ChiMerica 4 18 May 2020.

For decades, both foreign policy experts and business leaders saw China in a favorable light.  They expounded their views to American voters.  Opening China to capitalism and world markets would integrate the Asian giant into the global economy to the benefit of all.  At the same time, capitalism would raise billions out of poverty while spawning a middle-class, the historical driver of democratization.

“Outsiders” long dissented from this “elite” view of China.  They claimed that China rigged its domestic market to exclude foreign products, subsidized Chinese companies competing on international markets, and ruthlessly stole intellectual property.  One effect came in the massive out-sourcing of American industrial jobs and manufacturing in the wake of China’s accession to the World Trade Organization (WTO).  They claimed that China remained a one-party state governed by and for the benefit of the Communist Party.  They pointed out that economic power converts readily to military power, while China advanced supposed “historical” claims to territory beyond its current borders.

Now the “elite” view has lost traction.  American public opinion has taken an increasingly critical view of the Peoples’ Republic of China.[1]  Already in 2019, under the shadow of the tariff war with the United States, the brutal repression of the Uighur minority, and the crack-down on pro-democracy forces in Hong Kong, 57 percent of Americans took an unfavorable view of China.  In February 2020, the unfavorable view had risen to 67 percent.  There is little difference between the political parties in their perception of China as a threat to American interests: 62 percent of Democrats see it that way, leaving little daylight between them and the 68 percent of Republicans who feel the same way.

As a candidate, Donald Trump loudly expounded the anti-China “outsider” view.  As President, he followed his campaign words with presidential action by slamming severe tariffs on China and harshly criticizing it behavior.  Now the United States is in the midst of a coronavirus-induced economic collapse that has undone all the progress that took place during the first Trump administration.  Now the country is desperately short of the personal protective equipment that American companies produced at home in days of yore.  Now many countries, and not merely the United States, are criticizing China for a lack of transparency in the early days of the coronavirus outbreak.

 

How vulnerable is China to external pressure?  China faces grave economic problems.   Its drive for industrialization overshot even the huge demands of domestic and export markets, leaving it saddled with excess productive capacity.  Its long construction boom has achieved the same thing in terms of office space and housing, leaving a property bubble.  Both were financed by excessive government credit channeled through banks that are now on the verge of insolvency.

As the early response to the coronavirus in Wuhan showed, the Chinese central government is hard-put to respond to a crisis because of the autonomy actually exercised by—often corrupt–local authorities.  Moreover, the claim of the Communist Party to sole authority requires that its failures be covered up.  Finally, China’s flawed economic progress has enriched the Party elite and their cronies.  Fixing problems would require painful sacrifice.[2]  For all these reasons, China is vulnerable to external pressure.

 

How wise or idiotic would it be to exert such pressure?  Anything that triggered a severe economic crisis in China would send shock waves around the globe.  Slumping Chinese production would lead to falling demand for raw materials from many countries.  For example, in 2018, China imported more than $60 billion worth of iron ore, gas, coal, agricultural, forestry and fisheries products.[3]  China is deeply entangled in global supply chains for many goods, so the markets for many Chinese products would also start to strangle.  Finally, the global financial system would suffer from the resulting global slowdown.  Thus, in the interlocked global economy, trouble in China will mean trouble everywhere else.  Furthermore, as history has shown time and again, severe economic problems have comparable political effects.  Sometimes the effects create important reforms.  Sometimes they create turmoil and crisis.  All in all, it seems better to seek a co-operative solution that addresses both the immediate crisis and the underlying problems.  That might appeal to the risk-averse, but they aren’t the only ones making decisions.

[1] Walter Russell Mead, “Trump’s Best Re-election Bet: Run Against Beijing,” WSJ, 23 April 2020.

[2] Walter Russell Mead, “China Is the Sick Man of Asia,” WSJ, 4 February 2020.

[3] See: https://asialinkbusiness.com.au/china/getting-started-in-china/chinas-imports-and-exports?doNothing=1

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