CHICAGO, Illinois: It was late November 2016, and my Chinese counterpart, Vice Premier Wang Yang, was visiting Washington. Over the course of my tenure as US Secretary of Commerce, the vice premier and I had developed a warm and candid relationship.
Since this was to be our last official meeting, I decided to do something a bit different: Take him to rural Virginia for a traditional Thanksgiving meal.
While we were surrounded by our usual phalanx of security, we effectively sat alone, with the exception of our two closest aides. Shortly after we were seated, the vice premier leaned in close and almost whispered to me:
Can you explain what just happened in your presidential election?
Clearly, the Chinese were just as surprised by the results as we were.
I told the vice premier that we were still trying to understand the outcome ourselves, but that it was important for him to appreciate that China had played a significant role in the election. As the translator spoke into his ear, he shot me a somewhat surprised look.
I explained that then-candidate Donald Trump’s “tough on China” rhetoric had tapped into an underlying strain of thought in the US that Wang and other Chinese leaders needed to understand.
CHINA A DEVELOPING COUNTRY?
For years, Americans were told that China was a developing country and shouldn’t necessarily be held to the same standard as developed nations such as the US. But China’s success had severely undercut that line of reasoning.
The Chinese economy was growing at 6 per cent or more annually. Chinese cities, roads, ports and bridges were rising seemingly overnight. The world’s low-cost manufacturer was rapidly becoming a global technology hub. And the Chinese government was investing billions of yuan in support of its “Made in China 2025” industrial plan.
The disconnect between rhetoric and reality was profound and growing by the day.
At the same time, Americans felt that at least some of China’s success had come at their expense. They were seeing their middle-class jobs and once-prosperous lifestyles disappearing.
China wasn’t playing fairly; it was consistently violating its international commitments and tilting the playing field to advantage Chinese firms. Economic complexities aside, the fact that Americans were, in part, paying the bill for such behavior had begun to sink in with millions of my fellow citizens.
Candidate Trump, of course, didn’t create these imbalances; he was simply very effective at tapping into this growing resentment. With or without Trump, the US-China relationship was moving quickly toward a crossroads.
MODERN CHINA A REALITY
The point I was making to the vice premier is that, as China has risen to become a global power, the dynamic between the two countries has unquestionably changed. Meanwhile, too many Chinese actions and policies have not.
In fact, Chinese officials still frequently rely on the outdated rhetoric that China is merely a developing country. The developing nation narrative is clearly at odds with the observable reality of modern China, and it logically runs counter to China’s lofty goal of establishing a “new model of great power relations” between the US and China — a dynamic focused on fostering cooperation and competition but avoiding confrontation, which, historically, has been the defining feature of relations between existing and rising powers.
It is hard to be both a poor, developing nation and a party to a “new model of great power relations.” The formulation assumes the existence of two great powers. In the modern world, though, being a great power requires leadership.
It requires being a good steward of the global economy, not just benefiting from it. It requires playing by the same rules and competing fairly, not relying on state resources to support domestic industries and innovation.
If China wants to be the world’s other great power, it is manifestly in its interest to start acting like one.
DISCONNECT BETWEEN WORDS AND REALITY
To be fair, we have seen China emerge as a global leader on certain issues — such as climate — and, in recent months, President Xi Jinping has spoken consistently about China assuming a larger role in world affairs. In other areas, however, particularly those tied to economic and trade policy, the rhetoric continues to surpass the policies.
In part, it was this disconnect between words and reality that gave Trump his political resonance in the US China is a great power. China has risen and, in so doing, has lifted 800 million people out of poverty.
But, if China doesn’t change its approach to economic competition, I fear that today’s trade war will be nothing compared to the heightened tensions to come. Frankly, our domestic political system will demand action and President Trump will look like the mild first incarnation of a trend rather than an outlier.
RELATIONS DEEPER THAN EVER
The irony, of course, is that in so many important respects the economic and personal ties between the US and China are deeper than ever:
- The US hosted roughly 130,000 Chinese graduate students during the 2016 to 2017 academic year. On average, each of those Chinese students spends more than US$26,000 per year in the US.
- Chinese direct investment in the US expanded dramatically to US$46 billion in 2016, before a steep decline in 2017. That investment has hyper-charged a range of sectors in all corners of the US.
- Less than 10 years, spending from Chinese tourists in the US has more than quadrupled to over US$20 billion annually. Xi and then-President Barack Obama agreed to offer new 10-year tourist visas to citizens of both countries, so we can expect that number to grow.
In large part, China’s progress wouldn’t have been possible without the stable global economic order that the US has underwritten and secured for the last 70 years. In that time, this system has limited conflict and led to the greatest increase in prosperity the world has ever seen.
Without question, particularly over the last two decades, China has reaped the benefits of this rules-based order not just by competing aggressively but, it must be said, at times exploiting the existing system. That must change.
If it doesn’t, I fear that the stated goal of this “new model of great power relations” — competitive cooperation — will fall victim to China’s inability to change course. Then the politically plausible options for navigating China’s rise over the decades to come will be narrowed down to one: confrontation.
Penny Pritzker served as US Secretary of Commerce from 2013 to 2017. She is the founder and chairman of the investment firm PSP Partners, and is on the advisory board of the Bloomberg New Economy Forum, to be held Nov 6 to 8 in Beijing.