Apr 27, 2015 05:30 PM

For the Sake of Future Generations

My new book, Dealing With China, has just been published in the United States. On the book tour circuit, I am often asked why I am focusing so much of my time on China. My answer may surprise some people. The reason is my grandchildren. I want them to grow up on a safe, prosperous, healthy planet, and I think that will only be possible if the United States and China find a way to work together today to solve some enormous global challenges.

I believe the U.S.-China relationship is the most important bilateral relationship today. As the world's two largest economies and emitters of carbon, the two countries have a shared interest in sustaining economic growth and protecting our shared environment.

These days, some Americans are afraid of China. The old consensus that China's rise is an unmitigated good for the United States is fraying. People worry that a new, more powerful China is a threat to the United States. The concerns arise from several sources: China's more muscular projection of its power, its growing economic clout and the perception that foreign companies aren't always treated fairly in China. All of these concerns are understandable. But my message to Americans is that our long-term prosperity depends on a pragmatic, constructive U.S.-China relationship.

The truth, as I tell American audiences, is that the "new" China – and it is a new China, a pivotal power on the global stage – will sometimes be a partner but also be a formidable competitor to the United States. And neither nation should fear healthy competition, as long as it does not preclude cooperation when our interests overlap. In my view, this need not be a zero sum game, with winners and losers. Instead, I believe that China's economic growth is good for the United States. A growing Chinese economy, where consumption plays a larger role, would not only improve the lives of Chinese people. It would also mean more export opportunities for American companies and the creation of good U.S. jobs.

There is plenty of positive news in the U.S.-China relationship. The recent bilateral climate agreement was a significant and historic step forward – a sign that the two countries can work together to mitigate global problems. The agreement also sends a powerful signal to other developing countries that might have been holding off on making carbon commitments before the climate talks in Paris in the fall.

I was disappointed by the United States' response to China's new Asian Infrastructure Investment Bank (AIIB), however. I believe the United States should have welcomed China's interest in founding a new institution, which will help fill an important gap in international infrastructure funding, and encouraged the bank to meet the highest environmental and other standards. The United States should encourage and facilitate China's increased engagement with multilateral institutions generally. By joining the new AIIB, the United States could contribute ideas about best practices and help fund important development projects.

Meanwhile, economic and business linkages between the United States and China are the bedrock of a pragmatic, healthy bilateral relationship. Robust economic ties are not only good for both our economies: they also will insulate our relationship when disagreements arise, as they inevitably will between two great powers.

That's why I believe it is so important to negotiate a successful U.S.-China Bilateral Investment Treaty (BIT), which would help open markets, foster competition, level the playing field, introduce high standards and best practices, and ultimately create jobs both in the United States and China. A BIT would create opportunities for both US and Chinese companies, while helping China accelerate reforms and integrate more fully into the rules-based system. Competition is especially important to China's economic reforms, since it will attract cutting edge technologies and help strengthen its companies for the future. Especially given rising American fears, it is more important than ever to turn shared interests into tangible outcomes so that people in both nations can see the benefits of a strong U.S.-China relationship.

The fact is that the world's greatest challenges simply can't be solved if the United States and China are working at cross-purposes. Climate change and environmental protection transcend national borders. That's one reason I established the Paulson Institute four years ago to work at the nexus of economics and the environment to promote sustainable growth in the United States and China. In China, we are working on climate change and air pollution, hoping to introduce international best practices that will enhance energy efficiencies and aid the development of less energy-intensive industries.

Our CEO Council for Sustainable Urbanization, with top U.S. and Chinese CEOs, is launching energy-efficient building projects that we hope will become models for future development. We are also training China's mayors, who are at the front lines of China's drive for more sustainable development, to help them introduce cutting-edge urban planning. On the economic front, we focus on cross-border investment, developing models and approaches that will work for Chinese investors in the United States and vice versa. Our Think Tank publishes papers that advance ideas at the center of the most important economic reform debates in China.

China is facing some daunting domestic challenges: the overhaul of a US$ 10 trillion economy is no easy thing. And the United States, as I tell American audiences, needs to fix fundamental problems in its system to better prepare for an increasingly competitive global economy. A healthy U.S.-China relationship is crucial, so that we can all focus on the urgent tasks we face at home, while working on global issues together. For the sake of our grandchildren, it's crucial that we get this relationship right.

Henry M. Paulson Jr. is chairman of the Paulson Institute and a former U.S. Treasury secretary

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