China: Globalization, Not Cold War

Odds are when the Chinese military entered the U.S. Navy EP-3 spy plane and opened its computers, they found "Made in China" stamped on all kinds of chips, circuit boards, and other high-tech gear. Such is the conundrum facing policymakers in Washington and Beijing. How can they manage a growing strategic rivalry in Asia even as their economies become more dependent on one another? Put another way, is globalization and the integration of China into the world economy compatible with a post-cold war cold war? We think not, and it's time for Corporate America to start pondering the problem. The stakes are very high.

The Bush Administration shows increasing comfort with cold war language and posture. But there are significant differences between U.S.-Soviet competition during the 1980s and U.S.-China rivalry today. Militarily, the Soviets were at par with America and had the potential to annihilate it in war. China poses no such threat and won't for many decades. Geographically, the Soviet Union strived for world dominance. It sought to spread communism throughout Asia, Africa, and Latin America. China is a rising regional power, focused on local issues, with Taiwan being the most important.

There was little trade or investment between the U.S. and the Soviet Union. China and the U.S., however, are joined at the hip. China depends heavily on the American market for its exports, and it needs huge U.S. investment for future growth. The legitimacy of China's leadership depends on delivering a higher standard of living, so it needs America economically in a way that the Soviet Union never did. For their part, U.S. corporations have integrated China into their supply chains. High-tech companies, in particular, depend on Chinese factories, many of them Taiwanese-owned, to manufacture the guts of the handhelds, PCs, servers, and cell phones that they sell in the U.S. And Kmart, Toys `R' Us, and Home Depot depend on Chinese-made products on the lower end. The Soviet Union never played such a key role in the U.S. economy.

There are people in both China and the U.S. who appear to prefer the simplicity of a new cold war between enemies to the complexity of managing relations between nations who are both economic partners and strategic competitors at the same time. In Washington, the Bush Administration is attempting to distance itself from President Clinton's foreign policy by deemphasizing the economic component of the U.S.-China relationship. The focus is primarily on military and geopolitical issues. A new Defense Dept. review, for example, predicts that the next big war will be fought in Asia, presumably against China. The missile defense system proposed for Asia could be aimed at stopping Chinese ballistic missiles, not just rogue North Korean ones.

With China poised to enter the World Trade Organization, open its internal markets further to U.S. and other foreign investment, and privatize the rest of its state-owned industries, the nation is being fully integrated into the global market. But the benefits of this integration for both China and the U.S. could end. Already, polls show that Americans believe China is second only to Iraq as a potential enemy. Chinese Internet chat rooms are full of anti-U.S. hate. It is up to political leaders in Washington and Beijing to ensure that relations between a dominant global power and a rising regional power do not tip from rivalry to enmity. We don't need another Cold War and globalization is the best way to prevent it.

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