economics

June 27, 2010

The reality of the ‘China Fantasy’

Filed under: Uncategorized — ktetaichinh @ 6:02 pm
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Is the “China Fantasy” starting to get deflated by reality? Three years ago, Jim Mann’s provocative book of that title identified the “China Fantasy” as the dogmatic belief of many Western political and commercial elites that China’s economic liberalization and growth would lead inevitably to democracy at home and responsible conduct abroad. The operative word was “inevitably” — the assumption being that China’s remarkable economic success would automatically produce a middle class that demanded greater political rights, and that China’s growing integration with the global economy would produce benign and responsible international behavior. Based on this assumption, the corollary policy prescription for the West was to pursue a policy of engagement and encouragement towards China’s rise.

This paradigm seems to be shifting. I recently participated in a conference in Europe on China, attended by a cross-section of policy, academic, and commercial leaders from Europe, the United States, and China, and came away struck by palpable attitude changes in at least three dimensions. Taken together, these are signposts that the previous conventional wisdom on China is coming under question:

* European attitudes. Many of the Europeans present voiced a pronounced skepticism towards China, both for the Chinese Communist Party’s ongoing refusal to liberalize the political system as well as for what they perceive as China’s irresponsible international posture. Various reasons were suggested for this change in European attitudes from even two years ago, but the most salient one seems to be European ire over China’s obstreperous conduct at last year’s Copenhagen climate change conference. If Europe has a litmus test for international good citizenship, it is climate change. But China’s behavior on that front seems to be prompting increased European frustration with China on other issues as well, including human rights, Iran’s nuclear program, and China’s military build-up.
* Business attitudes. American and European business leaders with extensive China experience also expressed significant disillusionment. As one noted, whereas 5 or 10 years ago the business community was virtually unanimous in its enthusiasm for the China market and in support of closer political ties between China and the West, now the consensus is fractured. Causes for this disenchantment include widespread corruption, intellectual property rights violations, the protectionism of the new “indigenous innovation” policy, and the general restraints on private sector flourishing imposed by China’s state capitalism model. To be sure, many multinational companies remain profitably invested in what is still the world’s largest emerging market, and many more are eager to get in. But Google’s recent exit from China may not be the only one, and some multinationals looking at China are weighing a new set of cost-benefit analyses.
* Chinese attitudes. If assessments in the West are changing, so are elite Chinese attitudes. Most of the Chinese participants were from universities or think-tanks (i.e. not People’s Liberation Army hard-liners), but even they displayed a nationalistic confidence and rather defiant posture towards the West, especially the United States. At its most benign, this is an understandable attitude of a proud rising power. But in too many ways it is not benign, especially considering that the Chinese participants took worrisome stances on issues such as human rights, Taiwan, Tibet, mercantilist nationalism, Iran’s nuclear program, shielding North Korea, and especially the security “threat” purportedly posed by the United States.

The erosion of the “China fantasy” does not mark from a precise date, but a watershed moment ironically may have been the 2008 Beijing Olympics. Anticipated as China’s grand arrival on the global stage, the Olympics were by many measures a major success — and not just for people named “Michael Phelps.” Yet surrounding the Olympics were constant reminders of Beijing’s authoritarianism, whether the petulant rhetorical attacks on Tibet supporters, the draconian efforts at pollution reduction, the omnipresent surveillance, and the tight control on any voices of dissent. Put it this way — as obnoxious are those %&*!@ vuvuzelas at the World Cup, they are also the sound of a free society. You can bet they would have been banned in Beijing.

The end of the “China fantasy” does not necessarily prescribe a wholesale shift in the free world’s posture towards China — just a more realistic one. For the United States, this has several policy implications:

* Remember that “engagement” doesn’t just apply to the government to government relationship with Beijing, but also to the people of China. A forward-looking China policy must include increased support for the seeds of civil society in China — especially young entrepreneurs, religious leaders, human rights activists, students and scholars. Much more than the CCP, they are the best hope for the future of China.
* Keep cultivating our alliance partners in Asia, and also build ties with emerging powers. Nations as diverse as Australia, Japan, Vietnam, Indonesia, South Korea, Singapore, and India have two things in common: they are wary of China’s aspirations to regional hegemony, and they desire closer ties with the United States.
* Strengthen our defense capabilities to deter China’s emergence as a viable peer competitor. The problem with China’s military build-up is not just that it is non-transparent, but that much of it seems designed specifically to counter American force projection and capabilities. For the United States, this means everything from improved cyber-security, command and control system protection, and anti-ship missile defense to, yes, a sufficient F-22 force to preserve air superiority.
* Get our debt under control. Not that the United States needs yet another reason to tackle its mind-blowing $13 trillion debt, but the fact that China owns close to $1 trillion of it is a further concern. The debate will continue over whether this debt financing imbalance actually leaves China or the United States more vulnerable in the aggregate (see this Dan Drezner article for a thoughtful analysis), but at a minimum it is a strategic constraint on the United States.

None of this precludes continued bilateral cooperation with China on important issues, or continued support for sound investment in such a vast market. The “China fantasy” was based more on hope than experience, but the benefit of recent experiences with state capitalism is the chance to replace hope with prudence.

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