China vs. America And The New World Order

Dec 1st, 2018 | By | Category: Featured Issues, Politics & Current Events

The world order put together by the United States after World War II is unraveling.  In the Middle East, nation states are disappearing, replaced by ancient tribalism and clan loyalties rooted deep in the region’s history.  The benefits of open borders with lower tariffs and growing international trade are being challenged by a narrow nationalism, a dangerous isolationism and a short-sighted introversion.  All aspects of the old order (e.g., the World Bank, the International Monetary Fund, NATO and the European Union) are under siege with little or no public trust in that order.  Because this old order was built on globalization, free trade and a commitment to democracy, the democracy part of the foundation is producing an unexpected tension between the leaders of the world and those being led.  Upheaval, chaos, disorder and dysfunction now characterize our world.  There is no better evidence of this unraveling than the relationship between China and the United States.  Over the last two decades, the US followed a policy of engagement with China.  But that era is over and has been replaced with an intense rivalry between these two superpowers of the 21st century.  As the New York Times has reported, China is the newest superpower, “a rival challenging American interests.  Western economists said China’s mix of state control and free enterprise was unworkable.  They were wrong.  Playing by its own rules, China now leads the world in homeowners, college graduates and, by some counts, billionaires.  It has become a global lender, flexing its muscles in Asia and beyond as it builds dams, power plants and ports, though growing debt and a trade war with Washington may yet derail it . . .  China’s citizens enjoy prosperity but have not won the political freedoms that were supposed to come with it.  An unspoken pact has prevailed:  A good life is possible for anyone—but don’t make waves.”   What has happened in China?  How could all major think tanks and foreign policy experts get it so wrong?  Why did America’s policy toward China fail so miserably?

When the People’s Republic of China was founded on 1 October 1949, the US viewed China as an enemy similar to the communist state of the USSR.  As with the Soviet Union, the US followed a policy of containment, preventing the spread of communism, but accepting it in these two nations.  This policy of containment explains the founding of NATO, the Berlin Airlift, the Korean War and the Viet Nam War.  But, following the counsel of Henry Kissinger in the 1970s, President Nixon opened the door to Mao’s China with an astonishing visit to Beijing and then President Jimmy Carter officially recognized Communist China in 1979.  With the death of Mao, China began to slowly change its economy from a rigid state-controlled economy to a form of state capitalism, where the Chinese state controlled basic units of the economy but permitted a degree of private ownership and limited capitalism.  In the 1980s and into the 1990s, China and the US began a trading relationship that tied the two economies together.  Over time, the two economies became inextricably linked.  By the early 21st century, America helped China become a member of the World Trade Organization (WTO).  Thus, China was allowed in as a “developing nation,” subject to very low tariffs on its exports to the US, but permitted to protect its own rising industries from US and European competition.  The assumption of the US was that, as China’s economy grew, China would quickly cut its tariffs—like its 25% tax on car imports, compared with the 2.5% tariff imposed by the US.  But the WTO still has not completed a new trade round and China has refused to voluntarily lower its tariffs.  In addition, China developed an industrial policy that bent WTO rules.  Furthermore, as Tom Friedman reports, “The [Chinese] government gave away cheap land, and state-guided banks granted cheap loans for new industries, but foreign companies that wanted access to China’s market were forced to pay to play—to have a Chinese partner and be willing to transfer their advanced technology to them.  As a result, over time, Beijing was able to force multinationals to shift more and more of their supply chains to China, and grow Chinese competitors to Western companies in its protected market, and then, once they were big enough, unleash them on the world as giants.”  As long as American and European companies were making money, they tolerated this arrangement.  But in 2015, China announced its long-term vision:  “Made in China 2025,” a plan to dominate 10 next-generation industries, including robotics, self-driving cars, electric vehicles, artificial intelligence, biotech and aerospace.    This vision changed the West’s perception of China; it was now time to make China play by the same rules!

China’s perception of the West changed with the global financial crisis that set off the Great Recession in 2008, which narrowed America’s economic lead over China.  After the collapse of the export markets during this crisis, over 20 million Chinese were out of work in just a few months, and the government responded with a massive stimulus, rolling out high-speed rail, motorways, sewage-treatment plants, housing projects and more.  Thus, Chinese GDP bounced back but America’s growth remained well below par for years, validating for the Chinese their economic and financial model.  Furthermore, the leadership of Xi Jinping, which really was consolidated in 2012, began what Chinese officials call “the new era.”  Among many other things, President XI sought to entrench the state’s leading role in the post-crisis economy.  He stifled dissent and tightened the authoritarian screws.  He launched the Belt and Road Initiative, which seeks to construct a massive infrastructure network of roads, ports and airports connecting China with the West.  Xi further spoke of the “reform of the global governance system,” signaling quite clearly that China would no longer embrace the American-led global order; it would challenge it!  This challenge has produced several verifiable actions on the part of Xi’s China:

  1. China has one of the most sophisticated cyber networks in the world, much of which is designed to steal strategic plans and information from major worldwide companies. As The Economist reports, China is now the most prolific source of nation-state attacks on American computer networks. There have been China-based hackers attacking firms in biotech, aerospace, mining, pharmaceuticals, professional services and transport.  The result is that China is the world’s leading stealer of intellectual property, doing so with near impunity.
  2. China is now the major competitor of the US on the high seas. Its warships are active from Djibouti on the Horn of Africa, where China has established it first overseas base, to the East China Sea.  China is clearly challenging American domination of the world’s oceans.  Since 2014, China has launched naval vessels “with a total tonnage greater than the tonnages of the entire French, German, Indian, South Korean, Spanish or Taiwanese navies.”  China’s anti-ship missiles, launched at sea, in the air or from the ground, are more plentiful and more advanced than America’s.  “A growing array of satellites and sensors, including some on disputed islets, can funnel panoptic targeting data to this wide array of missiles, making it dangerous for hulking American aircraft-carriers to station themselves near flashpoints.”  As Friedman summarizes, “It’s been the US Navy in the Pacific that has assured China’s trading partners there that China’s economic domination wouldn’t result in China’s geopolitical domination over them.”  That assurance is being challenged.
  3. China’s rivalry with the US is not the same as the Soviet Union’s during the Cold War, which pitted capitalism against Marxism. China officially follows the dictates of Marxism-Leninism, but its true ideology is one of state power.  China is trying to achieve something never really done in history:  Maintain virtual totalitarian control over its citizenry in terms of rights and liberties, but permit a degree of economic and financial freedom.  This has led President Xi to tout China to the world as a governing system that works.  Thus, China is willing to accept ruthless, authoritarian regimes as viable trading partners.  China does not focus on human rights or liberties, only on what yields the best economic and financial benefits for China.  As Richard McGregor of the Lowy Institute argues, China is “presenting itself as an alternative to Western democracy.”  Xi speaks frequently about the “China solution” for a world facing political and financial turmoil.  He lauds the wisdom of China’s global governance.

The West, including the US, believed that political and economic integration would produce a more liberal, pluralistic and democratic China.  Especially the US believed that with the right incentives, China would eventually join the world order as a “responsible stakeholder.”  That policy has failed.  The Chinese economy is growing more than twice as fast as America’s and the state is pouring money into advanced technology, such as artificial intelligence, quantum computing and biotech.  China is going its own way and the new normal is that China and the US—the world’s two superpowers—are engaged in an intense rivalry.  The post-World War II world order is disintegrating.  What the new world order will look like will be the result of this new rivalry between China and the US.  May God give our leaders wisdom and discernment for the future.

See The Economist (20 October 2018), pp. 11, 21-24; The New York Times Special Report, “China Rules,” (24 November 2018); Tom Freidman in the New York Times (2 May 2018 and 11 November 2018) and Richard McGregor in the Wall Street Journal (2 March 2018).

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