Caixin
Jan 07, 2019 08:20 PM
OPINION

Editorial: How Should U.S.-China Relations Proceed?

Chinese and American businesses and citizens are facing the question of whether incumbent and rising big powers can get along, or whether they will fall into the “Thucydides trap. Photo: VCG
Chinese and American businesses and citizens are facing the question of whether incumbent and rising big powers can get along, or whether they will fall into the “Thucydides trap. Photo: VCG

Jan. 1 was the 40th anniversary of the establishment of diplomatic relations between the U.S. and the People’s Republic of China. The two countries’ respective heads of state exchanged congratulatory letters emphasizing coordination, cooperation and stability in bilateral relations. These themes are not just diplomatic rhetoric — they have real relevance. The U.S.-China trade war is currently still in full swing, and the world must be more vigilant against the zero-sum game mentality, while having more confidence that China and the U.S. have compatible interests and can work together to maintain the international system.

The 40 years of U.S.-China exchanges have been closely aligned with China’s reform and opening-up. During this time, China combined its domestic demand for change with external capital, technology and management assistance in order to achieve progress. As the richest country in the world, the U.S. played a clear role.

Now that the two countries’ overall strengths have changed, their governments, businesses and citizens face the question of whether incumbent and rising big powers can get along, or whether they will fall into the “Thucydides trap.” Some people in the U.S. are uncomfortable with China’s increasing prominence in the international institutions, asking if China intends to challenge the postwar order established by the U.S. and build its own order. In terms of trade, not everyone is happy to see that China has upgraded its role from that of a subcontractor to a consumer and a developer, and then toward setting next-generation industrial standards in many industries.

On the other hand, many in China see the U.S. as wanting to hold onto power at all cost. To these people, communication and negotiation are just tools for shoring up power. “Hawks" on both sides clearly agree on one thing: They believe there are essential differences between the basic political and social systems of China and the U.S., and that there will be a showdown in the future. If we cling to this kind of thinking, there will be no solution to the problems facing current trade negotiators and the long-term development of U.S.-China relations. These suspicions can become self-fulfilling prophecies.

Politicians and citizens of the two countries must ask how they can overcome this suspicion. The answer will determine the future direction of U.S.-China relations. For China, this shouldn’t be about figuring out what Americans want to hear and believe, but about figuring out what China wants, what China is willing to do, and what China can do in terms of U.S.-China relations and broader international cooperation. We believe that comprehensively deepening reform and opening-up is still the best way to serve bilateral interests and expectations. This process will give the Chinese people a clearer and more-thorough understanding of what should and can be changed, and what should not and cannot be changed.

China’s prosperity today is not a gift from the U.S., as some American politicians have said. It is the work of the Chinese people. However, we should also note that the conditions during the period of reform and opening-up are different from the period when China was closed off from the world. The learning curve that the Chinese people have overcome in the past 40 years has earned universal praise. China today is still a developing country, and this is the biggest defining factor of its “national condition.” It is still not a perfect market economy, and has a long way to go in modernizing its governance system and capacity. This is why China’s policymakers advocate “absorbing all the achievements of human civilization,” choosing the best from every field and region without excluding any areas.

The Third Plenary Session of the 18th Communist Party Central Committee made top-level plans for comprehensive opening-up. In 2018, the pace of China’s opening-up to the outside world accelerated significantly, especially in the relaxation of foreign shareholding ratio restrictions in the financial sector. The 2018 edition of the “negative list” for market access was fully implemented by the end of the year. On the first working day of 2019, the first foreign-funded oil company obtained a permit for wholesale operation in the area of refined oil in China. A draft Foreign Investment Law that combines three existing laws and focuses on strengthening investment protection has also been submitted to the National People’s Congress for consideration.

These moves have been made amid the U.S.-China trade war. However, the Chinese government stresses that these decisions are not the result of submitting to external pressure, but independent choices in line with China’s own interests. We deeply believe that this deserves widespread recognition within the ruling party and Chinese society. The Chinese government is also set to accelerate the pace of opening-up in the fields of telecommunications, education, medical treatment and culture. In particular, it will relax foreign share ratio restrictions in the areas of education and medical treatment, where China lags behind significantly. These measures will undoubtedly boost the confidence of the Chinese people in the future of reform and opening-up. They will also pave the way for the institutional opening-up proposed by the Central Economic Work Conference a year ago, and promote the transition from a focus on opening-up product flows toward rule-based opening-up.

After 40 years of reform and opening-up, the focus of China’s opening to the outside world has changed. In the early stages, China strived for export earnings and aimed to fully use its demographic dividend. Now, institutional reform is key, including optimizing the business environment, improving regulatory efficiency, clarifying the power structure of governments at all levels and the boundaries between the government and the market, and clarifying the scope of legitimate access for domestic and foreign investment. To accomplish these missions, we need the appropriate values and thinking. If zero-sum thinking is adopted, some officials will take an opportunistic view of opening to the outside world. They will implement opening-up with conflicting feelings, which seriously affects the effectiveness of implementation and which could even set up obstacles to previously promised openness. This will cause the rest of the world to doubt the consistency of China’s policies and regulations, and to doubt how serious China is about market access throughout the country. It will also foster an indifferent attitude within the foreign business community in China, as the U.S.-China trade war has shown. These businesspeople should actually be the driving force for developing China’s relations with the world.

President Xi Jinping once said that “there are a thousand reasons for us to do well in U.S.-China relations. There is no reason for us to do poorly in U.S.-China relations.” U.S.-China relations are so close, that “decoupling” is no longer possible. How should China deal with the U.S.? Only by truly and properly doing what it has promised. At the recent meeting of the heads of state of China and the U.S. in Argentina, the two countries set a 90-day negotiation period and agreed not to impose additional tariffs on each other. The clock is ticking. The world is looking forward to a mutually acceptable solution from the working teams of the two countries.

Translated by Teng Jing Xuan (jingxuanteng@caixin.com)

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