It seems that China has come under the spotlight during the current US election campaign. Both President Obama and Governor Romney have come out with a strong posture against the country (at least economically). It is not surprising considering the history between the US and the world’s second largest economy and the current state of economic affairs in the US. But are the candidates taking a fair and productive stance? The answer is probably yes and no.
(CIA World Fact Book)
A few things to remember about China;
First; regardless of how large it is, China is still a developing economy. The total size may be the second biggest in the world, but the per capita GDP of China is still dwarfed by the US and probably 100+ other countries. A rising tide lifts all boats and everyone in China is probably better off now than they were 20 years, so it is moving in the right direction, but they still have a long way to go.
Second; although it is run by one party, it would be wrong to think there are no politics in China. I do not have any particular insight into the political system, but my experience leads me to believe that there is actually a lot of wrangling that goes on within the party, over even the smallest issue. Don’t believe that just because they are not being discussed publicly, that they are getting resolved easily.
Third; and riding very close behind the previous point, is that China is a shame-based society and not a guilt-based society like most Judeo-Christian societies. Things get done and reactions are based on whether one gains or loses ‘face” and not necessarily on a right-or-wrong basis. This is not a judgement on Chinese society, but just a comment. What does this mean though? It means that the government of China bases much of their decisions on whether their actions will make them look better or worse to others in the party, to the average Chinese citizen, and other countries in the world. And as the average citizen also looks through this prism, they are concerned about whether they are being insulted, looked down up, or look like they are being taken advantage of. I am not saying neither of them considers whether the arguments are ‘right’ or ‘wrong’, but just that sometimes it is more important how things look.
Fourth; The west has had a huge impact on the development of China even if most Americans do not realize it. Foreign Direct Investment has been a major driving factor in the growth of the economy. Domestic consumption has picked up, but the demand from the west for Chinese-made products drives much of the export growth (obviously), but also much of the overall growth. As Governor Romney pointed out in the last debate, generally speaking, China has much more to lose on the trade front than the US.
So what does all this mean? I think it means that the US and other western countries will continue to play a major role in the economic growth of China. And this growth will have knock-on effects, both politically and socially. China is still a developing nation and it needs to continue to get foreign investment and to sell their products to western countries if it is going to continue to bring its people out of poverty. But the relationship between the west and China has entered a new phase. China is becoming more economically independent and they will continue to seek other avenues of growth in Africa or Central Asia to offset anaemic growth in their major export markets. But their relationship with the more developed world is still essential.
We shouldn’t expect China to roll-over on these issues, but they are becoming more sensitive to them. They have allowed their currency to appreciate, presumably because they know the consequences on their own economy if they don’t. But that doesn’t mean they are going to bow down and let the currency float as the US would hope it would. The US should continue to push forward even as China takes stronger stances on issues. But the US shouldn’t expect that a strong rebuke is going to get them very far. They are going to need to have a strong bite to back their bark if they take that route, but they are probably better off to keep a constant pressure and expect smaller, more incremental moves. This doesn’t make an election any easier, but that’s the reality.
