” operations in the approaches to its territory. In other words, it can now defend itself against foreign assaults from the sea of the sort it suffered over the past five centuries. This threatens America’s ability to dominate China militarily if need be. From our military’s perspective, it constitutes aggressive Chinese expansion into what — for the past seventy-three years — has been an exclusive U.S. sphere of influence. Once an American lake, the Western Pacific is now a contested space. Escalating tensions over Taiwan are a reminder that China’s civil war was suspended but not ended by U.S. intervention in 1950 and that China is the only nuclear power whose borders and territorial integrity the United States actively challenges.
Finally, as is always the case these days in Washington, there is a partisan political dimension to be considered. The Democrats are in a state of politically induced hysteria about Russia, which they accuse of having manipulated the American people into voting against Hillary Clinton and for Donald Trump. Not for the first time in history (remember the “who lost China” uproar?), the Republicans have found a political weapon against the Democrats in China, which — based on even less evidence — they accuse of equally appalling influence operations here.
All this is enough to have taken Vice President Mike Pence to the Hudson Institute (which is a rightwing belief tank that provides shelter to homeless Sinophobes). There he proclaimed the equivalent of a new Cold War with China. His speech — all of which was self-righteous and some of which was paranoid and delusional — made antagonism toward China the prerequisite for membership in Washington officialdom. Aspiring officeholders have taken note.
Deng Xiaoping’s decisions of forty years ago launched a world-altering phase change. The Pence Doctrine promises a comparable reorganization of global geopolitics. What does this portend? What scenarios may it entail?
The kickoff of the widening Sino-American split was Trump’s launch of his trade war. This seems to be proceeding in a now familiar way. Trump asks much, offers little, and gets nothing. But let’s assume he wins his war. What does winning look like?
To begin with, peeling back tariffs isn’t going to get the China market back for U.S. farmers or technology firms. Chinese are well along in shifting to more reliable producers of soybeans and other feed grains, cotton, hides and skins, pork, dairy products, wheat, and maize. They have also learned the hard way that supply chains that rely on US-originated technology can be subject to arbitrary and capricious interruption and that the United States wants to keep China down. So, the Chinese are redoubling efforts to become self-sufficient in microchips and other key technological inputs. They will do the same with other products subject to global oligopolies, like aircraft and pharmaceuticals. In time, they will succeed.
American exports of services to China — in which the United States has enjoyed a substantial and growing surplus — are almost certain to suffer as hostility between the two societies gels. As an example, tuition-paying Chinese students and high-spending Chinese tourists have begun to think about going elsewhere. Meanwhile, banning Chinese participation in cutting-edge scientific and technological research in the United States will deprive American universities, labs, and companies of access to what is rapidly becoming the largest population of scientific, technological, engineering, and mathematics talent on the planet. It’s less clear what the damage to China will be. By 2025, China is expected to have a STEM workforce larger than that in all of the members of the OECD combined. It’s not going to stop making progress. It will just do it without involving Americans.
Research is both iterative and collaborative. Chinese researchers are now inextricably connected to the world’s S&T establishment. Attempts to isolate them will alienate scientists in other countries and make them too less likely to carry out their research in an America from which their Chinese colleagues have been purged. Ostracism of Chinese intellectuals thus seems more likely to retard the advance of science and technology in the United States and boost it in China than to enable the U.S. to retain its lead in key fields. U.S. efforts to persuade other countries not to buy Chinese technology may have some effect, but many abroad can’t suppress a snicker when they hear the United States, which was caught out spying on its closest allies not so long ago, claiming that we’re defending them against China doing the same.
Calling out China will not cure American fiscal constipation or the defensively obstructionist American mentality that has sapped the dynamism and thinned the capital of the World Bank, regional development banks, the WTO, and other Bretton Woods legacy organizations. Blocked reforms and funding in these institutions have impelled the establishment of alternatives to them — like the Asian Infrastructure Investment Bank and the New Development Bank — in which the United States is represented only by an empty chair. It’s worth noting that the U.S. trade war with China coincides with Washington’s escalating use of dollar sovereignty to impose unilateral primary and secondary sanctions on Iran, Russia, north Korea, and their trading partners. This is an encouragement to other countries to work with China to end reliance on the dollar.
Determined hedging by the countries of the Indo-Pacific against both Chinese bumptiousness and American fickleness is already well underway. It seems destined to intensify. China is every nation’s biggest trading partner and largest current source of investment. No nation anywhere wants to choose between an erratic America and an overbearing China. But, whatever others may think about Sino-American military games of chicken in the South China Sea, these games will continue, raising the probability of an accident that tips into combat. Meanwhile, the Sino-American understandings and inhibitions that have prevented war over Taiwan show every sign that they will continue to fray and decline as generations ignorant or contemptuous of them come to power.
China’s defense modernization will progressively narrow, erase, or reverse the gap in U.S. and Chinese military capabilities. China already has a larger navy than the United States. It will get bigger and more capable still. We must hope that both countries remain mindful of the consequences of escalation to the nuclear level and develop systems of escalation control between them. It is depressing to note that none are currently in place.
If this is winning, what would not winning look like?
It won’t look like the Cold War, even though, as was the case in that contest, both sides will seek to avoid risking a hot war that could trigger a nuclear exchange. China may be obnoxious in some respects, but, unlike either the Soviet Union of the United States, it is not interested in exporting an ideology or engineering revolutions or regime change in other countries. China does not have satellite states or allies to defend. It is fully integrated into the global economy, not apart from it.
China is the world’s largest manufacturing power, has a huge, vigorous private sector, and is a major investor in other nations’ economies. Far from being excluded from multilateral organizations, China exercises growing leadership in most of them. China’s greatest strength is its economic prowess, not its armed forces. Its military expenditures remain low and its strategic forces sized and deployed to enable a second strike, not a first.
In the Cold War, the United States was protecting allies, partners, and friends from Soviet aggression and messianism. Their independence and their national and ideological identities as well as their strategic interests were at stake. China’s expectations of deference may offend but they do not raise concerns about conquest. U.S. security partners have no compelling reason to choose between China and the United States.
Europe is concerned about Chinese economic behavior but does not fear that China will erode its autonomy, corrupt its democracy, or menace it militarily. China is too smart to allow countries in the Middle East to overlay Sino-American quarrels on their own interminable conflicts. India will cooperate piecemeal against China but remains determined to chart its own course without allies. To one degree or another, East Asians, from Japan and Korea to Indonesia, are now actively hedging against both China’s rising power and America’s apparent dementia and unreliability. Even Australia, which has been alongside the United States in every previous war, has made it clear it wants to sit out any conflict between Washington and Beijing. Africa and Latin America are getting closer to China. Russia is on China’s side. If the United States is determined to keep China down in order to sustain our own hegemony, we will have few, if any, allies.
Let us “seek truth from facts.”
The Trump presidency has been a twenty-two-month-long festival of unintended consequences. There is still no administration worthy of the name in place. But what passes for one is actively trying to pull down the WTO and destroy the rule-bound economic order that previous generations of Americans, Europeans, and Japanese created. I hold no brief for Chinese behavior, but to accuse China of disordering the world is to indulge in a preposterous form of mirror-imaging.
China’s rise is indeed a major challenge to the existing constellations of power, but China is not trying to void the rules, do in the WTO, or practice anything resembling so-called “debt-trap diplomacy.” If U.S. cable television networks are more valued sources of information than our intelligence community, policy responses to challenges to national interests are likely to be not just ignorant but counterproductive. The repetition of falsehoods by talking heads does not transform them into facts.
For example, China is not the first developing country to cut corners with respect to intellectual property rights. This was a major issue between Europeans and Americans in the 19th century and between Americans, Japanese, and Taiwanese in the 20th. It was not a casus belli then, but a problem to be rectified through negotiation. It should not be a casus belli now.
Nothing — no supremacy — is forever. History does not repeat itself, but it echoes what came before. Americans, like Chinese, are entering a new era in which we must work together and with other powers to advance common interests. We cannot hope to resolve all our differences at once. We need time and a strategy to narrow them. Above all, we must be realistic about our own capacities and the challenges of an era in which no one is in charge.
Don Quixote charged windmills he thought were giants. The United States is now charging a fictitious dragon — the China of our fevered imagination, not the China that exists and is reacting. American great power chauvinism is encountering its Chinese Doppelgänger. No one is likely to fall in behind us as we try to undo China’s return to wealth and power. Attempting this is not wise. In the end, China and the United States need each other, and the world needs us to find an equilibrium in which we can cooperate. With wise counsel and leadership, we can prosper and keep the peace. But where is that leadership?