China's view of the world can be summed up succinctly by President Xi Jinping's remark that “the world has been undergoing the most profound changes unseen in the last century.”
On China's international engagements, my conclusion is pure and simple: China needs the world and the world also needs China. Please note carefully that I said “need,” which should not be taken to mean that some relationships are indispensable.
Why has China come to view the world as a place full of challenges and opportunities on a scale unprecedented in the last hundred years or so?
1. China has grown to become the world's second-largest economy, reaching the “red line” of 60 percent of the GDP of the United States and functioning as an integral part of global supply chain in the last three or four decades — with all the accompanying global influence that comes with that rising status. As a result, the balance of power has shifted in favor of emerging and developing countries, with China featuring prominently in global governance, which obviously was taken by the U.S., the incumbent dominant power, as a threat to the “American Century” or “Pax Americana,” the U.S.-led world order for more than 70 years.The resulting reordering of American global strategy toward containing and competing with China has set the U.S. on a geopolitical and geoeconomic collision course with its Eastern rival even though China has repeatedly pronounced its determination to persist in peaceful development and to avoid the so-called Thucydides trap of deadly confrontation. The world, therefore, has become more complicated and risk-laden for China. Simply put, this is both the best and worst time for China in its relations with the rest of the world — in particular with the U.S.
2. The tug-of-war between globalization and anti-globalization driven by populism and narrow-minded nationalism the world over, especially in advanced economies like the U.S., the United Kingdom and others worries China a great deal, since its growth, which is underpinned by its policy of opening-up and reform, has been very much intertwined with the last round of globalization. China certainly hopes that globalization and the underlying global governance system will continue to function, maybe in the form of “globalization 2.0. And the growing gap between rich and poor, the lopsided distribution of wealth that favors capital versus labor, can be addressed properly and urgently in the world at large, thus reducing its poisonous effect on social cohesion and harmony.
3. The global governance system and its institutions centered on the United Nations is disintegrating right before our eyes with the Trump administration attacking the rule-based system, withdrawing from UNESCO, the Paris Accord, INF, TPP and Iran nuclear agreement, and even going so far as to threaten abandonment of the World Trade Organization. If the WTO Appellate Court's vacancy is not filled by the end of the year, the court will cease to function. We will have no multilateral mechanism available for any trade dispute settlement.
China thus faces the unprecedented challenge of a bifurcated choice, either sitting on its hands and watching the world roller-coastering to wherever, or playing a leadership role, willingly or unwillingly, in concert with like-minded countries, to charter a new course for global governance based on the current system with some key modifications.
In this connection, I would be remiss not to mention that China is already the largest trading partner with over 130 countries and regions. The latter seems to be the natural choice for China, but it will be misinterpreted or misunderstood as China tries to oust the U.S. from its hegemonic position in global affairs or to replace the U.S. as the world leader, which would dangerously reinforce the American strategic reassessment of China as being its major strategic competitor, rather than its erstwhile partner in cooperation intermingled with some competition.
4. The tech revolution is running at breakneck speed and will change the way of life and production for mankind. It has been driving economic growth and globalization for decades and no doubt will continue to lead the course of globalization and reshape global supply and production chains. China is right in the middle of this revolution with R&D input accounting for 2 percent of its GDP and still growing.
There are two key concerns for China in the tech area:
One is that there is quite some distance to go before China catches up in the sci-tech field, and it is imperative that it shorten the distance with advanced economies soon if it is to be a genuine major power. This is more easily said than done. Lots of hard work, huge investments and years of effort are required. China believes that sci-tech modernization — one of the four modernizations it has set for itself to be realized by the mid-21st century — will put it in a better position to contribute more profoundly to world peace and prosperity.
Another is the worrisome reactions to China's tech advances from other major powers, especially the U.S., which, as the incumbent hegemonic power for almost a hundred years, views China as a strategic threat to the sci-tech superiority it has enjoyed for a long time.The mindset of strategic sci-tech competition has taken the reins in American strategy and policies toward China in general, and China's sci-tech capability enhancement in particular. It is not only unwise for the U.S. and China to engage in sci-tech strategic competition, but it will lead the two countries to “decoupling” in sci-tech and economic development, with a dead-end-result that will hurt the whole world.
Why has China concluded that “China needs the world and vice versa” when it comes to international engagements?
1. China's opening-up and reform and its ensuing success is closely intertwined with globalization and has been supported by fairly good relations with other countries, both developing and developed — especially with the U.S. It is clear that China would not be what it is today without a favorable global environment. It is a well-considered and well-thought-out conclusion that China's progress cannot be achieved in isolation.
China now is part and parcel of a well-integrated and highly interconnected world economy. It needed the world in the past and even more so today — and for the future. It is exactly in this spirit that President Xi proposed to build, together with all nations, a global community with a shared future and common destiny.
2. Given that China cannot develop itself in isolation, it is also valid to suggest that it can't deliver what it aspires in an insecure environment. China therefore has been a promoter and defender of world peace both regionally and globally. It believes that a more interconnected network of global partnerships both politically and economically will serve as a solid base for the collective security so essential to the lasting peace we all hope for. With its conviction and determination for long-term peace and economic prosperity, both for itself and the world at large, China has frequently reiterated its strategy of peaceful development and that it has no intention whatsoever to be a hegemon either in the region or the world.
This is definitely not propaganda or a PR stunt. This is the lesson that China has learned over the last 40 years of involvement in globalization, as well as in the last hundred years of “humiliation,” which has so often been the subject of China study by numerous scholars and experts. The best course for China is to have and maintain a secure international environment, starting, if possible, with a steady, well-balanced and sustainable relationship with the U.S. China does not want and will not start a strategic rivalry with the U.S. Instead it will try its best to have a mutually beneficial bilateral relationship that combines healthy competition with more and broader cooperation. The U.S. should by no means take this as weakness on the part of China, which is ready to take up any challenge to its sovereignty, territorial integrity, national security or economic achievements, which form the core of its national interests.
3. The conclusion that the world also needs China is not a self-induced fantasy. It comes from the country's 70 years of international engagements. It has dealt with a wide range of conditions, from full confrontation to full cooperation, from imposed isolation to open-armed globalization. China has tasted it all. It is now by every measure an important member of the international community. It's a permanent member of the UN Security Council and has joined more than 500 international treaties and agreements. It is also a member of almost all the world's intergovernmental organizations. China also is a strong engine of world economic growth, contributing more than 30 percent to global GDP growth for the last 10 years.
4. The almost instinctive and intuitive approach China has taken toward the global governance system and its increasing willingness to provide the much-needed “global commons” for today's world — especially as the U.S. is “leaving the crowd” by formally starting the process of withdrawing from the UN Paris agreement — is strongly rooted in Chinese culture, which values the oneness of humankind and the universe.
From this perspective, the Belt and Road Initiative, the proposal to form a community with a shared future; the setting up of the AIIB; the idea that a country's security can't be achieved unless others also feel safe and secure — all of these new proposals and initiatives are both for China and the world. The country realized long ago that “China needs the world and the world also needs China.” As China grows economically, the sense of world togetherness gains more traction.
5. China's external investments and domestic investment environment are moving in the same direction, which is designed on to help China achieve sustainable growth and to benefit the world with a spill-over effect through a global network and increased connectivity.
The BRI serves as a good example. Infrastructure is key to industrialization and long-term economic growth for all countries, a lesson China has learned over the past seven decades, and especially in its 40 years of opening-up and reform. Infrastructure is where developing or less-developed countries have a huge gap to fill if they wish to catch up with the rest of the world and really enjoy the benefits of globalization.
From a macro point of view, China believes firmly that it will be hard to develop the world economy further unless a large number of less-developed countries can move into (and then up) the global supply and consumption chains. Infrastructure building is the first step.Naturally China's excess production capacity in steel, cement and consumer goods has to move in two ways — domestically moving toward less-developed regions in western and southwestern China, and abroad to countries that need and welcome such commodities. It is a win-win for everyone.
Unfortunately, ugly geopolitical labels have twisted perceptions in some quarters to cast China as a dark and menacing figure trying to gain economic and geopolitical advantages at the expense of its poor brothers. Debt, for example, has often been singled out as part of China's “cold-hearted” approach to direct foreign investment. In reality, that could not be further from the truth. Any project along the corridors of the BRI will be evaluated on a commercial basis, and with applicable international standards.
Here, the AIIB represents the best practices of developmental investment and financing. If there is any political consideration involved in the decision-making process, the funding of a project could be done through a combination of commercial loans and foreign aid. The latter, to a certain extent, reflects the donor country's foreign policy in general and foreign aid policy in particular. From the modern history of China, one can see with clarity that it has no intention of seeking its own sphere of influence. Neither would China through economic means try to establish regional hegemony, something reiterated by President Xi on numerous occasions internationally. Moreover, the reality of six years of experience with BRI implementation can also bear testimony to the point I am making here.
6. China's economy is undergoing tremendous changes, one of which is more reliance on domestic consumption, which is taking up an ever-increasing share of GDP. In 2008, net exports by China represented 9 percent of its GDP, and that number dropped to 1 percent in 2018. I am sure that it will continue to drop at least in 2019 and 2020, as China continues to import more — as demonstrated by the Second International Import Expo going on in Shanghai. The consultant firm Mackenzie issued a report recently saying that China's dependence on the world — a reference to its huge volume of exports — has been reduced, while the world's dependence on China's growth and market is rising.
