My mom in China isn’t exactly a news hound – that’s why she surprised me recently by asking me to tell her what the recent fuss on US-China trade is all about. “Explain it simply,” she told me. So, I reflected for a moment, and then began.
In a nutshell, the US and China are in a marriage that appears to be disintegrating as of late. At the time of their wedding, the pairing made perfect sense. Despite different political systems and cultures, both sides were able to get along well enough to marry their economies and finances in a relatively stable home. The marriage worked wonders for over 20 years, with China transforming from an agrarian economy into one of the world’s economic powerhouses. The US poured billions of dollars of investment into China, stocking US store shelves with low-cost Chinese-made goods and driving corporate profits ever higher. Global capital markets reaped the rewards and prospered during a period of unprecedented economic growth, while people from both countries studied, immigrated and developed lasting friendships with each other. The in-laws - each country’s political establishment - were never terribly close, but they understood that cooperation drove progress, so they stayed out of each other’s way. It wasn’t a perfect union, but like any good marriage both sides became better, and both sides benefitted.
Today, little niggles in the early stages of that marriage have become big resentments. America is fed up, particularly with four things China continues to do despite being asked to stop. It has long accused China of dumping (unfair trade practices), restricting the amount of American food served at mealtime (market access restrictions), allowing household items to disappear, later to be discovered at a China in-law’s home (intellectual property theft) and accepting unfettered meddling in the children’s affairs by the Chinese in-laws (state support of SOEs).
The China spouse is miffed, too. China can’t understand why the US is so angry when generations of Americans have been able to consume so much, and corporations have made out so well. China made great sacrifices in the early days for the marriage to work, enduring two generations of lower wages, few labour protections and environmental degradation to put food on the table and build the basis for future earnings (a global manufacturing and supply chain). Now that China has finally found some success, it is questioning why the American is changing the rules and trying to deny China’s future progress. If the American hasn’t distributed its massive gains from China fairly across the American society, resulting in a populist backlash, why should China pay the price?
The spouses have reached an impasse. They still live together but are no longer talking. Sometimes, in fits of anger, they’ve even thrown kitchen items at each other (tariffs). Tensions are high.
“As long as they don’t end in divorce,” my mom interrupted me. And she’s right. The real question is: can the US and China be saved, and what will it take to save it?
An optimist might say the differences are largely cultural and China will increasingly move closer to international norms over time, because doing so is in its long-term strategic interests. Once the two sides let off some steam, the thinking goes, they’ll reconcile amicably.
That view is easy to understand if one looks only at three main issues the Americans are complaining about: unfair trade, market accessibility and intellectual property protection. The issue of trade practices is probably the easiest to resolve, because it’s largely economic with manageable structural implications. Opening high-value Chinese markets to international investment is arguably more difficult, but is definitely in China’s long-term interests -- there are recent indications that China has begun to accelerate its pace and scope of opening.
There is also growing common ground on intellectual property protection. As China becomes a global leader in innovation and technological advances, particularly with national champions like Tencent, Alibaba, Huawei and others, the importance of protecting intellectual property is becoming clear to China’s leaders. Undoubtedly there are still some differences, but overall China is trending more towards the American point of view.
The optimist generally believes that the political establishments of both countries will continue to stay out of the way, even if they snipe from time-to-time. The US’ desire for political development in China and the Chinese request for the US to respect its rightful sphere of influence shouldn’t be used as weapons that put the marriage at risk.
Even an optimist will admit that both sides still need to make a huge effort to patch-up wounded feelings and lost confidence from this marital conflict. Like marriages in real life, building trust again is the first step toward reconciliation. America needs to give face and have patience as China evolves, so the country doesn’t feel cornered and intimidated. China, meanwhile, needs to help rebuild American trust by making and sticking to its commitments and pursuing genuine change in earnest. Both parties need to accept that the future will be shaped by their ability to operate in shades of grey, rather than battle over the difference between black and white.
The pessimist, most of whom are in the US, appear to believe that the marriage is now challenged by the growing political and philosophical differences that are no longer reconcilable, particularly with respect to the contentious issue of Chinese state influence over its economy. They seem to argue that unless China fundamentally alters its political and economic governance, the marriage can’t be saved. Whether or not these views represent most Americans, they are the loudest voices now and have largely been driving the current policies towards China.
All indications are China is not interested in a divorce and is willing to compromise to save the marriage. It understands the need to accelerate reforms and opening in areas where the government still has unduly strong controls. There are reasons for hope here because these reforms, as challenging as they are, would also be in the overall long-term interests of China itself and are supported by China’s younger generation, which has grown up amid a dynamic economy, with access to social media and the opportunity to see how people in other countries live. The biggest challenge for China is to find a way to rebuild American trust that China will make and deliver on its commitments.
As much as China may pursue political changes on its own terms and pace, it will not respond well to America’s lecturing, which it sees as being akin to your in-laws telling you how you should raise your kids or run your household. If you are in a marriage with such a vocal, opinionated in-law, your natural reaction would be to resist, or say “back off”. Continued pushing by the United States will fuel an equally-strong nationalist belief in China that American arguments represent a thinly-veiled cover for America to contain China’s inevitable rise. That belief, if it prevails, will drive an equally hard line in China against any reforms that might be perceived as giving concessions to America under duress, and push the two countries even farther apart.
It’s not clear whether the American partner is prepared to give China the respect and patience required to undertake the reforms. To make it work, America needs to invest in the process, listen, and even address some of its own financial and industrial policies that lie at the foundation of the current American populist backlash so that China does not become the undue scapegoat of America’s domestic issues. Without addressing these pressing domestic problems, however, voices for a full and open confrontation will only increase, especially in light of the existing trade war. There is heightened alarm that an overheated trade conflict could risk escalating to a full divorce, intended or not.
Like the pessimist, the realist assumes the worst; but unlike the pessimist, the realist isn’t interested in throwing in the towel and insists on asking, “What can we do?”
The questions we must ask ourselves are: Could the US and China truly go their own separate ways in such a small, connected global village? How would a divorce really work? How would they divide up the economy, the money and the exchange of people? Do we all have to rebuild new, separate economies and supply chains to lock ourselves into isolated, separate and smaller corners of the globe? If our top scientists can no longer work together to solve pressing global problems, how would we survive? What would be the impact on human progress? Could a full divorce lead to a new arms race? Are we ready for a new cold war that could last 10 or 20 years, or even longer? Could the cold war lead to, cataclysmically, a hot one?
For most people, the answers to these questions are clear, because even the most ardent critics understand that the US-China marriage is too important, too entrenched, too necessary – too beneficial – to contemplate a full divorce. No matter how much they may dislike each other at the moment, now is not the time to push the marriage further toward the cliff.
The first step is to lower the temperature. There is a lot of anger and resentment on both sides, with a big risk that either spouse could say or do something they may later regret. If they’re ready to talk, they should come to the table. If they can’t, go back to their separate rooms to chill out and think about solutions. The temperature in the kitchen is too hot to risk conflict that could escalate into a physical altercation. Even a small or accidental military confrontation between the two most powerful nations in the world would have enormous global consequences that need to be avoided at all cost.
The US-China relationship isn’t just a marriage between two people, or even two big powers — its impact is global and transcends generations. Its future cannot and should not be decided by flashes of anger, decisions in haste and short-term domestic agendas. The road ahead will not be smooth, but that does not mean the marriage isn’t worth fighting for. In these difficult times, we should all be reminded that no marriage is perfect -- and take these anonymous words to heart: “The perfect marriage is just two imperfect people who refuse to give up on each other.”
America and China should never give up on each other.
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