Wang Wen: Aces now in China’s hands: Why Professor Nye’s views are mistaken


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Wang Wen: Aces now in China’s hands: Why Professor Nye’s views are mistaken


By Wang Wen    Source: Financial Times    Published: 2017-11-8

My deep respect for Professor Joseph Nye’s scholarship does not detract from the fact that his optimistic outlook regarding US power is somewhat outdated.

He posits that geographic isolation is enough to shield the country from hostile powers. Yet this blithe assumption conveniently discounts `lone-wolf’ terrorist attacks, capable of visiting far greater destruction than traditional geopolitical animus.

While the US is now emancipated from fuel imports, it is precisely this need which has seen China welcomed with open arms on energy markets in the Middle East, Russia, Africa and Latin America.

While the US might fare better in a trade war, it is China that flies high the banner of global free trade. The greenback’s primacy is confronted with increasing acceptance of the renminbi as a result of cross-border payment.

Built on the four elements of geography, energy, trade and currency, Professor Nye’s assertion that “America still holds the aces in its poker game with China” reads decidedly like 20th-century realist orthodoxy, ill-suited to the conditions obtaining in China during President Trump’s visit from November 8 to 10.

The occasion represents Trump’s first state visit to China since he assumed the presidency and the first time that he has set foot on the mainland.

Rumour has it that, many years ago, the maverick businessman got his first taste of Chinese business acumen when he was unable to gain an edge during talks in Hong Kong. The same held true when, in April 2017, he learnt of the wisdom of China’s political leadership during a marathon seven-hour meeting with President Xi Jinping in Florida.

Visits by US presidents have always commanded pride of place on the Chinese diplomatic calendar, with such events accorded the highest of priorities due to the special nature and importance of the Sino-American relationship.

What sets Trump’s upcoming visit apart from those by Bill Clinton, George W Bush and Barack Obama are important changes in the comparative social psychology of the two countries.

China is increasingly confident in dealing with such occasions. In recent years, its ability to shape the future of Sino-American relations has caught up with and even exceeded that of the US on such issues as human rights, trade and the Taiwan strait, where the US is deliberately obstructive.

This new-found sense of self is to be seen, first and foremost, in fundamental strategic judgments regarding the stability of the Sino-US binary. Thus far, the two countries have established mature mechanisms for bilateral co-operation in many fields, underscored by over 100 channels for dialogue, almost $600bn in bilateral trade, and personnel exchange annually amounting to 6m.

Although the Thucydides trap still haunts bilateral relations between the two countries, systematic and structural factors have determined that the future will be marked by coexistence between competition and co-operation. This sense of general stability will not be changed, for better or worse, by a single presidential visit.

Second, the way both countries are perceived by international society has undergone a subtle shift. China has enjoyed broad support for its championship of such just causes as infrastructure construction, climate change, free trade, reforming the international order, poverty reduction and supporting UN endeavours. In its capacity as the world’s largest trade nation, the second-largest economy and third largest military power, China has exercised positive international influence in such multilateral realms as G20, Belt and Road Initiative and Brics.

This contrasts starkly with US post-election withdrawal from global affairs. The steady decline in US soft power is both bemoaned and critiqued by politicians, scholars and members of civil society alike.

Third, China is ever committed to its mission of blazing a path of socialism with Chinese characteristics. In contrast with the internecine conflict rending Western society, China’s increasing ability to impose orderly governance is a beacon of hope for the developing world.

Rebuffed by Trump, who is facing mounting criticism over his leadership both at home and abroad, traditional US allies such as France, Germany, Australia, Japan and the UK have heaped praise upon China and President Xi Jinping.

Embroiled in domestic political strife, Trump’s visit is underscored by a marked thirst for Chinese support in all areas. A businessman by trade, Trump’s realist outlook has lent itself to a refutation of `political correctness’ and a focus on the end result. This resonates with China’s founding principles of seeking truth from facts,innovation and self-reliance.

Given this convergence, there is much scope for building a `win-win’ relationship in such areas as energy, infrastructure, space, the internet, productive capacity and industrialisation.

In sum, relative Sino-US power and international status has reached unprecedented levels. Going forward, the binary will be informed by the new governing principles in big-power relations, namely `no conflict, no confrontation, mutual respect, and win-win co-operation’.

Wang Wen is executive dean and professor at the Chongyang Institute for Financial Studies at Renmin University of China (RDCY).

The following is the article published by Joseph S. Nye on the FT.

America Still Holds the Aces in its Poker Game with China

After the Chinese Communist party`s celebratory 19th congress, which ended last week, some observers proclaimed Xi Jinping a new emperor. Mr Xi, for his part, called China a "great and strong" power and touted his Belt and Road infrastructure initiative to promote Chinese economic and political power around the world.

The US used to be the world`s largest trading nation and its largest bilateral lender. Today nearly 100 countries count China as their largest trading partner, compared to 57 that have such a relationship with the US. China plans to lend more than $1tn for infrastructure projects over the next decade, while the US is cutting back aid programmes and its contributions to the World Bank. Are the alarmists right that China is winning the geopolitical card game with a declining US.

Imagine a visitor from Mars looking at the cards each player holds. Contrary to the conventional wisdom, our Martian would be wise to bet on the US. It holds four aces that are likely to outlast the Trump administration.

One of the high cards is geography. The US is surrounded by oceans and neighbours that are likely to remain friendly, despite Donald Trump`s mistaken policy of undercutting the North American Free Trade Agreement. China has borders with 14 countries and has territorial disputes with India, Japan, Vietnam that set limits on its soft power.

Energy is another American ace. A decade ago, the US seemed hopelessly dependent on imported energy. Now the shale revolution has transformed it from an energy importer to exporter, and the International Energy Agency projects that North America may be self-sufficient in the coming decade. At the same time, China is becoming more dependent on energy imports from the Middle East, and much of the oil it imports is transported through the South China Sea, where the US maintains a significant naval presence.

This vulnerability presents China with three options: avoid naval conflict with the US that would disrupt these supply lines; increase dependence on natural gas pipelines from Russia; reduce dependence on fossil fuels by switching to renewables and banning the internal combustion engine. China is investing in the second and third options, but eliminating vulnerability will take decades.

A third high card is trade. High levels of economic interdependence encourage prudence in the US`s relationship of "mutual assured economic destruction" with China. A trade war, such as the Trump administration has threatened, could do grave damage to both countries. But if prudence fails, China is more dependent and has more to lose than the US. For example, the Rand Corporation has estimated that a non-nuclear war in the Pacific would cost the US about 5 per cent of gross domestic product, but would cost China about 25 per cent.

Finally, the US dollar is an American hole card. Of the foreign reserves held by the world`s governments, just 1.1 per cent are in renminbi, compared with 64 per cent for the dollar. A year ago, with great nationalist flourish, China announced that the renminbi had become the fifth currency used by the International Monetary Fund to calculate special drawing rights. Many saw this as a sign that the Chinese currency was beginning to overtake the dollar. But in fact its share of international payments has slipped from 2.8 per cent in 2015 to 1.9 per cent today. A credible reserve currency depends on deep capital markets, honest government and the rule of law- all lacking in China.

Of course, a reckless player can misplay a strong hand. But these four cards are likely to survive the Trump administration. And those who proclaim Pax Sinica and the end of the American era should take such underlying power factors into account.