Kings or Pawns?

See the whole board. Good advice for any chess player – or politician.

A global economic and political chess game is on between the United States and China. There are many moves, defensive and offensive strategies, short- and long-term gains, but, unlike chess, mutual victory is possible. But only if the U.S. and China understand each piece, all the potential moves, what can be sacrificed, and what victory really looks like. But this does not appear to be happening. Instead of working for mutual benefit, regardless of fundamental cultural and political differences, we are now drawing bright lines demarking battle zones. The result will be economic and technical inefficiency and degradation in the quality of life, safety, and prosperity for everyone.

I first visited China in the 1980s and began doing business there in the 1990s. I have seen firsthand the benefits of engagement and cooperation. China has achieved astounding economic success, improving the lives of hundreds of millions of people in less time and more dramatically than anyone could have predicted. Now, confrontation versus cooperation, disentanglement versus engagement, and the development of a bipolar world where the U.S. and China are adversaries and are forcing the world to “pick a side” will cause everyone to be worse off.

Just Follow Us, It’s Easy

“You overestimate your abilities to transform the world,” my Chinese colleague said to me in 1997 shortly after China’s takeover of Hong Kong. At the time, I believed that Hong Kong would influence China more than China would influence Hong Kong. After all, freedom and prosperity go hand-in-hand and are irresistible desires for any country. This was “the End of History,” after all.

Obviously, I was misguided, and my friend’s comment quite prescient. Western governments and political systems, and very specifically those of the United States, cannot simply write the rules for other major nations, especially China and India, regardless of how compelling we believe our model is for any country. Currently, we are pressuring China on trade and there is a general belief that they will simply fold. This is even more profoundly misguided than my assessment of Hong Kong and China’s relationship in 1997. China is far too strong and interconnected globally to simply kowtow to Western structures and demands.

Our relationships can be mutually beneficial, engaged and more collaborative. Our countries have forged relationships in politics, business, security, entertainment, and technology, and a positive trajectory seemed clear only a short time ago. Now, relationships on each of these dimensions are ruptured, and the depth and speed with which this has happened are startling. The relationship seems to be in free fall, it seems destined to deteriorate, and the economic impact will hurt confidence and growth beyond each country’s borders. The consequences seem beyond either government’s grasp.

Rapturous Enchantment Followed by Despair  

Some level of tension has existed historically ever since the United States initially engaged with China. Beginning in 1784, when the first American merchant ship landed in China to trade ginseng for tea, the two sides have cycled through what John Pomfret, the author of “The Beautiful Country and the Middle Kingdom,” calls “rapturous enchantment followed by despair.” But the relationship always generated mutual benefits. Buyers in Canton generated fortunes for the Astor and the Delano families; Christian missionaries built China’s first universities and hospitals. Then the Cold War pulled the countries apart—the Party feared “Coca-Colanization”—but eventually the People’s Republic needed cash and foreign know-how. On December 13, 1978, Deng Xiaoping announced China’s Open-Door policy, inviting in foreign businesses and encouraging Party members to “emancipate their minds.” Two weeks later, the first bottles of Coke arrived. Coca-Colanization began with Deng’s encouragement.

It was believed that engagement with China politically and economically would eventually make it more profitable and liberal. Despite China’s flagrant abuses of intellectual property and human rights, the strategy enabled the largest trading relationship between any two countries in the world, with an estimated 70,000 American companies doing business in China today. In 2005, the George W. Bush Administration loosened visa policies, encouraging a huge influx of Chinese students, who now make up the largest group of foreign undergrads in America. Microsoft opened a 500-person research center in Beijing, its biggest lab outside the United States. In speeches to Americans, Communist Party officials said, “There is some of me in you, and some of you in me.” If only…

Just Let It Go

However, it appears the United States government wants none of that now. Political and economic integration has morphed into uncoupling with China. The belief now is that China will bring down the United States, not that the two can help each other build and reach greater heights through cooperation.

A fringe position of confrontation – pushing factories to leave China, reducing the flow of students and technology – has gained surprising support among politicians and businesses. Now, instead of a message of growth and opportunity, the narrative has become Chinese hackers stealing trade secrets, Chinese officials forcing American companies to hand over technology, and the state subsidizing Chinese rivals. It is now impossible to compete. Roundups of human-rights lawyers, activists, and ethnic minorities do not help counterbalance this narrative. It is hard to ignore the combination of all of this.

“Trade Wars are Good and Easy to Win” 

This kind of nonsense serves no one well. On top of that, China is now talked about as if they are comparable to such sworn enemies of America as Iran and the Soviet Union and argue that only hardline pressure can “crush” its expansion.

The relationship has deteriorated in recent months, and it has created a belief that each side is a permanent adversary to the other. Engagement may be abandoned, but there is no strategy to replace it. This kind of shallow reactionary thinking will make both countries worse off.

China is not an existential menace in spite of analogies with the United States’ struggle with the Soviet Union gaining in popularity. There are lessons to be learned but preparing for confrontation is not one of them. The diplomat George Kennan when discussing choices regarding responses to the Soviet Union recognized that there is a middle ground between appeasement and world war – “firm and vigilant containment of expansive tendencies.” Kennan’s theory of containment became America’s defining strategy in the Cold War. Now, there are calls for a similar containment strategy today for China. It won’t work.

China is too rich, and too intertwined with the American economy to be contained, and neither country actually wants to see its counterpart impaired. Each seems most alarmed by alarmism itself. The leaders of the two countries are both hasty, intransigent, and not very well informed about the other side’s goals. The U.S. wants to preserve its influence and to balance trade. China seeks, above all, to expand its power. These changes are happening quickly and if there is an overreaction, the results can be disastrous. Timing matters. It’s being ignored creating mistrust and potential conflict.

In chess, assume your opponent will make its best move – or its least bad. Neither China nor the U.S. is doing either.

Absolute Control is Easy, Isn’t It?

China is not a monolithic power, and we shouldn’t react as if it were. Risks are everywhere there: a precarious economy, an aging population, an Arab Spring-style revolt in Hong Kong, an ethnic insurgency. The party is trying to understand how to manage these increasing issues, and it is reacting with absolute power as its only strategy. If the United States reacts too strongly, we reinforce this tactic to everyone’s detriment because it will create separate, competing economic and political blocs – a two-centered world. An “either you’re with us or against us” forced dichotomy is simple-minded stupidity and disastrous.

China has invoked its status as a “developing country” to erect barriers against foreign competitors, and to coerce American companies into sharing technology. Eventually, those practices turned some American businesses from ardent advocates for good relations into fierce critics. When China joined the World Trade Organization, in 2001, it agreed to a schedule for dropping tariffs and opening markets. But that schedule ended in 2006, and so did any of the momentum toward opening. Now, fragmentation and self-interest are overwhelming any approach to open markets and drop tariffs. Policy to do the opposite is now dominant.

My Technology Wins

These days, the most acute standoff between the two countries is over who will dominate the next generation of technologies. Until recently, executives in Silicon Valley tended to belittle China’s potential in tech, arguing that rigid controls in politics and education would constrain radical innovation. But that view no longer prevails. Under a plan called Made in China 2025, Beijing has directed billions in subsidies and research funds to help Chinese companies surpass foreign competitors on such frontiers as AI and machine learning, electric vehicles, and robotics. Its success at surpassing the U.S. is still questionable, but unprecedented resources, combined with vast intellectual capital, are being applied to this strategy.

China’s gains in technology should be alarming to Silicon Valley and its competitive priorities. The U.S. does not have a 5G alternative to compete with China’s, a failure that cannot be blamed on spying or any other political scapegoat. If America does not compete with China’s technological advances, it risks technology Balkanization and losing influence in many key areas of new technological development.

We’re Still a Couple

A complete decoupling between the US and China is implausible. The total revenue of U.S. companies and affiliates in China in 2017 is $540 billion. Decoupling is not a plausible option. So, what is?

China is Not a Simple Story

Totalitarian dictatorship, oppression, no human rights, suffering. China is just evil. Of course, that’s not right; there is much more going on. It’s not perfect, it is a complex and alternative system. In China, social progress is genuinely getting better for most people, despite the problems. It’s more of a battle of narratives about values.

Xi Jinping has called it “a new option for other countries and nations who want to speed up their development while preserving their independence.” He has found some fertile markets for that view, in an era when Trump has reduced aid spending, separated children from parents at the border, and called migrants “animals.”

Yet, China’s sprint for soft power has not been that successful. The scale and posture of its new power have aroused a backlash, even in places where it offers the Belt and Road Initiative, a global infrastructure push that China has committed, depending on which estimates you believe, between $1 trillion and $9 trillion (larger than the Marshall Plan). In Malaysia, which once welcomed a surge of Chinese investment, Prime Minister Mahathir Mohamad has grown concerned about “a new version of colonialism.” Mahathir canceled Chinese projects worth almost $23 billion, seeking to avoid the fate of Sri Lanka, which defaulted on heavy Chinese loans and eventually agreed to give Beijing control of a major seaport for 99 years. Four other seaports in Asia are equally at risk.

Did America Get it Right?

Americans think that free speech and freedom of the press are basic for people. But Chinese culture believes the community and the country are higher priorities. Most ordinary Chinese people don’t understand why democracy is so important for America. “Yes, America brings democracy to Iraq, to Afghanistan, to other countries. But these countries are getting killed now.” China is not democratic, but it is, on the whole, a peaceful country with a good living standard – so says China’s state media.

Is It Really Over?

China and America are moving steadily toward a separation that is less economic than political and psychological. But, as Henry Kissinger puts it, “we’re dealing with a multipolar world. The components of an international system are so much more varied, and the lineups are much more difficult to control.” Like a good chess game, it has many subtle components and variations that make meaningful differences – although it continues to be played badly by both parties.

The trade war is an ominous signal; economic polarization is creating two big blocs confronting each other. History has shown us repeatedly that global conflict, whether economic or military, does not end well. No leader wants to suffer those consequences in retrospect. It’s time for the leaders of each country to see this now.

On each side, the greatest risk is blindness born of ignorance, hubris, or ideology. If the Trump Administration were to gamble on national security the way that it botched predictions on trade, the consequences would be grave; if Xi embraces a caricature of America determined to exclude China from prosperity, he could misperceive this as his “maximum moment.”

The most viable path ahead is an uneasy coexistence, founded on a mutual desire to “struggle with but not smash” the relationship. Coexistence is neither decoupling nor appeasement; it requires, above all, deterrence and candor—a constant reckoning with what kind of change America will, and will not, accept. Success hinges not on abstract historical momentum but on hard, specific day-to-day decisions – what the political scientist Richard Rosecrance, in his study of the First World War, called the “tyranny of small things.”

Just Admit It

China must acknowledge the outrage caused by its overreaching bids for control, and America must adjust to China’s presence, without selling honor for profit. Competition is not us-or-them; reality is us-and-them. The U.S. semiconductor industry gets 30% of its revenue from China. China’s resulting products service the world. China’s producers need the U.S. as well. Such examples of mutual benefit will proliferate, if allowed.

It is naïve to imagine wrestling China back to the past. The project, now, is to contest its moral vision of the future. Connected, collaborative engagement is the only effective way. China has come a long way, and its trajectory cannot be ignored or dismissed. Both the U.S. and China will be much better off from this more enlightened realistic perspective.

See the whole board.

 

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