13
Apr
Needless to say, one of the focus issues drawing the world’s attention for now is what exactly has happened to the strategic relationship between China and the U.S. as the world’s largest emerging country and the largest developed country respectively? Where is Sino-U.S. relationship heading? To accurately predict and judge the direction of Sino-U.S. relations, a key signal is worthy of attention. That is, the recent National Security Strategy and National Defense Strategy issued by the Trump administration successively clearly positioned China as America’s “strategic competitor” and a “revisionist power.” This means that in the mainstream ideology of the U.S., China has been initially identified as a strategic and competitive major country that challenges the American order. However, China does not feel that it has caused any fundamental challenges and conflicts with the US-led world order, and it has always had the illusion of constructing the “new model of Sino-U.S. major country relationship” and made various attempts.
Under the situation where the two sides have quite different perceptions of their strategic relationship, it becomes particularly urgent and vital to correctly identify and understand the strategic competition focuses perceived by both sides and the big power game strategy that the U.S. has or is about to implement.
Three focuses at the economic level
The current focus of Sino-U.S. strategic competition is mainly concentrated on the economic level and the development model, embodied in the following three aspects:
First, free trade vs. fair trade. The clear signal sent by U.S. President Trump at the World Economic Forum in Davos in 2018 is that only trade that fully meets the interests of the U.S. and excludes the interests of other major competitors is the so-called “fair” and “reciprocal” trade. The current “free” trading system has been separated from the basic categories of “fair” trade and “reciprocal” trade. In particular, the current free trade system embodied by global value chain specialization and trading system has “hurt” the overall interests of the U.S. yet is helpful to China in obtaining huge development benefits. This leads Trump to believe that the U.S. must fully oppose or even abandon the current global value chain “free” trading system that was originally constructed and led by developed countries.
Seen from a theoretical perspective, free trade is indeed different from fair trade. Free trade may even bring about a net loss in the trade benefits of specific countries in the short term; but more crucially, free trade is the precondition and cornerstone of fair trade in the long run. Without free trade pursuant to the principle of comparative advantage, it is impossible to eventually promote the formation of a “fair” trade pattern under which both sides obtain net trade benefits. Therefore, the logic that deliberately puts free trade and fair trade in opposite positions has in itself deviated from the objective laws of the dynamic development and phased development of international trade.
More importantly, if we look at the equalization of trade benefits among different groups in the country, free trade will, in a certain period of time, indeed reduce job opportunities of specific classes, lower wage incomes of specific classes, and further increase domestic income inequality. This is more likely to stimulate similar old countries such as the U.S. to manoeuvre and shift the issues of rigidity dilemma of domestic interest system and lack of reform impetus to the so-called “unfair” competition in the external free trade system, further causing opposition, confrontation and ideologicalization between free trade and fair trade.
Second, market economy vs. non-market economy. After the U.S., Europe, and Japan successively denied China’s market economy status, Trump in Davos accused China of being a specific country of “large-scale theft of intellectual property,” “subsidy,” and “state-manipulated planned economy.” In fact, this shows the concern or judgement of the U.S. and other developed countries, that is, whether China is “farther and farther from the market economy.” However, another more important implication behind this concern or judgment is that developed countries led by the U.S. are deeply worried and even very scared because of the gradual improvement of China’s independent innovation capability system and the rise of high-end manufacturing system, the emergence of local Chinese enterprises and high-tech companies, The rise of China’s economy, the competitive pressure and squeeze effect directly posed on businesses in developed countries, and the system superiority of China’s unique “effective government+competitive market” system in economic development.
Therefore, it is extremely necessary to think seriously and objectively. Is the rising China getting “farther and farther” or “nearer and nearer” to a market economy? To what extent exactly do the national development strategy plans such as “Made in China 2025” released by the Chinese government conform to or deviate from the basic logic of market economy?
A fact is that the relationship between the government and the market has always been a fundamental issue that runs through China’s economic reform and development process. China has the dual identities of being both a developing country that is transformed from a planned economy to a market economy and a country of catch-up innovation. The phased changes in economic development will, of course, endogenously force and require dynamic adjustments and changes in the relationship between the government and the market. In particular, although China has entered the specific stage of high-quality development and independent innovation, due to a serious lack of independent innovation capabilities for basic innovation of public goods, basic applied innovation, and industrial key common technology, as well as development mechanism and institutional obstacles, it will inevitably require reasonable intervention and support from the government’s “visible hand.”
Even according to the market economy theory system in Western economics and the functional industrial policies commonly adopted by developed countries, there is also an internal logic and reasonable cause for government intervention and support. Therefore, for a developing country with a catch-up economy, reasonable government intervention, planning and guidance do have a certain level of rationality and necessity in a certain scope, whether seen from the theoretical logic of the market economy itself, such as solving external issues and eliminating information asymmetry, or from the practical experience of developed countries.
Of course, it is undeniable that there are indeed many misunderstandings and operation mistakes made by governments at all levels in China regarding the reasonable relationship and functional boundary between the government and the market. Many local governments still rely on the simple method of government subsidy and preferential policy in implementing national strategic plans. The simple way of subsidy and preferential policies. Considerable room for improvement still exists for China to deter and eliminate the excessive intervention in the micro-economy by governments at all levels and to utilize the decisive role of the market in deploying resources.
Third, bilateral trade system vs. multilateral trade system. At present, the big difference between the U.S. led by Trump and other countries is whether to defend and improve the existing multilateral trade system, or to abandon the existing world trade system, or to create a bilateral trade system comforming to U.S. interests and hegemony according to the logic of “America First”?
Obviously, whether it is from the perspective of free trade or fair trade, without the global and overall layout logic that involves developed countries, emerging countries and developing countries, the trade gains and the more crucial economic development space and transformation and upgrading opportunities created by economic globalization for countries will be greatly reduced and squeezed.
Under such circumstances, on the one hand, a bilateral trade system may not necessarily create greater opportunities for development in the U.S., and the complexity, overlapping and conflicting nature of bilateral trade negotiation rules are likely to make the U.S. unable to withstand the pressure and the risk of such complicated interest conflicts and interest appeals among different countries. The various bilateral trade agreements reached may not necessarily be stable and sustainable; on the other hand, against the complex backgroud where the economic development competition landscape between developed and emerging countries at this stage becomes increasingly evident, and where the strategic competition landscape between established and rising major countries becomes increasingly prominent, whether the existing WTO system should give priority to satisfying the development interests of developed countries and established major countries or to give priority to satisfying that of developing and emerging countries, or cater to both has become the focus of today’s global interest conflicts and contradictions, and the key to maintaining the global multilateral trade system.
“America First” or “a shared destiny for mankind”?
An undeniable and unavoidable fact is that China and the U.S. are gradually entering a specific stage of full-on strategic competition with a high probability, which will inevitably pose the question about how to perceive Trump’s “America First” and Chinese President Xi Jinping’s “a shared destiny for mankind,” the differences, competition and even confrontation between the two new ideas on globalization.
Regarding the new globalization concept of “America First,” Trump explained that “America First” does not mean “America Alone” and that as the world’s largest economy and leading force of innovation, the renewed prosperity of the U.S. economy will surely bring about world economic prosperity. The subtext is: without the prosperity of the U.S. economy, the world economy will not prosper. Obviously, this kind of thinking logic is still a logic that puts U.S. strength far beyond other countries and a logic that prioritizes America’s development rights over other countries. It is both a reproduction of the American “exceptionalism” and hegemonism at the economic level and also a continuation of American economic nationalism, conservatism and trade protectionism.
As to the new globalization concept of “a shared destiny for mankind,” Xi Jinping explained in 2017 in Davos that “with a good world comes a good China and with a good China comes a better world.” Its hidden logic is China is determined to abandon the narrow-minded logic of the “zero-sum game” and the exclusive development idea of “only good for me”and promotes the inclusive development idea of “good for all”; China expects to, by further deepening reform and opening up and actively using the huge import and export opportunities brought about by its own scale expansion, continue to promote the common development of the global economy and the upgrading of the global trading system of “one for all, and all for one,” and ultimately promote the building of an open, inclusive, balanced and win-win economic globalization.
More importantly, a fact that both China and the U.S. need to see is that even the world’s largest emerging country and the world’s biggest developed country can not shape or change this new global system based on its individual will. At best, they can only obey the established consensus and common needs of most countries for economic development with the greatest goodwill and guidance; the only way is to plan the upgrading of the global trading system in accordance with the basic principle of “mutual benefit and win-win.” Obviously, Chinese leaders have already deeply understood this point. The “Belt and Road ” Initiative is a profound embodiment of this philosophy. It is a derivative world trade system. However, the incumbent president of the U.S. is running in the opposite direction and has become the spoiler and even the destroyer of the world trade system. This has become the most important factor leading to uncertainty in the future globalization trend and the risk of global economic fluctuations.
(The author is a Research Fellow at the National Academy of Development and Strategy, RUC and a Professor at the Institute of China’s Economic Reform & Development, RUC)
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