At the invitation of the National Committee on U.S.-China Relations (NCUSCR), WSCRC President Joe Borich led a discussion on U.S.-China relations at Winona (MN) State University October 29. The discussion was tied to the NCUSCR’s 6th Annual China Town Hall Meeting. Below is an excerpted version of Borich’s opening comments.
Are we in transition from the American century to the China century? What does the future hold for U.S.-China relations?
The 21st Century has certainly started out as though it will be China’s. Over the past 25 years (and the past ten or so, in particular) China has invested trillions of dollars in roads, rail, ports, airports, the power grid and telecommunications.
Taking China’s rail network as an example, Beijing is in the midst of a three-year, $300 billion expansion of its network, including more than 8,000 miles of new track specifically for its bullet trains capable of going over 250 mph. For expressways, China now has the second largest expressway network in the world. Work on its expressways continues apace and China will soon surpass the U.S. in total miles of high speed roads.
Or, take airports as an example. Construction of a second international airport with a capacity of 70 million passengers per year began in Beijing last year. Construction on or expansion of ten other airports also commenced within the past year. In telecommunications all of China’s cities are now linked by backbone fiber optic cable. There are more than 500 million people plugged in to the Internet and an even larger number with smart phones.
Similar examples of phenomenal growth can be found in all elements of China’s infrastructure.
The result of all this infrastructure investment for transportation and communications is having the cumulative effect of diminishing time and space within China and between China and the rest of the world. It is China’s new found, world class ability to connect people and businesses across time and space as much as anything that underpins its competitive advantage today – and will continue to do so tomorrow. Along with infrastructure China is also investing massively in education. It now can boast more college graduates per year than the U.S.
The above helps to illustrate the leap China is making from the 19th Century to the vanguard of the 21st Century. This transformation in barely a quarter century’s time is not only unprecedented in China’s history; there are arguably no precedents in global history. All of this activity is aimed at China’s stated goal of becoming a mid-level developed country sometime in the second half of this century.
Given the speed with which China is developing today, its goal might seem quite modest at first blush. Why should China not be a superpower on parity with the U.S. sometime in this century? The answer is that despite all the progress made so far China still must resolve some major obstacles and systemic weaknesses before it can reach even its own stated development goal. Let me focus on just four of them.
Obstacle number one is the absence of a social security safety net coupled with an overdependence on export driven growth.
In the old days of top down, command economy, China didn’t have much, but what was there was relatively equitably distributed. In today’s capitalist China, the various social safety nets that used to be in place – guaranteed affordable housing, free medical services and education and state sponsored retirement – have vanished.
China’s remarkable growth is not broad enough to give the average consumer a sense of long term financial security. Thus the paradox is that even as individual incomes have grown on average, so have individual savings accounts.
Personal savings in China have replaced the old state security net as a hedge against future medical, education and retirement needs.
This prudence, however, means that Chinese on average consume far less than per capita incomes would enable. This, in turn, means that in order to continue to grow its economy at a high rate, China must rely heavily on exports as a principal growth driver, rather than domestic consumption. The problem is that this strategy skews global trade and investment flows and creates significant political problems with its leading export markets like the U.S. and EU.
Even China’s top leaders now admit that export driven growth is no longer sustainable. But, in order to reposition China’s growth on a more sustainable footing, Beijing must strengthen China’s social safety net, including pension and healthcare system reform, to boost domestic consumer demand.
Obstacle number two: Beijing also faces a significant challenge to reduce official corruption and other economic crimes. The cost of corruption can be calculated not only in terms of lost economic opportunities, but also in social and political discord. The government conceded that in 2010 there were 180,000 incidents of unrest. Most of these were precipitated by local corruption, malfeasance and extra-legal expropriation of property.
The absence of competing political parties, an independent judiciary and an unrestrained media means that the ruling party must effectively police itself to root out corruption and official criminal behavior, something it has thus far generally failed to do with consistency.
To deal effectively with corruption and sustain confidence, the party and government must undertake the political reforms that have been largely ignored even as China opened up its economy – things like promotion of civil society, an independent judiciary and uncensored media – that will increase government transparency and accountability.
Obstacle number three: Beijing must also find effective answers to the need for more and cleaner energy and to address its environmental problems. China is already the world leader in energy consumption and greenhouse gas generation, and is adding power generation capacity at the rate of about one gigawatt per week (roughly the amount of energy needed to power the city of Seattle).
But, it’s not just about power generation and heavy industry. China now is also the world’s leading manufacturer of and market for automobiles, and its market share of global sales will continue to grow quickly.
Project ahead a decade or two when private car ownership rises from the current rate of under ten percent to somewhere between 30-40 percent of the population, a virtual certainty. What will the impact of another 400-500 million cars on China’s roads be on its own environment, as well as the biosphere generally?
Obstacle number four: the issue of China’s demographics and along with that the geographically uneven pattern of development.
Economic development has been more rapid in coastal provinces than in the interior, and approximately 250 million rural laborers and their dependents have relocated to coastal urban areas to find work. As many as 20 million more are migrating to the cities each year and this is likely to continue for another decade or more. China will thus have to expand its urban environment by the equivalent of the entire U.S. population before 2030.
Not only is China’s population moving, it is getting older. One demographic consequence of the "one child" policy is that China is now one of the most rapidly ageing countries in the world. Currently there are about 167 million people in China over 60; that number will grow to 248 million by 2020, and to 437 million by mid-century. If birth rates do not change substantially by then over one-third of China’s population will be over 60 and China’s population pyramid will resemble a top-heavy hour glass.
While these challenges are daunting, they are not necessarily insurmountable. There are solutions, but they will be difficult to implement. Considering the challenges China has already successfully faced in the past 30 years, one would be foolish not to bet that it will find ways over or around the ones it is now facing.
On re-positioning the economy, for example, the central government is undertaking measures to raise the income floor for peasants and the lowest paid workers while increasing affordable housing, health care and education. And, most of China’s larger cities now have retirement plans in place funded by contributions from municipal governments, employees and their employers.
Official corruption will be tougher to deal with, but the leadership changeover that will begin in November this year offers China’s new leaders an opportunity to begin implementing the reforms I mentioned above.
On energy, China is quickly assuming a global leadership role in developing and deploying clean energy technologies and in obtaining energy from sources other than fossil fuels. By 2020 about 15 percent of China’s energy will come from non fossil fuel sources, according to the current Five Year Plan.
The single most difficult obstacle China faces may be the ageing of its population. It is unlikely that the distorted population pyramid China is creating can be significantly altered over the next 30 years, no matter what policies and incentives are applied. China’s best bet here is to increase its economic productivity and efficiency enough to offset the declining proportion of its population in their productive years. In other words, China must get rich before it gets old.
Re-centering our Foreign Policy
The administration has continued the engagement policy generally practiced by President Obama’s predecessors since Nixon visited China in 1972. Moreover, this administration has gradually re-centered U.S. foreign policy away from Europe and the conflicts of the Middle East and South Asia, and more toward East Asia and the Pacific.
Within the Obama administration’s policy of engagement is a search for a long term modus vivendi between the U.S. and rising China. Initially, this took the form of attempting to re-establish a military-to-military dialog between the two countries. As has been demonstrated a number of times in recent history such as the mid-air collision between U.S. and Chinese air force planes in 2001, mil-to-mil contact and transparency is essential given the risk of an accidental confrontation that could quickly spin beyond containment.
While our interests and China’s overlap in many areas, significant differences remain.
With regard to the Korean Peninsula, for example, Washington and Beijing are perfectly aligned in their desire to limit North Korea’s ability to develop and deploy a nuclear arsenal. At the same time, North Korea is perched on China’s border, a fact that has constrained Beijing’s responses to Pyongyang’s development of nuclear weapons as well as its acts of outright aggression against South Korea in 2010 with the torpedoing of a South Korean naval vessel and shelling of a South Korean island.
Similarly China has given less than enthusiastic support to the West’s imposition of sanctions against Iran’s nascent nuclear program. This is in part due to Beijing’s historic reluctance to engage in sanctions generally, in part due again to the proximity of Iran to China’s borders, and especially because Iran holds huge reserves of oil and gas sought by China.
Another and more recent foreign policy challenge by China is Beijing’s apparent and curious shift starting in 2010 from its traditional “soft diplomacy” approach in relations with its neighbors to a much more assertive stance. It is not altogether clear that support for the shift was broad and deep within China’s leadership.
Nevertheless, Beijing on several occasions during and since 2010 stridently proclaimed an expansion of its territorial waters off its east coast, which has led to intermittent confrontation between China and Japan. It also revived an old claim to virtually the entirety of the South China Sea, a claim vigorously challenged by various SE Asian countries.
For the U.S., Beijing’s more assertive stance on its boundary waters posed a clear challenge to U.S. naval and commercial shipping operations with South Korea and Japan, as well as transits from the Indian Ocean to the Pacific through the South China Sea. Indeed, the Obama administration made clear that China’s expanded claims notwithstanding, it would continue to uphold traditional freedom of passage rules in the Yellow, East and South China Seas for itself and other nations.
Perhaps it has been China’s more assertive foreign policy that precipitated Obama’s interest in re-pivoting America’s foreign and security policies over the past year. The full dimensions of this pivot were enunciated in a speech by the president to the Australian Parliament in late 2011.
While his speech sounded a tough security posture generally, Obama was also clear that among America’s top foreign policy priorities is to continue to build a cooperative relationship with China. (Quote) All of our nations -- Australia, the United States -- all of our nations have a profound interest in the rise of a peaceful and prosperous China. That's why the United States welcomes it. (Unquote)
This is certainly a long overdue and welcome clarification of our strategic interests ten years on into the U.S.’ proclaimed global war on terror. While the goal of combating terror and the aims of terrorists must continue to be pursued, the issue has always been the means by which we do this and not the end itself.
By redirecting U.S. strategic priorities to those that encompass a far broader range of American interests, Obama has signaled that a policy based primarily on the blunt use of military force will not defeat terrorism and terrorists, even as it has denied us the opportunity to advance further other U.S. interests that require a more nuanced approach.
Beijing may choose to see this pivot of U.S. strategic priorities as directed against itself. I doubt that it is; as Obama noted there is every reason for the U.S. and the rest of the world to encourage China’s development and emergence as a major player on the global stage and much for the world to gain from China’s cooperation on issues like North Korea, climate change and stabilization of global finances.
Still, there remains the suggestion, at least, in Obama’s remarks in Australia that the U.S. would not stand idly by if China were to attempt to redefine unilaterally the international order as it is presently constructed (heavily influenced by the U.S.), or impede commerce and the freedom of navigation in the region.
Looking ahead: U.S.-China cooperation, competition, or conflict?
China is a rising power that is not going away and we will need to adapt to China and its changing circumstances. How best to do this?
Although our ability to force China into systemic change is long gone (if it ever existed), we still have a limited capacity to influence to some extent the direction that China will take. Our best cards to play are the indisputable success that a market economy, an open political system and the free exchange of ideas have created here.
To the extent that China may be willing to borrow more from our example, it may help overcome some of its own systemic weaknesses on one hand, while enabling a wider range of convergent interests with the U.S. on the other. For this approach to work, though, we must continue to maintain our “edge,” or there will be no reason for China to take our example seriously.
And this, I believe, is where we are most vulnerable. I am increasingly uncomfortable with the direction (or, perhaps, lack of direction) the U.S. is manifesting, and with the emerging parallels between United States today and China of the Ming and Qing Dynasties several centuries ago. By the early 1400s China was the world’s only superpower. As recently as 1800, China still accounted for nearly 1/3 of global GDP. But during those 400 years, China turned inward and rested on its glory while the rest of the world advanced.
Much of what China is doing today is flawed and the flaws will constrain to some extent its prospects for further growth and development. But there is also much China is doing that is right. Beijing’s policies promote infrastructure development and the growth of educational and research institutions. If someday China overcomes its systemic weaknesses, it will have in place all the material building blocks needed to reach its goals and go well beyond.
We, on the other hand, are consuming our treasury and lives in a global war on terror while our infrastructure crumbles and our education and research institutions languish through lack of investment and policy priorities. We have surrendered civil discourse and a sense of commonwealth for winner-take-all politics and a me-first attitude. We still want to be the best, but we are no longer willing to pay for it.
Where are the bipartisan political leadership and a common willingness to share sacrifice that won WWII, produced our interstate highway system in the 1950s and won the space race in the 1960s?
As I see it, the fundamental issue is not whether we can somehow stop or slow China’s advance; rather, it is whether the U.S. will simply cede its advantaged position through lack of political will and effective policies here at home as the Ming and Qing Dynasties did in China at an earlier time. The question we should ponder is when/if China reaches its goals, will we even be in the game? The outcome of this issue is completely – and only – ours to control.
How we manage this challenge and our relations with China today may well determine whether historians someday describe the 21st Century as one of peace and prosperity, or one of conflict and suffering.