A Vital Survey of our Relationship with China and What We Can Do to Reverse Its Dangerous Path
Stephen Roach's "Accidental Conflict" is an important book on the most important geo-political challenge facing the US today. It mirrors my own deep concern about the risk now dividing China and the US and the paucity of trust between us.
Some of the most mind-opening facts which the book revealed were these:
1. The sanctions we have imposed against China have been of no value in impacting our budget deficit and really never could have given a lack of change in the underlying drivers of it. (e.g. our over over consumption and low rate of savings). It’s been whack-a-mole: the trade deficit which has been reduced in China has moved to other countries, most of them with higher costs, thereby hurting U.S. consumers two ways.
2. The different visions of China and the U.S. are striking and well described. That from China focusing on China’s “rejuvenation after a century of humiliation”; the U.S. dream anchored, as it’s always been, in a utopian, exceptional vision of freedom for every individual, unmarked by the recognition of the errors of our own history (which we’ve conveniently, as most countries do, forgotten...in our case, slavery, treatment of Native Americans, misbegotten wars in Iraq, Vietnam and Afghanistan).
Just as has been the case with Russia, Roach points out our failure to understand the vision and actions of China in the context of its history and culture.
3. Roach effectively underscores the nature of and danger of “false narratives.” He talks about many, but chief for me are is the US belief that our trade deficits are caused by nefarious intent by China, greatly overestimating, for example the role of IP theft (real, but not the most important factor).
On its side, China sees us out to envelope and constrain them. Just as this has become a paranoia for Putin, it’s become much the same thing with Xi. He certainly has things we’ve done to point to as support for the belief: including TPP, which intentionally excluded China, treaties between Australia, the U.S. and the U.K., providing submarines to Australia.
The major problem I have with Roach’s thesis is that I believe he overestimates the importance of resolving different savings rates between our two countries (much greater than I realized) as both the cause and the solution to our lack of trust and failure to work together. While he touches on this with clarity, I think he underplays relative to structural economic issues, the difference in world view between Xi and the current Chinese Communist Party and the prevailing view in the U.S. on both sides of the aisle which sees China as an existential enemy and is unwilling to consider the possibility that China should be and probably will be an “equal partner.”
As to how the difference in saving rates as an underlying economic structural driver of imbalanced trade will be resolved, I see little cause for hope in
Roach's analysis. I see little chance that U.S. consumers are going to change their consumption habits, thereby increasing the rate of savings. I believe the underlying causes for the high savings rates in China (insecurity and fear of aging) are going to be very slow to change as well.
I totally agree with Roach on the underlying need to rebuild trust. And I hearken to Roach’s emphasis that that has to be both institutional and personal trust.
I worry greatly that that is unlikely to occur on President Xi’s watch or in the political climate that exists in the United States. I don’t mean that as a “forever” comment. Time and history change things, just as it did as the Soviet Union fell and our relations with China for a time increased greatly.
I am a great believer in the importance of human agency as well as underlying historical and environmental circumstances. Roach mentions Zhu Rongji in several places and Deng Xiaoping. I don’t think the changes that occurred in the late ‘80s and early ‘90s would have happened if it weren’t for the legacy and actions of those individuals and others who were working for them any more than I believe the Soviet Union would have fallen as it did if it weren’t for Gorbachev and the personal trust that was established between him and Ronald Reagan and George H.W. Bush and the Russian and U.S. Secretaries of State at the time, James Baker and Shevardnadze.
I think the best that can be hoped for right now is to:
1. Get real on what it will take to address our balance of payment issue and stop punishing ourselves and our relationships with China and other countries by self-penalizing tariffs.
2. Work with China in a quiet, professional way on items of common interest, which Roach identifies well. One is certainly public health. I personally experienced how well leaders from the Yale School of Public Health and Chinese public health officials worked together three or so years ago at the beginning of COVID.
I also think there is a common interest in an institutional framework for working together on climate change and halting nuclear proliferation.
We definitely need to work together on cyber-security and on the risk of social platforms, now amplified by AI, to do enormous damage to consumers and to our mutual relationships through false news.
This is the time for quiet diplomacy, a time to build a few personal relationships at high levels. Maybe they won’t be between Biden and Xi. Hopefully they might be between Secretaries of State, or the heads of health, communication and education ministries.