PREAMBLE
Yao Yang (姚洋)
Director of the China Centre for Economic Research, executive director of the Institute of South-South Cooperation and Development and professor at the National School of Development, Peking University presents
US-CHINA relationship and China's role as a Great Power
basing on an interview conducted on December 2023 by
NetEase (网易) and PKU’s National School of Development in collaboration with Douyin (抖音)
It needs to be stated that Sino-US competition is here to stay and to last. If geopolitical-managed correctly, this could prove beneficial for China.
On the other hand, on hindsight, The West’s de-industrialisation process was a strategic mistake when the hollowing out of especially American industries is often regarded as too severe.
It must be expressed that attempts to reverse this trend are likely set to fail.
Illustration by OpenAI’s DALL·E3
I. The Changing Global Order and the West’s Insecurity
“In today’s evolving global economic landscape, the most important [aspect] remains the rise of China. In the past, we had two camps consisting of the United States and the Soviet Union. Then, China rose.”
“Although our economy is not the largest [in the world], our manufacturing industry is. This has changed the global economic landscape profoundly, especially the deep-seated relationships between [the world’s] different economies. This is the fundamental difference between the US-China relationship and the previous US-Soviet relationship. It is also the fundamental difference distinguishing today's global economic landscape from the US-Soviet struggle for supremacy.”
“Of course, if China's manufacturing industry is too powerful, it will create imbalances. China's manufacturing sector accounts for 30 per cent of the world's [production], but China accounts for only 17 per cent of the world's GDP. This gap means that Chinese-made products cannot be fully absorbed by [the PRC] and must be exported to the world. The United States accounts for more than 20 per cent of the world's GDP, but its manufacturing industry accounts for only around 18 per cent of the world's [production]. Thus, the United States must absorb foreign-made products.”
“This holds true for other countries too. The vast majority of developed countries have seen their share in global manufacturing decline. This creates imbalances. Imagine their waking up and suddenly realising how the vast majority of goods are produced in just one country. We have to realise that looking at both China and the world from a developed country’s perspective is different from looking at it from our own perspective. Indeed, what they may sense is that it is not possible for them to go on like this, that there may be considerable risks and that they cannot rely too much on one country, hence the need to readjust.”
“However, such a trend is very hard to reverse. The time for developed countries to re-industrialise has, I’m afraid, passed forever [发达国家想再工业化，时间恐怕永远过去了]. Young people in developed countries will no longer be willing to return to factories. This is a challenge faced by these countries. Their re-industrialisation will encounter great resistance. For example, when Foxconn invested in building a factory in Wisconsin just after Trump took office, it said that it wanted to create 10,000 jobs. I felt at the time that this was unlikely because the United States basically no longer had factories employing such numbers. The facts have shown that the factory Foxconn built with such confidence is now a shambles [成了烂尾工程].”
“Today, Taiwan Semiconductor Manufacturing Company (TSMC) is building a plant in Arizona. This is also proving to be a very rocky process. How it will eventually operate remains a big question. TSMC may have to keep transferring technical personnel from Taiwan, but this is not sustainable and involves many issues (e.g. families). Young people in America will not go to factories to watch over machines. They won’t put up with this [不可忍受]. Should they have the ability to do the work TSMC requires, they would definitely rather opt for [a job in] Silicon Valley, Wall Street or the Medical Triangle (the Research Triangle Park in North Carolina is the third largest concentration of biotechs in America).”
“Global manufacturing is still moving to East Asia. This trend has not changed. East Asia's share is getting bigger by the day. This is not limited to China but includes other countries and regions in East and South-East Asia.”
II. US-China Rivalry
“China's rise will pose a challenge to the United States. Whether we admit it or not, from the US’s perspective, it is a challenge. Although this view may not necessarily be rational [这种看法未必是理性的], it is difficult for both competition and policymaking between countries to remain rational. In this context, geopolitics and economics are connected. It is not possible to have a situation where there are geopolitical tensions on the one side and flourishing economic activity on the other. Readjustments are sure to take place.”
“Personally, I think it is unlikely that US-China relations will suddenly return to their ‘honeymoon period’ of the [1980s]. Rivalry between China and the United States is unlikely to change over the next twenty or thirty years. The two countries are set to compete with one another in almost all areas, including the economy, geopolitics and so on.”
“However, I believe that as long as China takes the initiative to manage this competition and prevents it from turning into confrontation, [such competition] may not to be a bad thing and could even prove beneficial. Indeed, competition [with America] could force China to venture into important and hitherto untouched areas, such as high-end chips. Were we to succeed, this may end up leading the US to miss out on a lot of opportunities. Of course, China's proactive management of bilateral relations alone will not be sufficient. Washington will also need to maintain a certain amount of rationality.”
“With China's unstoppable economic rise, the United States will probably struggle [很可能会力不从心] to compete with such a rising power. The hollowing out of American industries is too severe. It amounts to a hollowed-out thing [in the US] competing with a real thing in China [相当于一个空的东西与中国实的东西在竞争]. The United States has clearly made a strategic mistake.”
“The US is forcing its allies to take sides, but they may not necessarily follow its lead. In fact, its allies have told Washington that, when it comes to economic issues, they do not want to take sides. This is forcing the United States to be more rational. [Thus,] over the past year, the US-China relationship has moved towards a period of relatively rational exchanges.”
III. Improving US-China Relations
“How can we get US-China relations to move in the direction of healthy competition?”
“Both countries should imagine a future based on rational exchanges. Although emotions can never be completely abandoned, returning to rationality [回归理性] is the only way to stabilise this relationship. Conversely, if everyone were to [give free rein to] their emotions, stabilising [US-China ties] would prove impossible and mutual accusations would just lead to quarrels.”
“New rules need to be established. The United States believes that it has been short-changed by the WTO and wants to renegotiate [its commitments]. In fact, this gives China an opportunity to set the next round of rules. It is very difficult for our country to play a [significant] role in multilateral institutions. Today, the United States is providing such an opportunity, a bilateral one, in which the United States must first talk to China. We should therefore seize this opportunity and formulate new rules. To give an example, the summer rules are no longer suitable, but we can take part in setting the ones for the winter.”
“Next, to promote convergence between China and the United States, we have to start with concrete matters and not just talk about grand principles [不能只讲大道理]. In January 2023, when we visited the United States, we met former Secretary of State Henry Kissinger. He said, ‘I have been interacting with you Chinese for so long. You love to talk about grand principles, while we Americans [like to] discuss concrete issues. This does not match.’ After listening to him, I felt that Mr. Kissinger had made a very good point. We cannot always be talking about grand principles, because doing so will turn into arguments [讲大道理就变成了争论]. When it comes to specific issues, what could China do? For instance, the United States now wants to re-industrialise. One of its plans is to develop its new energy industry, which happens to be China's forte. So, could we encourage new energy companies from China to set up factories and invest in the US? I think this could be done [此事可为]. In 2023, the governor of California visited China. I believe he would be happy if he could attract our companies to invest in California’s new energy [sector].”
IV. US-China Decoupling
“Regarding the US’s strategy of trying to decouple from China, its export control policy towards us is unlikely to change in the short term and I don't expect it to lift those tariffs [it imposed on us] either.”
“A new equilibirum has been established between the US and China. For example, China's direct exports to the United States have fallen [since] Washington imposed its high tariffs. However, this does not mean that China will not find alternative export routes. For example, many of our companies have moved to Southeast Asia and Mexico and are in fact still exporting to the United States. If we were to count these in, China's exports to the United States may not necessarily have dropped.”
“The division of labour in the world has a rationale to it. There is inevitably an economic logic behind it. It is impossible for the United States to decouple completely from China. Some people say that two parallel systems will emerge in the field of technology, but I believe this is impossible because building two parallel systems would mean having two sets of standards.”
“The United States tried to form a 5G alliance. But nothing has been accomplished since this was announced a while back. That is because 5G technology cannot do without Huawei and ZTE. Without the many standards that Huawei and ZTE have contributed, the US would not have been able to do it. Therefore, I don't believe that two parallel systems will emerge. That being said, we cannot expect the United States to lift its export controls and tariffs either. This is also unrealistic.”
V. How China can Become a Great Power
“From being a populous country with a small economy to being a populous country with a large economy, three things must be cultivated if China is to learn to be a great power:"
“We must have a global vision [要有全球眼光]. Having a global vision means that China has to imagine that it is responsible for the world as a whole. This includes many dimensions and participating in rule-making is a particularly important one.”
“We must treat the West as though we were equals [对待西方一定要有平视的态度]. This implies that we should not always blame and complain about the other side, nor look down on and attack them. Rather, [this should be about] equality. In some cases, it is also important to learn to understand the other side. For example, when the United States claims that it has lost out in the process of globalisation, China should not systematically question how this is possible or harshly accuse the United States of lying. We can be generous enough to say: ‘I understand you. Globalisation may have benefitted your country [in a lot of respects], but it has also created a lot of problems for you (e.g. income distribution, immigration and so on).’ Were we to say this, would we not be standing on a higher moral ground [更高的道德高地]? Would it not make them feel a bit better [更舒服]? As a global power, we must learn to understand different countries [better].”
“We must do a good job in both our domestic and foreign affairs. We used to say that foreign and domestic affairs were separate domains, but that is no longer possible. Domestic affairs are foreign affairs and foreign affairs are domestic affairs. This is especially true for great powers. The US’s domestic and foreign affairs are one and the same because its domestic affairs have a huge impact on the world. Likewise, the US’s foreign affairs have a huge impact on its people. If China is to be a global power, it must learn this too. Domestic and foreign affairs cannot be separated. China has developed into a great power and must learn to stand in the spotlight of the world.”
“In the face of the new global landscape, China's strategic choices are very important. Some people believe that we should strengthen cooperation with member countries of the Belt and Road Initiative (BRI) because of the size of this market. Others believe that we should continue to strengthen cooperation with the United States and certain developed countries in Europe, because they have the capital and most advanced technologies. I personally believe that China should strengthen [cooperation] on both sides. In spite of the US’s competitive relationship with us, we can still do things together. There are also many areas where substantive cooperation with Europe is still possible. Developing countries offer vast opportunities.”
“These days, it would appear that wherever Chinese companies go, they can carry our soft power along too. For example, some countries in Southeast Asia are becoming increasingly accustomed to speaking Chinese. Wherever economic influence travels, culture will inevitably follow.”
Extra: Education in China
“What worries me most about China's future is that our children are becoming incapable of thinking [critically] [我们的孩子变得不会思考]. Educators themselves must first reflect on the fact that education is not [just about] discipline [教育不是规训]. If something has gone terribly wrong with [our] education, it must be fixed. I have heard that some primary schools only have physical education classes once a month in order to prepare for the secondary school entrance examination [小升初考试]. This approach is wrong.”
The Author
