Copyright The Economist
IT HAS become a tedious tradition for Westerners dealing with China to garnish their speeches with wisdom from the Chinese classics. Barack Obama, addressing Chinese and American leaders in July, used not just a banal quotation from Mencius, a Confucian sage, but a punchier one from Yao Ming, a Chinese basketball player: â€šÃ„ÃºNo matter whether you are new or an old team member, you need time to adjust to one another.â€šÃ„Ã¹ Though it is 30 years since the two countries re-established diplomatic ties severed by the Communist takeover, both sides still badly need to adjust.
The heart of the problem is a profound uncertainty in both countries about where the relationship may lead. In many respects the two countries are in the same bed. Their economies have become interlocked, especially in the past decade. America is the worldâ€šÃ„Ã´s biggest debtor and China its biggest creditor. From climate change to the economic recovery, the world faces problems that demand China and America work in concert.
Prussian blues, Chinese reds
Yet relations are dogged by fears of a new cold war, or even a hot one, breaking out. Some Americans in Washington, DC, talk of China as â€šÃ„Ãºthe new Prussiaâ€šÃ„Ã¹. China has engaged in a rapid military build-up that could challenge America as the defender of Asian peace (and Taiwanâ€šÃ„Ã´s sovereignty). Unannounced, China is building its first aircraft-carrier, yet its generals often refuse even to talk to their American peers.
Underlying the strategic competition is Chinaâ€šÃ„Ã´s economic rise. Its companies are â€šÃ„Ãºcolonisingâ€šÃ„Ã¹ swathes of Africa and Latin America, cosying up to regimes Westerners shun. Its huge foreign-exchange holdings and its sniffing of bargains mean Chinese investment in the West will grow rapidly in the coming years. And to cap it all, China owns $800 billion of American government debtâ€šÃ„Ã®enough to give it power of life and death over the American economy.
Tensions will get worse in the next few years for two reasons. The first is unavoidable: 2012 witnesses important political transitions in the form of elections in Taiwan and America and a Communist Party Congress in China. Secondâ€šÃ„Ã®and more generallyâ€šÃ„Ã®there has been a recalibration of perceived power. There is now talk of a G2 of China and America, implying that their global weights are nearly equal. In fact, as our special report argues, this is a misperception, and a dangerous one.
Chinaâ€šÃ„Ã´s economy is still less than a third the size of Americaâ€šÃ„Ã´s at market exchange-rates. Its GDP per head is one-fourteenth that of America. The innovation gap between the two countries remains huge. Americaâ€šÃ„Ã´s defence budget is still six times Chinaâ€šÃ„Ã´s. As for the Treasury bills, dumping them is not an option for China: a tumbling dollar would hurt its own economy (see article). And as American consumers spend less, while Chinese stimulus boosts its domestic spending, the huge and politically troublesome trade imbalances are shrinking. In the meantime, the danger of overegging Chinaâ€šÃ„Ã´s economic expansion abroad is that it will fuel protectionism at a time when American unemployment is painfully high.
In terms of geopolitical power, China has neither the clout nor the inclination to challenge America. Confidently though Chinaâ€šÃ„Ã´s leaders now strut the world stage, they remain preoccupied by simmering discontent at home: there are tens of thousands of protests each year. For all the economic progress, all sorts of tensionsâ€šÃ„Ã®social, cultural, demographic, even religiousâ€šÃ„Ã®haunt the regime and help explain why it resorts to nationalism so often. So it is odd, and wrong, that Americaâ€šÃ„Ã´s approach towards China is driven by its own insecurities.
To simplify enormously, the danger is that a frightened United States will be too tough on China over the economy, especially trade; and not tough enough on human rights. On money matters, Mr Obamaâ€šÃ„Ã´s foolish decision to slap tariffs on Chinese tyres has given dangerous encouragement to protectionists in America. As unemployment there climbs inexorably towards 10%, the pressure will grow for Congress to fuel a self-defeating attack on Chinese exports and the undervalued yuan. This is bad economics: both China and America would lose enormously from a trade war.
If economic freedom is one American value that Mr Obama should not sacrifice on his first visit to China next month, the other is personal freedom. Chinese authoritarianism is not somehow more acceptable because China is a rising power; nor are human rights bargaining chips to be played only when expedient. That Mr Obama needs Chinese help to fix the global economy and on climate-change mitigation does not mean the leader of the free world should stifle criticism of its political system. Avoiding a meeting with the Dalai Lama in Washington this month was an unnecessary sop to his hosts. The Communist Party, keen to bolster its image at home, wants the trip to appear successful as much as Mr Obama does.
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Copyright The Economist