Businessweek Archives

For The U.S. And China, Time For A Fresh Start


International Business: CHINA

FOR THE U.S. AND CHINA, TIME FOR A FRESH START

Can Washington and Beijing achieve a breakthrough?

The date is sometime not too far into the next millennium. China's $2 trillion economy is chugging along, growing by 8% a year. Its days as a runaway export machine are fading, and its new consumer class is starting to give a lift to economies across the globe. While there's still an authoritarian edge to politics, the Communist Party's absolute rule has softened. And China's leaders are eager to work with the U.S. and Japan to keep Asia stable. China is a superpower, but rather than being angry and threatening, it is at ease and works comfortably with the rest of the world.

The scenario may sound utopian, but it's the prize U.S. policymakers seek as they prepare for the first visit from a top Chinese leader since 1985. Today, no one has any illusions that the vast differences in everything from culture to commerce that separate the two Pacific powers can be bridged overnight. But as Presidents Bill Clinton and Jiang Zemin sit down in the White House on Oct. 29, U.S. policymakers realize that they must aim for ambitious progress across a broad front of issues.

In the 20th century, dominant nations struggled, often with disastrous consequences, to cope with the rise of new powers such as Germany, Japan, and the Soviet Union. Now, the U.S. faces the same challenge with China. "This is the defining issue for American interests in the next century," says James J. Przystup, director of the Asian Studies Center at the Heritage Foundation.

GOOD TIMING. Building a new framework of relations with China overshadows other foreign policy issues such as NATO enlargement. President Clinton is finally consigning the West's policy of containing communism in Asia to the history books. There's a sense of urgency as China's economic and geopolitical might keeps growing.

Washington wants to make a fresh start with Jiang's China. An essential part of the new game is a firm embrace of the Middle Kingdom. "If we treat China as an enemy, we'll make China an enemy," warns White House National Security Adviser Samuel R. Berger.

The timing for a breakthrough in relations couldn't be better. Sweeping reforms in China, from privatization of state-run companies to further tariff cuts and currency liberalization, have narrowed the ideological divide over economics. Political dissidence is still not tolerated. But freedom of movement and freedom of enterprise--two key building blocks for a prosperous and politically engaged middle class--are greater than ever.

China is eager to join the world community as a full member. The U.S., as gatekeeper, has a lot of potential leverage. Already, China's need for legal and management expertise--as well as for services and consumer goods to satisfy a growing number of well-off urban dwellers--is enhancing the U.S.'s role.

LOSE FACE. The core of Washington's strategy is to entice Beijing to accept the rules of international institutions, such as the World Trade Organization (WTO). The Chinese will get permanent market access to the West and enormous international prestige. World bodies will put pressure on China to respect global norms of behavior in areas as diverse as trade and human rights. But China won't lose face by having to kowtow to Washington.

The Chinese have plenty to gain from better links with the U.S. China requires increasing amounts of global capital, technological expertise and managerial knowhow as it upgrades its economy. Besides, it needs the U.S. market, which absorbs over 30% of China's exports, and wants assured preferential access through permanent most-favored-nation status.

The payoff could be enormous. China's opening and reforms have changed the balance of world economic power in a few short years. Corporate chieftains from Paris to Tokyo have staked their own growth strategies on China's continued success. The U.S. nuclear industry, for instance, figures it alone could sell $60 billion worth of plants to China in the next 20 years.

But if China hews to Asia's export-led growth model exclusively, it could become a Godzilla that roils the world economy. As it quickly moves into medium-technology products such as autos and chemicals, its capacity for creating global economic mayhem through beggar-thy-neighbor policies increases exponentially.

Security issues will test U.S. commitment to engagement as well. Chinese officials argue that the U.S. no longer has any policing role in Asia. If they start to act on that belief, tension levels will rise, perhaps setting the region up for an armed conflict. Japan recently signed a new security treaty with the U.S., which unnerved China. "We are three giant elephants," says Japan's Foreign Ministry spokesman, Nobuaki Tanaka. "If we fight, the ground will be destroyed."

Domestic politics in both countries heighten the tensions. Clinton faces a diverse coalition of labor, human rights, and anticommunist groups opposed to engagement with China. Their growing clout is reflected in a raft of bills, introduced in Congress, aimed at punishing Beijing for everything from religious persecution to arms sales to Iran. Hollywood is also operating on the collective psyche by demonizing China in a slew of new films (page 56).

A possible wild card in Washington's China policy is the business community. It has been a huge booster for engagement, pushing relentlessly for better relations. But now it wants some serious concessions from the Chinese. It's pressing Washington to demand greater protection of intellectual property and fair treatment in China's courts.

Back home, Jiang is under similar pressure from rivals not to cave in to the U.S. There is also resistance to further fast economic liberalization in China. New Chinese foreign-investment guidelines are now being drafted with an eye to helping Chinese companies that feel under siege from new competition. So the guidelines may turn out to be more protectionist, not less, as outsiders had hoped. And China is taking a hard line on U.S. demands to open financial services and telecommunications markets.

UNFAIR ADVANTAGE. There are frustrations on both sides. China wants the global system to accept its special needs and allow it plenty of time to adjust. Washington objects, arguing that China is already a huge economy that runs a $50 billion trade surplus with the U.S. Besides, its state sector is so huge that Beijing can still rig the rules over important issues such as dumping. So granting China's wishes would give it unfair advantage on markets.

Matters would be simpler if China were just another Japan in the making: an Asian trader that continues to run huge trade surpluses long after it is an advanced economy. China is not a problem that can be managed through the WTO alone. Unlike Japan, which was happy to remain a strategic minnow, China already views itself as a key strategic giant with its own interests.

The long-run implication is that the U.S. will have to work with China not only as an economic force but as a player on the world political stage. The summit is the start of acknowledging that reality.

Yet it's also true that Sino-U.S. relations have made some of their biggest gains when prospects seemed bleakest. Richard Nixon first went to China at the peak of the Cultural Revolution. George Bush sent an emissary to Beijing to keep the relationship alive after the Tiananmen Square massacre.

Relations with China under Clinton have been similarly rocky. Unproved allegations of illegal Chinese campaign contributions made the U.S. suspect Chinese motives. Last year, relations hit rock bottom when the Administration allowed Taiwan President Lee Teng-hui to visit the U.S. The U.S. and China approached the brink in March, 1996, as China lobbed missiles near Taiwan and Washington sent aircraft carriers to the scene. The Administration assuaged Beijing by reaffirming its one-China policy and urging Taipei not to be provocative. But the issue could erupt at any time if, for example, the U.S. sells Taipei an antimissile defense system.

It may take a generation to determine whether China is the model global citizen its friends hope--or the pariah its critics fear. The U.S. can only influence, not determine, the path the giant nation will take. It's up to the leadership in Beijing to determine whether the Middle Kingdom will continue to live in its own realm or embrace the rules that govern the rest of the world.By Stan Crock in Washington, Dexter Roberts in Beijing, and Joyce Barnathan in Hong Kong, with bureau reportsReturn to top


American Apparel's Future
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus