Economic, political, and diplomatic challenges define the high-stakes bilateral relationship between the US and China
The relationship between the US and China is one of the most consequential geopolitical issues of today, with tensions escalating over trade, human rights, and disputed territories. As with any complex issue, multiple viewpoints and perspectives are crucial.
As part of Salzburg Global’s annual spotlight on “Looking East”, Yasheng Huang, an expert on international trade and political economy and professor at MIT Sloan School of Management, and David Firestein, a former US diplomat and CEO of the Bush China Foundation, provided valuable insights on how the West sees China.
Yasheng Huang: An Inside View of China
In Yasheng’s lecture on “China from the Inside: Xi Jinping and After - Where is China Headed?", Yasheng emphasized that, when analyzing China, one must not stop at the problems but also examine the resilience. According to Yasheng, “deep, structural, and long-term stabilizing factors” have historically stabilized Chinese society, and this resilience traces back to China’s long tradition of meritocracy and lack of civil society.
Meritocracy in China dates back to the year 587, with the introduction of the Imperial Examination, a civil service exam that remains the "only channel to the top". Yasheng believes that through this system, the state maintains a firm grip on power. This power is most potently manifested in the assumption that "the state gets everything right”.
As a result, Yasheng noted that the Chinese government has more room for error in its policies, allowing it to withstand pressure more than other regimes. Yasheng stressed that when studying China, the default assumption should be “stability until it is not”.
Yet, economic deterioration within China is creating what Yasheng terms “street-level instability”. The Chinese government relies heavily on rapid GDP growth to finance its programs. But with crucial revenue sources, particularly land sales, diminishing and real estate prices in major cities like Beijing, Shanghai, and Shenzhen declining by 30-40%, the government faces a significant challenge.
Stability in China entails, to a large extent, economic stability. Following this logic, Yasheng predicted that "the more the economy deteriorates, the more political capital they [the Chinese government] are going to lose".
In response to these new economic challenges, Yasheng posed the question of whether a change in political direction is necessary to maintain economic stability. He reasoned that, historically, China has experienced its greatest economic success during periods of political liberalization. China’s development in technology and science was when Deng Xiaoping moved China’s economy away from central planning. Under Xi Jinping, however, the government has increased state control, shrinking private sector investment and foreign direct investment (FDI). Yasheng added that this shift is exacerbated by China’s foreign policy, which risks "antagonizing its best customers" in the global economy and represents "the fundamental incompatibility" between China’s foreign policy and its economic model.
“It is just a matter of doing simple economic math," Yasheng explained. Xi Jinping could follow Deng Xiaoping’s lead and liberalize the economy, but if he continues down this path, China will need to grow its domestic demand.
Asking whether Xi Jinping would take a new path is only one-half of US-China relations. Whether the US is willing to accept a reformed China, what reforms are deemed palatable, and how the US positions itself toward China during this tense period are equally pressing questions critical in shaping both countries and the world’s future.
David Firestein: Rethinking the West's Approach to China
Supplementing Yasheng’s inside view of China, David’s lecture, "China from the Outside: What the 'West' Gets Wrong About Relations with China, and How to Get It Right," argued for a clear-eyed, fact-based, and more moderate approach.
According to David, one of the most flawed assumptions in US foreign policy is that China seeks to displace the US as the world’s sole superpower, as the US defines the term superpower. In his view, the notion that China seeks to become the “United States 2.0” and take over America’s traditional “world policemen” role in the world is a uniquely American idea, not a Chinese one; indeed, it is the US projecting their own thinking onto China. He noted, for example, that, unlike the US, China does not have or seek to have hundreds of military bases all around the world.
In terms of China’s positioning in international relations, David believes China sees alliances as "constrictive, entangling, and diminishing of its sovereignty," preferring instead to avoid being compelled to one action or another as a consequence of other nations’ actions. What China truly seeks, according to David, is “multipolarity” in which it can function as a "coequal pole player" without being subject to the directives and orders of foreign powers.
David also dispelled the notion that China wants to overturn the established international order, reasoning that China has benefited enormously from the current system. China holds a permanent seat on the UN Security Council with veto power over all key UN decisions. And the Chinese economy has flourished subsequent to China’s accession into the World Trade Organization. David observed that, indeed, the reality is, “the current international order is already very welcoming to autocratic governance” – and thus, why would China seek to overturn that order?
In essence, David argued that China "wants the latitude to govern and organize its country, its polity, and its society and economy as it sees fit. And it is content to let other nations do the same.” Yet, in Washington, D.C., misconceptions about China’s ambitions have propelled extremely hawkish foreign policy. The US approach to China is increasingly defined by hardline approaches that began during the Trump administration and have largely continued, in terms of legislation and policy, even if less so in rhetorical tone, into the Biden administration.
David lamented this new direction as “counterproductive”. On the economic front, David explained that protectionist measures have only led to higher US trade deficits with China, with President Trump presiding over the largest average annual merchandise deficit with China of any president in US history. They have also led to higher prices for American consumers, while doing nothing to solve any of the underlying problems in the US-China trade relationship.
According to David, on geopolitical conflicts and human rights, the hardline American approach coincided with increased Chinese aggressiveness towards Taiwan, increased levels of tensions in the South China Sea, the passing of the National Security Law in Hong Kong, and mass round-ups and detention of Uighurs in Xinjiang. Noting that the hardline approach the US has embraced since 2017 has not yielded evident progress on most, if any, of the issues the United States says it cares about, David observed that the US seems to be "continuing to do the same thing again and again, but expecting a different result".
In addition, David noted Washington’s latest tendency to adopt some of China’s worst practices as best practices worthy of emulation, citing the potential ban on TikTok as a move that mirrors China’s censorship of Western platforms. David also cited cases in Florida and Texas where legislation that seeks to restrict Chinese citizens' rights to purchase real estate and even pursue education has been proposed and even adopted. David believes this undermines America's moral high ground and cautioned against losing sight of the values that have historically distinguished the US.
Instead of focusing so much on "dragging China down", David urged the US to concentrate to a greater degree on solving its own internal issues. He asserted, “to America’s political establishment, China is much more valuable as a problem unsolved than it is a problem solved”. David lamented how US politics have taken a performative turn, and China has become a convenient and expedient talking point and weapon with which to rhetorically bludgeon political opponents while establishing one’s own “toughness”.
China and the US are undoubtedly different countries with unique histories and cultures, but differences do not necessitate confrontations. As emphasized by both speakers, continuing down a path of fear and angst is detrimental for both countries and a potential catastrophe for countless lives. As David reminded us, “the more alienated and decoupled the United States and China are from each other, the greater the statistical likelihood that these two countries could end up in a war,” adding that that is an outcome all of us have a responsibility and a shared interest in trying to prevent.
David Firestein and Yasheng Huang attended the 2024 Salzburg Global Weekend, which focused on "Looking 'East': Confronting Assumptions and Expectations of 'East' and 'West' in an Unstable and Multipolar World."
