We Really Do Not Know How to Deal with China; and the Debt Crisis does Not Help
By Patrick N. Theros - June 2, 2023
Ambassador
Chas. Freeman, a good friend, old colleague, and one of the foremost
experts on China today in the United States, has written and lectured
repeatedly on the depth of our ignorance about China. China, he notes,
is our only peer competitor on the planet, but we have no idea how to
deal with it. Unfortunately, the Chinese may have the same ignorance
dealing with us.
In
the year preceding the pandemic I had the privilege of participating in
a project with Peking University, China’s Harvard. I had never been to
China, and, when asked, told my hosts that I wanted to learn about their
country. My hosts responded by scheduling hours’ long tours of museums,
Buddhist temples, the Forbidden City and the Great Wall. I learned that
recorded Chinese and Greek history both began about the same time,
about 4,000 BC. Geography, I believe, sent the two civilizations into
radically different paths. Greeks turned outwards, embraced and
dominated the seas, established colonies, and invaded foreign countries.
Ancient Greek history begins with the sacking of Troy and ends with
Alexander’s conquests. By contrast, the Chinese focused inwards and
eschewed foreign adventures. China, throughout its history, has tried to
consolidate the land of the Chinese people but shown almost zero
interest in ruling non-Chinese – for whom Chinese demonstrate no little
disdain. They fought many civil wars or defended themselves against
foreign invaders. History records only two Chinese overseas adventures;
they sent two fleets to conquer Japan in the 13th century. Fortuitous
typhoons destroyed both fleets and China’s appetite for foreign
conquests. China briefly embraced peaceful maritime expansion in the
15th and 16th centuries. China created the largest and most
technologically advanced fleet the world had ever known and sent it to
visit virtually every trading port in Asia. Instead of building on this
success, China’s emperor ordered the destruction of the Fleet and all
records of its journeys. Instead, the Chinese reverted to their
traditional embrace of economic production and exports; a policy that
made China richer and more powerful than foreign conquests. Between 1400
and 1700, China produced about a fourth of world GDP; the US, by
comparison, has never gotten much above a fifth of world GDP except,
briefly, after World War II wrecked our competitors in Europe and Asia.
Skeptical
readers will point to China’s enormous program of military
modernization; its fleet now has more ships than the US Navy, for
example. Surely, the Chinese are bent on world conquest; they have even
established a naval base in Djibouti! Take a deep breath; China’s
defense budget is a fraction of the US budget and its Navy can, at best,
defend the seas near China’s coasts. Add in the defense budgets and
fleets of our scores of allies worldwide and China’s relative military
power shrinks even further.
China
has always preferred economic power to military expansion; restoring
its 16th century dominance of world exports would do more to give the
Chinese the respect, influence and power they seek. Even a successful
Chinese invasion of Taiwan, literally the only likely flashpoint that
might provoke a Sino-American war, risks catastrophic economic
consequences. China’s wealth depends on the sea lanes. Two thirds of its
gas, and three quarters of its oil come by tanker. Four fifths of its
exports go to its customers by container ship. A tiny fraction of the US
Navy, especially if supported by our maritime allies, can shut down
these sea lanes far beyond the protective umbrella of the Chinese navy.
(I do not recommend we try this in peacetime; it would also wreak havoc
on the American economy.)
Dealing
with China’s economic growth is another issue; and we seem to be doing
it all wrong. Trying to derail Chinese economic growth by denying it
access to the latest technology reflects America’s ongoing conviction
that foreigners will never be as smart as us. The Chinese are very smart
and will find ways to work around our restrictions sooner rather than
later. More than half the world’s economy will continue to trade with
China. Even our closest allies, Europe and Japan, will not break
economic ties with China, especially as we seem determined to cut them
off from our markets as well.
The
key to dealing with China lies in accelerating the growth of our own
economy AND the economies of our allies. The post-World War II liberal
economic order has done more than any other factor in making America so
rich and powerful. Not only do we produce a fifth of the world’s GDP but
enjoy the enormous power that globalization confers on the US by making
the dollar the world’s reserve currency. But, beginning with Trump, we
have turned our back on our allies, imposing tariffs on their exports
and subsidizing domestic industry even when it will raise domestic
costs. We have doubled down on exploiting the dollar’s power to punish a
dizzying array of countries, businesses and individuals – foes and
friends alike. Unfortunately, the Biden administration continues Trump’s
misguided policies. The EU, and many other countries, have begun to
grapple with our new isolationist policies. They will find ways to
protect their own producers. They will, inevitably, trade more with
other countries and less with the United States, making us poorer.
To
make matters worse, we are now engaged in a childish act of
self-immolation. The debt crisis. Even if resolved by the time this
article appears, it will undermine faith in the US economy and
accelerate efforts to avoid using dollars for international
transactions. If we do not reconsider our lurch towards isolating our
economy and alienating our allies, we will surely find ourselves playing
second fiddle to Beijing.