China's strengthening is not bad news for America

By Daniel H. Rosen (ABC News)
Updated: 2007-05-15 10:29

"Charity rejoices in our neighbor's good, while envy grieves over it."

A woman holds an advertisement amongst pedestrians at the busy business district of Causeway Bay in Hong Kong May 2, 2007. [Reuters]

That quotation from Thomas Aquinas sums up the current China debate. America has a choice to make, between taking comfort in China's poverty reduction -- the greatest in human history, largely achieved using our economic model -- or wishing it back to the failed state it was before the boom began.

Do we honestly want to deal with a stagnating country of 1.3 billion people with nuclear weapons? To grieve over China's growth is to stick our heads in quicksand. The only responsible position is to be glad that China is becoming more fit to look after its people, take responsibility for its environmental impact and meet its responsibilities as a Great Power.

China does and will present challenges to US interests, some of them even what could be considered "threats." This does not mean China is a future enemy: Some of these are the same problems we manage with allies and friends from Canada to Japan to Europe, and China has many of the same geopolitical goals as the United States, so we may well need to be partners in global affairs.

How the United States reacts to China will have a significant influence on its future, and we are much better off with the challenges of a strengthening China than a collapsing or stagnant one.

On the economic side, China's currency is undervalued, its banks loan too much and the government is too quick to bail out uncompetitive firms to prevent unemployment. It is like the US bailout of Chrysler in 1979-80, only 100 times over. These and other economic distortions need fixing: Some of them unfairly boost exports, and in fact almost all are being reformed in the right direction, but often at a pace that does not satisfy.

Importantly, none of these Chinese problems are existential threats to the United States or other wealthy nations. Tools are available to confront China's exports when we conclude they are unfairly promoted: The main question has been internal -- whether our consumers are willing to pay more for their shopping in order to make India or Vietnam the origin of our goods instead of China.

Because when we do put punitive barriers on China's products, it is usually Mumbai and Saigon that pick up the contracts, not Michigan or Schenectady. Meanwhile, with just 43 percent our work force size Japan exports $10 billion a month to China while we ship only half of that; Germany has just one-quarter our employed population but has run a surplus with China over the 14-year period to today. Clearly China is not closed to rich-world wares; we spend too much time blaming China for growing, while our real competitors in Europe and Asia focus on their strengths.

Is China's growth bad news for us on the political front? It is hard to see how.

Assuming for the moment that Communist Party authoritarianism is wrong for China despite its meteoric success maintaining growth, there is still reason to see the glass half full.

The government that launched reform in 1979 when per capita incomes were $200 bears little resemblance to the Beijing that today must manage a $2,000 per capita country. In Shanghai and Guangzhou, where incomes near $7,000 per capita, people elect their own co-op boards and select PTA representatives for their kids' schools. Middle class people participate in society in a different way, the Communist Party recognizes this and is quietly making room to accommodate it. The government that runs the $10,000 per capita China of 2025 will be as different from today's unaccountable system as Shanghai's co-ops are from the collective dormitories with shared toilets that dominated the housing sector a generation ago.

Finally, what about the security realm: Is a stronger China likely to dilute US global military dominance? Well, yes and no.

China's defense outlays are rising, and technological capabilities are rising too. But the US lead in these regards is so great that we are talking decades before parity is even a distant question. As a regional military power with no tradition of global force projection and little interest in replicating America's entanglements in Iraq, the Middle East and elsewhere, China will not attempt to make up the gap with "asymmetric" power.

In fact, with 11 contiguous neighbors, three of them heavily Islamist, five of them patently unstable and three of them nuclear or near-nuclear powers -- not even counting the Taiwan "theater" -- China has plenty to worry about in the neighborhood without looking further afield. Many of us in America, such as former Deputy Secretary of State Robert Zoellick, are more interested in drawing China out to share the global burden with us than spending treasure to contain them from doing so.

A positive attitude toward one another's successes is a necessary starting point for the United States and China -- the world's strongest incumbent and strongest aspirant -- to work together on problems. Global warming, energy security, Islamic extremism and a host of real challenges await our cooperation, and cannot be dealt with one without the other. We have the competitive strength and endowments needed to win from China's growth, just as Japan -- despite simmering political -- has done with two decades of steady trade surpluses.

It is past time for our ambivalence to stop: Those against China's growth will only be satisfied by an Iraq-like outcome which, once again they are entirely unprepared to deal with were it to happen.

(Courtesy of ABC News)

Daniel H. Rosen is principle of the China Strategic Advisory and a visiting fellow at the Institute for International Economics.

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