The Endangered Asian Century
America, China, and the Perils of Confrontation
President Xi Jinping of China is traveling to Florida to meet with U.S. President Donald Trump. For those who are familiar with the Chinese cultural emphasis on protocol and formalities, this visit will be an unusual affair. China has a highly ceremonial culture. For the Chinese president to bypass the pomp and circumstance of a state visit and travel so far to call on Trump for the first time at his private estate is an extraordinary gesture of good will. And Trump seems to be reciprocating by hosting Xi at Mar-a-Lago, a treatment so far accorded only to Prime Minister Shinzo Abe of Japan, the United States’ closest regional ally.
A few tweets of complaints about trade and North Korea notwithstanding, Trump has exhibited rather uncharacteristic warmth in anticipation of the meeting. In an interview with the Financial Times, the U.S. President noted his “great respect” for Xi and for China. He expressed hope that the two leaders could accomplish “something that would be very dramatic and good for both countries.”
His words marked quite a turnaround from a few months ago, when Trump’s tough campaign rhetoric about China and remarks putting the United States’ longstanding One-China policy in doubt threw relations into a freeze. It seems, in short, that something is afoot. But what?
No doubt, there remains rivalry aplenty between the world’s one superpower and its fastest rising power. But a clear-headed analysis would show that, at this moment in time, the two countries’ list of common interests might be expanding rather than shrinking.
First the big picture. Trump was elected, against all odds, because the United States faces unprecedented challenges. Nearly 30 years of global expansion has benefited the very rich, but the bedrock of American society, the middle class, is crumbling, and along with it, American social cohesion. If the Trump administration is going to succeed in making America great again, it needs to focus its resources on rebuilding the country. Indeed, it even needs to redirect U.S. foreign policy toward America’s own reconstruction. On that score, making a bargain with China, its largest trading partner and creditor, is the clearest opportunity for gain.
China, meanwhile, is also at a critical juncture. The low hanging fruits of economic reforms and rapid growth have mostly been picked. If the country is going to meet its goal of building a society of modest prosperity (xiao kang) by 2020, it needs a peaceful external environment to tackle the tough challenges such as a complex transition from an economy driven by investment and export to one more powered by domestic demand. For that, it needs America’s cooperation.
Now, the deal. Deals are most likely when the priorities of the counter parties are different from each other. This means the same item is worth more to party A than to party B, and vice versa. In such a situation, trades make both parties better off.
Let’s take a look at Trump’s list when it comes to China. It’s probably in the following order: Trade and jobs, North Korea, American infrastructure, and the South China Sea. In any negotiations with China, Trump must deliver to his voters some substantive progress on trade and middle class job creation. Some progress on the North Korean nuclear threat would be important, followed by gains in infrastructure and in the South China Sea.
For Xi, regional security must be his number one concern. China cannot continue to develop without a conducive external environment. For that, it needs the United States’ cooperation on a range of issues, including its competitive relationship with Japan, potential conflicts in the South China Sea, and instability on the Korean Peninsula. In all these areas and more, China’s predominant objective is to avoid war.
Second on Xi’s list is probably the avoidance of a trade war. With economic growth slowing, the last thing China needs is a trade war with anyone, let alone the United States. Similarly, Xi wants to see the implementation of China’s economic outreach program, called Belt and Road with the Asia Infrastructure Investment Bank (AIIB) as its appendix, to develop a regional economic order that would support China’s next stage of growth.
Given these lists, China has a lot to offer the United States. It is actively engaged in an economic restructuring to shift its reliance away from exports. In the past few years, the value of its imports from the United States has grown at double the rate of that of its exports to the United States. China might be willing to voluntarily reduce further its exports and push for an increase in imports to help bring more balance to U.S.-Chinese trade. And this would be in line with China’s objective of building a more consumption-based economy.
China could also offer to increase its investments in the United States to help rebuild certain sectors of American industry and create jobs. It has considerable capacity and capital, and Trump has considerable goals for rebuilding America’s infrastructure. Bringing the United States into the Asian Infrastructure Investment Bank could go a long way on the financing front. The two leaders might further make a push to complete the Bilateral Investment Treaty (BIT) to facilitate such investments. The BIT would also promote U.S. business interests in China.
In exchange, the United States could extend a friendlier hand to China in China’s neighborhood. Obama’s pivot to Asia failed miserably without bringing any real benefits to America. In the South China Sea, where the Obama administration invested so much American geopolitical capital, for instance, the Philippines, Malaysia, and even Vietnam have turned away from the United States and toward China. If China and its neighbors are left to sort out their own differences, they would likely produce a reasonable outcome without any negative impact on issues important to U.S. interests, such as freedom of navigation. The current rapprochement between China and the Philippines after a period of intense hostility is a case in point.
On Taiwan, Trump stepped back from the brink after placing the One-China policy in doubt. With this most fundamental anchor of U.S.-Chinese relations secured, Trump should encourage a more cooperative relationship between China and Japan. As Trump told Abe last month at a press conference on the grounds of Mar-A-Lago, a constructive U.S.-Chinese relationship is good for Japan. In most instances, the United States has no real interest in picking sides between China and its neighbors, even when the dispute involves U.S. allies. On the contrary, it is at greater risk of being used by other countries in pursuit of their own interests. Trump, as a businessman, should have a keen awareness of that. In his interview with the Financial Times, he said that “alliances have not always worked out very well for us.”
With the South China Sea somewhat calmer than it has been of late, and with the issue of Taiwan out of the headline, conditions are conducive for U.S.-Chinese cooperation on the North Korea nuclear issue. The two countries essentially share the same long-term objective, which is the denuclearization of the peninsula. Any military conflicts on the Korean peninsula threaten the Chinese more than anyone else, save the Koreans themselves, of course. If the two leaders develop a more cooperative relationship by working through the other items on each other’s lists, Washington might be able to see substantive movement and a more collaborative attitude from the Chinese side on the North Korean nuclear problem.
In short, economics for security would be the primary trade. Both leaders would come out ahead if such deals could be struck. Such a grand bargain would not have been possible in the pre-Trump era. The post–Cold War U.S. foreign policy has swung between neo-conservative aggression and liberal interventionism. But the consequence was the same: imperial overreach that exhausted America’s strength. Trump’s election was a paradigm shift.
The two presidents share a similar outlook on the world, which is rare in the history of U.S.-Chinese relations. Trump is walking America back on its ill-conceived and costly project to remake the world in its own image. He is putting America first. And China, of all nations, should recognize the legitimacy of such sentiments and should know that America first does not have to mean China last. In the right context, it would mean that each country should be allowed to pursue its own development path and look after its own people. This is precisely what China has been advocating for a long time.
If Trump can free the United States from the shackles of trying to run the world, he would find that a good bargain with China could result in a much-needed period in which the United States can rebuild its economic strength and social cohesion. The idea that China would soon overtake the United States to become the top dog is delusional. Even when China’s GDP matches that of the United States sometime in the middle of this century, its income per capita and military power would still only be a fraction of that of the United States. By giving China, and perhaps other major powers, their spheres of influence, the United States would be prolonging its dominant position not shortening it.
For Beijing, meanwhile, the goal of continuing China’s development so that its people attain an above-average standard of living, will be nearly all-consuming for several generations. But that plan would be disrupted or even destroyed by external shocks, such as military conflicts abroad. By handing some economic benefits over to America at this moment, Xi could gain in return a much-needed period of regional security on China’s terms.
No one can predict the outcome of the Florida summit. Risks of confrontation and conflict remain. But cautious optimism that the contour of a grand bargain may emerge at Mar-A-Lago is warranted. The world would be a more peaceful and wealthier place if it did.